Group 1: Acquisition Announcement - American Industrial Partners (AIP) has signed a definitive agreement to acquire the Global Cellulose Fibers (GCF) division of International Paper, focusing on absorbent fluff pulp for personal care products [1][3] - The transaction is expected to close in Q4 2025, subject to customary closing conditions and regulatory approvals [3] Group 2: Company Overview - GCF is a leading producer of absorbent fluff pulp, softwood pulp, and modified fibers, with manufacturing facilities in the U.S., Canada, and Poland [2][5] - In 2024, GCF generated approximately $2.5 billion in annual revenue and employs around 3,300 associates [2][5] Group 3: Market Position and Growth Potential - GCF is well-positioned for future growth due to durable demand tailwinds such as population growth, rising incomes, and increasing customer preferences for product absorbency and comfort [2][3] - The company benefits from a sustainable wood basket, strong end markets, industry-leading quality, and long-term customer relationships [3]

Core Viewpoint - International Paper is undergoing significant strategic changes, including the sale of its Global Cellulose Fibers business to American Industrial Partners for $1.5 billion, aimed at enhancing its focus on sustainable packaging solutions and improving its cost position [2][3]. Group 1: Sale of Global Cellulose Fibers Business - The sale of the Global Cellulose Fibers (GCF) business is valued at $1.5 billion, with adjustments including preferred stock issuance of $190 million [2]. - The GCF business generated $2.8 billion in revenue in 2024 and employs 3,300 people across nine manufacturing facilities [3]. - The transaction is expected to close by the end of the year, pending regulatory approvals [2]. Group 2: Strategic Changes in North America - International Paper is investing $250 million to convert the 16 machine at the Riverdale mill in Selma, Alabama, to produce containerboard [6]. - The company will permanently close the Savannah containerboard mill, Savannah packaging facility, and Riceboro mills, resulting in a net reduction of approximately one million tons in annual containerboard capacity [7]. - These changes will impact around 1,100 hourly and salaried positions, with the company committed to providing severance packages and outplacement assistance [4][5]. Group 3: Management Insights - The CEO of International Paper expressed confidence in the transition of GCF to AIP, highlighting the business's alignment with strategic customers and its potential for long-term success [3]. - AIP's partner noted GCF's strong position for future growth, supported by sustainable resources and long-term customer relationships [3].

Financial Data and Key Metrics Changes - The company reported that sales, operational cash generation, and EBITDA were in line with expectations for the quarter [10] - Net debt remained stable at $13 billion, with net leverage increasing to 3.1 times due to a reduction in last twelve months EBITDA to $4.2 billion [28] Business Line Data and Key Metrics Changes - The paper and packaging business in Brazil saw stronger sales volumes and lower costs compared to Q1, with EBITDA growth year-over-year [12] - U.S. operations experienced a 3% price increase quarter-over-quarter driven by product mix and better commercial location, although EBITDA was negatively impacted by lower volumes and higher costs due to maintenance [13][12] Market Data and Key Metrics Changes - In Brazil, print and write demand rose 6% year-over-year, while uncoated wood-free paper demand remained stable in North America and Latin America but declined 10% in Europe [14] - The U.S. market for boxboard demand was stable, with a 1% increase in demand for SBS boards [15] Company Strategy and Development Direction - The company is focusing on competitiveness and cost reduction, with expectations of lower cash costs in the upcoming quarters [10] - A deal with Eldorado is expected to provide an internal return of around 20%, allowing for increased production at the Ribba's mill without significant investment [7][8] Management's Comments on Operating Environment and Future Outlook - Management highlighted a positive outlook for cash cost trends and emphasized the importance of maintaining competitiveness in a challenging market environment [10][76] - The company is preparing for various scenarios in the global market