MERC - Earnings call transcript Q1 2020 | Mercer International Inc.

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Operator

Good morning and welcome to Mercer International's First Quarter 2020 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.

You may begin sir.

David Ure

Good morning everyone. the financial reviewing by begin first results. quarter's I'll

our the David, to outlook who my progress COVID-XX remarks, comment into to pass I'll on performance, of operational response Following the will second with XXXX. call on key markets, initiatives, quarter strategic along pandemic, our the our

I'd to your morning's Litigation provisions Securities Harbor of release and to Exchange Private Securities Please filings this we company's related statements make Safe conference note to that with call forward-looking in and fully which the will Act like of the risks are XXXX, Reform the the call press attention described in statements. to And according these our in the Commission. more

early quarter, scheduled to large COVID-XX marginally first of pandemic lower the activities in absence maintenance significantly will due pandemic primarily The only due in China. and Our moment. were impacted over that results operate volumes the speak quarter to of QX. in annual David to the we in in form a did, that how completed significant the we a challenges results quarter sales The impact however, logistics our last improvement

first an about $XX quarter in million compared $XX to EBITDA generated in QX. We EBITDA the about of loss of million

This including controls. quarter, all record at sawmill we mills, with benefited effective cost from of production Friesau our strong production along in our

remained low, $XX dollar EBITDA. our of about all our U.S. products was product steady the for pricing And considerably Demand quarter, to quarter. during this strengthened million contributing the while

quarterly EBITDA $X segment Products our of contributed Our record Wood million. contributed million, while almost EBITDA Pulp $XX of segment

of low record prices. segments production sawlog Products results sales Wood reflect and the volumes, benefit historically Our strong

Form can segment our As disclosures found additional of that in find on usual, the XX-Q SEC. you which our website and be can

in quarter. up U.S. all in slightly and was hardware Average pricing were our up list the in NBSK of the markets. China prices slightly down Average marginally in

discounts $X by higher during in our at the the EBITDA our quarter. to January, realizations to compared of timing that However, average about took pulp million sales modestly impacting due fell quarter prior sales effect the

volumes markets. sales from XX,XXX business also Pulp our our production QX, in of Sales which up strong, about Our as was Products and in XXX,XXX steady the from was reflecting all market. board of U.S. were Wood QX, we tons about this of sold totaled demand equivalent higher board feet million in to sold XXX feet volume XX% lumber about quarter, about million with the XX up which being of the tons,

gigawatt-hours relative our totaled sales at is heavy to Electricity XXX to schedule strong and significantly in our QX quarter, the annual all QX due maintenance production up which mills. of QX

joint using Cariboo Pulp venture, is contributed to the another total. equity XX which accounted for gigawatt-hours Our method, this

a to QX. loss net the $XX quarter $X.XX $XX.X of per million or of net to in loss in $X.XX share $XX for quarter million We a share totaled the million or cash $X.X recorded compared Cash per million inflows QX. of usage in compared

by cash anticipated primarily Our in working driven capital was QX usage and was movements.

which year, schedule the payables the substantially in left were maintenance significant heavy with end QX in us at Our paid of QX.

volumes of result to as up our receivables strong addition, was inventory and higher were up goods of also sales due finished while a timing In production. sales, the

in also few a our speak quarter. in invested $XX of minutes. million about capital more will that We to mills David this

produced considerable undrawn on million remains $XXX of revolvers. quarter, unusually low after in liquidity but totaling capital, including expected, of As temporarily QX was cash million roughly $XXX $XXX million, the working and our rising in

inventory write-down. us force certain to components $X.X continue in and inventory of prices in to a non-cash revalue our QX resulted Low this million

recent pulp million, QX in down on and the downward the a about QX. diminished pricing EBITDA reflects our expectations extent the written recognize $X.X inventory considering we prices will our in profit write-down inventory positive $X.X current increase, after million was that pulp To of net impacted this weeks. pressure However, of is realization QX

short a plan at River XX Celgar production larger Peace completed two-day days. lower that QX Celgar, in we The costs and Stendal, QX, million about to of executed aggregate and maintenance shut $XX QX successful compared In higher planned at shuts benefited when compared we EBITDA by totaled QX. direct to benefits and

IFRS shut we their reminder, that a capitalize report expense costs, the while annual our competitors the of majority to As costs our maintenance completion. under results are their of in permitted period

time program by the Our COVID-XX to and in the the uncertainty to program today pandemic, the renew expires buyback Board elected response not current created our being. for share has

in been have the $X.XX. average first the purchase in quarter weeks of few but the about an did market, of price We particularly active not XX,XXX shares at

prudent that which in dividend payment our will the shareholders with be quarterly a approved per Board to for share on has consistent pandemic, for on And record stance $X.XXX of respect June of July Xth moderated XXXX. XXth, made

I'll David. the over turn That to the of and results ends call my overview financial

David Gandossi

morning, Thanks Dave. everyone. Good

saying in is that unprecedented by my event begin to of me lifetime a certainly our COVID-XX presented has it business. and Let challenges an number

our manufacturing work-related to well been these industrial keep I ran running requirements, distancing including And want I'm these easy. while proud have working that challenges. to to thank changes large employees have for current responded cooperatively very social the despite our not note at pleased of quarter. to how working safety all facilities The I'm environment forefront. employees mills maintaining this our also challenges, and

controls from for our steady also We cost strong demand and benefited products.

