Mr. Peter Wijnbergen reports

NORBORD REPORTS SECOND QUARTER 2014 RESULTS; DECLARES QUARTERLY DIVIDEND

Norbord Inc. has released its financial results for the second quarter of 2014.

Financial references are in U.S. dollars unless otherwise indicated.

Second-quarter 2014 highlights:

• Earnings before interest, taxes, depreciation and amortization of $33-million;
• Earnings of $11-million or 20 cents per share diluted;
• North American shipments up 10 per cent year to date;
• Record quarterly European panel production; year-to-date shipments up 3 per cent;
• Norbord received APA's 2013 Safest Company Award;
• Declared quarterly dividend of 60 Canadian cents per share.

Norbord had EBITDA of $33-million in the second quarter of 2014 compared with $27-million in the first quarter of 2014 and $102-million in the second quarter of 2013. The year-over-year change is due to the exceptional North American OSB prices in the first half of 2013. North American operations generated EBITDA of $24-million in the quarter versus $17-million in the prior quarter and $92-million in the same quarter last year. European operations generated EBITDA of $12-million in the second quarters of both 2014 and 2013 versus $13-million in the prior quarter.

"In North America, homebuilding activity continues to improve. But the pace has been held back by labour availability and a lack of entry-level buyers and OSB prices have been disappointing," said Peter Wijnbergen, president and chief executive officer. "However, we are not discouraged. We always expected it would take time for OSB demand growth to absorb the additional capacity that has been ramping up since early 2013. At Norbord, demand from our key customers in all core segments -- new home construction, home improvement and industrial -- continues to grow, driving 10-per-cent-higher shipments so far this year. At the same time, our OSB cash production costs are declining due to improved productivity and lower raw material usages.

"European panel markets were a bit slower in the second quarter, reflecting a pullback from a particularly robust first quarter. Our business there performed well once again and our panel mills are operating at record production levels. I expect we will continue to generate solid results through the second half of the year."

Norbord recorded earnings of $11-million or 21 cents per share (20 cents per share diluted) in the second quarter of 2014 compared to $7-million or 13 cents per share (basic and diluted) in the prior quarter and $53-million or $1 per share (99 cents per share diluted) in the second quarter of 2013. There were no one-time items in either the current or comparative quarter earnings.

Market conditions

In North America, year-to-date U.S. housing starts were 6 per cent higher than the same period in 2013 and permits were 5 per cent higher. The consensus forecast from U.S. housing economists is continuing to decline and currently stands at 1.05 million starts in 2014, which would still be a 13-per-cent improvement over last year.

North American OSB prices were relatively stable and continued to trade in a tight range in the second quarter. The north-central benchmark averaged $219 per thousand square feet (seven-16ths-inch basis), unchanged from the previous quarter and down from $347 per thousand square feet in the same quarter last year. In the southeast region, where more than half of Norbord's North American capacity is located, benchmark prices averaged $199 per thousand square feet, compared to $193 per thousand square feet in the prior quarter and $313 per thousand square feet in the same quarter last year.

In Europe, panel markets slowed in the second quarter as strong demand on the Continent in the first quarter due to unseasonably mild and dry weather pulled homebuilding activity forward. Average panel prices held firm in the quarter, unchanged versus the prior quarter and 2 per cent higher than the same quarter last year.

Performance

In North America, Norbord's OSB shipments increased by 11 per cent versus the prior quarter, 12 per cent versus the same quarter last year and 10 per cent year to date, primarily due to higher demand from all customer segments.

The North American OSB mills produced at approximately 85 per cent of stated capacity (including the two curtailed mills in Huguley, Ala., and Val d'Or, Que.), compared to 80 per cent in the prior quarter and 75 per cent in the same quarter last year. The increase versus both comparative periods is due to improved mill productivity. The year-over-year improvement also reflects the additional volume from the Jefferson, Tex., mill, which restarted in the third quarter of 2013.

Norbord's North American OSB cash production costs per unit (before mill profit share) decreased by 4 per cent versus both the prior quarter and the same quarter last year. Lower raw material usages and higher production volume more than offset higher raw material prices. Excluding the impact of higher raw material prices, unit costs decreased by 6 per cent year-over-year.

