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Core Insights - Mercer International Inc. will have its CFO Richard Short attending and hosting meetings at two upcoming conferences in December 2025 [1] - The company is a global forest products entity with significant production capacities across various product lines [3] Conference Details - Richard Short will present at the BofA Securities 2025 Leveraged Finance Conference on December 2, 2025, at 10:10 a.m. (EST) [1] - The UBS Global Industrials & Transportation Conference will take place on December 4, 2025 [1] - A copy of the presentation will be available on the company's website prior to the events [2] Company Overview - Mercer International Inc. has operations in Germany, the United States, and Canada [3] - 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 - 230,000 metric tonnes of biofuels [3]

Financial Data and Key Metrics Changes - The company reported an EBITDA of negative $28 million for Q3 2025, a decrease from negative EBITDA of $21 million in Q2 2025, primarily due to lower pulp pricing and demand [3][9] - The consolidated net loss for Q3 was $81 million, or $1.21 per share, compared to a net loss of $86 million, or $1.29 per share, in Q2 [9] - Cash consumption increased to $48 million in Q3 from $35 million in Q2, driven by lower EBITDA [10] Business Segment Data and Key Metrics Changes - The pulp segment had a negative EBITDA of $13 million, while the solid wood segment reported a negative EBITDA of $9 million [3][23] - Pulp sales volumes increased by 26,000 tons to 453,000 tons, while pulp production remained flat at 459,000 tons [5][20] - Lumber production decreased by about 4% to 150 million board feet, and lumber sales volumes decreased by about 9% to 110 million board feet [6][23] Market Data and Key Metrics Changes - Average published prices for MBSK and MBHK pulp decreased across all markets compared to Q2, with the MBSK net price in China at $690 per ton, down $44, and the European average at $1,497 per ton, down $56 [4][5] - Lumber pricing in the U.S. remained stable, with the benchmark price for Western SPF No. 2 Stud averaging $477 per 1,000 board feet, a modest increase from $472 [6] - Electricity sales totaled 204 gigawatt hours, a 6% decrease from Q2, while pricing increased to about $106 per megawatt hour [7][8] Company Strategy and Development Direction - The company is focused on its "One Goal 100" program, targeting $100 million in cost savings and operational efficiencies by the end of 2026, with an expected $30 million in savings by the end of 2025 [9][12] - The company aims to transform its pulp mills into biorefineries, enhancing resilience during commodity downturns [30][31] - The mass timber business is expected to grow, with a backlog of projects valued at about $80 million and increasing interest in sustainable construction [27][50] Management's Comments on Operating Environment and Future Outlook - Management highlighted significant industry headwinds due to trade uncertainty, impacting demand for both paper and lumber [11][29] - The company expects modest NBSK price improvements late in Q4 2025 and into Q1 2026, driven by curtailments and market dynamics [20][29] - Management remains optimistic about the long-term value of its products and the potential for market recovery as economic conditions improve [29][30] Other Important Information - The company plans to reduce capital expenditures in 2026, focusing on maintenance and essential projects [28][45] - The company is actively engaging in discussions with banks regarding liquidity and financing options [41][56] Q&A Session Summary Question: Potential asset sales to expedite deleveraging - Management is considering asset sales but acknowledges that current market conditions are not ideal for divestitures [32] Question: Industry supply-demand balance and capacity adjustments - Management indicated that closures of pulp mills may be necessary to right-size the industry, especially in Canada and Finland [33] Question: Substitution issues in the pulp market - Substitution has been ongoing, with a recent increase attributed to a significant price differential between hardwood and softwood pulp [35][38] Question: Liquidity-enhancing actions - Management is exploring various liquidity-enhancing actions, including discussions with banks and potential asset divestitures [41][43] Question: Industry supply pressures from sawmill closures - Management noted that the situation regarding chip access is already tight, and closures of sawmills could further impact pulp mills [54]

Financial Performance - Mercer's Q3 2025 operating EBITDA decreased to $(28) million, a decrease of $(7) million compared to Q2 2025[6] - The net loss for Q3 2025 was $(81) million, compared to a net loss of $(86) million in Q2 2025[26] - Cash flow used in operating activities increased to $(30) million in Q3 2025 from $(5) million in Q2 2025[26] - Capital expenditures increased to $(30) million in Q3 2025 from $(24) million in Q2 2025[26] - Liquidity position decreased to $376 million in Q3 2025 from $438 million in Q2 2025[26] Market Conditions and Pricing - Lower sales realizations led to a non-cash inventory impairment of $20 million in Q3 2025[8] - Lower sales realizations for NBSK and NBHK pulp negatively impacted EBITDA by approximately $15 million[8] - Lumber production decreased by 4% compared to Q2 2025 due to planned maintenance at Friesau[43] Strategic Initiatives - Mercer aims to improve profitability by $100 million by the end of 2026, using 2024 as a baseline[29, 36] - The company anticipates $30 million in cost savings for 2025 and is on track to meet this goal[29, 36] - Mass Timber backlog of projects currently sits at ~$80 million[60]

