Norbord, Inc. (NYSE:OSB)
Q2 2016 Results Earnings Conference Call
July 26, 2016, 11:00 am ET
Heather Colpitts - Senior Manager, Corporate Affairs
Peter Wijnbergen - President & CEO
Robin Lampard - SVP & CFO
Sean Steuart - TD Securities
Hamir Patel - CIBC Capital Markets
Paul Quinn - RBC Capital Markets
James Armstrong - Vertical Research Partners
Bill Hoffman - RBC Capital Markets
David Quezada - Raymond James
Andrew Kuske - Credit Suisse
Benoit Laprade - Scotia Bank
Ketan Mamtora - BMO Capital Markets
Good day, everyone and welcome to Norbord, Inc.'s Second Quarter Earnings Conference 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 risks 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 27, 2016 Annual Information Form and the cautionary statement contained in the forward-looking statements section of Norbord’s Management’s Discussion and Analysis dated July 25, 2016.
And now I'll turn the call over to Mr. Peter Wijnbergen, President and Chief Executive Officer. Please go ahead sir.
Thank you, Nick, and good afternoon, everyone. Welcome to our second quarter 2016 conference call. I am joined today by Robin Lampard, our CFO and Heather Colpitts our Senior Manager of Corporate Affairs.
As usual I'll start off with a few comments on the quarter and I will provide our perspective on the potential impact of the U.K. Brexit referendum. Before I turn the call over to Robin to review our financial performance and operating numbers.
North American OSB demand and prices have been strengthening and our adjusted EBITDA improved for the sixth consecutive quarter to $94 million, which is more than a 50% increase versus the previous quarter and almost five times higher than the same quarter last year.
Our sales volumes were up to serve this growing demand, supported by continued strong operational performance at our mills and despite losing almost three weeks of production from the fire at high level.
Our improved mill productivity help lower our unit's manufacturing cost by 4% year-over-year and year-to-date we've generated margin improvements program gains of $14 million.
I am very pleased with the continued progress we've made on realizing the benefits of our merger with Ainsworth. The companies are fully integrated today and we've captured $39 million in cumulative annualized synergies, which is almost 90% of our $45 million target and I remain confident we will deliver on the full target by yearend.
In addition to these synergies, the merger has enabled us for a significant cash outlays we would otherwise have had to incur. We estimate this capital and operating cost avoidance at $18 million, which includes transferring the second unused Grand Prairie press to Inverness, maintaining lower inventory levels throughout the system and optimizing the timing of supplier payments.
The second quarter was not without its challenges however. For the past decade, we have been making step changes towards world-class safety performance, but two week ago we were tragically reminded that we can never let up on this focus. One of our long term serving colleagues employs was fatally injured during a routine maintenance shut down.
This was divesting news for everyone at Norbord and our thoughts and sympathies are with our colleagues' family at this difficult time. And secondly, I would like to acknowledge our team in High Level, Alberta as well as the local authorities and community at large, following the fire our mill experienced in May.
Thanks to the effort of our employees, the first responders and many others, the fire was contained and everyone remained safe. On behalf of Norbord's and everyone at Norbord, I would like to thank the people of high level for their support.
Now regarding the U.K.'s Brexit referendum, I won't speculate on how the U.K.'s withdrawal from the EU will play out, but I will tell you what we think this development means for Norbord.
In the long term, the fundamentals of our business are unchanged. OSB represents only about 45% of structural panel consumption in Europe compared to well over 65% in North America and for the past several years, substitution of OSB for higher cost plywood has been driving double digit demand growth.
Further, there is a chronic undersupply of new housing in the U.K. and the government there has been taking steps to make more land available for development. We obviously knew the referendum was coming when we decided to reinvest in modernizing our Inverness mill and assess that whichever way the referendum went, this was a unique and low risk way of further strengthening our European business.
