Norbord’s European mills continue to prosper

8 August 2014

Norbord’s European operations continue to operate at record production levels and profits are remaining strong, according to the company’s latest financial update.

The European operation, which comprises three UK panel mills and a factory in Belgium, recorded second quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of £7.1m, the same as a year ago and down from £7.7m in the first quarter.

"European panel markets were a bit slower in the second quarter, reflecting pullback from a particularly robust first quarter," said Peter Wijnbergen, Norbord president and CEO.

"Our business there performed well once again and our panel mills are operating at record production levels. I expect we will continue to generate solid results through the second half of the year."

First half shipments continued to show an improvement over last year but OSB prices have been softened by the Ukraine crisis. This a result of eastern European OSB producers redirecting some of their volumes to western Europe because of Russian supply chain logistics difficulties.

However, chipboard and MDF prices have continued to strengthen.

Mr Wijnbergen said the outlook for Norbord's European business was positive, with long-term fundamentals remaining favourable for OSB capacity expansion. Norbord is currently evaluating whether to expand capacity at either its Inverness or Genk plants.

"We have advanced on a number of fronts in developing our plans to grow Norbord's production volume, but have yet to make a final decision," he added.

Norbord Inc's chief financial officer, Robin Lampard, told TTJ that the group's plans to increase OSB capacity represented the largest-ever investment for the company in Europe.

Average panel prices in Europe remained unchanged from the first quarter and were 2% ahead on a year ago.

Q2 shipments were 3% down on a year ago and 9% lower than Q1. First half shipments were 3% up on 2013.

The European mills operated at 105% of stated capacity in Q2, compared to 110% in Q1 and 100% a year ago.

Group-wide, Norbord recorded EBITDA of US$33m, although the company said the North American OSB market did not meet expectations because industry capacity restarts outpaced the recovery of US housing starts.