Financial Performance - Total revenues for Q3 2025 decreased by approximately 9% to $458.1 million from $502.1 million in Q3 2024, primarily due to lower pulp and manufactured products sales realizations, partially offset by higher lumber sales realizations [115]. - Net loss for Q3 2025 was $80.8 million, compared to a net loss of $17.6 million in Q3 2024, resulting in a net loss per common share of $1.21 [111]. - Total revenues for the nine months ended September 30, 2025, decreased by approximately 9% to $1,418.6 million from $1,555.0 million in the same period of 2024 [153]. - Net loss for the nine months ended September 30, 2025 was $189.2 million, or $2.83 per share, compared to a net loss of $101.8 million, or $1.53 per share in the same period of 2024 [162]. - Operating loss in Q3 2025 was $67.6 million, a significant decline from operating income of $8.8 million in Q3 2024, primarily due to lower sales realizations and higher costs [119]. Revenue Breakdown - Pulp segment revenues for Q3 2025 were $339.0 million, down from $373.3 million in Q3 2024, while solid wood segment revenues decreased to $117.2 million from $125.1 million in the same period [111]. - Lumber revenues increased by approximately 24% to $61.0 million in Q3 2025 from $49.1 million in Q3 2024, primarily due to higher sales realizations [143]. - Pulp revenues decreased by approximately 10% to $318.6 million in Q3 2025 from $354.2 million in Q3 2024, driven by lower sales realizations [126]. - Lumber revenues increased by approximately 21% to $192.7 million in the nine months ended September 30, 2025, up from $158.9 million in the same period of 2024, driven by higher sales realizations and volumes [181]. Costs and Expenses - Costs and expenses in Q3 2025 increased by approximately 7% to $525.7 million from $493.3 million in Q3 2024, primarily due to higher per unit fiber costs and negative foreign exchange impacts [116]. - Costs and expenses in Q3 2025 increased by approximately 9% to $378.6 million from $348.6 million in Q3 2024, influenced by higher fiber costs and inventory impairment [136]. - Total costs and expenses decreased to $1,108.3 million in the nine months ended September 30, 2025, from $1,129.1 million in the same period of 2024, despite higher fiber costs and inventory impairment [176]. Production and Sales - Lumber production in Q3 2025 was 115.4 million board feet, down from 122.5 million board feet in Q3 2024, with sales slightly increasing to 110.2 million board feet from 108.8 million board feet [113]. - Pulp production for Q3 2025 was 366.7 thousand ADMTs for NBSK and 92.0 thousand ADMTs for NBHK, compared to 374.4 thousand ADMTs and 41.4 thousand ADMTs, respectively, in Q3 2024 [113]. Price Trends - Average NBSK pulp prices in Europe were $1,497 per ADMT, down from $1,573 in Q3 2024, while prices in North America decreased to $1,700 from $1,762 [113]. - Average sales realizations for NBSK pulp were $728 per ADMT in Q3 2025, down from $814 in Q3 2024, while NBHK pulp realizations decreased to $528 from $632 [113]. - Average lumber sales realizations increased by approximately 16% to $533 per Mfbm in the nine months ended September 30, 2025, compared to $458 per Mfbm in the same period of 2024 [186]. Impairments and Charges - The company recorded a non-cash impairment of $20.4 million in Q3 2025 primarily against pulp inventory due to lower prices [116]. - The company recorded inventory impairment charges of $29.9 million in the nine months ended September 30, 2025, primarily due to low pulp prices [175]. Debt and Interest - Interest expense increased by approximately 8% to $28.5 million in Q3 2025 from $26.4 million in Q3 2024, primarily due to debt refinancing activities [120]. - Interest expense increased by approximately 5% to $85.1 million in the nine months ended September 30, 2025, from $80.8 million in the same period of 2024, driven by debt refinancing activities [158]. Market Conditions and Risks - The company faces intense competition in the forest products industry, which could adversely affect its financial condition and results of operations [224]. - The pulp and lumber markets are highly cyclical, with prices sensitive to global economic conditions and industry capacity [229]. - The company’s level of indebtedness could negatively impact its financial condition, results of operations, and liquidity [228]. - Political uncertainty and trade protectionism could adversely affect global macroeconomic activities and the company’s financial condition [228]. Capital Expenditures and Liquidity - Total capital expenditures for the nine months ended September 30, 2025, were $74.4 million, primarily for various upgrades and strategic projects [193]. - As of September 30, 2025, cash and cash equivalents were $98.1 million, with approximately $278.0 million available under revolving credit facilities, totaling aggregate liquidity of about $376.1 million [202]. - The company expects capital expenditures for fiscal 2025 to be between $90.0 million to $100.0 million [202]. Currency and Foreign Exchange - The dollar was approximately 3% weaker against the Canadian dollar and 13% weaker against the euro since December 31, 2024, which could adversely affect operating margins [213]. - The company’s operations in Germany, Canada, and the U.S. expose it to currency exchange rate fluctuations, impacting operating margins and cash flow [238].

