MERC - Earnings call transcript Q2 2019 | Mercer International Inc.

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Operator

Good morning, and welcome to Mercer International's Second Quarter 2019 Earnings Conference Call.

On the call today is David Gandossi, President and Chief Executive Officer of Mercer International and David Ure, Senior Vice President Finance, Chief Financial Officer and Secretary.

I will now hand the call over to David Ure.

David Ure

Good morning everyone. I'll begin by reviewing the second quarter's financial highlights.

our pass key to integration of markets, new progress I'll comment he of XXXX. remarks, outlook assets, our our on operational on my the second David, call will our in Following the and half strategies performance, the and risk the I'd Please statements the Private company's attention to Reform of this and XXXX, Securities Securities to which fully make in Safe call are to Exchange the that with filings press described conference call Litigation to note will these statements in Harbor Commission. like the your the we release related morning's forward-looking according provisions of more in and Act our

which our we $XX of results, operating sharp performance, financial in decrease in with in and despite through attributable achieved declining pleased prices reduction quarter. pulp energy occur to the quarter. compared QX QX, was our the most EBITDA supported a QX the consolidated principally that prices overall pulp We're million quarter $XXX.X the million record production pulp during to

days results XX XX% million reduced by to no were $XX also our which downtime scheduled pulp in schedule venture, there portion QX included EBITDA approximately our of maintenance. which compared QX joint at Our Cariboo of

inventory weakening increase, unrealized this profit days reduced million extent, pulp charge $X.X inventory an to impairment prices recognize To of the in we non-cash In our addition, our loss EBITDA will a the was the portions $X.X sharp to in pulp the with by of dollar along of million prices the on non-cash quarter. to low due QX. U.S. reflect final

our $XX.X segment contributed product $X.X EBITDA million Our million. contributed wood pulp EBITDA of of and segment

in additional As segment our you usual, find XX-Q. will disclosures

NBSK, to QX, European $XXX tonne, was a list relative about QX. pulp the price down average In

$XX down NBSK prices in negatively $XX list down China impacted to EBITDA average our compared realizations were $XX. about China quarter QX. to US Hardwood about in tonne tonne in pricing relative by market a the the And over a about down QX, price was pulp $XX quarter. was million. average While

sales to down from totaled sales up pulps XXXX the compared broadly QX, all When QX volume operations. reflecting Our nearly tons, XX,XXX XXX,XXX Cariboo which our River lower of Peace of about sales due markets. were contribution however, our tons, tonnes XXX,XXX across to and was new

new After gigawatt Mills, XX% [ph] QX which almost roughly contribution sales tonnes up quarter, QX. up the the hours XX,XXX removing of relative Electricity were the is Sales totaled in XXXX. to to relative XXX

strong our our from and energy Mills production of record benefited sales production pulp electricity all QX included at Our Stendhal mill.

also should and are method joint sales, to venture which that was from the of due of X statistics Inclusion statistics remind these venture another scheduled not QX is using gigawatt from hours I you in joint the down maintenance. our results energy because included sales Cariboo accounting. would Cariboo the for pulp QX add equity our the accounted related of

of equivalent market. this the sold wood board the we million of XX% with side lumber of feet in the about quarter, volume our US sold On product business, of about the XXX being into

quality down Our increased to beetle X slightly diluted $X.XX $X.XX net million a lower yields or of as of in damage lumber feet or QX. from diluted were of per production of from lower sales QX the income per logs. levels We quarter due million supply reported to result in million share $XX.X $XX.X net income lower and board the storm compared share,

for and per charges include results foreign $X.X totaling exchange QX Our inventory non-cash share. million, $X.XX or losses impairment about

quarter. of $XX the generation million compared of The in Overall, reflects flow EBITDA, collections of with $XX free million of to million we led quarter $XX receivable QX. in Our generated cash combined to solid the during almost higher strong operating of performance QX. the cash in generation cash level accounts

$XX invested capital this mills of also our quarter. in We million

an calls, ambitious plan moment. previous about we XXXX. in in talk noted in capital As have And expenditure this a have more David to will

leverage and EBITDA, our month an net efficient level a debt X.X to to is on due down basis, at primarily XX debt. remains Our times lower net

I totaling value in portion in recorded recorded quarter This our that the value. highlighted down. earlier, at or was that realizable cost of non-cash was existed quarter be inventory US of this recorded analysis As at GAAP adjustment that net above accordingly, inventory inventories cost noted wood due end, million low statement inventory And pulp we sales we small our net values recorded to of higher cost quarter. realizable those lower and spot this charge a impairment $X.X adjusted requires operations. prices or

filings Last prescribe The maximum completed that, in extended, we on for to market. us quarter, will shares the a acquire necessary $XX Mercer XXXX. not expire of if program filings May million

including price, for share will share. During $XX.XX board of of record seen our purchased quarter made per which release shareholders XX,XXX dividend the have at X, September for will you approved fees an October press yesterday, be shares our on we per And $X.XXXX has average from quarterly of payment market our about XXXX. XXth,

David. overview is my results. That turn now And the financial the call to I'll of over