As previously announced, Norbord has begun rebuilding the press line at the curtailed Huguley, Ala., mill to prepare it for restart. The company has not set a restart date and will do so only when it is sufficiently clear that customers require more product. Norbord does not currently expect to restart its curtailed mill in Val d'Or, Que., in 2014, but will continue to monitor market conditions.

In Europe, Norbord's shipments increased 3 per cent year to date, but were 9 per cent lower versus the prior quarter and 3 per cent lower than the same quarter last year. The company's panel mills achieved a second consecutive quarterly production record. The European mills produced at approximately 105 per cent of stated capacity in the quarter, compared to 110 per cent in the prior quarter and 100 per cent in the same quarter last year.

Norbord's mills delivered margin improvement program gains of $6-million in the first half of 2014 from a richer value-added product mix, improved productivity, lower raw material usages, lower labour and maintenance costs and the timing of maintenance shuts.

Capital investments totalled $42-million year to date and the full-year target remains at $65-million. This year's capex target includes the rebuild of the wood-handling end at the Joanna, S.C., mill and a continuation of strategic investments across the company's other mills to improve productivity and reduce manufacturing costs. It also includes approximately $10-million for preliminary work to rebuild the press line at the mothballed Huguley, Ala., mill. Further spending to prepare this mill for restart has been deferred to 2015.

Operating working capital was $96-million compared to $93-million in the prior quarter and $86-million in the prior year. Working capital increased year over year due to the foreign exchange translation impact of a stronger British pound relative to the U.S. dollar, as well as higher inventory and maintenance supplies on hand for annual maintenance shuts planned for the third quarter.

At quarter-end, Norbord had unutilized liquidity of $425-million, consisting of $83-million in cash and $342-million in unused credit lines. The company's tangible net worth was $453-million and net debt to total capitalization on a book basis was 44 per cent. Both ratios remain well within bank covenants.

Dividend

The board of directors declared a quarterly dividend of 60 Canadian cents per common share, payable on Sept. 21, 2014, to shareholders of record on Sept. 1, 2014.

As previously announced, the board expects to maintain the quarterly dividend at this level for the remainder of 2014 ($2.40 (Canadian) per share annualized). This reflects the company's positive outlook on the longer-term housing recovery and panel demand in its core North American and European markets.

Additional information

Norbord's second-quarter 2014 letter to shareholders, news release, management's discussion and analysis, consolidated unaudited interim financial statements and notes to the financial statements have been filed on SEDAR, and are available in the investor section of the company's website. Shareholders are encouraged to read this material.

Conference call

Norbord will hold a conference call for analysts and institutional investors on Tuesday, July 29, 2014, at 11 a.m. ET. The call will be broadcast live over the Internet. A replay number will be available approximately one hour after completion of the call and will be accessible until Aug. 27, 2014, by dialling 1-888-203-1112 or 647-436-0148. The passcode is 5610602. Audio playback and a written transcript will be available on the Norbord website.

An accompanying presentation will be available in the investors/conference call section of the company's website prior to the start of the call.

Mr. Wijnbergen further said: "The pace of improvement in the North American OSB market did not meet my expectations this quarter. The ramp-up of restarted industry capacity has so far outpaced the recovery in U.S. housing starts. Even so, our EBITDA of $33-million was higher than the previous quarter as our mills ran more efficiently. Our manufacturing costs declined and we generated meaningful MIP gains. In fact, our Cordele line 1, Bemidji, La Sarre and Joanna mills all set quarterly production records. Our year-to-date North American sales volume is up by 10 per cent as Norbord experienced strong demand growth from our key customers across all segments -- new home construction, home improvement and industrial.

"Many of you may be concerned about the disappointing U.S. housing starts data recently released for June. But the official statistics do not seem to reflect what we are seeing on the front lines of the housing market. Experts on the ground still report improving single-family construction in all major markets, including the southeast, our primary market. More importantly, permits, an indication of future construction activity, continue to rise each month. With sluggish numbers in the first six months of the year, U.S. housing data will probably come in closer to one million in 2014, still a healthy year-over-year growth of 8 per cent. We see stable OSB prices continuing over the next few months while industry supply is gradually absorbed by improving demand. In response to this slower market environment, we are moving some of our annual maintenance shuts ahead into the third quarter.