The benefits will be driven by significantly lowering the mill's manufacturing costs through the installation of larger scale modern press technology that has been sitting idle in Grand Prairie and the project is further underpinned by access to a growing and low cost wood basket in Scotland.
Now let's focus on the short term, the political uncertainty is weighing on the comp's drilling. The U.K. is a net panel board’s importing market and we're the largest domestic producer. So the weaker comps makes our panels more attractive than competing imports and in fact we've already seen a 15% hike in imported plywood cost being -- prices being recorded by some of the importers.
So the bottom line is don’t see our business being negatively impacted by the Brexit outcome.
Now Robin over to you to review the financials and after that we'll take your questions.
Thanks Peter. I'll make a few brief comments on our financial performance in the second quarter. A greater level of detail is always available in our MD&A and financial statements all of which are available on our website and summarized in the accompanying quarterly earnings presentation, which I will reference in my remarks.
I'll begin with a few comments regarding market. The U.S. housing market continues to recover at a gradual by steady pace. On Slide 4, you'll see that June year-to-date housing starts were up 7% versus the same period last year and more importantly for OSB demand, single family homebuilding activity was up 13%.
The seasonally adjusted annualized rate for June was 1.19 million starts. Housing economists are forecasting approximately 1.2 million starts for 2016, which would be an 8% increase over last year. We continue to hear that homebuilder labor shortages are constraining the pace of this recovery and we've been seeing about a 100,000 additional starts each year since the recession.
Moving to Slide 5, as you can see Q2 average benchmark prices in all our key North American regions were significantly higher both quarter-over-quarter and year-over-year.
Oversea prices increased rapidly during the month of May before pulling back in June and have been trending up against since then. As of last Friday, the North Central spot price was $306, the highest level in over three years.
In Europe, our core U.K. and German markets continue to show strong demand growth. Our second quarter average European panel prices were in line with those of previous quarter and same quarter last year.
Looking at the three panel products in making Europe, OSB prices were stable in the U.K. and continued to rise on the Continent. As you can see on Slide 6, average Continental OSB prices have now increased for four consecutive quarters.
MDF and particleboard prices were a bit lower compared to Q2 of last year due to the stronger pound sterling increasing import competition earlier this year. However prices were in line with the prior quarter.
In light of the Brexit referendum, I'll just take a moment to provide a bit more color on the foreign exchange exposures in our U.K. business. We have almost no net direct cash flow exposure as our exports those on the U.K., which are denominated in Euros are offset by the raw materials we purchase in Euros.
We have indirect competitive exposure on all our U.K. domestic panel sales since the U.K. is a net panel world importing market. As Peter explained a moment ago, the weaker pound sterling makes our domestically produced OSB part of our Board and MDF more attractive than competing imports.
And finally we have translation exposure when we convert the European segment EBITDA from pound sterling to U.S. dollars for financial reporting purposes. While this does not impact our cash flow, the weaker pound will impact the U.S. dollar translated amount of our reported EBITDA. Assuming the pound stays around it's current level, we will see this impact starting in Q3.
With respect to the Inverness project, the Euro denominated equipment we're buying is now more expensive in pound sterling terms. However, this will be offset when we translate this spending from pounds to U.S. dollars and so we remain confident we can stay within our $135 million project budget.
Next to our results. On Slide 7, you will see our sales and segmented adjusted EBITDA, as well as the summarized reconciliation of reported earnings to adjusted earnings. In Q2 Norbord reported adjusted EBITDA of $94 million and adjusted earnings were $0.49 per share, significantly improved over Q2 of last year and more than double compared to the prior quarter.
The impact of the High Level Alberta Fire was recognized below the adjusted EBITDA line. Cost incurred were 7 million for lost log inventory and 4 million for fire fighting and site restoration. We recognized an insurance recovery of $10 million against these costs resulting in a net P&L impact of $1 million in Q2, which represents our insurance deductible. The business interruption portion of the insurance claim is ongoing and we expect to finalize that in Q3.