David Gandossi

Thanks, everyone. Dave. morning, Good

by were lower operating impact pulp As performance strongly with results highlighted prices. strong of weakening markets Dave the personally our offsetting QX our influenced

term performance is operating creation long result of a our value strategy. Our

in $XXX the European to per the list list in tonnes. QX, its European Now I'm QX. about was China $XXX in to NBSK tonne at curtailments. June in demand markets. QX on was going Demand while price compared strengthened through event weakened averaged July's $X,XXX through midway demand pulp slightly start news weakest quarter. European per steadily today prices with NBSK

was at in per combined China, tonne to $XXX the QX. fiber that market $XXX floor the NBSK believe at NBSK in with the per from announcements July. average price us which Recent was QX regions In $XXX tightening or per in near led supply tonnes, some prices NBSK Chinese curtailment down tonne

tonne, and $X,XXX the QX QX from The average price down hardwood $XXX QX in $XX in China QX. list per $X,XXX averaged US hardwood in market was list price the compared per in tonne to

a markets trade be to producer which writing and number factors and influenced the all demand pulp pulp uncertainty by macroeconomic conditions, continue are printing pulp factors us markets certain paper markets. inventory are including pulp creating dispute, high the affecting levels, and negatively reducing Now grades. the prices influencing by related of China These tariffs, continuing all of in for

In limit addition, high Tissue purchasing steady. and are paper levels allowing pulp to demand pulp inventories buyers specialty their today. remains producer

QX, look we to lines. We've signs some summer demand in to seen we ahead remain inventory slow overhanging markets improving but months as flat we as expect of traditionally pulp essentially

push We demand to by tariffs expect government offset would growth to stimulus improve the remain increased Chinese which be be seen. economic this will that may

pulp volumes in expect we retail take half this of supply of effect. as offline the time conversion must of same projects impact as production pulp And take pulp announced planned the At the and significant producer reduced year. maintenance back

We see to expect QX. QX upward through pricing in late and pressure

not months, tomorrow, a pulp short to while Over pulp source the large able the have producers in allows hopes currently Pulp low prices with for needs levels. have This to last shift six inventory in dynamic lower if large seen being inventories. historically enough buyers balances paper buy downside we've historically, risk term little pulp. producers of inventory

balance. being the catalyst a we trace back see into However, maintenance to noted move and previously downtime curtailments and conversions

the hardwood in overhang. hardwood softwood will than fueling tighten Our larger inventory given faster

offset with Looking further been pressure new continue the curtailments, than demand capacity US to through markets we and steady absence giving housing will production ahead, weaker bumpy upward with Lumber prices. life expected believe have demand combined of demand. that QX by exert to being some of subsequently the on then in

$XXX further links demand sawlog number US a high announcements two benchmark We The random better $XXX QX. in in compared British QX thousand to sawlog due Columbian driven board for and Western prices expect by and supply. average production feet curtailment per limited poor SPF to

the the part price. in are Today's is average to cost close shortages levels. sawlog in due Western prices in sustainable to lumber prices Today, at selling not certain Canada. producers high We are below benchmark believe resulting currently log QX

create along announcements demand the to to expected with yet will due US QX. eventually from materialize pricing in that building continue to poor upward weather that season We believe has curtailment momentum

experience realized our in with in to the sales recent the continued European average the $XXX majority lumber to price about to per the When QX. Despite of down QX. market. US, market softening in remainder demand sales price with our or compared steady QX, board only thousand was lumber in market from in has of volume slightly sales US feet XX% European slightly QX the to the of QX In average $XXX dropped comparing the

enhanced year. and capital us assets strategic to achieve record on driving our Our production is allowed this spending our focus this quarter has

return being no In in invest to the I've in more projects noted support of focused will half investment asset from our the firm from with continue sheet be to reliability. foundation support on maintenance program the high than with XXXX holding operations financed strong maintenance asset cash of we leaving and growth. pillar past, remainder mills As will our further strategy or our intact ambitious world a XXXX class of balance capital in

record the in lumber The Our of which this and mills of performance quarter. XXX a ran sawmill we very the than quarter. ship wood us produced generated power. this market achieve Despite of majority also pulp with about almost Cariboo from XXX,XXX our joint Mill. Pulp $X Rosenthal quarter, record conditions, gigawatt to including product Friesau million feet for reduced are wood roughly and we produced cost pleased XXX less also of tonnes venture EBITDA the million of allowed our ideal hours well a million in QX of segments synergies $X.X board We resulted

Western and saw supply costs used plentiful ships in replace curtailing resulting be options Canada, is which tight wood resulting higher sawmills cost have been those beetle mill damaged that remains generally. are limiting in is of volumes. to the in volume as available, lower In Germany, and log production, to pulp wood continues storm

overall fiber our down expect we a continue as costs. European to lower the wood of forward, Looking to result cost trend

planned throughout shut our in In Rosenthal day the line QX take for a maintenance, important a will last a of productivity we we and but take annual Turning days XX expect in only XX shut to will QX days. some upgrade. QX a now QX, major do Stendhal, improvements in At also schedule. packaging I we day as to total we quarter QX. shut a including will maintenance have At mill, XX we shut not at Celgar XX take mentioned will

to to of progress XX work the parts, to well. originally continues we key the we day XXXX. delaying a supplier QX Peace due Cariboo QX. At River, had Pulp We take and take in River an a repair The recovery shut this the Peace delivery integration to rescheduled to will shut extended in but have boiler, planned of Mills

program on We continue safety identified we and synergies. to our are grow progressing these at mills

we we lumber on bioextracters approach I derivatives pulp As Any a but mentioned previous energy. Mercer's opportunity production, to term shareholder to by competencies well green and core and we calls, maximize consider long growth be aspirations, ensure will we value. disciplined as will framed wood as have take in continue further

