Core Insights - Mercer International Inc. released its 2024 Sustainability Report, highlighting progress towards its 2030 sustainability goals, focusing on emissions reduction, resource efficiency, and renewable bioproducts [1][3] Group 1: Sustainability Achievements - In 2024, 83% of fuel-based energy used by the company came from renewable sources, moving towards a 90% target by 2030 [4] - The Total Recordable Incident Rate (TRIR) improved by 25%, decreasing from 3.68 to 2.76 [2] - Landfill waste was reduced to 16.6 kg/ADMT, a 24% improvement over the 2019 baseline, aiming for a 30% reduction by 2030 [4] - Water consumption at pulp mills decreased by 8% year-over-year due to operational efficiencies [4] Group 2: Governance and Reporting - The company secured third-party assurance of its emissions data and aligned with evolving disclosure standards, improving its Sustainalytics ESG Risk Rating from 21.4 in 2023 to 17.6 (low risk) [4] - Mercer completed its third climate scenario analysis to enhance climate risk assessment and disclosure [4] - A double materiality assessment was conducted to align with the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) requirements [4] Group 3: Recognition and Future Outlook - Mercer received the 2024 SFI President's Award for leadership in mass timber and supply chain certification [4] - The company remains committed to integrating sustainability into core business decisions and delivering long-term value for stakeholders [3]

Transforming biomass into bioproducts for a more sustainable world Q1 2025 Earnings Call May 2, 2025 Juan Carlos Bueno – President & CEO Richard Short – CFO, Executive VP & Secretary Mercer International Inc. Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial con ...

Mercer International (MERC) Q1 2025 Earnings Call May 02, 2025 10:00 AM ET Company Participants Richard Short - CFO & SecretaryJuan Carlos Bueno - President, CEO & DirectorSandy Burns - MD & Head - High Yield ResearchSean Steuart - Managing DirectorMatt McKellar - Vice President Conference Call Participants Cole Hathorn - Senior Vice President- Equity Research AnalystRoger Spitz - AnalystJim Cox - Senior MD, Credit Analyst, Fixed Income Research Operator Good morning, and welcome to Mercer's International F ...

Financial Data and Key Metrics Changes - The company's EBITDA for Q1 2025 was $47 million, a significant decrease from $99 million in Q4 2024, primarily due to 22 days of planned maintenance downtime at the Celgar mill, which adversely impacted EBITDA by approximately $30 million [3][11] - The consolidated net loss for Q1 2025 was $22 million, or $0.33 per share, compared to a net income of $17 million, or $0.25 per share in Q4 2024 [11] - Cash consumption in Q1 was about $3 million, a decrease from $54 million in Q4 2024, with a net working capital increase of roughly $23 million due to seasonal movements [11][12] Business Segment Data and Key Metrics Changes - The pulp segment contributed an EBITDA of $50 million in Q1 2025, while the solid wood segment's EBITDA was essentially breakeven [4] - Pulp sales volumes increased by 26,000 tonnes to 478,000 tonnes in Q1, attributed to the timing of sales despite the planned downtime [6] - Lumber production reached a near-record 128 million board feet in Q1, up 12% from Q4, with sales volumes also hitting a new record at 131 million board feet, up about 6% from Q4 [8][9] Market Data and Key Metrics Changes - MBSK prices in Europe averaged $15.50 per ton in Q1, an increase of $50 from Q4, while North American MBSK prices averaged $17.53 per ton, up $66 from Q4 [4][5] - In China, the MBSK net price was $793 per tonne, an increase of $26 from Q4, while hardwood sales realizations were flat due to offsetting price changes in North America [5] - The North American MBHT average price was $12.68, down $30 from Q4, indicating mixed pricing trends across different markets [6] Company Strategy and Development Direction - The company is targeting a $100 million improvement in operational efficiency and cost savings by the end of 2026 compared to 2024, alongside a $20 million reduction in inventories and capital expenditures in 2025 [17] - The company is focusing on maximizing mill operating rates and generating cash to reduce debt, with a strong emphasis on improving asset reliability across all businesses [24][25] - The mass timber operations are expected to grow, with the company confident in its ability to capture market growth due to its significant production capacity and broad product offerings [30][37] Management's Comments on Operating Environment and Future Outlook - Management noted that the weakening U.S. dollar could enhance purchasing power for U.S.