October 27, 2010 / 11:05 AM / 7 years ago

REFILE-UPDATE 2-Norbord Q3 loss wider than expected

(Refiles to add dropped word in headline)

* Q3 results hurt by lower OSB prices

* Sees a pickup in demand, pricing of OSB later in 2011

* Sees slow but gradual housing recovery

* Revenue up 10 pct (Recasts, adds detail, analyst comments)

Oct 27 (Reuters) - Canada’s Norbord Inc NBD.TO, one of the largest producers of oriented strand board (OSB), posted a wider-than-expected third-quarter loss, but said it expects OSB demand and pricing to improve in the latter part of 2011.

“We expect markets to have no real momentum until later in 2011 when improvements in both new home construction and total OSB demand should be apparent,” said Chief Executive Barrie Shineton.

The wood-based panels producer said North Central benchmark OSB prices ranged from $207-$160 and averaged $180 in the third quarter. The South East region -- where over half of its North American capacity is located -- prices averaged $156.

North American benchmark OSB prices fell throughout the third quarter in light of seasonally weaker housing activity and continued market softness, the company said in a statement.

“It’s tough to imagine that it’s (OSB prices) going to deteriorate much further than that, the key question is how long is it going to take before we see a material pick-up?” Desjardins Securities analyst Pierre Lacroix told Reuters.

The analyst has a “buy” rating and C$18 price target on the company’s stock.

“As the company is saying, they expect to see slow but gradual housing recovery and OSB demand recovery taking hold later in 2011, and that makes sense. The next window of opportunity for demand -- in the meantime -- is next spring,” he added.

OSB PRICES WEIGH DOWN ON Q3 RESULTS

For the third quarter, Norbord posted a loss that was flat at $7 million or 16 cents a share, compared with last year.

Net sales for Norbord, which also manufactures plywood and a range of other engineered wood products, rose about 10 percent to $211 million.

Analysts on average expected the company to lose 7 cents a share on revenue of $184.6 million, according to Thomson Reuters I/B/E/S.

Groundbreaking for new U.S. homes scaled a five-month high in September, though housing starts remained at depressed levels. [ID:nN19115893]

“With new home inventories (in the United States) now at 40-year lows and affordability at all time high levels, we should expect a meaningful recovery in housing construction once these structural issues are worked through,” Shineton said.

The company’s European operations continued to benefit from the jump in construction activity that carried over from last quarter and supported strong panel pricing, particularly OSB.

“The condition seems to be going relatively well there,” analyst Lacroix said of Norbord’s European operations.

“There are a couple of risks there though with the stimulus removal and also cutting spending in the UK... But the currency dynamic in Europe seems to be favorable to keep some kind of a good market there.”

Shares of the Toronto-based company, which have gained about 6 percent in value since its second-quarter results topped estimates in July, closed at C$12.11 Tuesday on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar and Isheeta Sanghi in Bangalore; Editing by Aradhana Aravindan, Vyas Mohan)

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