Our to creation. term long core drive will value competencies continue

I'll well quarter as It remind the we dividend our listeners our to. of which second approved remain that generation. Board steady sheet cash strength our supported and has flow our by balance deeply committed

listening, call back to for operator. I'll to the forward your and Thanks Operator? the turn I'm questions. looking over

Operator

And will with RBC Markets. from the Instructions] [Operator you. Thank Paul Quinn line question of Capital be first your

Unidentified Analyst

my taking this for for guys, Thanks Marcus Hey questions. is on Paul.

David Gandossi

Hey Marcus.

Unidentified Analyst

talk touch you a starting today? what you're bit Could Just there? seeing pulp you're in with seeing regionally on global about markets. bit Maybe inventories of a terms what

David Gandossi

Chinese is careful when are Yeah, they way maybe China starts are well, buyers the I think going overhang I think that. the about to think quite prices pulp guess big in -- down.

a So just they need guess their can it. I as way need orders. less more spot what or don't withhold think buy And about and they the they use market. they it,

seen we've this customers levels big now China So would be in what to shift from in otherwise producers.

tonne Our take we're overhang. X.X million probably is it on

would X.X today. normally at have sort Qingdao XXX,XXX about XXX, today. of it's XXX think the Changshu tonnes, I

So X.X over. total of

is that of Our estimate is XX% hardwood. about

third where rather. that the been I the problem the price or to quarter term. is to there of that side, there see the And on -- to the market. moves movement that's is is. big clearing think expecting hardwood beginning So lately that's in We're the an announcement from consumers in really There's customers producers a

see like things long as have clearing drag move. It's They it's until just you price, you -- as along. kind always to said, of volumes moving, and we've that starting think

curtailment maintenance that there are also announcements and America. So announcement coming hopefully and with in an Latin summer with to getting end season. And into

turn the a to that third fourth through So should be quarter And scenario. we're quarter be expecting with back. different should

as volume not had We've China's moves. serious. good and Softwood

we'll up side for know, may it's mill well Europe, been August. Mercer see you Rocco things. As better both that And how XX In we and of on do announced net.

get can't that sold that the available, European Central to pulp the that moved move anything logistics would China extent market. are some So into in down of

it's month down. So Every know. it's been decline been in as you moving

So, persists. the well, in that until US offers slow continue compared I business spot profitable reasonably we China. have erosion, think see will up turn the as held turn the it's been there. But again, really global overhang a markets to contract quite

we to in with through hopefully, volumes a fourth significantly larger so seeing today, carry it. quarter from the lift the think expect read much things I as and So, can quarter, producers, on transferring I’ll third we're

Unidentified Analyst

you of related taking downtime then that XXXX, just also, the have downtime on just guys when then And Peace at on downtime. in And considered there, would helpful. That's thanks. a market be occurring? River, delay any Alright, maintenance follow

David Gandossi

Thanks.

question So downtime. on to no do that about, in Yeah, market reason us we, it's to the considered that. have our we there's something think for but obviously system,

We to have access wood.

fixed working on we're and And hard have costs pump be productivity mill. need reliability our the of covered. We to that improving

have taking our summer. short to we market downtime. as see the I mills won't the condition know So so long taken right rest quarter head of be the the on taking zero in -- the And Mercer you be as won't down relatively as We've the term market interest costs. a moving covering in And we're market downtime, I as ahead. this fixed

In terms get out by be manufacturing with that the The tubes the that -- tubes of done it's I know that. is and and be yet. supplier tubes working an figure meet users did wrong stainless specialist recovery the what the is what to trying a did directed shot to overlay going don't carbon manufactured to on issue they when And the not for boilers, required. the has entity, by specifications steel

we're Peace is fine the side. had the the quite bit River, half capital amount with the up year, not a actually, I to timing. a plan that. think, change And productivity lighten on This back at spend for for problem It'll of us of we we the

So of I of ability, the major But by we’ll up its else, a the we back that, and concern. and year don't stage, spend at we lighten that other actions. $XX think capital this half run terms in as of in the and result about of everything don't health our this see million a boiler as

Unidentified Analyst

luck Alright, have. thanks, of the quarter. guys. That's I Best all for

David Gandossi

Thank you.

