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Edited Transcript of OSB.TO earnings conference call or presentation 5-Feb-20 4:00pm GMT

Q4 2019 Norbord Inc Earnings Call

TORONTO Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Norbord Inc earnings conference call or presentation Wednesday, February 5, 2020 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Peter C. Wijnbergen

Norbord Inc. - President, CEO & Director

* Robin E. Lampard

Norbord Inc. - Senior VP & CFO

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Conference Call Participants

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* Andrew M. Kuske

Crédit Suisse AG, Research Division - MD, Head of Canadian Equity Research, and Global Co-ordinator for Infrastructure Research

* John Plimpton Babcock

BofA Merrill Lynch, Research Division - Associate

* Mark Adam Weintraub

Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst

* Paul C. Quinn

RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst

* Sean Steuart

TD Securities Equity Research - Research Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to Norbord, Inc.'s fourth quarter and year-end earnings conference call. As a reminder, today's call is being recorded and webcast on Norbord's website at www.norbord.com. Norbord's discussion today may include certain projections and forward-looking statements regarding Norbord's business, future actions and expected results. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risks, please see the caution regarding forward-looking information statement in Norbord's February 4, 2020, annual information form and the cautionary statement contained in the Forward-Looking Statements section of Norbord's management's discussion and analysis dated February 4, 2020.

And now I'll turn the call over to Peter Wijnbergen, President and Chief Executive Officer. Please go ahead, sir.

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [2]

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Thank you, Bryce, and good morning, everyone. Welcome to our Q4 and year-end 2019 conference call. I'm joined today by Robin Lampard, our CFO; Heather Colpitts, our Director of Corporate Affairs; and Robert Winslow, our Vice President of Investor Relations and Corporate Development. This morning, I'll comment briefly on 2019 and the markets. Then, Robin will review the financials before we share our outlook for 2020 and take your questions.

2019 was a challenging year for Norbord. Our financial results were disappointing as U.S. housing activity lacked prior year levels through most of the year, only turning positive in November, and this slowdown was reflected in lower North American OSB demand. Further, the slowing industrial sector in Germany put downward pressure on the very high panel prices we have been enjoying in our European markets.

In Q4, we delivered adjusted EBITDA of $27 million and an adjusted loss of $0.13 per share, leaving full year results at $138 million and a $0.37 loss per share, respectively. In North America, we took decisive action during the year to align our production with weaker housing-related demand, indefinitely curtailing our 100 Mile House BC mill and Line 1 at our Georgia -- at our Cordele, Georgia mill. When added to the maintenance work, we typically schedule across our mills during the slower winter months. This resulted in 222 mill days of downtime in Q4, which represented almost 20% of our available production days. This compares with 70 mill days of downtime in Q3 and 131 days in Q4 of 2018. Now on the plus side, the consolidation of downtime allowed us to more efficiently allocate production volumes as the year progressed, resulting in record annual production of 2 mills and lower unit manufacturing costs.

Our European business had a solid year even as power prices weakened, generating adjusted EBITDA of $64 million, about 50% above our 15-year average and representing the third best ever year for this segment of our business. Our experience says that there is a much stronger link between crisis and cost in Europe. With prices having rolled over from the peak, we expect the wood cost to follow suit and have already seen some improvement during Q4. We have also seen, in the past, that lower OSB prices in Europe drive faster substitution against imported plywood. We are in the early innings of ramping up production at our expanded Inverness, Scotland mill and have an estimated 4-year pipeline of growth ahead of us to meet increased customer demand.

I'll talk about our outlook in a moment, but first, Robin, over to you for some financial comments.

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [3]

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Thanks, Peter. This morning, I'll provide some quick additional color on our Q4 North American segment results as well as some guidance on a few items, I know you would be looking to update in your 2020 model. As you have seen, our results were lower than the consensus this quarter. As Peter already highlighted, we curtailed significant production volume in Q4. Combined with the 6 fewer fiscal days, this resulted in 17% lower year-over-year shipping volume in North America. Since our 2019 fiscal quarter reset is now behind us, thankfully we won't have to talk about fiscal day count differences for the next several years.