record production a record and reported EBITDA. sawmill Friesau of second quarter consecutive Our

generally increased per through ton was modest NBSK QX. in per net from pressure pricing up ton, average China, price all In Pulp $XXX the upward prices in QX the to pulp $XXX midway steady slightly NBSK QX due QX. markets demand. in experienced slightly prices

per $XXX per $XXX ton $X average ton the in and $XXX quarter QX. in a in price ton ton, price European China compared to QX compared hardwood The averaged in list QX net to U.S. up prices $XXX per hardwood one list $XXX quarter the from average the QX. in market was in

be uncertainty but spread economic that can significant limited printing recycled tissue writing recognize and increased under pressure. paper producers a virgin expecting to quickly. also seeing changes the responses from producers, drop demand We're hygiene create steady government from and office will demand created for demand we have expect happen believe Currently, pulp and which and pulp. in are we pandemic we large The some to

On of the tons supply late tons. announce of four expecting Cariboo lack market, our mills pulp that April, recently venture being announced with our joint certain to taking beginning XX,XXX shared production side, about we due started in of times are a weeks downtime Mill out the to XX,XXX fiber. curtailments We

and have unplanned shuts forced increase in annual announcements and of virus These reduce the of mills of we will unplanned to half in deferrals seen several defer their As a being result likelihood pulp second of supply social scheduled decision requirements of shuts. will downtime XXXX. the outbreaks, maintenance

some price Pulp have uncertain. increases, market midterm despite to sales volumes announce supply remain overall conditions high led producers shortages and localized remain

market is positive volumes decline writing and deep printing March softwood and how less the grades hardwood. for is sales short-term reflect movement statistics demand dynamics clear be. in What supply demand both for will and

important the add We an to we're chain of pricing, elements any and are we I curtailment essential service. an that see believe will pulp our further expect see healthcare are if year pricing considered in pulp and supply part that products floor pulp we some further market-based. downward pricing this jurisdictions;

we ensuring government related continue continue So, will to virus to follow to and recommendations to spreading keep safe risk our to and all health reduce our we of run through one we the of the expect people facilities.

demand. the our Products European experienced With lumber business, regards steady market Wood to

believe compared QX. slightly upward limited statistical supply down on QX. in the We the housing to was create show British pricing However, to markets curtailments and data Lumber U.S. US of logs market in Columbia to lumber due that production continue improvement saw part this pressure. in in positive the

random compared board X,XXX Today, X has Western U.S. X,XXX down per for The regarding to per feet. to the the to QX. pandemic in $XXX in average SPF board uncertainty close better lengths $XXX QX pushed benchmark $XXX feet benchmark and Number

in QX In was lower comparing lumber U.S. one-third the volumes average as the about realized flat price sales of feet the per by QX, at QX remainder sales European with market to When prices. sales pricing market. European in the higher our X,XXX in compared board majority to number market were offset of was of $XXX $XXX of in our QX, our U.S.

sales As with reopen prices we lumber buyers weak how move QX, economy. housing been project to global the as volatile begin relatively realizations. we to expect along Today markers starts do-it-yourself to as demand lumber clarity governments for remain in will fare and have look

mills days Our mills XX,XXX our pulp, we Including Cariboo had all quarter tons maintenance very of of venture, XXX,XXX ran in annual the of produced up when pandemic-related XX spite pulp tons joint the challenges. of scheduled we QX well from this

to our XXX venture, produced from power, gigawatt-hours planned heavy our joint maintenance QX Cariboo again QX, our Excluding mills of gigawatt-hours due XXX up pulp

quarter segment in production record generated ongoing we project. Products XXX Products mentioned, of Wood lumber performed segment million record Wood board as our Our construction QX. produced at as level work $X We of despite feet Friesau through EBITDA and the this Dave a almost million interruptions

and lower damaged beetle Germany, In costs resulting wood remains in plentiful log generally.

Western supply resulting tight. pinching to with cost supply We with supply XXXX. low is combined sawmill those remains into Sawmill used Canada, replace wood pulp chip expect to options slug corporate considerably. High last in volumes. cost log have this very In well curtailments dynamic margins limited being combined higher historically

in changed to reduce assist shut. occur Our exposure a large annual contractors when to XXXX site program maintenance has COVID enter the may order traditional that of numbers during maintenance a for to the with

And short has take shut shut take until in five-day a River of QX XX-day able will boiler its three-day been contractors days Cariboo people current is and shut during shut QX. of Our will deferred QX. in Rosenthal recovery the being take to inability guarantee two expectation five-day as Stendal in and Peace will rebuild shut a skilled has QX to the QX larger availability take its in QX. typical deferred and Celgar QX. the QX XXXX pandemic. in slightly to that QX shuts trade shuts And three due will

reduced about mills. planned million pandemic. and expected a of million $XX we of invested reduced to anticipation program QX, the at We've return projects manage the labor our result CapEx In XXXX to of $XX as in cash skilled high our availability also

return productivity program XXXX project, capital a focus some the and completion initiatives. cost smaller with modest will high on X Friesau Phase reduction expansion of along more A

to expect project the will year. to We from XXX,XXX total tons on that the in complete work of at mill commence per capacity also when expansion Stendal, production which tons XXXX, XXX,XXX increase early

fiber our assets, I've XXXX on and and implementing well focus QX market and on sheet on operations our will our of comforted us handling been our strategy, focus has balance has in shifts. world-class us potential sustainable by been our serve costs. operating focus continue challenges discipline, optimizing terms we and controlling strong logistics success unprecedented in and to

in continued Our liquidity shape balance will shareholder value considerable sheet good contribute longer is over with to and financial term. the discipline