Financial Performance - In Q3 2025, Mercer International Inc. reported Operating EBITDA of negative $28.1 million, a decrease from positive $50.5 million in Q3 2024[2] - The net loss for Q3 2025 was $80.8 million ($1.21 per share), compared to a net loss of $17.6 million ($0.26 per share) in Q3 2024[2] - Total revenues for Q3 2025 decreased by approximately 9% to $458.1 million from $502.1 million in Q3 2024, primarily due to lower pulp and manufactured products sales realizations[14] - Operating loss for Q3 2025 was $67.6 million compared to an operating income of $8.8 million in Q3 2024[50] - The company reported a net loss of $80.8 million in Q3 2025, compared to a net loss of $17.6 million in Q3 2024[45] - Total revenues for the nine months ended September 30, 2025 decreased by approximately 9% to $1,418.6 million from $1,555.0 million in the same period of 2024[36] - Operating EBITDA for the nine months ended September 30, 2025 decreased to negative $1.9 million from positive $144.5 million in the same period of 2024[38] Revenue Breakdown - The pulp segment's revenues decreased by approximately 10% to $318.6 million in Q3 2025 from $354.2 million in Q3 2024, driven by lower sales realizations[19] - Solid wood segment revenues in Q3 2025 decreased by approximately 6% to $117.2 million from $125.1 million in Q3 2024, primarily due to lower manufactured products revenues[30] - Lumber revenues increased by approximately 24% to $61.0 million in Q3 2025 from $49.1 million in Q3 2024, driven by higher sales realizations[31] - Manufactured products revenues decreased by approximately 66% to $12.2 million in Q3 2025 from $35.8 million in Q3 2024, impacted by lower sales realizations and volumes[33] Production and Sales Realizations - Average NBSK pulp sales realizations decreased by approximately 11% to $728 per ADMT in Q3 2025 from $814 per ADMT in Q3 2024[20] - Pulp production for NBSK decreased to 366.7 thousand ADMTs in Q3 2025 from 374.4 thousand ADMTs in Q3 2024, a decline of 2.0%[47] - Lumber production in Q3 2025 was 115.4 million fbm, slightly down from 122.5 million fbm in Q3 2024, a decrease of 5.8%[47] - Average sales realizations for manufactured products were $1,615 per cubic meter in Q3 2025, compared to $3,463 per cubic meter in Q3 2024, a significant drop of 53.4%[47] - Average lumber sales realizations rose by approximately 23% to $553 per Mfbm in Q3 2025 from $451 per Mfbm in Q3 2024 due to lower supply and improved demand[31] Cost and Expenses - Per unit fiber costs increased by approximately 14% in Q3 2025 compared to Q3 2024, with expectations for further increases in Q4 2025 due to supply constraints[26] - The company incurred interest expenses of $28,506 thousand in Q3 2025, compared to $26,429 thousand in Q3 2024[59] - Total depreciation and amortization for the nine months ended September 30, 2025, was $117,390 thousand, slightly down from $121,959 thousand in the same period of 2024[54] - Inventory impairment increased to $31,400 thousand for the nine months ended September 30, 2025, compared to $4,000 thousand in the same period of 2024[54] Liquidity and Assets - As of September 30, 2025, the company had cash and cash equivalents of $98.1 million and total liquidity of approximately $376.1 million[40] - Total current assets decreased to $867.8 million as of September 30, 2025, from $910.0 million at the end of 2024[52] - Long-term debt increased to $1.55 billion as of September 30, 2025, compared to $1.47 billion at the end of 2024[52] - Cash and cash equivalents decreased to $98.1 million as of September 30, 2025, down from $184.9 million at the end of 2024[52] - Cash used in operating activities for the nine months ended September 30, 2025, was $(37,569) thousand, compared to a cash inflow of $19,046 thousand for the same period in 2024[54] Future Outlook - The company expects to realize approximately $30 million in cost savings and reliability improvements by the end of 2025 as part of its "One Goal One Hundred" program[5] - The company is advancing a carbon capture and sequestration project at the Peace River mill, expected to enhance long-term economic viability and sustainability[6] - The company will host a conference call on November 7, 2025, to discuss the earnings release and future outlook[41]