On Slide 8 you can see the main drivers of our improved results. Year-over-year adjusted EBITDA improved by $75 million primarily due to higher North American OSB prices and shipment volumes, as well as lower raw material prices and usages with the small offset from higher supplies and maintenance costs and the profit share cost associated with our improved result.
Quarter-over-quarter the $33 million increase is driven by the same factor with the further partial offset from last production due to the High Level Fire. We had 30 mill days of down time in North America in Q2 with over half of that due to the High Level Fire, this compares the 40 days in Q1 and 70 days in Q2 of last year.
Turning now to our balance sheet and cash flows starting on Slide 9. As you can see our operating cash flow improved significantly this quarter driven by our improved EBITDA. Operations generated $86 million of cash in the first six months of this year compared with consuming $55 million of cash in the same period of last year.
In terms of operating working capital, the quarter-over-quarter decrease was driven by seasonally lower log inventories in our Northern Mills and the loss of the log inventory due to the fire at High Level.
Working capital increased year-over-year primarily due to the impact of higher North American OSB prices on our receivable, and the insurance receivable related to the High Level Fire. Working capital remains well controlled across the company and we continue to manage it at minimal levels.
Capital investments totaled $34 million year-to-date including 6 million on the Inverness project. Construction works began on site in Inverness this quarter, and as well work began to dismantle and move the unused second press from our Grande Prairie mill.
Our regular CapEx budget for 2016 is $75 million, plus we expect to spend $45 million on the Inverness project this year.
Finishing up on Slide 10, our balance sheet is strengthening alongside our improving financial results and we use our free cash flow to fully repay our AR securitization drawings this quarter. During the quarter we extended the maturity date for $225 million of our revolving bank lines in May 2019 with the remaining 20 million commitments maturing in May 2018. As part of this renewal, we reset the tangible net worth covenant from 450 million to 500 million.
As you can see, we continue to have significant headroom versus the financial covenants that govern our access to these undrawn revolvers with tangible net worth of almost 800 million and net debt to total capitalization of 48%. I will also note that we remain committed to permanently repaying our 200 million 2017 bonds when they come due next February.
And finally, you will have seen that our Board declared another Canadian $0.10 per share dividend for the quarter, payable on September 21.
And with that, I'll turn the call back over to Peter.
Thank you, Robin. I am very pleased with the results this quarter and the steadily improving U.S. housing markets and related rise in OSB prices, make us optimistic our second half performance could be stronger yet.
Our European business has continued to generate stable cash flow each quarter with future growth potential once our reinvested in Inverness mill comes online in the back half of next year. The underlying fundamentals of our business are positive and we remain confident that we have the right strategy and operational approach in place to deliver value for our shareholders.
And with that, we will take your questions. So operator if you could please open the line for the questions.
[Operator Instructions] We'll take our first question from the line of Sean Steuart at TD Securities. Please go head.
Thanks, good morning everyone. A couple of questions, Peter first with regards to Inverness, you indicated you see the same returns on that project and I appreciate the near team tailwinds tied to the weaker pound. But can you go into a bit more detail on how you think about long-term demand headwinds in the U.K. and I guess I am thinking in the context of home builders since Brexit being down I think on average about 25% any context you can give us on that front.
Yes, good morning Sean. I think that started off or as I mentioned earlier on that longer term demand in the U.K. specifically for housing will be influence primarily by the government’s success in helping to alleviate the chronic under built that has been plaguing the U.S. housing market.
There is real political will to make that change and if you look at the publicly traded builders they have been under pressure in the immediate aftermath of Brexit. There has been a lot of uncertainty in that immediate aftermath and particular around the London market where there has been speculation that perhaps the important banking sector might be under pressure there.
Luckily for us the London housing market does not consume a lot of OSB. So we remain confident from a longer term demand perspective and the other reason why I can say that is because as I've pointed earlier, we are only at about 40% to 45% versus imported plywood.