Board our be short us our economic has This by and global reduce optimistic precaution mentioned, reduction reduction a flexibility financial the Dave will as dividend given this to As this cautiously gives uncertainty we're pandemic. decided created lived. increased

prepared there and risk. remains our a completes to beginning society, take This that if despite I is say reopen moment a to take significant steps remarks. out the governments virus But to can still

call So, for our turn friends, the I'll as please operator we families, keep you. to safe. Thank questions. say continue Thanks back neighbors for the and your employees, listening. to all now to

Operator

Instructions] [Operator

question first with Patel Capital CIBC Markets. Hamir comes from Your

Hamir Patel

from COVID-XX? softwood year much demand down you Morning. pulp expect do how to David, this be

David Gandossi

so grade forecast and hygiene to is that's it’s is feeling. to tissue million I think real their just various of required. for pulp strong, a to continue X.X I year tissue think be look be incremental going Yes, RISI expecting bag, mixed our so will is -- at an this a be tons sites, that's mainly the

here concerned in and on. and slowdown side, On writing conditions like magazines, things so economic the time for with some flyers, certain impacts types I've graphic the though, about been packaging, side of the printing

number of only about is reduction -- having about on really two-thirds XXXX. talking So, the recycled pulp that, side, graphic which But X million pulp, X.X that of a is of million softwood. wood number so we're tons about containing of in of of fiber, or XX% the said in RISI is the tons that I think

tons. XXX,XXX So,

are supply net-net right than more a so on And grades -- X pulp to so about little down X taken of seen the forecast. million good. million And we've be This the is coarser RISI the million forecast tons of Packaging, going a supply side, then down off been RISI. coming far a all has out -- that's X.X on maybe now, it's tons.

both downtime -- for glider the capacity. Europe. in seen same machines In paper sure the of really it see We lots we've U.S. taking there's and Europe, no in

and market of resulting whole not simply And finishes. it's just of I paper as combination that's those in grades. a paper are mentioned, more grades different reduction pulp So,

machine, big these move other pan-European European they'll downtime take companies machines. -- to orders quite When at a often

really it keep profitable less trying So, the down in is profitable machines the take to do machines. and running

the that interesting look of -- more -- any their So, in about do back and like for the for older as a basis, a positive if should the to reasonably and they the think our on slower other watch customer rest I little can't then not whether base, what well in in net it'll them balance we're half maintenance be are be year, -- really what's feeling expecting of -- the to but that does out is the summer pulp year. slow mills summer, the going the maintained shuts, of

So, the the first half. maintenance second deferred to literally half every pulp from any mill has

you're So, an through issue. the half the that's lot And dynamic challenged maintenance we for back in interesting as could have going which then recovery. us think operations one of and a create I quite go a to year,

Hamir Patel

Thanks.

David Gandossi

a go. you long Hamir, but there winded,

Hamir Patel

then go structural the of given of, where That's away fiber a curtailments. just mills I sawmill permanently kind scale BC in to constraints? the see just and get do pulp think helpful. the finally, And because we'll BC, tipping of some we'll point

David Gandossi

I don't know.

make about strategic part policy I government. that ability to to depends really on critical to quite answer British starting of the Columbia bold their decisions. provincial think feel the I'm question

log in the wood, is byproduct would fortunately non-saw round risk us, the of no are in processing So a British quality suggest are log furtherer Columbia. had a mill, Celgar for change a sawmill I history there, harvested there as of this logs And of absence our we've that harvesting. long

the Celgar that, should term. Decca medium the do we've procedures so a sawmill for process Home on is and programs front me. got short a and got well, good in So equipment good logs to for which it, of down stay to question

we XX, it can into for don't a we've us six week who for back if eight These into four of You like been this year, you to the well they everybody. know, will stretch see that's this if knows. they half announcements, as into challenge something, do into are. continues seem and going hearing be And

be something for sense to -- expect and back So because sawmills or begin to to them have you to economics to business, get for do to the the recovery strong make them again.

Hamir Patel

all Great. I'll turn I Thanks, David. had. That's it over.

Operator

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

Sean Steuart

Thanks. Good morning.

whole Hamir's on us of what cost chipping idea cost differential can and like with up for that a residual an that Following between that chips differential the looks Celgar specifically, lot for mill what question, mill? you give

David Gandossi

hypothetical look know, to like actually, you way good a That's you at Yes. is so this a it if number.