and aims to improve operational efficiency [85] Other Important Information - The company is not currently planning significant new investments but is focused on executing existing projects and deleveraging [10][86] - The company has built inventories in the U.S. to mitigate the impact of 50% import duties imposed by the U.S. government [17] Q&A Session Questions and Answers Question: What are the changing dynamics in the pulp scenario? - Management noted high order intake levels in China and a supportive environment for price increases due to restocking movements and production recovery [32][34] Question: What is the internal rate of return for the deal with Eldorado? - The expected internal rate of return is around 20%, driven by optimized harvesting and reduced operational costs [40][42] Question: What is the expected CapEx trend for 2026? - The company anticipates a declining trend in CapEx, although specific numbers will be disclosed later [84] Question: How are negotiations regarding the 10% tariff going? - The company successfully negotiated that customers will bear the 10% tariff, ensuring that Suzano will not absorb this cost [95] Question: What is the status of the Kimberly Clark acquisition? - Dedicated teams have been established to plan the carve-out of the new joint venture, with the project progressing as planned [96]

Financial Performance - Sales volume reached 3.3 million tons in 2Q25, compared to 2.7 million tons in 1Q25 and 2.5 million tons in 2Q24[6] - Adjusted EBITDA was R$6.1 billion in 2Q25, versus R$4.9 billion in 1Q25 and R$6.3 billion in 2Q24[6] - Operating cash generation amounted to R$4.1 billion in 2Q25, up from R$2.6 billion in 1Q25 but down from R$4.5 billion in 2Q24[6] - Cash cost ex-downtimes was R$832/ton in 2Q25, compared to R$859/ton in 1Q25 and R$828/ton in 2Q24[6] - Net debt stood at US$13.0 billion in 2Q25, slightly higher than US$12.9 billion in 1Q25 and US$12.0 billion in 2Q24[7] - Leverage was 3.1x in US$ in 2Q25, compared to 3.0x in 1Q25 and 3.2x in 2Q24[7] Pulp and Paper Business - Paper sales were 348 thousand tons in 2Q25, compared to 329 thousand tons in 1Q25 and 270 thousand tons in 2Q24[6] - Pulp sales volume increased to 3,269 thousand tons in 2Q25 from 2,651 thousand tons in 1Q25 and 2,545 thousand tons in 2Q24[12] - Pulp business adjusted EBITDA margin was 52% in 2Q25[12] Financial Management - Notional value of the current portfolio was US$6.8 billion as of June 2025[22]

Summary of the Conference Call on the Pulp & Paper Industry Industry Overview - The China pulp market is currently in a fragile equilibrium, with good pulp sales recently but negative macro sentiment affecting trading and growth uncertainties [1][2] - Paper production has decreased by 2% year-to-date, while pulp supply is growing rapidly, leading buyers to perceive no risk of deficit for restocking [1][2] Key Points - **Market Sentiment**: Confidence levels among buyers and sellers are low, limiting significant price movements in the short term. Industry participants are holding onto unclear and potentially unsustainable reasons to support pricing [2][3] - **Price Trends**: Pulp prices are expected to remain relatively flat until the end of summer, but a potential cyclical rebound could occur towards year-end as low prices impact producers' balance sheets [3][19] - **Production and Inventory**: - Pulp inventories at Chinese ports decreased by 2% month-over-month to 2.1 million tons, still 14% above the 5-year historical average [19] - Paper output in China increased by 4% month-over-month and 5% year-over-year in July, with utilization rates remaining flat at 59% [21] Pricing Data - China FOEX hardwood imported pulp prices decreased by $3 per ton to $495 per ton, while domestic resale prices ranged from $488 to $492 per ton [10] - Softwood imported FOEX prices also decreased by $3 per ton to $687 per ton, with domestic resale prices ranging from RMB -27 to 1 per ton [10] Margins and Production Costs - Paper margins in China were flat to down in July, primarily due to a slight decline in paper prices across all grades, despite lower pulp prices partially offsetting this decline [13] - The cash cost curve in China remains deflationary, allowing production to remain resilient at low prices [1] European Market Insights - European containerboard prices were broadly flat in July, with Kraftliner prices up by 2% and Testliner down