Looking forward to 2020, as a reminder, we typically have significant seasonal cash outflows in Q1. This year, some of the cash outflow from our usual seasonal work

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ongoing CapEx investments and the $12 million dividend the Board just declared will be offset by a significant tax refund we are expecting to receive. So I would point you to the taxes receivable number on our balance sheet at year-end.

In terms of 2020 CapEx, I'll confirm the guidance we gave last quarter with a pared back budget of $100 million. This will be allocated across our mills for normal maintenance work as well as to reduce manufacturing costs and ensure we can continue to support growth in our specialty product sales. This budget includes the completion of the Inverness Phase 2 investment as well as continued investment at our Chambord, Quebec mill in preparation for an eventual restart. We have not yet made a restart decision in Chambord, and we will only do so when it is sufficiently clear that customers require more products.

We continued to take a balanced approach to capital allocation in 2019. We reinvested more than $140 million in our mills and returned $130 million in cash to our shareholders through a combination of dividends and share buybacks, including $5 million during Q4 under our renewed normal course issuer bid. As of today, we have 3.8 million shares of remaining room under [NCIB], and we will continue to look for opportunities to buy back stock when the price is significantly below our view of intrinsic value.

Our balance sheet remains solid as we head into 2020. You'll recall that last summer, we termed out our 2020 senior secured notes to 2027 and upsized the principal by $110 million to increase our liquidity. We finished 2019 with $272 million of liquidity and a debt-to-cap ratio of 40%. This remains well below our revolver covenants. We remain committed to returning excess cash to shareholders, and our variable dividend policy gives us the flexibility to prudently balance capital allocation decisions with the inherent cyclicality of our business. As you will have seen, our Board maintained the variable dividend at CAD 0.20 per share for the quarter, payable on March 23.

And with that, back to you, Peter.

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [4]

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Thank you, Robin. So looking ahead, underlying U.S. housing market fundamentals are encouraging. U.S. housing starts continue to improve with experts' current forecasts averaging 1.33 million starts for 2020, which represents a 3% increase over 2019. Further, the seasonally adjusted annual pace of permits, the more forward-looking indicator, was up nearly 6% year-over-year to 1.42 million in the

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Builders have seen early success adapting their offerings, to growing demand for lower-cost entry-level homes. Hence, mortgage interest rates remain near multi-year lows. These factors are expected to positively impact housing activity and OSB demand as we enter the prime spring building season.

And as of yesterday, Random Lengths' regional prices are up between 10% and 18% over Q4 average levels. We have significant upside potential in an improving housing market, and I'm increasingly encouraged by the outlook.

Outside of new home construction, we see continued solid growth in other OSB end users. Our Big Box volumes remain strong, and we continue to focus on our ambitious growth targets for industrial products.

In Europe, our panel business is poised for -- near or above average results as the

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should start to offset declining panel prices and the OSB ramp up -- will continue to ramp up Inverness to meet growing OSB demand. Combined with our solid balance sheet and liquidity, we believe Norbord is well positioned for the year ahead.

And with that, we'll move on to questions. So I'll turn things back to the operator, who'll open up the lines.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from John Babcock with Bank of America.

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John Plimpton Babcock, BofA Merrill Lynch, Research Division - Associate [2]

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I guess I just want to start out. You mentioned that there were 222 mill down days during the quarter. Could you give us a sense as to whether that was any more weighted towards the front- or back-half of the quarter?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [3]

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John, no. I mean, we -- for...

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [4]

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I mean, sorry -- Peter, I was just trying to say the one thing that we -- that is obvious is that we closed down Cordele Line 1 halfway through the quarter. So obviously, that was fairly weighted into the back-half of the quarter. And then typically, our maintenance shuts would be more weighted towards the end of the quarter.