Imported plywood has become significantly more expensive here in the near term because of the poor or the poor exchange rate between the pound and the U.S. dollar and most of that imported plywood is U.S. dollar denominated.
So that was our sort of the factors that we sort of see at least in the longer term for our U.K. demand. The other thing to keep in mind is that about where as most of our particleboard or virtually all of our particleboard and MDF production remains in the U.K. The OSB they’ve been producing in Inverness, can go both stay in the U.K. or be exported and so in the short term that gives us also the potential to take advantage of the more favorable exchange rates if we should have to do so.
So should we still think about a 20% plus return on capital for that project from your perspective?
At this point we have not changed our perspective on the economics of the project.
Okay. And my second question is with respect to the North American market, you are clearly seeing some good demand pull right now evident both pricing and your volumes. Any updated thoughts on a potential restart timing for Huguley going forward?
Well I think as we have been talking about over the last - I don’t know what it is now, two years I guess, we have always - we have maintained that we will start that plant up when we believe there is a good outlook for demand from our key customers for additional OSB. If I sort of look back at Q2 industry demand capacity ratio as reported by the APA, the industry in Q2 was running at about 91% demand capacity.
So there is still slack in the system today on the base of that number to support the growth in demand that we're seeing at the moment but I would suspect that if housing starts continue to recover at the kind of pace that we have now seen for the last six years, and if next year’s numbers end up in that sort of 1.3 million, 1.35 million range in terms of forecast, there will be a need for additional capacity next year and we'll be revaluating that towards the end of this year, with regards to the start-up to sharing a startup date for Huguley.
Once we do, we expect to need about nine months to get production happening and in the meantime we continue to work on getting the press rebuilt, fully rebuilt and that was our longest lead time item sorry, and we have made good progress here recently to get that behind us.
Okay. And then just lastly, Robin, can you repeat that those downtimes because you provided I just missed that when you read those off?
So sorry, we were 30 days of downtime this quarter -- versus 40 in the prior quarter and 70 in the same quarter last year.
Got it. Okay. That's all I have got. Thank you.
50% from -- 50% from the high level.
Yes, over half of this quarter was high level.
Got it. Okay. Thanks, guys. Appreciate it.
Our next question comes from the line of Hamir Patel from CIBC Capital Markets. Please go ahead.
Hi, good morning. Peter, you ran at 96% in North America this quarter, how much room do you think there is to debottleneck your current operating mills in North America?
Good morning, Hamir. Well, that 96% number still includes high level running at about 50% of its traded capacity. So we've got room to grow there in the short term. And as we just discussed obviously the next step is to -- that's step one, step two.
Robin just pointed out that we still took downtime especially in the first quarter to make sure that we produce what our customers demand. And then obviously the next step is to make a consideration around about our Alabama mill start up.
Right, okay. And has there been any changes in view on deciding market? I know you’ve been doing some work on studying that. Just curious any one of your competitors recently announced plans for additional capacity down the road for that market. Just curious if that's maybe changed how you look at it?
Yes, well we will continue to do work on that. We did a fair bit of engineering work this quarter to make sure that we understand what would be involved. But we have not got -- we haven’t had the change really to draw any final conclusion on that and don’t expect we'll be reviewing that with our Board until October at the soonest.
Okay. Great. Thanks Peter. I'll turn it over.
Our next question comes from the line of Paul Quinn at RBC Capital Markets. Please go ahead.
Thanks very much. Good morning, Peter and Robin. Hi, just trying to figure out this Brexit impact. What is Inverness currently exporting as a percentage of production and then where do you expect that to be once the new mill is in place?
That's a good question, Paul. Let' say, if you go back a couple of years, Inverness shipped around 60% of it's production out of the U.K and 40% within the U.K. We have been deliberately reversing that, so today it's about 60% staying in the U.K. and slightly more than that and about just shy of 40% being exported outside.
And we deliberately did that to make sure that we could grow our market share in the U.K. and in fact grow the market share of OSB in the U.K. in preparation for our expansion.