by 3% [25] - European graphic paper prices decreased, with coated and uncoated woodfree prices down by 2% and 3% month-over-month, respectively [28] Company-Specific Insights - UPM's management indicated a negative outlook for pulp, citing macro uncertainties and declining orders, leading to planned shutdowns of certain mills [34] - SCA's management noted a challenging market for European containerboard, with negative price movements due to oversupply and tariff discussions [35] - Altri's management highlighted that hardwood pulp prices are close to marginal costs and may stabilize soon, with European prices expected to follow China's trend with a delay [35] Latin America Market Data - In Brazil, corrugated box shipments decreased by 2% year-over-year and 6% month-over-month in June, with year-to-date shipments at 2.0 million tons, reflecting a 1% year-over-year decline [36] Investment Ratings - Various pulp and paper companies in Latin America have been rated with target prices and upside potential, with Suzano SA rated as a "Buy" with a target price of $65.00, reflecting a 24.6% upside [38] Conclusion - The pulp and paper industry is facing a complex landscape characterized by fragile market conditions, fluctuating prices, and varying production outputs. Investors should remain cautious and monitor macroeconomic factors that could influence market dynamics.

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 Data and Key Metrics Changes - The company reported a negative EBITDA of $21 million for Q2 2025, a significant decrease from the positive EBITDA of $47 million in Q1 2025, primarily due to foreign exchange impacts and lower pulp prices in China [3][11][20] - The consolidated net loss for Q2 was $86 million, or $1.29 per share, compared to a net loss of $22 million, or $0.33 per share in Q1 [11] - Cash consumption increased to $35 million in Q2 from $3 million in Q1, driven by lower EBITDA [11] Business Line Data and Key Metrics Changes - The pulp segment had a negative EBITDA of $10 million in Q2, while the solid wood segment reported a negative EBITDA of $5 million [3][26] - NBSK pulp sales realizations decreased in Q2, with the net price in China dropping to $734 per tonne, a decrease of $59 from Q1 [4] - Lumber production decreased by 6% to approximately 120 million board feet in Q2 due to planned maintenance [9] Market Data and Key Metrics Changes - In North America, the average list price for MBSK increased by $67 to $18.20 per tonne, while the European price remained stable at $15.53 per tonne [4] - The average price for NBHK in China decreased by $45 to $533 per tonne [5] - Pulp sales volumes decreased by 51,000 tons to 427,000 tons in Q2 due to weaker demand [5][6] Company Strategy and Development Direction - The company launched the "One Goal 100" program aimed at achieving $100 million in cost savings and operational efficiencies by 2026 [10][14] - The company plans to reduce capital expenditures to about $100 million in 2025, focusing on maintenance and safety projects [34] - The company is exploring a carbon capture project at the Peace River Mill, which could generate significant revenue from CO2 credits [35][70] Management's Comments on Operating Environment and Future Outlook - Management highlighted that trade uncertainty and tariffs have negatively impacted Q2 results, particularly affecting demand from China [13][19] - The company expects pulp prices to remain weak through the summer but anticipates a recovery in Q4 as demand picks up [22][66] - Management remains optimistic about the long-term value of pulp and the growth potential of mass timber products [36][33] Other Important Information - The company suspended its dividend as a prudent measure to focus on debt reduction amid market uncertainties [19] - The company reported a strong liquidity position of $438 million at the end of Q2, including $146 million in cash [12] Q&A Session Summary Question: Can you provide information on cash flow items for 2025? - The company expects cash taxes for the year to be about $25 million, with a slight negative working capital change anticipated [39][44] Question: What is the minimum liquidity level the company is comfortable with? - The company is not concerned about liquidity and has room to adjust capital expenditures if needed [51][54] Question: Can you comment on softwood inventory levels and potential write-downs? - The