25 March 2020 by jbchevrel
Norbord inc. will join the CDX HY s34 after being out since s25 included. They are an international wood-based panelboard producer. Their product line include wall and flooring panels, decking and roofing boards, as well as boards for shelving and furniture. They operate in the US & Canada (3/4 revenue) and also Europe (1/4 revenue). The company’s products are primarily used in the construction of new homes and the renovation and repair of existing structures. Products are primarily sold to major retail chains, contractor supply yards, and industrial users. They are public and their market cap is $1.7B. Their bonds (23s 27s) total C$1B ie ~$700M. The housing slowdown in North America due to the covid19 outbreak has added some uncertainty on NFCN’s wood-based panels business. They have a relatively healthy balance sheet, making them look like they’re capable of weathering this economic downturn. They had adjusted EBITDA margin of ~8% in 2018 and 2019. Before that the margin was more in 20-30% area and the Bloomberg consensus for 2021 still stands in that area. $300-400M EBITDA for $2B revenue. Beyond the covid19, some positives to note on NFCN is that customer inventory levels are reportedly very low, building conditions seem favorable because there hasn’t been a lot of bad weather in NA compared to previous year, and the outlook for housing remains solid 3m forward. They also have a plant in Scotland (UK). This new plant from Inverness will mostly target the UK market. Indeed, 70%+ of our European sales (1/4 total sales) are UK focused. That mill is also meant to meet rest of Europe growing demand. The pricing competition is fierce, though, and Home Depot has also been focused on growing their total volume sales in the products that NFCN does.