might of $XXX. in of Okay. pulp $XXX per residuals, But This know, between our your ton some would transportation. chips sawmill belt have either from the incremental the lowest is come and then, we of cost sawmills we fiber. fence, right for the is and wood somewhere spectrum our $XXX into a say everything from mill let's And costs a across a sawmill is of like on that you that wood ton, through cost which the balance case, a below other just your be just other in comes the region coming

the for you mill. non-saw depending sawmills. log And the are wood, where those byproduct logs close into then to some on which And fairly them move of harvesting round are, is of

you're bit up go I little your to XXX tonne transportation the be And you know processing your have highest cost right it than fiber, XXX costs, the which highest get out could kilometers that picking so there you all you maybe blend maybe and than more because marginal away. know, pulp. you this to a in a And $XXX is when per average. cost of you And together, sawmill,

four of sawmill sawmill anybody's We've they all lower happening. front I residual don't they're announced What's than -- they've happening of we've mill, that all in that well that -- already including purchased. chip right logs weeks. now costs of is over not more anything weeks supply virtually the got -- inventory four is think And

roll and we'll costs is, buying we pile to pulp these the like higher a keep are prices bringing how logs So, that need going. question saw up where be there's room not to fiber. keep the higher But of to do going, be heroic, cost today, lot in

outcome manage to driver is to So big, big balance and going and that's here that we've be come the the the when got sawmills of back. big,

Sean Steuart

question that the you If And schedule? that to for crews we that should on do there for there's about lined Thanks that in have you Understood. contractor and is out, How And the place? schedule laid potential initiatives downtime committed? risk remain that a a that? detail. think social schedule distancing deferrals up

David Gandossi

big like at really River Peace power, for example, we just the for Well, feasible. not like things that's like know, the recovery boiler

So issue. we it's not you our in given good of inconvenient. It's fine. That's nature that. know, a this safety just It's modern shape. for defer And But mill. the

lot need things to do shut our own a and that a the on people. with mini during we can maintenance do shut we of do So you can

contractors a of recognizing is it's we're going seeing that that this it's a for XXX shut. a been with lining unlikely actually on So have to pandemic site silver to bit X,XXX during we've Mercer

been doing keep splitting mill shape. stops we've and in different the pit really So, good the been -- of work to kind of on we've up areas everything

any think to us back contractors. of unable if third-party operating, That from can't year. hold our we of would get were in I anything So this mills

bites. smaller in and everything could think we it I do well pretty ourselves do

my risks us. That's -- I I I But for don't what in mills. particularly say wouldn't for that the big others. for I meant any older earlier So comments don't operating there, see

these some that age period they need often lot to equipment need, of and we need a go of complete down, complete water to and -- inspections, to of issues. because a in their which mills short own do these usually time of insufficient are of quite the usually wash they of resources work, Some their do conduct remedial

everybody that's going big -- to the or what's in the you're mill. mill and it's each the boilers. if can two, or it's what's on So just and not, state XX on for the really to some be the for for recruiting challenging then the And months going digesters, equipment, is pieces of be you're -- depends for and those it's good you And shape and months, if XX defer easy. our

Sean Steuart

Last you question thing dividend the various pulling liquidity other look options sort of unwinding that there through the refunds reduction, deferrals, and of laid of for Are for out you're terms preservation, Dave, an levers it lower CapEx, we gets in you're in working capital coming liquidity that tax support? any to near-term. the can

David Ure

would jurisdictions, you're I And not, guess there give We're adjust terms tax can Canada, we're of obviously we're not accustomed quarterly I those your say certain quarterly, and we to paying I say would examples adjusting, where like taxable refunds, you batch that. are doing the in you payments in him no, are circumstances some in that if No. like forecast, and material.

for the be those XXXX. I taxable that and So of our say income material big we would our not but refunds, be to material. terms We'll in lower modifying payments, forecasts evaluating tax extent quarterly believe will

are we're, a reasons like at working it's of and to working market We why terms In have certain there here. some reasons capital. to it's hold operational good balance obviously times out capital, we'd

good make costs. can the can, wood of front piles having you wood to control instance, For that you of sure keep considerable is yard in your

we'll make sharpen to sure well. as you And and and a from having sufficient helpful meet able We'll things view we we're working are warranted. inventories we're to the to inventories up cost doing too. that's your keep mentioned, as up that and but we're point those with of regularly that keep efficient of customer that -- CapEx same benefits and sharpening David that keep all as doing capital demands, lumber customer And analysis. But service pulp evaluating

Sean Steuart

for had. you that. Thank That's all I guys. Thank

Operator

line the Our next Markets. of question comes Campeau RBC with Capital Marcus from

Marcus Campeau

With good needs, could allocation, about guys, you of Hey uncertainty capital the whether creating morning. eventually be COVID-XX that even a balancing in how through you're growth maintenance lot here, thinking returning opportunities, market us just or capital? obviously walk

David Gandossi

Yes.

it's to for work, I COVID you economy So know, think you crystal don't be I my just I an ball get have remarks, to know, seems of as pent-up resolves. the in it's a to I It mentioned just energy how a time. unprecedented going. lot back mean, get opening

of be of in not we're are think downside going But come the going I to to what to overly it, the when But don't I know we're I So, we negative. very think, have this, -- quickly. out we middle things looks I'm like. while recover because just cautious,

as mentioned, undrawn half well cash, we've half liquidity, half that of over So, revolvers. in an of Steve billion of a got that

to We're We're still operate. able able EBITDA. to generate

We attractive continue that and very maintenance and for will things high have capital prepared we some projects to we're return that. several do

renewed our XX%. have always can on in a and cut call really dividend We if but reinstitute have not point we board that order, mentioned short we this we we're our -- at to, need time, that share and buyback by meeting We program.