Core Insights - Mercer International Inc. reported a significant decline in third quarter 2025 Operating EBITDA, posting negative $28.1 million compared to positive $50.5 million in the same quarter of 2024, and negative $20.9 million in the second quarter of 2025 [2][15][36] - The company experienced a net loss of $80.8 million ($1.21 per share) in Q3 2025, a stark contrast to the net loss of $17.6 million ($0.26 per share) in Q3 2024 and a slight improvement from the net loss of $86.1 million ($1.29 per share) in Q2 2025 [2][12][36] Financial Performance - Total revenues for Q3 2025 decreased by approximately 9% to $458.1 million from $502.1 million in Q3 2024, primarily due to lower pulp and manufactured products sales realizations, partially offset by higher lumber sales realizations [13][34] - Costs and expenses increased by approximately 7% to $525.7 million in Q3 2025 from $493.3 million in Q3 2024, driven by higher per unit fiber costs and negative foreign exchange impacts [14][36] - The pulp segment's revenues decreased by approximately 9% to $339.0 million in Q3 2025 from $373.3 million in Q3 2024, with pulp revenues specifically declining by about 10% [18][34] Market Conditions - The decline in pulp market demand and pricing was attributed to persistent global economic uncertainties, fiber scarcity in Germany, and increased pulp substitution [3][6] - Sales realizations for both softwood and hardwood pulp decreased due to lower prices across all markets, with a notable price gap of approximately $200 per ton between softwood and hardwood pulp [6][19] - Lumber sales realizations remained stable in Q3 2025, with expectations for modest price increases in Europe due to higher fiber costs and slightly higher prices in the U.S. driven by duties and tariffs [7][8] Strategic Initiatives - The company is advancing its "One Goal One Hundred" program, targeting $100 million in profitability improvement actions by the end of 2026, with an expectation of realizing approximately $30 million in cost savings by the end of 2025 [4][8] - A carbon capture and sequestration project is being developed at the Peace River mill, which is currently in the conceptual engineering stage, with a pilot expected to be operational in Q4 2025 [5][8] Operational Highlights - In Q3 2025, pulp mills experienced 32 days of downtime, including 20 days of planned maintenance and 12 days of unplanned downtime due to mechanical failure [10][24] - Total pulp production increased by approximately 10% to 458,708 ADMTs in Q3 2025 from 415,837 ADMTs in Q3 2024, attributed to improved production reliability [24][36] - The solid wood segment's revenues decreased by approximately 6% to $117.2 million in Q3 2025 from $125.1 million in Q3 2024, primarily due to lower manufactured products revenues [26][34]

Core Points - Mercer International will release its third quarter results for the period ending September 30, 2025, on November 6, 2025, after market close [1] - A conference call to discuss the results will be hosted by the President and CEO, Juan Carlos Bueno, and CFO, Richard Short, on November 7, 2025, at 10:00 am ET [1] 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]

Core Insights - Mercer International reported a wider net loss and a year-over-year decline in both earnings and revenue for Q2 2025, with GAAP EPS at $(1.29) and revenue at $453.5 million, below estimates of $476.7 million [1][2] - The company suspended its regular dividend to preserve cash amid worsening profitability and uncertain market recovery [1][9] Financial Performance - Q2 2025 GAAP EPS was $(1.29), a decline of 27.7% from Q2 2024's $(0.96) [2] - Revenue for Q2 2025 was $453.5 million, down 9.2% from $499.4 million in Q2 2024 [2] - Operating EBITDA turned negative at $(20.9) million, a significant drop from a gain of $30.4 million in the previous year, indicating serious cost and pricing pressures [2][5] Segment Performance - Pulp segment revenue fell approximately 10% year-over-year to $332.3 million, with NBSK pulp prices declining 7% to $758 per air-dry metric ton [2][6] - Solid Wood segment revenue decreased by 10%, with a notable 65% drop in revenue from mass timber products due to reduced project activity [2][7] Strategic Focus - The company focuses on producing Northern Bleached Softwood Kraft (NBSK) pulp and solid wood products, with a strategy centered on cost-efficient manufacturing and sustainability [3][4] - Mercer holds a monopoly as Germany's only NBSK producer and is investing in products linked to global carbon-reduction trends [4] Challenges and Outlook - The company faces challenges from currency movements, high input costs, and weak demand in key markets, particularly China [8][12] - Management did not provide formal financial guidance but indicated that softwood pulp prices are likely to decrease, while lumber prices may rise [11]

Financial Performance - The company's EBITDA for Q2 2025 was negative $21 million, a significant decrease from Q1's positive EBITDA of $47 million [5]. Management Commentary - Richard Short, the CFO, provided an overview of the financial and operational highlights for the second quarter before handing over to CEO Juan Carlos Bueno for further insights into markets, operations, and strategic initiatives [3].