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John Plimpton Babcock, BofA Merrill Lynch, Research Division - Associate [5]

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Okay. And also -- and then also with regards to OSB prices, I was wondering if you could kind of provide your own commentary on what's driving prices lately if this is kind of more demand driven or if you're also seeing kind of tightness on the supply side? I mean, generally, wanted to get your views on it?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [6]

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Yes. Well, I mean, obviously, it's difficult for me to comment on the supply side other than what I

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operations. But we have talked in the past over about the fact that we have seen continued very low inventory levels throughout the system, really, for most of last year. We think that, that remains unchanged. I think building conditions have been very favorable because we haven't had a lot of bad weather compared to previous years, at least so far this year or even into the fall. And so -- and that, combined with, I think, very strong outlook for housing has meant that demand has been good. And so we're sort of seeing that sort of tick through the supply chain, I think.

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John Plimpton Babcock, BofA Merrill Lynch, Research Division - Associate [7]

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And then with regards to Europe here quickly, I mean, it looked like shipments were down a fair bit during the quarter. Maybe I missed this from your commentary. But was that primarily demand driven or were there any issues at Inverness, which I know you had talked a little bit about last quarter, what can you kind of add to that?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [8]

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So I mean, in Europe, we have a little bit the same thing that we do here. We try to load in some downtime at year-end, this typically also a lot of our European customers take that sort of period around Christmas and New Year's off. That's sort of a much more baked in, I think, in Europe, than it is typically in North America. So there's always sort of a slow period for about a couple of weeks there around year-end. But beyond that, I wouldn't read too much else into it. Robin, you have...

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [9]

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I would also just remind you about the fiscal day count difference. So 6 fewer days in Q4 2019 versus Q4 2018. So that's about 6% right there.

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John Plimpton Babcock, BofA Merrill Lynch, Research Division - Associate [10]

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Okay. And are you seeing any signs of pricing turning the quarter in Europe?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [11]

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Well, it's early going in that sort of price adjustments. That really sort of started -- I think we started mentioning that in Q3 of last year. So far, we're pleased with the sort of the demand uptick that we're seeing, which we typically would sort of expect after that Christmas break. So I'm encouraged by the outlook at the moment.

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Operator [12]

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(Operator Instructions) We'll take our next question from Paul Quinn with RBC Capital Markets.

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Paul C. Quinn, RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst [13]

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Hey, I thought I'd start in Europe here. Peter, you mentioned that the ramp at Inverness is going to be 4 years. Which specific markets are you targeting with that extra volume? And then the lumber guys you are all talking about the European spruce bark beetle and the impacts there. Just wondering if that's lowered cost for some of your European competitors, and that might be a little bit of a headwind for that extra volume from Inverness?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [14]

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Good question, yes. So first of all, I think we have -- as we have mentioned in the past, more than 70% of our European sales are focused on the U.K. That is also the case for the bulk of the additional volume that we expect to produce from our Inverness mill. At the same time, that mill is now capable of supporting growing demand on the continents -- in our typical continental markets. I would say that there's definitely the pressure in the middle of Europe as a result of this pine beetle thing. I don't know. Can you still hear us?

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Paul C. Quinn, RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst [15]

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Yes.

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [16]

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Okay, sorry. There's some weird electronic noise.

And what we have seen so far is harvest levels in Central Europe that are more than double what they typically are as people trying to cut that timber before it is destroyed. And you can see that has had an impact on cost of that wood and availability, plenty of availability. And that probably has led to some downward price movements in the -- that's probably contributed to that downward price movement we have seen on the continent for our products here over the last 6 months. On the flip side, certainly we've seen -- we're not in the middle of that market, but we are sort of on that fringe with our Belgium mill, for example, in Genk. And so we started to see wood cost trending down there as well. The flip side is that, that harvest volume that is sort of so significant will clearly declined within probably about a year. And so over the long-term or longer term, I would say, that there will be a significant constraint on wood supply in Central Europe and that will have the opposite effect.

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Paul C. Quinn, RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst [17]

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So it sounds like a minor headwind in the short term, but very favorable in the medium and long term?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [18]

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Yes, that's certainly how I'm thinking about it right now.