be another maintaining some value do. of creating are day, time, often it's about things may long-term that to to quite fight At there opportunities. living in strategy we point There our all this want that in times, maybe difficult

-- And that's think liquidity go. wise I so as very as to a having weak very I much way things think when are a possible

flexibility well can We're global view, digesters ordered finishing and situation continuing much It we're margin the in its wood we have access world, sawmill. the were sawmill mill so of the new in that and markets. the see largest probably two XXXX. upside at producer completed point allocation because be one the as to Stendal, from the that capital Friesau, of that, to best continuing that we for And given program the we'll we've and of whole the expansion

with overly benefits. from an the million -- offsets capital of with -- that range huge in not It's that's than more other the programs. expenditure And half wastewater $XX I've considering guided

we don't a pay wastewater So means the fee. we capital, have to spend

So it's equipment. of like the getting a grant for half

still So intending create moving but the short-term. in being we're forward, very value, we're to cautious still long-term

Marcus Campeau

Thanks. putting And announcements month your from been And by of many are of geography? pricing, What for and up customers you then maybe have discussions? have seen any your hearing pricing the notable on price May. peers you differences

David Gandossi

Well, there's too -- steady in pressure there's say. I QX across I May been discussion in want markets it's be there's a about of right now don't to lot -- would -- our market.

So say I too don't much. to want

of producers demand about Some incremental the is from risk. worried supply coming paper

kind they're toilet So of Costco, might go the it's it's people hear you -- meatpacking down kind to get -- plants you you or like of and that going paper. news can't read

everybody So too. And industry that bunch. in bit like little a a it's buys whole our

almost month, the I'd of tons tissue hey, more side, asked otherwise for been instead taken the it's, thing. than it writing it's allocated. and mean, I been would that's has printing every X,XXX on they say X,XXX, kind this having customer can have said So of or But be that,

So know. there's dig wave, -- out optimistic half the increases going we the get as a we're how time for I of don't uncertain this in in well that second quite we this on don't year. I'm price nicely reasonably or long third me, to as of is, back do

The the situations of different grades, different or or are $X uncertainty all grades, in $XX particular the too that with. tissue. read function wouldn't into of incremental supply. It's the market. packaging much slowdown $XX in decreases down any increases, or supply price dealing in $X really slowed some It's I price rating and printing players a But

So course through little in of of think the serious as expect should we the a II long a a Wave stay and mosaic the summer as weakness it's back I problem the it'll next half with And have I bit I'm the year. quarter, better. -- we quite a cautiously there. here out then optimistic, bit to be think really don't

Marcus Campeau

All and I good right. Thanks That's all luck. had.

Operator

Your Management. of Shapiro the next Capital question with comes line Lawndale Andrew from

Andrew Shapiro

me? hear you Can morning. good Okay. Hi,

David Gandossi

morning. Good Hey, fine Andrew.

Andrew Shapiro

it's of connections so Okay. Excellent. Sheltering, not sure how kind are.

looking angle from So if could return questioners are prior the the a approach this which following what thresholds board on question or calls in different shareholder milestones is, you I at?

you to on With reinstate can be the respect reinstate I buyback you when to -- in reauthorize looking the short going and you guys are notice, would terms but what to buyback? understand of thresholds determining to milestones a

and of gradual you based when described moderation to would on the the how to addition, dividend, it either increase increase dividend, in a the it level just would would reinstate the you at? reset a were or an be And decision for we be

David Gandossi

lots our all of there's And in the both cash-generative questions. think stock underpinning of that think ways trades. to different approach I Well, I those to well of confidence is compared of the how business potential the

of you So, can things. there's theoretical a do these whole bunch around math

return. dividend. And intended we've that that. want is to view a our will But we always to return and dividend committed they're We the rewarded want dividend gets over -- and provide it push said shareholders to grows and we a stronger shareholders be return and to to our through time to and we profitable, be company more the continually intend shareholders, that increase the time, as through

buybacks there's weakness, focus us focus for in real share for the been extreme reasons we're there's In that stock, of -- for our growth, on the it. liquidity generally that one times not buybacks a with discount is growing our the a have a of issues reason. In bit understand we and of recognize for

paper those programs pulp should coming government through that in want and to green consider that of and these tap be Canada that similar transformation. support I some out put anyway, programs companies like Another there into support believe for factor the I is just a lot

want shell-ready why programs comes tap been stock, we that you've they right? where a can't buying when buying when in don't there's put kind they're it of to looking for hard into try would stuff. and be right? to some stuff for want it's the to back economy, handout apply -- when give Like, of governments going to you're When a of stocks, working, that. you for position stimulate get just that I your Mercer And back and to people stimulate, kind projects they support So

Andrew Shapiro

Sure.

David Gandossi

there's decision. different Andrew? whole that. we up back of when it comes So What back again, be control appropriate that whole at board these bunch through will I shouldn't very focused it our levels This and confidence over be pretend factors. the the But we'll factors have I to a move would this this on board pandemic. different question, a times. And of the all debate

Andrew Shapiro

I talking because flush buyback more mean might does as and on the case, dividend, bit stock your targeting yield your dividend be something to of it just little understand a And the dividend? And the Sure. based. comments price that sounded you on that's if the were if the out that as

David Gandossi

We not. we're No, don’t.

Andrew Shapiro

Okay.

