The signals macroeconomic markets are giving us are, at best, mixed. Muted alarms were sounded in the last week of January by the prospect of economic contraction in the U.S., what with preliminary gross domestic product (GDP) figures actually fading in 2012’s last quarter by one-10th of a percentage point, the first such backward steps since the first quarter of 2009, when all seemed doom and gloom.
More encouraging, though, were the tidings about U.S. housing starts; they soared 28% last year to 780,000, from 2011’s figure of 610,000. For December, the figure was a seasonally-adjusted 954,000, or 37% ahead of the same month in 2011. Both numbers caused pulses to quicken in the board rooms of wood panel products such as Toronto-based Norbord Inc. (T. NBD), which came out this week with heartening earnings figures from which investors should take courage.
The black ink generated by NBD last year came in $72 million. or $1.65 per share ($1.59 per share diluted), compared to red ink totaling $11 million, or $0.25 per share in 2011. To conclude calendar 2012, the company recorded earnings of $38 million or $0.86 per share ($0.76 per share diluted) in the fourth quarter of 2012 versus a loss of $9 million or $0.21 per share in the same quarter of 2011. All in all, pretty decent news!
Norbord is an international producer of wood-based panels with assets of $1.0 billion, and 13 plants in Canada, the United States, and Europe. The company specializes in Oriented Strand Board (OSB) in the United States, Canada and Europe, and Medium-Density Fibreboard (MDF), as particleboard and furniture for the European market.
Besides the jump in U.S. housing starts, the company also benefited from a significant improvement in North American OSB prices over the second half of the year -- from a February low of $188 per thousand square feet to finish the year at an annual high of $370. The firm also notes that North American OSB shipments were 8% higher in such a strong pricing environment
Norbord takes such good vibes from increased customer demand for OSB that it has announced plans to restart its curtailed mill in Jefferson, Texas by perhaps sometime this summer. The mill has been mothballed since the first quarter of 2009. NBD will invest approximately $10 million to bring the mill back into production.
"Norbord will continue," a press release this week enthused, "to monitor market conditions, but does not currently expect to restart its mills in Huguley, Alabama or Val-d'Or, Quebec in 2013."
The combination of U.S. jobs numbers and other favourable factors played into a 6.7% hike in Norbord’s stock price on February 1. The price reached $31.20 by midday, in the upper end of a 52-week range that peaked at $32.59 intraday the day before, prior to settling at the close below $30. The 52-week gulch was $9.82, in the middle of last February.