-sourced fiber, while also indicating potential modest fiber cost inflation and lower energy sales prices in Q2 [20][21] - The company anticipates stable demand for softwood pulp in the mid-term, with upward pricing pressure expected due to reduced supply [22][23] - Management expressed concerns about global economic uncertainty impacting buying patterns and pricing, particularly in China, but remains optimistic about the long-term outlook for softwood pulp [20][23] Other Important Information - The company plans for major maintenance shutdowns throughout the year, with a total of 79 days of planned downtime compared to 57 in 2024 [34] - A quarterly dividend of $0.75 per share has been approved for shareholders of record on June 26, 2025 [12] - The company is committed to its 2030 carbon reduction targets and believes its products will play a significant role in addressing climate change [38][39] Q&A Session Summary Question: Can you elaborate on the secondary effects related to tariffs? - Management explained that secondary effects include the weakening U.S. dollar impacting costs and a slowdown in demand in China, which has put pressure on prices, particularly hardwood [44] Question: What is the outlook for pulp prices in Q2? - Management indicated that they expect more positive than negative impacts on pulp prices in Q2 compared to Q1, despite some recent softness in lumber prices [47] Question: Can you provide context on the $100 million cost savings objectives? - Management detailed that the cost reduction program targets various operational aspects, with expectations to capture $40 to $50 million in savings by 2025 [52] Question: How would meaningful Section 232 tariffs impact lumber markets? - Management noted that Canadian lumber would become less competitive due to countervailing duties, which would favor their products from Germany [64] Question: Are there any changes in order patterns from pulp customers? - Management reported no significant changes in order patterns in Europe or North America, although there is some caution in China [106]

Financial Performance - Total revenues for Q1 2025 decreased by approximately 8% to $506.974 million from $553.430 million in Q1 2024, primarily due to lower pulp sales volumes [102]. - Net loss for Q1 2025 was $22.339 million, or $0.33 per share, compared to a net loss of $16.703 million, or $0.25 per share, in Q1 2024 [110]. - Operating EBITDA decreased by approximately 26% to $47.088 million from $63.601 million in Q1 2024, primarily due to higher planned maintenance downtime and increased per unit fiber costs [111]. - Selling, general and administrative expenses decreased by approximately 6% to $29.7 million in Q1 2025 from $31.7 million in Q1 2024, attributed to lower selling costs [104]. - Cash used in operating activities was $2.99 million in Q1 2025, a significant improvement from $29.19 million in Q1 2024 [141]. Revenue Breakdown - Pulp segment revenues were $381.080 million, down from $432.404 million in the same period last year, while solid wood segment revenues increased to $122.720 million from $119.023 million [98]. - Pulp revenues fell by approximately 13% to $357.0 million in Q1 2025 from $408.3 million in Q1 2024, attributed to lower sales volumes [114]. - Solid wood segment revenues increased modestly to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, driven by higher lumber and manufactured products revenues [130]. - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, primarily due to higher sales realizations [130]. Production and Sales - Pulp production for Q1 2025 was 370.4 thousand ADMTs, down from 453.2 thousand ADMTs in Q1 2024, indicating a reduction in output [100]. - Solid wood segment lumber production was 128.0 million board feet, with sales of 130.9 million board feet, compared to 127.0 million and 121.4 million board feet respectively in Q1 2024 [100]. - Total pulp production decreased by approximately 15% to 458,909 ADMTs in Q1 2025 from 538,907 ADMTs in Q1 2024, impacted by planned maintenance downtime [116]. Market Conditions - Average NBSK pulp prices in Europe were $1,550 per ADMT, while in North America they were $1,753 per ADMT, reflecting strong market conditions [91]. - The company expects modest increases in pulp prices in Europe and North America in Q2 2025, while anticipating lower prices in China due to