So…

David Gandossi

We happy. excess it's just We knock you've the you see future. that. were of proud of closer very to and But we're got, thought it down just we a when And to can't risk, when mention you've to yield, range, were right. three in very it's X% better

Andrew Shapiro

forgetting the of on the in So about touched terms dividend, buyback, clear I you've enough, understand. that

in been present of a its levels were if reinstatement that kind sounds as of the terms would that visibility. or gradual increase the there if terms it in that's from of it about? thresholds, were discussion visibility, and board or a would dividend have And mind? In Or milestones the -- mean

David Gandossi

but specificity, what know I for to don't do. want comment. I your desire Yes. understand don't I we'll

Andrew Shapiro

Okay.

David Gandossi

It anyway. misguide would incorrect to be

Andrew Shapiro

right. All

move Let's on.

David Gandossi

Yes.

Andrew Shapiro

any you're across Or canceling you on then, terms the Board? then or of pushing projects in when are that reduction, the CapEx the just is elaborate particular So CapEx, it there back?

David Gandossi

these obviously. went every We leads mill, to discussions. David No.

project its and that that have reduce. him company deferred merits. And each evaluate risk for I But -- We're to looking really create prudent. be We Chief we're let's doesn't individual let's we're Officer for acknowledge support can higher that is, what What the in for project on going being return? are our Operating that. those

able pricing doing any be to the cause don't bring direction risk when or that, the don't liquidity that projects returning we'll strategic What And mill. to of high pulp are improves. returns? are important factors What attractive the different superior to deferred most of lot strategically? there's we've in. of come a that do be lot things business, impact really to back when by a honest, And the And the

Andrew Shapiro

Okay.

David Gandossi

-- we're have not We're big not don't addressing. any issues we maintenance that

assets the our taking on strategy the our that -- to and we're any shape have throughout of front. is not good cycle, risks maintain part in We

this, let's want the So, didn't our to to stop, a we're I Stendal we year, or said, we work. said go slow XX. Friesau work down slow the have XX might don't want we and stop or or last when down and want down different we bond stop don’t did -- to company But to

project wastewater it. is a a for project, the very fee government important that capital at the filing terms a smaller having similarly, of mill provide much And in but offset for and wastewater also project Rosenthal

it's… So

Andrew Shapiro

Right.

David Gandossi

…it’s it's short-term liquidity, but a freebie.

So maintaining types we're sort of those things. of

Andrew Shapiro

I've integration any asked is to the don't but need remains? more, ask if or past, know DMI the in I I complete what

David Gandossi

process. work it's -- well, a always It's in Yes.

continuous culture Our is improvement.

They in marketing people. of of the the but in the So to themselves think as the we're cultural They’re acquisition And not like They're we've place yet, really, if some a Great part family up pleased fantastic I been the unwind of there. gone, finished program. owners we're and running put summarize with it's going really, it's got there's had I us. Mercer think side, the just own I'd candy terms on with previous team how there. of They was that now. our continuing say, that team fit. really arrangements were to

still strictly the enterprise them work side, be done On them systems the creating more getting wide of in in for terms onto accounting of there's system. more and sort efficient to systems

ongoing is cultural and the things, going and makes all been is a these with great, of but fit people, Mercer a now, COVID, yes, to it's bit it's difficult because fine. some of Mercer mill work that do deferred it So little of

Andrew Shapiro

of But created? have been synergies the the rest

David Gandossi

work in Well, say, a I like process. it's

So we've is have. wood optimized optimized cost been opportunities line studying, the And big project to what we've what like wood the recovery. are we to goes what we a we've cost, of wood a costs, pulp been differently? mill lower of on the now return What and a continue can there studying on better? are And on do we've do until they in capital high we sight have hold those better but can opportunities, chunk

finished. questions. still lots So great we're shape, be there's of and finished, never in but We'll we're good not

Andrew Shapiro

that regularly. like the stuff ask don't sounds It done. is to need big I

call. for was the I out thing main getting you the currency here. that's effects the break plate So what the were net off the Did late to I was quarter?

David Gandossi

that we of Dave that to could speak maybe Dave? minute. in some had think but queue, I our for a

David Ure

EBITDA Yes. that positive $XX about a impact the that and had that dollar. million. to Canadian estimate so the We euro we had quarter the against the strengthened U.S. dollar about during And considerably both

Andrew Shapiro

transport the In call, company, ago, stand in logistics transport been impacts talked the although, China what logistics net just us remains as about China do the than too long it around and now the major up China or with business in of Where their otherwise and the being call hurdles things prior Okay. and we demand pandemic country kind in other behind have and of primarily issues, the either mills demand? constrained. for running, might not we'll

David Gandossi

Yes.

up opened a lot. have things think I

On driver for truck get the most and to shipping a think to I other challenges from constraint B. the last A capacity. of call, you alleviated logistic the been were try containers of And simply of has that availability the describing to pieces with a

not over think was there tonnage tonnage shipping, bring at wanting sitting Asian back beginnings, lot back. in a the empty, cargo not of to come having waters, to I