So post once you get the person in place and the capacity additions, is that additional square footage, is that going to be split again -- or is that going to find the majority of the home for that or is that going to be in the export market?
No, I think it will be split and our expectation would be to maintain a similar kind of percentage that we currently have.
Okay. And then just looking at your OSB segment, can you give us an indication in terms of what you're hearing from your customers in terms of inventory levels and is there any kind of regional strength in order files?
Good question. Yes, we’ve seen this really real strong market based on continued strong demand growth and we’ve seen little or no signs of any inventory build-up during the quarter.
Robin pointed out that June single-family starts were up 13% year-over-year and they now represent 68% of starts this year. So that’s up about 4% or even slightly more compared to last year and that's obviously real benefits to OSB producers.
If I look at what the strength of our order files is suggesting in terms of current consumption, I wouldn't be at all surprised to see a stronger July start numbers once they come out and possibly even an upward revision of June’s numbers.
Now of course we're now in the what would be typically the summer doldrums and substitute the impact by the high heat in the U.S. South but demand continues to be very strong led by northern and western regions in particular.
Okay. And then just lastly, do you have a rough split as to where North American OSB is going in terms of end markets right now? Is that going -- is the majority going in housing versus repair remodel versus -- new home construction versus repair remodel versus industrial?
No, I think our percentages are fairly much unchanged. So most of the growth obviously of demand has been for -- if you look at across industry as far as we can estimate that has been in new housing but for Norbord we're still and that roughly 50, 25, 25 percentage split.
Great. That’s all I had. Best of luck in Q3.
Our next question comes from the line of James Armstrong at Vertical Research Partners. Please go ahead.
Good morning and congrats on a good quarter. First question I had was on your realizations versus the benchmark were a little bit lower than we've been seeing in the last quarters. Do you think that was just a lag effect as the pricing went up or is there something else going on?
No, good morning, James. As Robin pointed out in her comments, when markets rise rapidly, there is always a lag effect. I realize it's difficult to forecast that accurately. It’s also difficult to forecast that accurately for us. But I will always prefer to take a $264 average we saw in Q2 versus the $226 we saw in Q1.
Absolutely. And then how much of your business is now going to the big box versus other channels just as the markets grown? It used to be a really high percentage back during the downturn, but I just wondered how that has changed over time?
Well, I think that percentage has not changed dramatically as our presence with the book big boxes has grown. We were able to extend that business as we took on the -- or as we merged with the Mills Southwest and we're able to serve some of those markets that we were in the past weren’t able to serve economically. So I don’t…
As the shipments have been growing James, the relative percentage of big box versus new home because they both -- both those segments have been growing and stayed relatively constant. I think we’re about 55% pro-dealer, 25% big box and 20% kind of industrial and everything else right now.
Perfect. That helps. Thank you very much.
Our next question comes from the line of Bill Hoffman of RBC Capital Markets. Please go ahead.
Thanks. Just two quick ones, one I wonder if you could comment a little bit about on the Canadian market whether you’re seeing any signs of slowdown there? And two, just with regards to high level if you can update us on Asian market conditions?
Sure. Good morning, Bill. Yes, the Canadian market is relatively small for Norbord and not much has changed there. One of the good -- I guess it's not so good and that is relatively small, but on the other hand that is good and that is very stable. And the volume for us into the Canadian market has continued to be very stable.
We haven't really seen much of the impact that everybody talks about with the slowdown in Alberta in terms of the at least impact on our OSB consumption.
Asian markets, our core markets in Asia are Japan, China and Vietnam and we have seen continued - a real strength in the second quarter in those three markets. Overall volumes to Asia for us were somewhat flat because we have chosen to reduce the volume of some of the peripheral markets that are really sort of more priced driven rather than customer service driven.
Okay, great. Thank you. And then just on the Inverness project, it sounds like you just sort of getting started on I think any thoughts maybe Robin could help me with this, your comments on the currency impact what you expect there?