economic conditions [92]. - Average lumber sales realizations increased by approximately 8% to $499 per Mfbm in Q1 2025 from $460 per Mfbm in Q1 2024, supported by lower supply and stronger demand [135]. Costs and Expenses - Per unit fiber costs for the pulp segment were steady in Q1 2025, but are expected to rise in Q2 2025 due to strong demand and reduced supply [95]. - Segment Operating EBITDA for the pulp segment decreased by approximately 27% to $49.9 million in Q1 2025 from $68.5 million in Q1 2024, mainly due to higher maintenance downtime [127]. - Cash paid for interest expense decreased to $25.0 million in Q1 2025 from $34.7 million in Q1 2024, reflecting a reduction of 28.0% [147]. Assets and Liabilities - Total assets increased to $2,336.17 million as of March 31, 2025, compared to $2,262.93 million as of December 31, 2024 [145]. - Long-term liabilities rose to $1,600.43 million as of March 31, 2025, up from $1,576.62 million as of December 31, 2024 [145]. - Planned capital expenditures for fiscal 2025 are expected to be between $90.0 million and $100.0 million, indicating a reduction from previous estimates [149]. Future Outlook - The company anticipates that cash flow from operations and available cash will be sufficient to finance capital requirements and pay dividends over the next 12 months [151]. - Future acquisitions may require substantial capital resources, which will be generated from cash flow, cash on hand, or borrowing [152]. Risks and Compliance - The company faces risks from geopolitical conflicts, including Russia's invasion of Ukraine, which could disrupt operations and financial results [167]. - The company’s operations are subject to extensive environmental regulations, which could incur substantial compliance costs [171]. - The company relies on third-party certifications for sustainable management standards, which are increasingly important to customers [177]. - The company’s profitability is highly dependent on managing its cost structure, particularly raw materials, which represent a significant component of operating costs [178].

Financial Performance - First quarter 2025 Operating EBITDA was $47.1 million, down 26% from $63.6 million in Q1 2024 and 53% from $99.2 million in Q4 2024[2][5][16] - Net loss for Q1 2025 was $22.3 million ($0.33 per share), compared to a net loss of $16.7 million ($0.25 per share) in Q1 2024 and net income of $16.7 million ($0.25 per share) in Q4 2024[2][14] - Total revenues for Q1 2025 decreased by approximately 8% to $507.0 million from $553.4 million in Q1 2024, primarily due to lower pulp sales volumes[14] - The pulp segment generated revenues of $381.080 million in Q1 2025, compared to $432.404 million in Q1 2024, reflecting a decrease of approximately 11.9%[40] - Total revenues for Q1 2025 were $506.974 million, down from $553.430 million in Q1 2024, representing a decrease of about 8.4%[40] - Net loss for Q1 2025 was $22.339 million, compared to a net loss of $16.703 million in Q1 2024[46] - Operating EBITDA for Q1 2025 was $47,088 thousand, a decrease from $63,601 thousand in Q1 2024, reflecting a decline of approximately 26%[55] Revenue Breakdown - Pulp revenues in Q1 2025 decreased by approximately 13% to $357.0 million from $408.3 million in Q1 2024, driven by lower sales volumes[19][22] - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, attributed to higher sales realizations and volumes[29] - The solid wood segment's revenues increased to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, primarily due to higher lumber and manufactured products revenues[28] - Average NBSK pulp sales realizations increased by approximately 7% to $783 per ADMT in Q1 2025 from $732 per ADMT in Q1 2024[20] - Average sales realizations for lumber in Q1 2025 were $499 per MMfbm, up from $460 per MMfbm in Q1 2024[42] Cost Management and Savings - The company is targeting approximately $100 million in cost savings by the end of 2026 through operational efficiency initiatives[5][7] - The company expects a reduction of inventories by $20 million and a decrease in capital expenditures by $20 million in 2025[7] - The company expects higher per unit fiber costs in Q2 2025 due to continued strong demand, with a 12% increase in fiber costs noted in Q1 2025 compared to Q1 2024[32] Production and Operational Impact - Planned maintenance downtime at the Celgar mill impacted production volumes by 22 days, resulting in a loss of approximately 29,700 ADMTs in Q1 2025[11][24] - Lumber production in Q1 2025 was 128.0 