Operator

you. Thank

comes Our Markets. with next line the of Hamir question Patel from CIBC Capital

Hamir Patel

hardwood near do Hi, think the David, side. price that is has drive got price announced over the to hardwood clearing potential more that customers down for the touched good Chinese you guess to I on on switch going What we've term? you morning. to if Susanna is the hardwood clearing

David Gandossi

to when size is guess of premium the a reflect margin. Well, XX-XX markets important it's days the furnish, there compared it's substitution size the recycled you hardwood the the I million in market NBSK on fiber take in these of a which is hardwood hard two the in characteristics. to of some like and in tonnes a say, always and But, market the availability amount way recycled is to terms the strength relative of

the and provides. structure it The strength because the that use need guys attributes NBSK that they use it

and that the be you prices they and of come they do. a margin. big because hardware, And there's a able sort So softwood to time, into swing approach little down softwood may on adjust pile get bit, when so

grades furnish. and a products particular that our NBSK But goes that branded are or of into the fundamentally, recipe, tissue specialty need pulp very, majority

are or that doing the psychology the of normally producer, a something of being they'd see like maybe from to day don't just tonnes really The at the shifted XX,XXX tonnes the up XX, lot producer. customer with that days is And have do think be from has XX. is a issue. the inventory, is X.X every and I I major XX it today it if So days just on million paper to sentiment. what as the and market running maximum guys

that if bottom, right. So are far optimistic we're of from out we're not balance people the

Hamir Patel

M&A Fair pulp? up, to start you lumber the give for to ask enough, thanks on that the environment that's on seeing project sawmill And helpful given any and and were side. the opportunities here? weaker pricing want come just both any update can you Are us studying you

David Gandossi

say our growth mean, I this for is we're you're Okay. when stage sense safest they really cycle. thing the think that lot the right, the on opportunities. you're about me the do make hard Well I it when M&A always of we're and I valuations to And than on top different -- in front, mean, thinking you're a as it at working the the more options in and cycles, at

active for we're So sure.

On is say well, would when on I but site. well, Friesau congestion I I it running work very mill mill the going going we've the in a and lot construction would touch of the despite got say the things are very on this,

We're really better we're looking completing fourth we'll comes performance that, from where middle the see of and trim sorting, getting be product going in quarter as start that the product to as all it's a the this lift year, it's volume to the to improvement well that forward going optical be significant capabilities, big profitability and in increase. to and the of scanning number the

around issues you know, that's real up equipment. at to and no equipment installed And, is stage. the sawmills speak the So This this world.

major expecting to So anybody any new challenges. it's nothing not

Hamir Patel

a you elsewhere Europe? are Dave, considering still in And Greenfield

David Gandossi

to you that. if in one the We've continues. next Yes, able mils one that like, Greenfield competitor versus off probably of northern we that on year something Timing a renovating, analysis Germany, the and so buying options been sandal announce of trading be are. of of

Hamir Patel

had. Thanks. will I all That's turn I Great. over.

Operator

Our a comes next Kuske Andrew line Credit question with of from Suisse.

Andrew Kuske

numbers think Thank the is David, said market. context snapback? pulp a Could walk million tonne see pricing morning. it cycles and you you of then as some on versus I'm past then what you. X.X through downturns you of seen? the frame especially of you've current you around Good the the I cycle the just the some in that overhang And the

David Gandossi

of don't hardwood this Well, seen the ever really and big, from And baffled -- things the for a haven't the me them. just strategy It's that I consolidated before. coming is it's throughout around Andrew. worked different Hey kind go overhang we producers. think it's year

So say that's different my -- that's where me. why feels I it to

turn back enough, If to you the used when it you'd looked far then it go get And it be industry was go the producers high and orders rebalance, I chronically would cycle there it so the hold price tightened were simply down, rock mean, cycles And whole and the times pricing. and a good up, take like would through when then oversupplied. a back of was customers you market again. cost bunch the the downtime and you

is market not like everybody's good. everybody's once recycle. the oversupplied they're a just are or things shouldn't It's feeling whether hardware -- be fundamentally, going not this. it Like it software Today, coaster be and like roller

Like fundamentally and just market things. all year sentiment were these destruction we're It's of where like a that a so has in nothing much because different trade wars a -- we than that really negative demand ago. were believe really more is don't much I happened we

it's enough to in snapback say we've a like So be be going the past. brave wouldn't to I seen

real or across number start factors of warehouses around looking pulp that fall and custom become that me describe refill my and their inventory paper off. paper supply going coming seeing inventory markets, is you you. shots best even really a levels get their though guys is normal in lot there's concern is most the should of with to of I I that the to think the today players to up going these that's and think But then and a earlier and there's these maintenance [indiscernible] start it that question You know, I to that did

we've and NSL be [ph] off start to which hasn't [indiscernible] paper yet. has grade in paper the going Our off going right, that year, a seen grades, up running happened if last going really it's problem so. And anybody like paper we'll then grade, moving,

Andrew Kuske

the what hardwood the the to scheduled self-help side. lot I we Okay. NBSK, there maybe look But the That's is, there's next the market. needed really by of hardwood guess, alluding in players mean years. went on of maybe hasn't several a as I nothing additions you're the through when there's at for some been capacity, helpful. anything, we ahead

So others? cost that And downtime I tighter. curve, how the current conditions? got market do And should the some you've are in you cost comments about how guess curves echoes think market your just you do versus young for think in market that right sizable on no be mills about the you now? the because So

David Gandossi

is Well, a the cost curve shifting lot.

