Financial Performance - Mercer's Q1 2025 Operating EBITDA decreased to $47 million, a $52 million decrease compared to $99 million in Q4 2024[6] - The Pulp segment's EBITDA decreased by $56 million, from $106 million in Q4 2024 to $50 million in Q1 2025[6] - Net loss was $22 million in Q1 2025, compared to a net income of $17 million in Q4 2024[27] - Cash flow from operating activities decreased by $74 million, from $71 million in Q4 2024 to -$3 million in Q1 2025[27] Operational Factors - Planned maintenance downtime at the Celgar mill had an estimated EBITDA impact of approximately $30 million[9] - Total planned downtime for 2025 is expected to be 79 days, compared to 57 days in 2024[57] - Q1 sales volume increased from 452,000 tonnes to 478,000 tonnes[15] Market Dynamics and Outlook - The company is targeting $100 million in cost savings by the end of 2026 compared to 2024[31] - Fiber costs are expected to increase by approximately 10% for the solid wood segment in Q2 2025[42] - The company is monitoring potential tariff impacts on pulp and lumber imports into the U S, with average annual sales of approximately 200,000 tonnes of pulp and approximately 200 million fbm of lumber into the U S[30] - Mass timber order file suggests a weaker Q2 and Q3 for 2025, with improvement anticipated to start in Q4[46]

Financial Data and Key Metrics Changes - The company's EBITDA for Q1 was $47 million, a significant decrease from $99 million in Q4, primarily due to 22 days of planned maintenance downtime at the Celgar mill, which adversely impacted EBITDA by approximately $30 million [3][11] - A consolidated net loss of $22 million was reported for Q1, translating to a loss of $0.33 per share, compared to a net income of $17 million or $0.25 per share in Q4 [11] - Cash consumption in Q1 was about $3 million, a decrease from $54 million in Q4, 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, while the solid wood segment's EBITDA was nearly 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, a 6% increase from Q4 [8][9] Market Data and Key Metrics Changes - MBSK prices increased in key markets, with the European average price rising to $15.50 per ton, an increase of $50 from Q4, and North American prices averaging $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 remained flat due to offsetting price changes in North America [5] - The North American MBHT average price decreased to $12.68 per ton, down $30 from Q4 [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, alongside a $20 million reduction in inventories and capital expenditures in 2025 [17] - The company aims to maximize mill operating rates and generate cash to reduce debt, with a focus on improving reliability across all businesses [17][24] - The mass timber operations are expected to grow, with a current order file of about $24 million, and plans to ramp up production in early 2026 [28][29] 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 [19][20] - The company is closely monitoring trade policy developments and has contingency plans to mitigate potential tariff impacts [14][17] - Despite global economic uncertainty, management remains optimistic about the long-term demand for softwood pulp and the potential for price differentials between softwood and hardwood pulp to widen [22][23] Other Important Information - The company reported a liquidity position of $471 million at the end of Q1, including $182 million in cash and $289 million in undrawn revolvers [12] - A quarterly dividend of $0.75 per share was approved for shareholders of record on June 26, with payment scheduled for July 3, 2025 [12] Q&A Session Summary Question: Can you elaborate on the secondary effects related to tariffs and pricing? - Management explained that secondary effects include the weakening U.S. dollar impacting costs and a slowdown in demand in China, leading to cautious inventory management [41][42][44] Question: What is the outlook for pulp prices in Q2? - Management anticipates more positive than negative impacts on pulp prices in Q2 compared to Q1, despite some recent softness in lumber prices [45][46] Question: Can you provide details on the cost savings objectives? - The company has identified various cost reduction opportunities across its operations, with expectations to achieve $40 to $50 million in savings by 2025 [50][51] Question: How will the lumber markets evolve if Section 232 tariffs are introduced? - Management indicated that Canadian lumber would become less competitive, potentially benefiting their products from Germany, which would be more favorable in the U.S. market [63][64] Question: What is the impact of Russian fiber on the softwood futures market? - Management noted that Russian fiber significantly influences the market, affecting pricing dynamics and creating an imbalance in supply [81][82] 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 [108][110]

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]

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]

Microsoft announced on Friday that it is buying 3.7 million metric tons of carbon removal credits from CO280, a project developer that works with pulp and paper mills.The purchase covers 12 years of emissions from CO280’s first carbon capture project at a mill on the Gulf Coast. CO280 expects the facility to start capturing CO2 in 2028. Microsoft’s purchase should help it meet its goal of becoming a carbon-negative company by 2030 — that is, removing more carbon than its business produces. But even with M ...

Summary of Key Points from the Pulp & Paper Conference Call Industry Overview - The conference call focuses on the **Global Pulp & Paper Industry** and discusses key themes for **2025** [1][2]. Core Themes and Insights 1. **Pulp Price Volatility**: Pulp prices experienced a **30% change** from peak to trough in **2024**, with a short **6-month cycle** expected to continue into **2025** [1]. 2. **Demand Normalization**: Following a strong **2023**, demand patterns are expected to normalize in **2025**, with **China** leading growth and an incremental demand growth of **1.2 million tons** primarily driven by hardwood demand [2][3]. 3. **Oversupply Forecast**: The market is projected to be oversupplied by **800,000 tons** in **2025** [2]. 4. **Utilization Rates**: The utilization rate for hardwood is expected to decline from **93% to 92%** in **2025** [3]. 5. **Chenming's Impact**: The temporary shutdown of **Chenming** in **China** is a significant factor affecting pulp prices, with a potential restart of production being closely monitored [18][19]. 6. **Growing Capacity in China**: An additional **5 million tons per annum (mtpa)** of hardwood pulp is expected to enter the market in **2025-26**, contributing to increased domestic production [23][24]. 7. **LatAm Expansion**: Latin America is seeing a resurgence in pulp capacity expansion, with **15 mtpa** growth over the last decade and another **13 mtpa** planned by the end of the decade [10][12]. 8. **European and Canadian Costs**: Pulp production costs in **Europe** and **Canada** are expected to remain elevated due to inflationary pressures, with North America experiencing a **40%** increase since the pandemic [36][37]. 9. **China's Virgin-Paper Oversupply**: China's paper utilization has been declining, averaging **66% in 2023** and **60% in 2024**, indicating ongoing oversupply issues [43][44]. 10. **Softwood vs. Hardwood Price Spreads**: The price spread between softwood and hardwood is expected to remain elevated, ranging from **$50 to $250 per ton** due to supply dynamics [66][67]. Additional Important Insights - **FX Impact**: Foreign exchange volatility is highlighted as a critical factor for pulp producers, affecting cash costs and pricing power [75][76]. - **Integration Trends**: There is a continuing trend of pulp-paper integration in **China**, reducing dependency on imported market pulp [49][50]. - **European Demand Decline**: European pulp demand has been in structural decline since **2018**, with a **CAGR of -5%** expected to persist [58][59]. - **Investment Considerations**: Investors are advised to monitor woodchip availability and pricing as proxies for domestic pulp production and profitability [25][54]. This summary encapsulates the key themes and insights discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the pulp and paper industry.