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Paul C. Quinn, RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst [19]

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Okay. And then on your CapEx plans, you mentioned investments to support production of specialty products and export. Just wondering if you can help us understand what some of those investments would include?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [20]

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Yes, I mean, we have talked recently -- over the last year, we have talked about investments in our finishing ends. so in particular, one thing I mentioned was that last quarter and the one before, it was a state-of-the-art sanding line that we just completed in our Alabama mill. It's those kind of investments that we will continue to focus on as we grow into that better understanding of what industrial customers require. And it's a -- it opens up a new avenue of potential sales for people who are looking at very tightly controlled thickness variants as well as much better surface quality.

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Paul C. Quinn, RBC Capital Markets, Research Division - Director of Paper and Forest Products & Paper and Forest Products Analyst [21]

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Okay. Then just lastly, just on repair/remodel shipments were up 19% year-over-year, just what's driving that strength?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [22]

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That's an interesting question, right, because I think overall, Home Depot and Lowe's are not showing dramatic -- total sales increase is certainly not 19%. We are always aware that there is some price sensitivity at the retail level. So OSB prices, as you know, last year were particularly low. And as a result, there's probably some extra volume that gets sold because OSB is probably -- it was probably one of the low-priced panels in the store. But even if I compare our sales last year to 2017, we're still seeing significant growth there, probably not quite 19% but more or like 10% or slightly over 10% in that comparison. And I think, particular Home Depot has been very focused on growing their total volume sales in ours and other wood related to our building material-related products as they try to penetrate more strongly with the larger renovating retailer.

Yes. Sorry, Paul, I meant, renovating contractor and not retailer, yes.

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Operator [23]

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We'll take our next question from Sean Steuart with TD Securities.

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Sean Steuart, TD Securities Equity Research - Research Analyst [24]

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Couple of questions. It feels like North American or U.S. demand, in particular, is picking up more quickly now, and question with respect to capacity management decisions. In the past, you've referenced capacity additions and your thinking around that are more closely tied to, I guess, underlying demand trends and then OSB prices. Any updated context on what type of demand backdrop you would need to see to restart Chambord? And I guess, potentially Line 1 at Cordele as well and thoughts on sequencing of those potential restarts?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [25]

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Yes. Thank you, Sean. I'm glad that we're actually able to talk about this challenge now rather than the other way around. But we've typically talked about needing 6 months lead time to start a curtailed mill, and that remains the case for both Chambord and 100 Mile House. So it's really the 2021 demand outlook that we're looking at to make that decision. We could be more nimble with the Georgia Line 1 operation because Line 2 is still fully operational and the management team as a result is still in place. So if we see demand sustained above expectations this year, that is a more short-term option. However, the labor market in the U.S. South remains very tight. And we know that all or at least most of the 50-plus employees we had to lay off have found other employment.

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Sean Steuart, TD Securities Equity Research - Research Analyst [26]

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Okay. A question on input prices. You gave some context in Europe. But in the quarter, it looks like input prices were a modest headwind, both year-over-year and quarter-over-quarter. Any detail you can give us with respect to cost trends in North America early in 2020?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [27]

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Yes. I mean, it's only been a few weeks so far, Sean. But if you look at last year, in the variance tables in the MD&A, you can see the numbers are pretty small on the input price front at that consolidated level. So we really haven't seen a lot of movement one way or another in the recent few quarters. So I guess, your guess is as good as mine going forward, but it really hasn't been much of a factor.

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [28]

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But I would add, in North America, we've really, on wood costs, our most important input price, we've thought for years now about the fact that those prices on the -- in the aggregate have remained fairly even. And although we will continue to see fluctuations here and there, I don't -- we don't, at the moment, anyway support a significant change there.

The resin prices, which is sort of our second most important cost input, have been fairly flat. They're indirectly driven by oil prices through benzene, I think, in particular, and benzene prices have been fairly weak or relatively weak. So there's no forecast of any significant move there. The one thing to look for is long-term, the impact of what happens as a result of this whole quarantining for lack of a better description of what's happening in China and as a result of this virus. Obviously, none of our suppliers come from there, but there is -- that has traditionally been a significant source of demand for resin and all sort of other products, and that maybe will slow down there temporarily anyways here in the short term.