MMfbm, slightly up from 127.0 MMfbm in Q1 2024[42] - The company has a consolidated annual production capacity of 2.1 million tonnes of pulp and 960 million board feet of lumber[37] Liquidity and Assets - Cash and cash equivalents as of March 31, 2025, were $181.5 million, with total liquidity of approximately $470.7 million[33] - Total assets as of March 31, 2025, were $2.336 billion, an increase from $2.263 billion as of December 31, 2024[34] - Total assets increased to $2,336,167 thousand as of March 31, 2025, up from $2,262,932 thousand on December 31, 2024, representing a growth of approximately 3.2%[48] - Cash and cash equivalents decreased to $181,473 thousand at the end of Q1 2025, down from $184,925 thousand at the beginning of the period, a reduction of about 2.5%[50] Debt and Liabilities - Long-term debt increased to $1,503,203 thousand as of March 31, 2025, up from $1,473,986 thousand at the end of 2024, representing an increase of approximately 2%[48] - Total current liabilities rose to $298,382 thousand as of March 31, 2025, compared to $256,538 thousand at the end of 2024, an increase of approximately 16.3%[48] Shareholder Information - A quarterly dividend of $0.075 per share will be paid on July 3, 2025, to shareholders of record on June 26, 2025[35] Other Financial Metrics - The company reported a depreciation and amortization expense of $40,355 thousand for Q1 2025, slightly down from $40,404 thousand in Q1 2024[50] - The company experienced a foreign exchange transaction loss of $8,418 thousand in Q1 2025, compared to a gain of $3,449 thousand in Q1 2024[50] - Shareholders' equity increased to $437,351 thousand as of March 31, 2025, up from $429,775 thousand at the end of 2024, reflecting a growth of approximately 1.3%[48]

Core Insights - Mercer International Inc. reported a significant decline in Operating EBITDA for Q1 2025, amounting to $47.1 million, down from $63.6 million in Q1 2024 and $99.2 million in Q4 2024 [2][14] - The company experienced a net loss of $22.3 million in Q1 2025, compared to a net loss of $16.7 million in Q1 2024 and a net income of $16.7 million in Q4 2024 [2][41] - The decline in financial performance was attributed to planned maintenance downtime at the Celgar mill and the impact of a weaker dollar against the euro [3][14] Financial Performance - Total revenues for Q1 2025 decreased by approximately 8% to $507.0 million from $553.4 million in Q1 2024, primarily due to lower pulp sales volumes [12] - Costs and expenses decreased by approximately 10% to $500.2 million in Q1 2025 from $553.9 million in Q1 2024, influenced by lower pulp sales volumes and a stronger dollar [13] - The pulp segment's revenues decreased by approximately 12% to $381.1 million in Q1 2025 from $432.4 million in Q1 2024, mainly due to lower pulp revenues [18] Market Conditions - The pulp market showed continued strength, with third-party softwood pulp list prices increasing due to stable demand and global supply constraints [6] - Lumber sales realizations increased in both the U.S. and Europe during Q1 2025, driven by reduced supply and steady demand [7] - However, the company anticipates a modest decrease in lumber prices in the U.S. in Q2 2025 due to economic impacts on customer demand [7] Operational Insights - The company is implementing cost reduction initiatives targeting approximately $100 million in savings by the end of 2026 [5] - Planned maintenance downtime at the Celgar mill impacted production volumes, with 22 days of downtime in Q1 2025 [9][23] - The company expects to reduce inventories by $20 million in 2025 and has cut expected capital expenditures by $20 million [5] Segment Performance - The pulp segment's Operating EBITDA decreased by approximately 27% to $49.9 million in Q1 2025 from $68.5 million in Q1 2024, primarily due to higher planned maintenance downtime [17] - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, attributed to higher sales realizations and volumes [29] - The solid wood segment's revenues modestly increased to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, driven by higher lumber and manufactured products revenues [28] Liquidity and Capital Structure - As of March 31, 2025, the company had cash and cash equivalents of $181.5 million and total liquidity of approximately $470.7 million [33] - Total assets increased to $2.34 billion as of March 31, 2025, compared to $2.26 billion at the end of 2024 [33] - The company declared a quarterly dividend of $0.075 per share, to be paid on July 3, 2025 [35]