company does not foresee any impairments on softwood inventories, although levels are slightly elevated [58] Question: What could catalyze pulp prices gaining momentum later in the year? - The company expects restocking demand after the low summer season to drive pulp prices up, particularly for softwood [66] Question: How significant is the carbon capture project at Peace River? - The project could generate over $100 million per year in revenue from CO2 credits, with a capital requirement of around $100 million for the company's share [70][74] Question: How is the Torgau mill positioned for the U.S. market? - The Torgau mill is equipped to supply the U.S. market and is expected to increase production capacity [78][80]

Financial Data and Key Metrics Changes - The company reported a negative EBITDA of $21 million for Q2 2025, a significant decrease from the positive EBITDA of $47 million in Q1 2025, primarily due to negative foreign exchange impacts and lower pulp prices in China [3][10][19] - The consolidated net loss for Q2 was $86 million, or $1.29 per share, compared to a net loss of $22 million, or $0.33 per share in Q1 [10] - Cash consumption increased to $35 million in Q2 from $3 million in Q1, driven by lower EBITDA [10][11] Business Line Data and Key Metrics Changes - The pulp segment experienced a negative EBITDA of $10 million in Q2, while the solid wood segment had a negative EBITDA of $5 million [3][25] - NBSK pulp sales realizations decreased in Q2 due to a weaker global trade environment, with the average net price in China dropping to $734 per tonne, a decrease of $59 from Q1 [4] - Lumber production decreased to approximately 120 million board feet, down 6% from Q1, and lumber sales volumes also decreased by about 8% [8][25] Market Data and Key Metrics Changes - In North America, the average list price for MBSK increased to $18.20 per tonne, up $67 from Q1, while the European price remained stable at $15.53 per tonne [4] - The average price for NBHK in China decreased to $533 per tonne, down $45 from Q1, while the North American average increased to $13.10 per tonne, up $42 from Q1 [5] - The company noted a significant decrease in pulp sales volumes, down by 51,000 tons to 427,000 tons due to weaker demand [5][6] Company Strategy and Development Direction - The company launched the "One Goal 100" program aimed at achieving $100 million in cost savings and operational efficiencies by 2026, with $5 million in savings already realized [9][15] - The company plans to reduce capital expenditures to about $100 million in 2025, focusing on maintenance and safety projects [33] - The company is exploring a carbon capture project at its Peace River Mill, which could generate significant revenue from CO2 credits [34][66] Management's Comments on Operating Environment and Future Outlook - Management highlighted that trade uncertainty and tariffs were significant factors behind the disappointing Q2 results, with expectations for pulp prices to remain weak through the summer [13][21] - The company anticipates a gradual recovery in pulp prices towards the end of Q3 and into Q4, driven by restocking after the low summer season [60][62] - Management expressed confidence in the long-term value of pulp and the potential for growth in the mass timber business, despite current market challenges [36][32] Other Important Information - The company suspended its dividend as a prudent measure to focus on debt reduction amid market uncertainties [18] - The company reported a strong liquidity position of $438 million at the end of Q2, consisting of $146 million in cash and $292 million in undrawn revolvers [11] Q&A Session Summary Question: Can you provide information on cash flow items for 2025? - The company expects cash taxes for the year to be about $25 million, with capital expenditures targeted at $100 million [39][42] Question: What is the minimum liquidity level comfortable for the company? - The company indicated that it is not close to being uncomfortable with liquidity and has room to adjust capital expenditures if needed [48][51] Question: Can you comment on softwood inventory levels? - Management stated that softwood inventory levels are slightly elevated but not concerning, and there are no current impairments expected [55] Question: What could catalyze pulp prices gaining momentum later in the year? - Management believes that restocking after the low summer season and supply constraints will drive pulp prices up in Q4 [60][62] Question: What is the potential financial impact of the carbon capture project? - The project could generate significant revenue tied to CO2 credits, potentially exceeding $100 million per year, with a capital requirement of around $500 million, of which a substantial portion is expected to be covered by grants [66][68]