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Operator [29]

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We'll take our next question from Mark Weintraub with Seaport.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [30]

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And I apologize, I missed the first couple of minutes. But the -- you mentioned the fewer fiscal days, so I was just trying to understand so if shipments were down, 17% is -- can we attribute 6% of that to just fewer fiscal days and so on a more apples-to-apples basis, it would be down 11% or is that not, say, the right way?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [31]

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Yes, that's exactly the right way to think about it, Mark.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [32]

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Okay, good. And so presumably, production also on an apples-to-apples basis was down somewhere on the order of 11% for you?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [33]

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Yes, that's right. I don't have the number absolutely. Anyway, yes, they always move almost exactly as Mark, stated.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [34]

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Okay. And you referenced in your commentary that the APA pointed to an 83% operating rate for OSB during 2019. Do you happen to know if though -- if the capacity number used there is adjusted for the closures that took place towards the end of the year?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [35]

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No. So that would have taken all mills that started out the year running as the denominator and taken the production volume over that denominator.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [36]

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Okay, very good. So using the bigger capacity number effectively?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [37]

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Yes, that's right. So basically, everything exception on board would be the way to think about that.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [38]

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Okay, great. And then it's been notable in the last couple weeks that Western delivered prices, in particular, have really been moving, and I think that there have also been some changes in the go-to-market strategies in Western markets, delivered markets. Can you maybe help us a little bit understand what might be happening in those markets, specifically?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [39]

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Yes, that's a good technical question, Mark. So we have sort of mentioned, I think, in the past -- in past conversations that we have been concerned about the relationship between these Western delivered print numbers or randomized reported numbers versus the either Southwest or Western Canadian mill levels, including freight. And we've always -- we've recently sort of been concerned around there seems to be a very significant difference, at least the way sort of what we experienced in terms of freight rates plus our supplying mill nets. And so we have indicated to our customers that this is not sustainable. We don't see that as sustainable and we need to find different ways to come through a supply arrangement for that part of the market. And I don't know, of course, how that is interpreted or how Random Lengths reports on that kind of stuff. But it would surely the movements, at least on a short-term basis, would suggest that maybe the market is more closely reflecting what we see as the reality for our shipments into that region.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [40]

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And in order of magnitude, what percentage of your product would fall under kind of the delivered Western market?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [41]

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No I don't know for sure. I have to get back to you on that. But let's say, in principle, that market we supply out of our Alberta mills and a little bit out of our Southwest mills, frankly. But exactly how much of the total, I don't know, I'll find.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [42]

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And then lastly, just trying to understand a little bit more on the European spruce. My understanding is that the OSB business takes share during these types of environments and presumably from plywood. So, I guess, the first question is whether or not -- is that European spruce usable for the manufacture of plywood? You have...

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [43]

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There's not a significant, if any, plywood industry -- domestic plywood industry, at least on the continent, using softwood. So I think the answer there, I can say -- fairly safely say there is none. So -- and the big challenge is that wood needs to be consumed in a reasonably fast time frame. There's the ability to store some of it in lakes and behind hydro dams, but that is very limited. So the expectation is -- our expectation is that all operations that can consume this wood are running as hard as they can right now to consume as much as possible. There's some volume that is being stored, but there will probably also be a significant volume that will never be usable from a commercial perspective.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [44]

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And so I think that gets right to the heart of the question. So basically, the -- are all these mills already running full out that, that could be using the European spruce to your knowledge in OSB?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [45]

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Well, on the OSB side, as best as we can tell, which like we have even less information in Europe than we have over here in terms of what our competitors do with their operations. But as best as we can tell from the available shipment information, mills are running flat out, but there's other places where spruce can be -- or wood is being consumed whether that is pulp mills or

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wood pellets for heat energy. These are all industries, they've been also consume this spruce in the short term. And I would assume that all of them are doing their very best to try to deal with this crisis.

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Operator [46]

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(Operator Instructions) We'll take our next question from Andrew Kuske with Crédit Suisse.

