Mercer(US:MERC)2021-07-29 20:56Financial Performance - Total revenues for Q2 2021 increased by approximately 18% to $401.8 million from $341.2 million in Q2 2020, primarily due to higher pulp and lumber sales realizations[98]. - Operating income for Q2 2021 rose to $51.8 million from $10.3 million in Q2 2020, driven by higher sales realizations[102]. - Net income for Q2 2021 was $21.4 million, or $0.32 per share, compared to a net loss of $8.4 million, or $0.13 per share, in Q2 2020[104]. - Operating EBITDA for Q2 2021 increased to $83.8 million from $40.5 million in Q2 2020, reflecting improved sales realizations[105]. - Total revenues for the first half of 2021 rose by approximately 18% to $814.6 million from $691.8 million in the first half of 2020, mainly due to higher pulp and lumber sales realizations[127]. - Operating income for the first half of 2021 increased to $102.9 million from $34.4 million in the same period of 2020, driven by higher pulp and lumber sales realizations[130]. - Cash provided by operating activities was $111.4 million in the first half of 2021, a significant improvement compared to cash used in operating activities of $5.7 million in the same period of 2020[155]. Revenue Breakdown - Pulp segment revenues for Q2 2021 were $310.2 million, compared to $298.0 million in Q2 2020, while wood products segment revenues increased to $90.4 million from $41.7 million[94]. - Pulp revenues increased by approximately 7% to $297.2 million in Q2 2021 from $276.9 million in Q2 2020, driven by higher sales realizations despite lower sales volumes[107]. - Lumber revenues surged to $86.3 million in Q2 2021 from $37.6 million in Q2 2020, attributed to higher sales realizations in strong U.S. and European markets[121]. - Lumber revenues surged to $153.6 million in the first half of 2021 from $78.6 million in the same period of 2020, attributed to higher sales realizations in both U.S. and European markets[147]. Cost and Expenses - Costs and expenses in Q2 2021 increased by approximately 6% to $350.0 million from $330.9 million in Q2 2020, mainly due to higher maintenance costs[99]. - In the first half of 2021, costs and expenses increased by approximately 7% to $611.5 million from $572.4 million in the same period of 2020, primarily due to higher maintenance costs and the negative impact of a weaker dollar[142]. Market Conditions - The company expects strong pulp market fundamentals to support marginally higher NBSK pulp prices in Europe, while lumber demand and pricing are anticipated to remain steady[89]. - The pulp and lumber markets are highly cyclical, with prices sensitive to global economic conditions, industry capacity, and foreign exchange rates[189]. - Demand for pulp and lumber is closely tied to global macro-economic conditions and overall business activity[191]. Production and Sales - Lumber production in Q2 2021 was 116.7 million board feet, with sales at 109.3 million board feet, compared to 113.5 million and 109.0 million board feet in Q2 2020[96]. - NBSK pulp production declined by approximately 16% to 355,103 ADMTs in Q2 2021 from 423,773 ADMTs in Q2 2020, impacted by maintenance downtime[109]. - Average lumber sales realizations increased to $789 per Mfbm in Q2 2021 from approximately $345 per Mfbm in Q2 2020, reflecting strong demand in housing and renovation markets[123]. - Average lumber sales realizations increased to $706 per Mfbm in the first half of 2021 from approximately $347 per Mfbm in the same period of 2020, reflecting strong demand in the housing and renovation markets[149]. Risks and Challenges - The company faces significant risks related to the COVID-19 pandemic, which could adversely affect its business, financial position, and results of operations[185]. - The company is subject to extensive environmental regulations, which could incur substantial compliance costs[187]. - The company faces risks related to trade laws and foreign corrupt practices that could impact operations[193]. - Fluctuations in prices and demand for lumber could adversely affect the company’s business operations[185]. Financial Position - As of June 30, 2021, cash and cash equivalents amounted to $384.5 million, with approximately $310.4 million available under revolving credit facilities, resulting in total liquidity of about $694.9 million[163]. - As of June 30, 2021, the company was in full compliance with all covenants of its indebtedness[170]. - The company’s Senior Notes are rated B+ by S&P, with a stable outlook, which could affect financing costs and market price of securities[177]. Currency and Economic Factors - The dollar strengthened by approximately 3% against the euro and weakened by approximately 3% against the Canadian dollar since December 31, 2020, impacting the company's financial results[176]. - Currency fluctuations can adversely affect operating margins, as costs in Germany and Canada are incurred in euros and Canadian dollars, while sales are primarily in dollars[197]. Sustainability and Compliance - The company voluntarily complies with sustainable management standards, which is increasingly important to customers[192]. - The company received approximately $15.8 million in government grants to partially finance greenhouse gas emission reduction projects at its Canadian mills[164].