I mean got right. in Western Canada, curtailments happening north, the So we've

So has to wood. mill you've I that to earnings cash simply the are such that very a significantly flow get pulp be for before, take curtailment going or costs underwater reasons. fixed But be to very, reasons you're think can't got they of a

to better and That's to than lose run run trying a say. I'm it's little a money to lose So not what lot. and

stuff. There are And more is this continue curtailing that and any with about really saw come. curtailing there's being to the rather guys other Western it today access further to out access province And in will don't north than that of not struggle. in to struggling I see kind that announcements getting I cost. mills fiber of permanent better and and fiber, think and because more So closures or are male

and they're not the fourth the are said, quarter, rest quartile fourth as very in are I've third getting over. The always compared second high cost worse. in guides to curtailments and the the the So

Andrew Kuske

me, are you the you you missed that where one for on might are results. I And Where it one Have number? synergies? the have in tracking? just final disclosed in But helpful. and That's BMI,

David Gandossi

of run disclose not expectations put and with haven't it a yet, XX of the of lot No, we not, It's to a is XX rate do XX. there. I we that on out and has we're still market. mean to there

tighter the synergy were still and it's the customers and I a able to to it from aren't pulp is well significant them good respected And significant owners to We Mercer in benefit for future. market and But relationship, that the is the adding contract a pulp. our to versus the previous doing. in market our -- what relationship. package see It's that

So it will, a slower but little it's hoped. just we'd than

Andrew Kuske

that's Okay, you. Thank great.

Operator

next line Our Adam with is from Zirkin Knighthead. question of

Adam Zirkin

appreciate Gentlemen, your things the Few time. you. for taking

David gave from First, you falling me. this can below make once you making to what intuitively cost, [indiscernible] explain rise but sense quickly, again, through prices went money, very notion the Because of inventory adjustment? the to didn't so

you So perhaps could explain that?

David Gandossi

It's -- not not Yeah. may be intuitive.

the lower cash would the U.S. GAAP or costs, cost your the inventories depreciation defined not is value. realizable cost the And well. generally, most value be that you So as producers, policy the but of net your as so for is cost just in

So in you've got some costs. there, non-cash costs administration some

value. possible your inventory EBITDA, than are cash the it's costs So lower the that

to down down value and When cost. the we're tend when they that dips the so net inventory our fluctuations it to cost. we net adjust normal, you but pulp run value, be the And running of need there's is we pretty market in out, because inventory, the generally typically called small. inventory at at the realizable cost And to then below level, realizable the costs

this in price we the of this in But dropped had end considerably the towards the pulp case, quarter.

we to inventory value so And have the down. push

Adam Zirkin

right? that is account LIFO a are you me, remind David And

David Ure

or we weighted -- average use average method. We average are the an weighted

Adam Zirkin

it. Got

you losses one moves that or carried will say career from effect, another lower the they'll So is value? a these it tonnes right essentially pull earnings at net be to from inventory, quarter when this be

David Ure

Yes, that's exactly right.

that again. imagine P&L prices QX. to is hit pop-up wouldn't next taken the taking So in be in we've QX if quarter you a can This we

Adam Zirkin

Right. things equal, in result better Understood. All QX create you a not in taken would QX? that that it had

David Ure

it. inventory if valued have That's would pushing even would If have this been goes QX, in wouldn't and you down -- inventory just right have left up to some case, -- we QX, yeah, of and had We we cost. the In back we floated right. then smooth QX this would and noticed we're costs, through at it cost. Yes. the our

right Next next big to recovery is benefit quarter, it'll a it'll not -- be be the a earnings word, but quarter.

Adam Zirkin

helpful. this Picking Andrew's David. That's David Thank markets. with you, question to the on respect up Gandossi, question.

the the moment, curves. Mills about are perhaps Can just for talked you wood itself cost not I should Northern familiar. in the affecting why supply Canada? are you be issues shifting You explain a But affecting

David Gandossi

Well, would or less maybe mind anyway. fundamental is the in reasons activity, the my more Northern been either with Mills have integrated guess the sawmilling I

So mill consume the pulp them. mills to tend saw around the residuals mills from to

As you program. around with our world, needed in have we know,

have they're sawlogs. that along good but have lot can demand a the healthy always there's you like us, We sawmills the of around tops good we sawlogs, a the with bigger of fiber trees, look harvest the But than when they provide. that residual goes of parts don't trees

underutilized resource get innovative it quite British wood been and in process and developing been programs in that to Mercer has has that somewhat historically Columbia, economically. bring And it

not about we lots to have wood. concerned labors, it. and of of we have So access I'm lots

hard. there when all But is then If sawmills the haven't in it running North it's the cost is the gone much. really higher, sawmills obviously, really when are the guys -- pure where

that they of to -- need I So in they other lumber side. don't significant access the have to run context curtailments the forms on

And so…

Adam Zirkin

That's question. me I silly are move you? of into a mean, you far how mills suppliers? would to even tap have scale. far Is a from they Dave, that those can your to mean sense just how I helpful. give would

David Gandossi

kilometers, the geography A like XXX it's or completely North. XXX different

Adam Zirkin

Okay.