Company Overview - Mercer International Inc. is a global forest products company with operations in Germany, the United States, and Canada [4] - The company has a consolidated annual production capacity of 2.1 million tonnes of pulp, 960 million board feet of lumber, 210,000 cubic meters of cross-laminated timber, 45,000 cubic meters of glulam, 17 million pallets, and 230,000 metric tonnes of biofuels [4] Upcoming Financial Results - Mercer International will release its first quarter results for the period ending March 31, 2025, on May 1, 2025, after the market closes [1] - A conference call to discuss the results will be hosted by President and CEO Juan Carlos Bueno and CFO Richard Short on May 2, 2025, at 10:00 am ET [1] Access to Conference Call - The conference call will be available live over the Internet through a webcast [2] - For those unable to participate live, a replay of the webcast will be archived and accessible on the company's website [2] - Audio access to the call can be obtained by dialing specific numbers for the USA, Canada, and Germany [3]

Financial Data and Key Metrics Changes - Operating EBITDA for Q4 2024 totaled $99 million, a significant increase from $50 million in Q3 2024, driven by no planned major maintenance downtime and higher sales volumes [5][6] - For the fiscal year 2024, EBITDA rose to $244 million compared to $17 million in 2023, attributed to stronger pulp markets and cost reduction initiatives [6][18] - Consolidated net income for Q4 was $17 million or $0.25 per share, compared to a net loss of $18 million or $0.26 per share in Q3 [18] - The company reported a consolidated net loss of $85 million or $1.27 per share for the full year 2024, an improvement from a net loss of $242 million or $3.65 per share in 2023 [18] Business Segment Data and Key Metrics Changes - The pulp segment contributed an EBITDA of $106 million in Q4, while the solid wood segment recorded a negative EBITDA of $5 million [7] - Softwood pulp sales realizations were $794 per ton in Q4, down from $814 per ton in Q3, while hardwood prices in China decreased to $578 per ton, a drop of $54 from Q3 [8][10] - Lumber sales volumes increased by 14% quarter-over-quarter to 124 million board feet, while production decreased by 6% to 115 million board feet due to planned downtime [15] Market Data and Key Metrics Changes - North American MBSK list price averaged $1,687 per ton in Q4, down about $75 from Q3, while European MBSK list price averaged $1,500 per ton, also down by $75 [8] - The average price gap in China between softwood and hardwood pulp increased to about $20, with hardwood prices expected to stabilize around $550 per ton [10][29] - The random lengths US benchmark for Western SPF number two and better average price was $435 per thousand board feet in Q4, compared to $366 in Q3, with current prices around $488, indicating a 20% increase [13] Company Strategy and Development Direction - The company is focused on reducing leverage through strategic projects, cost reduction programs, and prudent capital management [50] - Plans for capital spending in 2025 are estimated to be between $100 million and $120 million, heavily weighted towards maintenance and environmental projects [21][43] - The company aims to enhance the reliability of its assets and is optimistic about the growth potential of its mass timber business, which is expected to be a growth engine [34][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the softwood pulp market and the ability to navigate uncertainties related to tariffs [23][24] - The company anticipates modest price increases for lumber in both the US and Europe due to limited supply and increased demand [14][38] - Management highlighted the importance of maintaining open dialogue with customers and government officials to adapt to changing market conditions [24] Other Important Information - The company redeemed $300 million of 2026 senior notes using proceeds from the issuance of $200 million of additional 2028 senior notes and $100 million in cash [6] - Foreign exchange positively impacted operating income by about $26 million in Q4 due to a stronger US dollar [18] - The board approved a quarterly dividend of $0.075 per share for shareholders of record on March 26, 2025 [21] Q&A Session Summary Question: Can you provide more detail on input cost trends this quarter? - Management noted a 5% decrease in pulp costs in Canadian and German mills, while a 5% increase was observed in lumber costs in FreeCell [55][56] Question: What is the outlook