Norbord, Inc. (NYSE:OSB) Q2 2019 Earnings Conference Call - Final Transcript

Aug 01, 2019 • 11:00 am ET

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Norbord, Inc. (NYSE:OSB) Q2 2019 Earnings Conference Call - Final Transcript

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Operator
Operator

Good day everyone and welcome to Norbord Incorporate's Second Quarter Earnings 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 risk, and future results may differ materially. For further information on known risks, please see the caution regarding forward-looking information statement in Norbord's January 31, 2019 Annual Information form and the cautionary statement contained in the Forward-Looking Statement's section of Norbord's Management's Discussion and Analysis, dated July 31 2019. And now I'll turn the call over to Peter Wijnbergen, President and Chief Executive Officer. Please go ahead, sir.

Executive
Peter C. Wijnbergen

Thank you, Jonathan. And good morning, everyone. Welcome to our second quarter 2019 conference call. I'm joined today by Robin Lampard, our CFO and Heather Colpitts, our Senior Manager of Corporate Affairs.

This morning I'll briefly summarize a few points about our Q2 results and outlook before taking your questions.

Our second-quarter results are disappointing, especially when compared to our record second quarter last year. US housing market pullback that began last Fall continued into the second quarter, ongoing affordability concerns and persistent record-breaking wet weather led to poor building conditions in many North American regions.

This held back OSB results for demand and as a result benchmark prices were down 11% versus the first quarter. For the third quarter in a row, we took extensive downtime across our North American mills another 77 mill days in the second quarter, to ensure we only produce what we could sell.

This obviously negatively impacted our production volumes and manufacturing costs. However, despite taking the same number of mill days down in the second quarter compared to Q1, we were able to lower our unit cost by 6% by operating more efficiently.

We also got some help from a modest 5% reduction in resin prices. As we announced back in June we will indefinitely curtail our 100 Mile House Mill in British Columbia starting later this month. This was a difficult decision but necessary for our business as the combination of wood supply shortage and high wood prices do not support the economic operations of the mill.

We have a first-class team in 100 Mile House and this decision was a no way of reflection of the quality or the capability of our employees. They worked tirelessly to avoid exactly this outcome and we thank them all for their efforts and commitments. It's a testament to their professionalism and dedication but the mill continues to run well even as we utilize the remaining wood we have on the side.

We are already in the process of transitioning manufacturing to our two lower cost mills in Alberta. Our capacity at broad Grande Prairie and higher level will enable us to meet current and future customer demand, including for the Japanese market.

Looking ahead, we are starting to see signs of improvement in North