Mercer International, Inc. Q4 FY2024 earnings call

Financial Results - Q4 operating EBITDA was $99 million, up from $50 million in Q3, driven by no major maintenance downtime, strong dollar, higher MBSK sales volumes, partially offset by modestly lower pulp pricing. 2024 fiscal year EBITDA was $244 million vs $17 million in 2023. - Pulp Market - Softwood pulp market remained strong, carrying positive momentum into 2025. Hardwood prices weakened in Q4 but reached floor, with early 2025 seeing modest increases. - Maintenance and Projects - Planned major maintenance downtime schedules for 2025, including Selgar, Peace River, Standal, Rosenthal. Capital spending expected between $100-$120 million in 2025, focusing on maintenance, environmental, safety projects. Torghall lumber expansion and Selgar's wood room projects to increase output and optimize fiber costs. - Mass Timber - Order book at $36 million, with pent-up demand in construction. Confident in mass timber as a growth engine with competitive advantages. - Lignin Pilot Plant - New lignin extraction pilot plant at Rosenthal showing positive development, seen as sustainable alternative with growth potential.

In the fourth quarter, the pulp segment contributed an EBITDA of $106 million. The solid wood segment had a quarterly EBITDA of negative $5 million. MBSK markets were strong, but sales realizations modestly decreased. Total MBSK pulp sales volumes in Q4 increased by 29,000 tons to 405,000 tons. Lumber sales volumes were up 14% quarter over quarter to 124 million board feet, while lumber production for the fourth quarter was 115 million board feet, down 6% from the third quarter due to planned downtime. The pulp segment's softwood pulp sales realizations were $794 per ton in Q4 compared to $814 per ton in Q3. The solid wood segment was impacted by a weak European economy and high-interest rates in the construction industry.

• Capital spending expected to be between $100 and $120 million in 2025, heavily weighted to maintenance, environmental, and safety projects. - Board approved a quarterly dividend of $0.075 per share for shareholders of record on March 26, payment on April 2, 2025. - Prepared to mitigate tariff impacts through flexible operations and sales strategies, maintaining dialogue with customers, officials, and associations.

• Uncertainty regarding US trade policies and related tariffs involving Canada, EU, and China could impact lumber and other products. Potential wood cost inflation at Selgar mill due to tariffs affecting Canadian sawmilling industry. - Weak hardwood pulp market led to $5 million non-cash impairment at Peace River Mill in Q4. - Solid wood segment held back by weak European economy and high-interest rates affecting construction industry.

Q: Unpack input cost trends, especially Europe vs Canada?

A: Juan Carlos Bueno discussed fiber cost differences, with Canadian pulp mills having tailwinds, German fiber costs expected to increase, etc.

Q: Outlook for fiber costs in Germany long-term?

A: Juan Carlos Bueno mentioned long-term fiber availability should be sufficient, with species shifts but no major shortage in 10-year timeframe.

Q: Mass timber sales and tariffs?

A: Juan Carlos Bueno explained mass timber sales outlook, and how multiple facilities in different geographies help mitigate tariff impacts.

Q: Downtime schedule and sales?

A: Richard Short explained sales expected to be flat despite planned downtime, with inventory build-up but sales not increasing significantly.

Q: Fiber costs in Germany and pallets?

A: Juan Carlos Bueno discussed fiber cost differences between saw logs and pulp logs, and pallets still subdued due to German economy.