So there blank sailings. we was, what call,

with containers These They're was FT just over that So there there'll happen. that are now be didn't containers coming a material. unwinding. go to them, of sailings And with ships lot bringing back. is

or to happening normal. two more to back prices probably as speak. we come is months that's to it And the down where three So unwind point container

there. like that while think of in that brick a us was -- front I little a whole So for wall

that's think dissolving really itself. I

that have blue Europe, only and The dramatic. think While now, border throughout And similar resolved. mean and lanes Czech. of a crazy. to hours the the green Poland it's Germany, topic, driver a I queues all They've you I'm on truly border, eight were got cross where that's not in truck would between as sit I cross bit story, couldn't or really to there just moving a there Europe. freight time was is

not having really So kinds those challenges anymore. we're not any -- having

Andrew Shapiro

lastly, for plans out many conferences of and to the the and me then to new all. the customers? inability months investors reach new obviously existing and given travel in as cancellation coming the well the continue as company's And What pandemic to and to Great. are existing and

David Gandossi

more Yes. now. think those industrial We've and Dave Well, got side, lined I the we'll a could participating bank-led up of the be virtual conferences. of in on some We're And couple at the busy, do tell on will moment. not speak our to marketing pretty available. side we're to IR best the story. more those. target always we but all We're our

to take had When And telling any chance at I'm if it, think website how story, it. a the new these thought of hear those on and haven't put of -- we our that a It's new I website. in of Dave have our can you voice listening, a for into you so things. look a own see we our lot lot about

there quite of in as ESG you bit new encourage well. we material There's to a So have look at that. a

As far as…

Andrew Shapiro

It's impressive. very something. Yes. That

David Gandossi

you. Thank

There's within They customers of Mercer them. as us open go, sphere. channels marketing communication all far producer. and our leading a teams the As know all know great is global

guys COVID remote the There's and to relationship. is as like work not home And mean, from -- learning – I important all maintain travel locations. to our much as we’re to so it's from or

we’re Google the -- use platform. on We

I for to if face-to-face, Meet, that Google to our we'd to the future And Meet, going that customers. I'd meeting. Hangouts, -- a us you have be. each easy Google wanted a Google is have -- Zoom or see love – do you we If So to the if think other very had see

Andrew Shapiro

investor would to here. now us the the otherwise nice short participate conferences enable conferences around or on virtually yes, -- to notice have we Yes. to in traveling too going what for you're actually more It’d wherever be than -- listen virtual could well, purposes you're to attending

So ones at? scheduled you that already what are what are the

David Gandossi

You line wanted the to next that give and one, up? can we Andy, just

David Ure

little down to don't June. bit actually, early And it's because Yes. like we have it be date, but looks a yet to it's early it going too pinned

do posted though on I I them two doing get can -- be they'll think once sure make those materialize. website once that be maybe So what get in We'll we'll there. But June. those our is, early we'll of we

Andrew Shapiro

Thank guys. Awesome. you,

David Gandossi

say also face to there. face to happy can open a We anybody to do do wants to we're very who invitation

Andrew Shapiro

Awesome.

Operator

comes the of from Suisse. line Your next Andrew question Credit Kowski with

Andrew Kowski

demand they've and question, it's a broader you down to David, a of tricky Good you. of categories unused giving a morning, the us good Maybe just job But Thank granularity breaking one. in did lot all of the a and really globally of it's, there. upwards, supply up that just seen modestly, move part is operating what we've where versus issues prices and seen we've degree mills related changes? underlying the downtime demand some of some just moved some

David Gandossi

Yes, in good market is psychological all the question. my It's view.

even were diapers diapers. Asia took I'm hygiene tower And going campaign talking real remember industry, I demand we've a on And about not can in about career, industry thing here, and habits when is so, to I a about the developed to there's like I change think a lot my thinking the permanently still side. as tissue pickup COVID been economy what working the and grade a some China and think in

economy's exploded, to X% all now thing. being was that And successful it of And XX% consumption maybe the Like use their demand is evolved I very compared or developed a fiber fiber I and mean, towel minimal. they below as economy. just think XX% one-third and in it's

aerosol about to what place your the China see think why you your impacts all would dry and hands when So, hygiene, a use throughout dryer, blow of over all like, which you you these germs dice off. COVID hand the is is

having you in the wiping for button, kind all in paper So, up towels just home, want of elevator your industrial things. when towels, an to push pocket paper those

I products. think hope potential going into there's hygiene some real in big -- shifts

permanent. lot like is back not are it's, a graphic are magazines see the side that much. Most is I travel And probably to the of not soon. think that demand that's people coming airports in I anytime of going happening don't loss as

So pulps shifts on as markets big so lot side, going that's be fiber of and well. the containing, wood demand the in loss recycle the to a non-chemical that's

pulp chemical our positive about pretty So forward. feeling going I'm net-net

all to like there. get on bumpy there market supply are when a will taking or these in about term that it to they we drive customers too your down not reasons, risks inventory as kind much be it. have short wanting those and How psychology opposing going the about that open thinking For of factors getting thinking customer will is depend the machine do

I Maybe on yet. the Globally, the much time. I really as for just how based either participants demand on that $X downside see the feeling expect or supply should picture, don't down, hardware don't I've not or could there's tension at or big at think and software. about around I different this we markets all the think mentioned, $XX because are up pricing fumble

back are temporarily if that there'd start up, on on price get vengeance. with think thinking But I shut as a the you any that soon cook kind pent about. grade capacity, reduction, as all lot And would kinds to things packaging there's hold would and capacity, serious will of down, supply demand I'm globally open be show that come the a of up on specialty that of

than much think I the downside. So, the greater upsides

Andrew Kowski

Appreciate you. helpful. the color. very Thank That's

Operator

line the Knighthead. Zirkin of with Adam next Your question from comes

Adam Zirkin

too the you much. early crisis you in appreciate was that you that the way gentleman, to time. change David the causing comment the operated really you taking and didn't had that to Hi mentioned you speak

any spoke maintenance but contractors and and beyond distancing, You it depth in with social about respect not to that.