"I remain optimistic about the robust longer-term recovery. Looking ahead, U.S. housing economists are forecasting 1.25 million starts in 2015. With new home construction advancing at this pace, all the current operating industry capacity should be fully absorbed next year.

"I'm happy to report that our margin improvement program is back on track. With mill productivity up and manufacturing costs down, we achieved total gains of $6-million in the first half of this year. We expect this improvement to accelerate over the coming quarters as some of our more significant capital investments start to pay back.

"Norbord's safety performance this year has been outstanding. Six mills are injury-free and our year-to-date safety record shows a 45-per-cent improvement over the same period last year. Recognizing our industry-leading performance, the APA -- the Engineered Wood Association -- presented us with the 2013 Safest Company Award. And in Europe, our South Molton, England, mill received the Royal Society for the Prevention of Accidents Gold Award for the second year in a row.

"In Europe, all of our operations continue to run exceptionally well. The panel mills achieved another production record for the second consecutive quarter. Panel markets eased somewhat in the second quarter, reflecting a pullback from the particularly robust first quarter. Still, first-half shipments continue to show an improvement over last year. Not surprisingly, the crisis in the Ukraine has negatively impacted Eastern European demand. Some OSB production from Eastern Europe has been redirected into our markets in the West and as a result, OSB prices were softer than the first quarter. We expect they will keep moving sideways for the remainder of the year. Particleboard and MDF prices, on the other hand, have continued to strengthen, reflecting our improved product mix.

"The outlook for our European business is positive. Economic indicators are solid in both the U.K. and our key Continental markets. Long-term market fundamentals remain favourable for OSB capacity expansion. We have advanced on a number of fronts in developing our plans to grow Norbord's production volume, but have yet to make a final decision.

"So far this year we have invested $42-million in capital projects. We continue to work on completing the Joanna, S.C., woodroom and Cordele, Ga., fines screening projects, with commissioning scheduled to be complete by the end of this year. These projects will improve reliability, increase productivity and reduce our raw material use. At our Huguley, Ala., mill, the press rebuild is progressing, but we have slowed the pace of this work due to market conditions. As a result, some of the capital allocated to Huguley has now shifted from 2014 into 2015. No restart decision has been made and will be dictated by customer demand.

"In closing, I want to thank you all for your ongoing support. Like you, I am disappointed by our share price performance in the past month. However, I am confident that Norbord will continue to deliver shareholder value in the quarters and years ahead. Our strategy of growing our OSB business, continuously improving the efficiency of our North American capacity and building on our success in Europe enables us to navigate through volatile markets. We are in a strong position to benefit from the ongoing housing recovery."

                               CONSOLIDATED STATEMENTS OF EARNINGS
                 (in millions of U.S. dollars, except per share information)

                                                         Second quarter ended    Six months ended
                                                             June 28, June 29,  June 28,  June 29,
                                                                 2014    2013      2014      2013

Sales                                                        $    311  $  365  $    614  $    730
Cost of sales                                                    (275)   (261)     (548)     (510)
General and administrative expenses                                (3)     (2)       (6)       (7)
                                                             --------- ------- --------- ---------
Earnings before finance costs, income tax and depreciation         33     102        60       213
Finance costs                                                      (7)     (9)      (15)      (18)
                                                             --------- ------- --------- ---------
Earnings before income tax and depreciation                        26      93        45       195
Depreciation                                                      (15)    (15)      (28)      (28)
Income tax (expense) recovery                                       -     (25)        1       (47)
                                                             --------- ------- --------- ---------
Earnings                                                     $     11  $   53  $     18  $    120
                                                             ========= ======= ========= =========
Earnings per common share
Basic                                                        $   0.21  $ 1.00  $   0.34  $   2.46
Diluted                                                          0.20    0.99      0.33      2.26

We seek Safe Harbor.