David Gandossi

right. region, storage Range

of North, the we're the So at Southeastern they province, in yes. are and corner definitely

Adam Zirkin

Got it. And then lastly, just on fiber cost generally.

materials your cost the fiber prices little Europe, but of I this downward that. falling Didn't through they I to run hadn't were about inventory how quarter, a in Mills. were a was think talking expecting see of more yet European in a the chance quarter. -- down last in fiber we move of had a raw of

So perhaps where sort fiber we that declining the explain you that of those P&L? in prices in seeing Mercer could are cycle of

David Gandossi

as for quite others or It's got access to so if and harvesting. got more we there's inventory aren't it, being not build heavy snow some or might we large without that familiar -- we've falls Well, with winter so come. wood that maybe there's storms, the the situation, to for whatever, of --

up inventory build you work continue your cost you did we that. that So average wood inventory, evaluation to to And decline, have as of down. costs

trend it and So in there'll the of wood this be available And in this a in more quarter. next There's we some unwound lot to quarter, of Europe. unwind see continuing.

out, on you put it If reason, you areas, forest up, the as for whatever market. you've it loss the got prioritize it some take you damaged that then bring you and

than really So it are more dynamic. the it's wood there there's buy to available and buyers

seeing And cheap pretty think going there. we we're So that's wood continue. over to some

Adam Zirkin

Can move of prices, perhaps best the dollars wood it? to wood about per terms like David tonne those tonne dollars how per think quantify you or just or in downward in

David Gandossi

I to Yeah, be careful. going

We discussed all haven't that stuff.

into want to don't I So get specific some numbers.

Adam Zirkin

Fair enough. Perfect.

have. very I I you all Thank much. think that's

David Gandossi

you much. very Thank

Operator

Our next from line comes question Joe of Pratt Stifel. with the

Joe Pratt

Dave Dave. morning, good and Hi,

current at what that's direct producers percentage the higher have my you Canada, cost a Looking simple than there question price? think is of do out operating NBSK

David Gandossi

a over write-down mills. are I we we say Joe generally well, low -- either And Canadian at producers here. are Well, pulp most guys with just would cost pulp took a

perspective. everybody is cost say cash So, I a underwater would from

them of to going struggling to access simply Some fiber. from be are

for tough the back going situation see the it's of As the events cost going think year. so that's some earlier, I that now why of right part to half I that in this high we're And mentioned improve for guys sure.

Joe Pratt

Okay. same pressures balance sheet have And with at time? pressures those financial the any of

David Gandossi

factor. say, but think it's I Hard a to physical

access it's think wood to I fundamentally.

Joe Pratt

Yeah.

Okay, you. thank

Operator

DeForest Our is line next on question with Walthausen & Hinman the of Company.

DeForest Hinman

that, we're a us know in seeing as quarter taking at and few an gave dynamic authorization. the first pricing over think repurchase changed first of although share dividend capital And last always a my market everyone questions. I to in for The Thanks quarter, lot things Hi. it about do allocation? current it some repurchase have the update increase, price. the higher relates share the help months. was is you than level we Can

follow a can high in level? have about you're thinking capital very ups. So how us allocation probably a you Then think help couple I'll about

David Gandossi

the is way said a is and the will in of some want dividend big throughout to there's cycle. Well, that, deep to the shareholders Obviously, we and dividend. concepts our return them say one capital number I've think do DeForest. it Board that to commitment sure allocation. I aligned about all believe that Yeah, we picture always we would

that's So one.

cycle us will a for maintain like never strong of to capital. dip are permanent throughout that go there the if we pillar Another destruction through be that done any investors balance sheet a is so concerned that that we've that

maximum kind We in we highly So our a mills use byproducts to and of productive our strong reliable waste to that stuff. maintain all and make of balance sheet. invest streams that are be

mills So want a build human we exceptional to continue concept of long-term resources to just want sustainability where, and be for run the to we here to them.

it course. the So stay

forward. to things, we is our that on thinking share as have utilize that judgment about we're the will of the how how far As trading concerned, best us tool buyback we depending available and going to we're and

DeForest Hinman

general? share of at we or about bit an more just curtailments repurchase comments volumes to pending you've for that but and ebbs to and your opportunity more authorization little some are share potentially helpful. more taking opportunistic, that share And made authorization overtime it your we to expectations and use the this price in consistently just think purchase maybe I repurchase with improve little and a way is authorization moving to stock it as a return a NBSK level price driven think bought even detail the Okay, on shareholders by past capital should sounds that's bit have opportunistically, the prices like in share pricing flows

David Gandossi

the how it's the opportunities more pick themselves. kit. depending trades But direction use markets I capacity in on go, some think the present to tool all the stock. stock equity mills the it the very tool am unfolds, sure we'll to of that to about And just when are another our not if to have it what or we to on focused nice continuing to as in just up that. We It's answer have grow invest Yeah, opportunity off less. also and really

to really approach. our in need So we just balanced be entire

DeForest Hinman

Okay.

well side? One any you're occurring other about that's as in out of side there geographies hardwood on in softwood seeing Canada, cash there negative either running situations mills the level or and the questioners is that asked

David Gandossi

yes. Certainly,

is things the in of one to integrated think quite some pulp is I China. it -- the issue a for material

and the them them. chips mills high their like the wood for is in is of this cost These fully have are ever their are that Vietnam are mills, integrated, -- it paper paper guys and pulp that that paper. So hits buying front and Australia it's but and these pulp mills it in places of really none pulp furnish the for market,

is purchase. perhaps. future is not just The of have other be to chips a more Southeast them would don't that not And same to they it's constraints And North-western pulp for manufacture thing. countries the production expensive cost it decline, sustainable significantly to would going fixed be and have, from that flows expected would markets Asia

hardwood. there So is to that. from expectation integrated production recycled to market into either shifting hard visibility it's purchases pulp my But or have of is

DeForest Hinman

for Okay. Thank you taking my questions.