Yes, I mean as there are a lot of equipment is sourced from the Arizona, Germany in particular. And so we will priced in Euros. But as they said, when you convert that back to pounds, it makes it seem more expensive and then conversely when you cut in U.S. dollars it's the opposite. So kind of all in our view it’s all going to net-out.
Okay, great. Thank you.
Our next question comes from the line of David Quezada at Raymond James. Please go ahead.
Thanks, good morning everyone. My question is just on, of the mills that are still curtailed in North America I guess there are about eight of them, two of which are yours and I know that there is no dates for Huguley plant doing the works there. What’s your sense of your competitors mills, have you heard any reports of any of them deciding to restart and I guess if they were to decide to restart what would be the timeframe be?
Well, I mean, I'm not really in a very good position to answer that question particularly in regards to our competitors. But you know and I think you've already commented yourself on wherever you stand with regards to Val-d'Or and Huguley.
Based on some of the general information that that we hear sort of within the industry or from our customers in particular, I'm not aware of any plans for restart of those assets in the near-term. I've not heard anybody or any rumors around the people talking about starting up capacity.
Okay, great. And I guess just could you just rephrase that a little bit, if you were going to start an idled mill or from the decision that you from the timing you make the decision that we started to the time that you are able to - I guess in general terms is it typically in the 12 to 18 months range?
Well, I can't comment about Norbord, we’ve had experience with the restart of our mill in Jefferson Texas in 2013 and it took us about 12 months between the moment we made the decision and when we were producing for the Solarbord. Plus then obviously you still need to ramp up capacity after that.
In the case of our Huguley mill, we’ve been working sort of slowly but steadily dealing with our long-term long lead item work that we wanted to do. And you know, so what remains can probably be done and a little bit quicker time. So we're estimating about nine months after we make the call.
Okay, great. Thank you very much. That’s all I had.
Thank you, David.
Our next question comes from the line of Andrew Kuske at Credit Suisse. Please go ahead.
Thank you, good morning. I guess the question is just around the distinction between the synergies you realized to-date off the Ainsworth transaction and then just the 18 million incremental on capital and operating cost avoidance and just why you bucketed those things in two distinct categories, as opposed to taking up the synergy number to a greater degree?
Good morning, Andrew. Well, I mean for the synergies we have our set of calculation rule is, we only count things you can see in our P&L in EBITDA in other words. For this other bucket that we quantify this quarter, you know these are items - these are capital or cost avoidance items whenever in our P&L to begin with. So you can’t see the reduction but nonetheless it is cash flow outlays that we have been able to avoid as a result of the merger.
And the obvious big one is moving the Grand Prairie Pratt to Inverness. But the other things we talked about were maintaining lower inventory levels you know, optimizing inventory levels across their larger system and making sure that we're optimizing the timing of our supplier payments.
So things like that is that we just don't think it’s a true synergy per stake, it was never in the P&L. But we’re just reporting down as a separate bucket.
Okay. That’s helpful. And then a lot of those optimization activities, do you anticipated helping you on a prospective basis for this margin expansion?
Yes, I think so. Yes.
Okay. And then maybe the second question, just on the comments that Robin you made on the 2017 bond repayment, how do you think about the capital structure of Norbord on a longer-term basis and really looking through the cycles, how should we think about debt to cap, the rate levels you're looking at?
Yes, well, it’s a good question. Andrew the - so once we repaid that 200 million, where we left 555 million of which is two bond issues left in the capital structure nicely staggered in terms of maturity. And I think we’ve always said that sort of comfort level that debt to cap range over the cycle is 25% to 50%. But obviously you know we are now five quarters into the merger and we need to think about what's the right absolute debt level for the long term and that is something that we will be thinking about over the coming quarters that recognizing our next maturity isn’t until 2020.
So happy with the flexibility that you’ve got and…
Yes, I think so. Yes.
Okay. That’s very helpful. Thank you.