for the European wood business? - Management indicated that FreeCell is resilient due to its efficiency, while Torghao is expected to improve as lumber production increases [60][62] Question: What are the expected trends for fiber costs in Germany? - Fiber costs are expected to increase by about 6% in Germany and 10% for lumber due to reduced harvesting [57] Question: How do you see the mass timber demand evolving? - Management expects mass timber sales to remain flat in 2025, with a focus on smaller projects rather than large ones [75] Question: What is the impact of tariffs on your business? - Management believes that tariffs could create opportunities, particularly if Canadian lumber is impacted, allowing European products to be more competitive in the US market [106][110]

Financial Performance - Fourth quarter 2024 Operating EBITDA increased to $99.2 million, up from $21.1 million in Q4 2023 and $50.5 million in Q3 2024[2][6][17] - Net income for Q4 2024 was $16.7 million ($0.25 per share), a significant recovery from a net loss of $87.2 million (negative $1.31 per share) in Q4 2023[3][6] - Full year 2024 Operating EBITDA rose to $243.7 million, compared to a loss of $242.1 million in 2023[6] - Operating EBITDA increased to $243.7 million in 2024 from $17.5 million in 2023, driven by higher sales realizations in pulp, manufactured products, and lumber[36] - Operating income for the year ended December 31, 2024, was $15.0 million, compared to a loss of $188.8 million in 2023[50] Revenue Growth - Total revenues for Q4 2024 increased by approximately 4% to $488.4 million from $470.5 million in Q4 2023, driven by higher pulp sales realizations[15] - Pulp revenues in Q4 2024 increased to $351.2 million from $340.7 million in Q4 2023, with average NBSK pulp sales realizations up approximately 12% to $794 per ADMT[21][22] - Solid wood segment revenues increased by approximately 6% to $111.6 million in Q4 2024, primarily due to higher lumber and biofuels revenues[29] - Lumber revenues in Q4 2024 rose by approximately 23% to $58.6 million from $47.8 million in Q4 2023, driven by higher sales realizations and volumes[30] - Pulp segment revenues for Q4 2024 were $375.5 million, compared to $364.2 million in Q4 2023, while solid wood segment revenues were $111.6 million in Q4 2024, up from $105.4 million in Q4 2023[45] Cost Management - In 2024, costs and expenses decreased by approximately 7% to $2,028.4 million from $2,182.6 million in 2023, primarily due to lower per unit production costs and foreign exchange gains[35] - Long-term debt decreased to $1.47 billion in 2024 from $1.61 billion in 2023, a reduction of approximately 8%[52] - The company reduced long-term debt by over $100 million in Q4 2024, focusing on debt reduction as a key goal moving forward[12][14] Liquidity and Assets - As of December 31, 2024, total liquidity was approximately $488.6 million, consisting of $184.9 million in cash and cash equivalents and $303.7 million available under revolving credit facilities[37] - Total assets decreased to $2,262.9 million in 2024 from $2,662.6 million in 2023, while total shareholders' equity fell to $429.8 million from $635.4 million[38] - Cash and cash equivalents at the end of 2024 were $184.9 million, down from $314.0 million in 2023, a decrease of 41%[54] - Inventory levels decreased to $361.7 million in 2024 from $414.2 million in 2023, a reduction of about 13%[52] Future Outlook - The company expects modestly higher softwood pulp sales realizations in Q1 2025 due to stable demand and global supply constraints[4] - The company expects to achieve further synergies from the Torgau acquisition as market conditions improve[35] Dividends - A quarterly dividend of $0.075 per share is scheduled for payment on April 2, 2025, subject to Board approval[39] - The company declared dividends of $0.075 per common share for both Q4 2024 and Q4 2023, maintaining the same level[50] Production and Sales - Lumber production in Q4 2024 was 114.7 million board feet, with sales of 123.6 million board feet, indicating strong demand[47] - Biofuels production in 2024 was 160.4 thousand tonnes, with sales of 184.4 thousand tonnes, showing an increase from 144.8 thousand tonnes in 2023[47] Price Changes - The average NBSK pulp price in North America was $1,687 per ADMT in Q4 2024, compared to $1,312 per ADMT in Q4 2023, reflecting a significant price increase[47] Impairments - The company reported an impairment of $34.3 million related to goodwill in 2024, which was not present in 2023[54]