Operator

Securities. from Our TD Steuart line Sean of next question comes the with

Sean Steuart

detail Thanks. guys. Good Couple all the the on on Appreciate markets curve. questions downtime. cost you morning, take the and

items respect Just of might high. any XX skewed million expense Cariboo, taken project seems can just specific us with this context to give on Any have this quite that the to under the that downtime quarter quarter? you relative

David Gandossi

all things think done. into would sometimes of little mills, shot. They well. settled it big to couple And don't were struggled a takes reasonably get these No, it's there might details at up down. was the the went end, work put get always them to I a I to big while mean, all to hard I it refer be Got a any context.

bit we a remarkable. that. suffered that's of we to think no, little So I But need nothing

Sean Steuart

one shut see River the what pushed have Peace going give XXXX. you the program being of you maintenance year? to is with an the else And if downtime, total the be total to what next Can this idea Okay. major you'll than bigger and us being on year deck

David Gandossi

moving that. bigger, Yeah, XX shuts. we I are to towards it I know month wouldn't expect don't

you'll work may year time will Friesau of year that's by regardless business Stendhal if next all. next So when it the me continue. a see fact it are months at play big finishing covered boiler have The the Peace There are, done and now River XX year, recovery Peace's from shut. be may happens, at will the for that shut it a probably happen happen won't interruption we've year. is in sawmill months be it'll this right components Stendhal, in next insurance. that XX off

of machines bale Celgar, in debottlenecks on next pulp there. the additional A bit line one which year little some our sorting

And you continue and be as improve place to back at the to so, as we debottleneck mill. end able the reliability, need the run to of

that that meters dryer line XXX up And the bottleneck a about And bale if bottlenecks new line we can, at that minute. issue. bale will

capacity are? And and out well we'll find the have where push and so machine next we'll XXX above the bottlenecks

be containment machines be Celgar And project. the work will return new that to it better pretty usual. debottlenecking there. allow furnish maintenance putting machine under on usual. River on speed like high Stendhal as So a both will will which of so is even get And Peace we a to Rosenthal business is up. also just as continuing is them a stock or system the

Sean Steuart

useful that's guys. detail. very Thanks much, Okay,

Operator

from question Andrew And Instructions] Lawndale Management. Shapiro our with [Operator the Capital line of next

Andrew Shapiro

were A you. questions and answered. of asked thank Hi, my lot

that that also equipment are major there's a of end these on a the bunch life capital you their amount talked are market-driven There higher or of plants of lack I where those. have boilers the of time, edge are I shuts getting So of of other wood some the everyone When about passage facilities are and and here few fringes competitors near facing a for on Canada. substantial needs. in expenditure cost guess and all

facing that because are capital issues for permanent of life end particular of and decision in any major or there Are shut these do the of really you some components? see

David Gandossi

Well, timers then happening supply the in expecting must with changes run globally. to be certainly that difficult pulp that fiber And significant are maintain. expensive out and I'm some old to that combine are reductions the fairly very capacity see you really there some there to all on when side, of

of names any But to the not operators. know are But we So will and generally it's those must I edges might do. to very close the be who fair think want some don't be. mills I to they Andrew, it's owners to within the what predict hard industry, other

Andrew Shapiro

rather that decisions of decisions names, these be are, an without market capacity right? But Is are than going extended naming permanent to shuttering these shutdown.

David Gandossi

that. know don’t I

Andrew Shapiro

Okay.

David Gandossi

We will [Indiscernible]. see.

Andrew Shapiro

But scripts Okay. I Like updates. questions in other said were many your don't had I of recall the I answered. and any asked

may update But some [indiscernible] six was going got tell not So investment. to longer thought I have the nanocellulose on history your as a you months the about well others venture, as about and joint product want asked. when ask commercial I even to I I here ago, maybe have which

will So a call interesting longer of can you update both on those term them investments?

David Gandossi

sure. Yeah,

that see well platform with activities. asset related There’s further -- that other and a objectives So to potential around and the life strategy. cellulose in situation very plantations growth are move we’ve created are in really Western as us our Australia call side that has pleased purchased. We for it forward hands getting as with growth what we our now and our what we

we’ve a I we’ve, and think that’s got there good so entrypoint nicely. And developing

properties fibrillated and strength this Laflamme have to that heavily create to a a and so looking material. cellulose don’t who filaments, and is listeners On partner novel in continue with optimistic those recently we’re an activity team venture complete products. just and there’s our products know be that value for fiber where application Yves I’ve R&D review product various the his would this met we that be for joint is that is, Resolute what in with

it still still committed and to moving So forward.