Our next question comes from the line of Benoit Laprade at Scotia Bank. Please go ahead.
Good morning. This one is probably more for Robin, just curious if you could comment specifically on resin and wood costs and what level were they in Q2, how would that compare to see Q1 in the prior year? And just curious on the resin side, is it something that is renegotiated every year, every quarter so what should we expect in coming quarters and for next year?
Okay, Ben. Well, in the Inverness that we provided in the MD&A, we always break out sort of - quarter-over-quarter and year-over-year change from key raw material input enterprises. And we’ve seen positive numbers there for quite a while. Not really is largely driven by lower resin prices that we’ve been experiencing.
Our contracts are longer term in nature but the raw material input feed through on our - basically on monthly basis. So it's pretty real time with global in the industries for the underlying chemical input. Things like benzene and the phenol.
So that’s what you’ve been seeing with $3 million quarter-over-quarter, this quarter and year-over-year $5 million benefit. And that’s mostly been driven by resin. That’s really been the only kind of big moving part. Other than a little bit still on a little bit of a positive experience on energy prices.
Great, thank you.
The next question comes from the line of Ketan Mamtora at BMO Capital Markets. Please go ahead.
Hi, Peter and Robin. First question on log costs, are you concerned at all about building log backs in Alberta for 2017?
Yes, good question, Ketan. We are - our team is working very hard to recover the wood that we lost in the fire head off at the normal logging season when we need to build up for next year. At this point we do believe that we will be able to do so.
Obviously there will be or there may be higher costs involved for doing so since logging especially in Northern Alberta is more efficient when you do it during the winter. But if there are any I believe our insurance coverage will take care of them.
Okay, fine. And then just one big picture question, if you step back on just kind of give you a parse on how the OSB business has changed over the last maybe 10, 15 years, you know particularly as you’re announcing some strengthening in demand and pricing. So can you just talk about how the business is evolved, how Norbord is managing the business differently?
Well, that's a broad question. Well, I guess you know if you go back 10 or maybe slightly more years, OSB had not yet gained the kind of market share versus plywood that we currently enjoy.
So in those -- in that period there was still the need -- the way we saw anyways for a Greenfield expansion. If I look at the market today over the last number of years, really we are seeing demand growth, but that demand growth can at least for the time being and I think still for a while yet be covered by Norbord and others bringing back idle capacity that was idle during the recession. So I think that’s a significant difference in our perspective at least in North America.
The other difference if I go back to again 10 to 15 years ago, 10 to 15 years ago the OSB market was a North American market that, one or two small mills operating in Europe. Today the European market has grown to being probably a fifth or a quarter of the size of the North American market with significant growth and showing the same kind of substitution characteristics that we have enjoyed in North America during the last 15 years.
So it’s much more a market that has seen growth not only in North America, but also in other regions and Asia is a bit -- is significantly smaller, but we see good opportunities there as well.
And maybe the third thing that I will point to is that, up until or if you go back to prior to the recession, most OSB in North America was directed at new home construction and the R&R market. We've seen a significant growth as OSB consumed in more industrial end users and as we have been able tailor OSB products to end users that OSB is particularly suited other than just new home construction and R&R.
So I think those are three significant changes over the last 10 to 15 years if I were reflecting on the market. Does that answer your question Ketan.
It does. Thank you. Appreciate your thought. And then one question for Robin, going to back Huguley, how much have you spent so far on Huguley out of your target?
So by the end of this year Ketan we will have spent about $15 million of our total $45 million approved for that restart. And the rest of it won’t come until we've made the decision to put a date in line.
Got it. Okay. Thanks very much. That’s all from my side. Good luck for the back half of the year.
There are no further questions at this time. Please continue.
Well. Thank you. Nick. As always Robin, Heather and I are available to respond to further questions. I want to thank you all for participating today. And I look forward to reporting on our continued progress next quarter. Have a good afternoon.
This concludes today’s call. Thank you for your participation. You may now disconnect.
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