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Andrew M. Kuske, Crédit Suisse AG, Research Division - MD, Head of Canadian Equity Research, and Global Co-ordinator for Infrastructure Research [47]

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Maybe just continuing on the European trend and the fiber pricing pressure that's happening there. Clearly, there has been a number of knock on effects. But do you see this effectively being a positive where maybe for the next year or 2, it effectively stimulates greater use of OSB and it becomes more of a permanent staple in the ecosystem? And then longer term, that -- you see that is being much more beneficial for you?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [48]

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Andrew, that's -- at least historically, that has been the trend. So as we are for whatever reason in period of price -- relative price weakness, we see -- we've seen substitution accelerate and mostly, it remains there after -- what we have seen, at least historically, it remains there afterwards. So once people are converted over to OSB and the shorter domestic supply chain rather than having to rely on imported stuff from Asia or South America or North America, no, they don't convert back.

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Andrew M. Kuske, Crédit Suisse AG, Research Division - MD, Head of Canadian Equity Research, and Global Co-ordinator for Infrastructure Research [49]

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Okay. And then sticking with Europe. I guess from a Brexit standpoint, for the next, I guess, it's 10 or 11 months, it's really status quo. And then are you exposed to new agreements at that point or maybe just some color on background or backdrop that you face on a go-forward basis for your mills in the U.K.?

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [50]

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Yes, that's a good question. Thank you. So there's obviously many facets to that question, but just focusing on our own operations. First, 70% of our sales remain in the U.K. and most of our non-U. K. sales are supplied by our mill in Belgium, which is -- which will remain in the European Union, at least we assume. And so then there is obviously some volume out of Inverness that moves overseas. We don't expect that to be significantly hindered going forward. And then there's the secondary input of what happens, the U.K. is a significant net importer of wood products, including panels, from primarily the European Union. And so what happens to that competitive pressure that we get from those products. So far, the impact of Brexit has been a 10% to 20% lower pound versus the euro, which is probably the important factor in that competitive position. We have not seen that sort of change significantly now that Brexit is official. No -- time will tell whether over time as trade relations will find their new avenue, whether that will change, but that's probably, for us, in the near term, we don't see a significant change there.

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Andrew M. Kuske, Crédit Suisse AG, Research Division - MD, Head of Canadian Equity Research, and Global Co-ordinator for Infrastructure Research [51]

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Okay. That's very helpful. And then one final question, if I may, and it's really to Robin, and it's just on the share buyback. How do you think about intrinsic value of the shares when you're making the buyback decisions versus, say, that the level of the variable dividend?

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Robin E. Lampard, Norbord Inc. - Senior VP & CFO [52]

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Okay. Well, I mean -- so in terms of thinking about the attractiveness of share buyback, I mean, we're obviously looking at our expectations of the cash flow that the business can generate over the long-term on a discounted basis. But, I guess, the simple thing to do is to point you to the activity we've done under our 2 NCIBs so far. And under those, we were buying back at a range of, call it, in Canadian dollar terms, CAD 0.33 to the CAD 0.37 a share. So that, I would just put as a fact.

And in terms of the variable dividend versus buying back stock, I mean, the best illustration is to point to what we did in 2018, 2019. We distributed significant cash through that variable dividend in 2018 when our stock price was trading at its 52-week high. It didn't make sense for us to buy back stock then. But when the stock corrected in response to the slowdown in U.S. home building, and that's when we became much more aggressive under the NCIB. So that, I think, is a good illustration of how we think about that relative -- the allocation of capital between those 2 options for returning cash to shareholders.

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Operator [53]

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It appears there are no further questions. Mr. Wijnbergen, I'd like to turn the conference back to you for any additional or closing remarks.

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Peter C. Wijnbergen, Norbord Inc. - President, CEO & Director [54]

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Thank you, Bryce. As always, Robin, Heather, Robert and I are available to respond to further questions. Thank you all for participating today, and I look forward to reporting on our continued progress next quarter. Have a good day.

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Operator [55]

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This concludes today's call. Thank you for your participation. You may now disconnect.