Andrew Shapiro

gone a there’s in JV? up, our other percentage has over cash venture of our from what’s gone David period and dilution a because that percentage down joint time

David Gandossi

No, objective. XX:XX no, perfectly organizations and we’re as we’re on aligned our

Andrew Shapiro

think investment think onto on I plans and And after recently place multiple I your coming announced was here, longer what but the earnings is months for month presentations else are one the what runway? soon in lastly Okay. roadshows taking

David Gandossi

new front ones meeting full so nice I'm on on listeners with what also Yeah. days on Jeffries Dave of Well got and the day I’ve else next marketing and there, the call up region [indiscernible] the phone? wind have got you so of some of week in the our couple IR

David Ure

We’ve got Forum the TV Forest attending Products mid-September… we’ll be in

David Gandossi

right? meeting, last The

David Ure

determined go there’s will to an be the or to you’re fall, sure reach let Coast we will East Dave in working we details included. we’ll when and please any East to still but then be out the that And Yeah. to if are know like listeners that roadshow roadshow being make Coast the on ask the would I

Andrew Shapiro

Bay And at present? you area for have any Francisco San the plans

David Gandossi

No moment. don’t the we at

Andrew Shapiro

guys. I'm Okay. Thanks know a when come. lot you me sure let you’ll

David Gandossi

you. Thank

Operator

is from Our the next line question with Sidoti Jacome Company. of Dan &

Dan Jacome

it update approaching Thank the actually mean energy I just acquisition. business, for XXX second the an you you’re recent in for taking of was biomass factoring run question. skewing off quarter rate, like just clearly million the morning. looks your I good on looking Hi plus even course

to if But on hear BC be I I'm still got not I expires your wanted year. it’d mistaken forward, Hydro know thought the you’ve next going that agreement

of then kind you’re couple in if get going from some to to to flavor range and That’d of years wondering through, regretting somewhere X% X% do normal how in next should of just green just the I'm that about some rate that. whether think you. whether want you Thank attrition be not that great. guys Just mistaken be you and of course

David Gandossi

think Stendhal will about Yeah. Celgar's way more the that down those to Well the in legislation market progress And and the with the that previous two guess tariff I XXXX with I’ll the I and current maybe is be to stand were ends XXXX. think in start rates point X% the Europe rates. the cross so year situation tariff that where they for you says line years that then a

so and a regime forward from attractive nuclear coal we’re Germany pretty with walking to that at generating on, and power power. in electricity have curve that the and away assets market look and needs in the you in expecting changes If the firm needs

the government starting to no Alberta energy expected is be. in and BC future Colombia going foreseeable British and for there’s next with provincial deal the changes So stable on I the think, what purchase with to engage we’re Hydro

trees [indiscernible] brainer. green a allow from all mill the produce where employment monetize that belief all you this energy them no it's and My to is to pulp the just

figure so we're that out expecting them in time. to And

And so..

Dan Jacome

Okay.

David Gandossi

It should fine. be

Dan Jacome

are favorable contract some a what things it for of like So lack have these have you. a that up or world better sounds for of outlook you

David Gandossi

If prevails, case. that would the yes, sense common be

Dan Jacome

the guys. current Okay. quarter. the Thank of rest with All luck you Good right.

David Gandossi

you. Thank

Operator

next is from Our line question of Frank the with Prudential. Duplak

Frank Duplak

give maybe where us year on capital can an David, spending out. the update full come may

is the at Peace this sounds delayed. it River a to the XXX be spending I'm next year, is some of year year like maybe guess going Now, million thinking maybe right I ballpark?

David Ure

closer Yes, to of And little in terms in is little I think bit still in premature XXX working describe We're we're that a of probably XXXX, probably that to million. a that than it probably that process XXXX the higher yet. I think plan. on on

Frank Duplak

at Can XXXX? point for us a this guidance you directional give

David Ure

premature, think I it'd be No, Frank.

Frank Duplak

appreciate…. Okay. Thanks I

David Ure

the Yeah, definitely in more which next this have will to about is it. have more typically cycle. quarter, on our say planning we we'll to matching talk But well,

David Gandossi

thing projects add is reliability. we that are heavily that be to would return and to than able maintenance the be much and in XXXX, I though will more weighted XXXX think one high

spending be up highest continue them. us opposed we're full the return. moving to don't that we bring just to give spend, So to, will into the we you that's, discretionary we mills where don't, mode off pick the know, to want their as on sure back want And projects that make we to that we capability, money

further take So will investments. contribute those we think judiciously projects with return debottlenecking to that high

Frank Duplak

guys. That's it. Appreciate helpful, Thanks.

Operator

have time, questions. Gandossi no the remark. for any call over At I'll back further to we turn closing David this

David Gandossi

everyone, Dave hesitate happy us to of joining always, week. I to talk of you again. and perhaps seeing next and for don't And so you some one to Thanks call the Well, forward are Okay. as anytime call. thank look

Operator

Thank conference today's call. you. This conclude does

You disconnect. may now

Mercer International (MERC) 2 Aug 192019 Q2 Earnings call transcript