Financial Data and Key Metrics Changes - The company generated EBITDA of almost $84 million in Q2 2021, compared to approximately $82 million in Q1 2021, despite significant planned downtime impacting operations [11] - Net income for Q2 was $21 million, or $0.32 per share, up from $6 million, or $0.09 per share, in Q1, reflecting the absence of a $30 million loss from early debt extinguishment in Q1 [17] - Cash used in Q2 totaled approximately $11 million, contrasting with cash generated of $34 million in Q1, primarily due to capital expenditures and repayment of revolving credit facilities [17][18] Business Line Data and Key Metrics Changes - The pulp segment contributed EBITDA of $41 million, while the Wood Products segment achieved record quarterly EBITDA of $46 million, driven by strong demand and high U.S. sales prices [12] - Average quarterly softwood and hardwood pulp prices increased significantly, with the Q2 average NBSK net price in China at $962 per ton, up almost $80 from Q1, and European list prices averaging $1,288 per ton, compared to $1,037 per ton in Q1 [13] - Lumber realizations increased considerably, with the U.S. benchmark for Western S-P-F 2 and Better averaging over $1,342 per thousand board feet in Q2, up $370 from the previous quarter [15] Market Data and Key Metrics Changes - Pulp demand remained steady, but sales volume decreased due to planned downtime, totaling almost 361,000 tons in Q2, down about 127,000 tons from Q1 [13] - The U.S. lumber market experienced a significant correction, with prices declining by roughly 70%, attributed to high prices negatively impacting demand [27] - The European lumber market showed steady price increases, with expectations for continued strength despite potential reductions in exports to the U.S. [28] Company Strategy and Development Direction - The company focuses on creating long-term value through investments in modern facilities, emphasizing sustainability and resource efficiency [6][7] - Ongoing projects include the construction of new wood rooms to enhance supply chains and reduce production costs, with total costs estimated between $65 million and $70 million [34][35] - The company is pursuing a stalking-horse bid for Katerra’s cross-laminated timber plant, viewing it as a strategic addition to its building products competency [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the global economic recovery driven by COVID-19 vaccinations, while acknowledging uncertainties related to variants and infection rates [21] - The company anticipates steady economic growth and strong market fundamentals will support pulp prices, despite recent price retreats in China [26] - Management highlighted the importance of maintaining a strong balance sheet and liquidity to capitalize on growth opportunities [38] Other Important Information - The company completed 117 days of planned capital and maintenance downtimes in Q2, which negatively impacted production levels [19] - A quarterly dividend of $0.065 per share was approved for shareholders of record on September 29, 2021 [19] Q&A Session Summary Question: What is the updated build cost for the Stendal project? - Management indicated that the updated build cost could be in the range of $650 to $750 per thousand board feet, with considerations for staging the project [41][42] Question: Has the appetite for acquiring existing sawmills increased? - Management confirmed that the current market conditions have influenced their thinking, but they remain cautious about purchasing existing facilities that do not meet their strategic criteria [43] Question: What production level is targeted for 2022? - Management did not provide a specific figure but indicated that production targets would be adjusted based on planned downtimes and operational efficiencies [44] Question: How will hardwood capacity coming online impact the market? - Management noted that while new hardwood capacity could create challenges, the demand for virgin fiber remains strong, and they expect the gap between hardwood and softwood prices to widen [53][54] Question: What profitability can be expected from the CLT plant? - Management stated that profitability would depend on wood costs, conversion costs, and market competition, emphasizing the potential for steady margins [55] Question: What is the status of the Performance BioFilaments joint venture? - Management confirmed that the joint venture with Resolute is focused on developing applications for biofilaments, with ongoing construction of a plant in Quebec [70][71]
Mercer(MERC) - 2021 Q2 - Earnings Call Transcript