Financial Performance - Mercer's Operating EBITDA decreased significantly from $47 million in Q1 2025 to -$21 million in Q2 2025[6] - The pulp segment experienced a substantial decrease in EBITDA, from $50 million in Q1 2025 to -$10 million in Q2 2025[6] - The solid wood segment's EBITDA also decreased, from -$0 million in Q1 2025 to -$5 million in Q2 2025[6] - Net loss increased from -$22 million in Q1 2025 to -$86 million in Q2 2025[27] Pulp Market - NBSK (Northern Bleached Softwood Kraft) list price was $1,000 per tonne[10] - NBSK China (net) price decreased from $793 per tonne in Q1 2025 to $734 per tonne in Q2 2025[10] - NBHK (Northern Bleached Hardwood Kraft) China (net) price decreased from $578 per tonne in Q1 2025 to $533 per tonne in Q2 2025[10] Lumber and Mass Timber - Lumber production decreased by 6% from 128 mmfbm in Q1 2025 to 120 mmfbm in Q2 2025[43] - Mass timber revenue decreased from $17 million in Q1 2025 to $11 million in Q2 2025[25] Strategic Initiatives - Mercer aims to improve profitability by $100 million by the end of 2026, using 2024 as a baseline[30] - The company realized $5 million in cost savings to date and anticipates $25 million for 2025[30]

Core Insights - Mercer International Inc. reported a significant decline in Operating EBITDA, posting negative $20.9 million for Q2 2025, down from positive $30.4 million in Q2 2024 and $47.1 million in Q1 2025 [2][9][37] - The company experienced a net loss of $86.1 million ($1.29 per share) in Q2 2025, compared to a net loss of $67.6 million ($1.01 per share) in Q2 2024 and $22.3 million ($0.33 per share) in Q1 2025 [2][9][37] - The decline in performance is attributed to ongoing uncertainties in the global trade environment, weaker demand for pulp in China, and a depreciation of the dollar, which negatively impacted Operating EBITDA by approximately $26 million [3][9][37] Financial Performance - Total revenues for Q2 2025 decreased by approximately 9% to $453.5 million from $499.4 million in Q2 2024, primarily due to lower sales realizations and volumes from pulp and manufactured products, partially offset by higher lumber sales realizations [14][35] - Costs and expenses in Q2 2025 decreased by approximately 6% to $511.9 million from $543.2 million in Q2 2024, driven by fewer days of planned maintenance downtime at pulp mills [15][35] - The company reported a total net loss of $108.4 million for the first half of 2025, compared to a net loss of $84.3 million in the same period of 2024 [36][48] Segment Analysis - In the pulp segment, revenues decreased by approximately 10% to $332.3 million in Q2 2025 from $367.4 million in Q2 2024, primarily due to lower pulp sales realizations and volumes [19][22] - The solid wood segment saw revenues decrease by approximately 10% to $117.3 million in Q2 2025 from $130.2 million in Q2 2024, mainly due to lower manufactured products revenues, despite higher lumber revenues [28][29] - Lumber revenues increased by approximately 23% to $66.3 million in Q2 2025 from $53.9 million in Q2 2024, driven by higher sales realizations [29][30] Operational Highlights - The company had 29 days of downtime in Q2 2025, which included 23 days of planned annual maintenance and six additional days due to slower than expected start-up [11][25] - Total pulp production increased by approximately 8% to 457,117 ADMTs in Q2 2025 compared to 421,692 ADMTs in Q2 2024, attributed to fewer days of planned maintenance downtime [24][25] - Average per unit fiber costs increased by approximately 11% in Q2 2025 compared to Q2 2024, primarily due to higher costs at German mills [26][34] Strategic Initiatives - The company is implementing cost reduction initiatives under the "One Goal One Hundred" program, targeting $100 million in profitability improvement actions by the end of 2026, with approximately $5 million in cost savings realized to date [5][9] - The quarterly dividend has been suspended to prudently allocate capital amidst ongoing market uncertainties [9][12]