EUR 850.00 For Business Accounts Only

Morningstar | OSB Updated Star Rating from 03 Jun 2019

Norbord is the largest manufacturer of oriented strand board in North America, with more than 7.1 billion square feet of capacity throughout Canada and the Southeastern United States. This is the result of the all-stock acquisition of Ainsworth in 2015, which added 2.5 billion square feet of capacity. Norbord also has a smaller European panel segment, which can produce more than 2 billion square feet, including some that is allocated to particle board and medium density fiberboard. After seven lean years for residential construction, we expect favorable demographics, a tighter labor market, and looser mortgage availability to spur a mild improvement in homebuilding activity over the coming decade. We forecast starts to rise to roughly 1.4 million units in 2024 as demand rises and households form, which is in line with our forecast for a demographically sustainable long-term pace of about 1.4 million annually.In contrast with a stellar 2018, we expect EBITDA margins to remain lower than those seen recently. Despite our above-consensus forecast for homebuilding, there remains an overhang of available supply in North American panel markets. Although we think pricing will begin to improve beyond 2019 again, as homebuilding gradually climbs, we think recent peaks will not persist even when building crests. As housing activity wanes to midcycle levels, we expect margins to subsequently contract to roughly 20%. In Norbord’s Europe segment, we believe growth will be modest. While we think regional household formation will remain fairly slow due to an older population, market share gains should facilitate segment growth in the coming years. In contrast to North America, Europe remains underpenetrated by OSB--despite comparable durability and lower costs. We believe Norbord's capacity additions will feed a growing appetite for the material.