the there And of improve sort learned efficiencies changed in the changes say any how long things or to structure term? of well. the there permanent? those long right, cost despite running because changes, opportunities mills obviously of time the are operations are to any reduce wondering, crisis utilize I'm So, And your those

David Gandossi

question. a And all there's silver of and Adam. all Great linings kinds changes. Thanks, this. lot of There's

may be talking just about you few examples. So a

that we a on, things us like were things were at very recognized train. early coming So freight

we top weeks, six senior very react five to and -- we X:XX We So response morning Beat and team meet we for every at that our have on initiated management needed recognized promote we team in call. so met morning crisis a or we as the XX a quickly, a company. Google of every met the plan

things websites we the see for all discussed to were safety we so just stats we keep what we coming could guys, scouring the information, looking started was practices and different what were, pandemic, the health adopting And safe. people we that had our and hearing our about

person example, in canteen, you of outbreak exist industrial you would the in risks take to to people facilities for shut a canteen we be. it the wide for you if -- these you're authorities be that so an who takes in like, the down the things the just one quarantine could that And know some have big spread is say, who health going how going said XX that XXX to the had during day down until day

in So our we all about procedures and canteens. people procedures have different policing chips, of kind so to of paper changed in coming Truck scanners fuel were our heavy distancing stuff. forms, right of finished pick windows, we to all plexiglass the hard drivers ensure up social policy or or PPE goods loads initiatives in instead bringing

And then our into moving we ship changing configuration. started

that don't interesting consistent have about teams. coverage. of at they middle. and work the things them day four if different And they maintenance got smaller So, into you -- don't the of And is, one we more they and imagine if XXX team of big teams, of we people, instead break big a a teams two have big you've got you hours a the you in -- really intersect much team, operating

Like user three on, off work off, right? three pods we four four same the that days, Four on, can off, have thing. three doing three on, people will

have You've XX/X nights have used whereas we'd on coverage to uncovered. uncovered and weekend's we got almost maintenance,

his got afternoon night. and if team. you you o'clock coworkers, part, do an XX in and to got makes the XX security lose a -- that shift whole got a or contagion, you've And don't that a at lose gives we've a that mistake you get coverage morning somebody Now, Texas the you've you

whole pump do, -- they every And we're another whether or nine yards to it's so individual, just with NXX proximity you. the every we tight, extremely really risk far changing need they If and -- close fitting careful assess It's masks, that properly what in procedure -- are also risk been shields, PPA. it's suits, to work understanding or working. a valve the have then need we it's hazmat for guys assess heavy

So, kind just mean, I this on shift we could never nature. it's done the human side, of have any historically. adjustment shift of

got. like You're you what

on. You this? they don't going in of And the a in anything's long their anything stay know a -- work. summer about they are starting you want so possible to to and How times do want vacation and them crisis, we surprising to certainly differently so it's lot are know, like to

So we've working. so it's we tweaking more, far far just -- we keep it's learn but indicated. as Well -- just so

having result coverage it's the more done I a in think, others and get the people actually to tools giving just maintenance our changes hours with lot we're it's a mitigating risk us of from with on more and more our shift. to bring as these own as getting opposed outside own and people the in

Adam Zirkin

financial paramount, to Obviously, there well? safety is that but implications there are as

David Ure

single maintenance can more you're Well, personal if one I shuts, benefit recognizing and of so contractor, spending on say ourselves today a and the initiative work XXXX major limit we mostly much to XX is contractors these money have that, really with day, you workforce, do have shut. you're large the largest reduction is mean the if biggest in not cost doing I going to own your were

moving the is to even move path. and years that the has to this XX and shift bring XX the possibly talked, outside been been Periodically, we we've the contractors just whole in historically do down they've change and in mills accelerating maintenance Mercer in structure two months inability way certain and our months since

the values where it's our their proud have they're they're the changing, safety the well. to need help spirit because changing to be as to a mill everybody's to well about It's way as successful can that in responsibility got they proud do people do and and of is we whatever here think and just their doing our company, us company of

And so, on. take we have is used we're digging contractors very I'm in prepared and encouraged. doing work to to that something do very

Adam Zirkin

Great.

I some Thank have. on guys. that's you all meantime, the with follow-up But that. me you, Let in more

Operator

question & Hinman line from with the of Your Company. comes next DeForest Walthausen

DeForest Hinman

Can you. thank hear you me? Hi,

David Ure

clear. and DeForest, Yes, loud

DeForest Hinman

Okay, great.

pricing the could in call on your I being then as termed mentioned earlier You And cost inventory. about, log the too a much. later about call, on picking talked think down Celgar be with inventory higher in the hero you you Could even and is end run as mill scenario a shut then remains remains softwood elevated in do environment? market Columbia see that pricing it and that British it with could where potential and a log pricing there's you where or side

David Ure

EBITDA our really mills, and not is government wood mills or while our Well, a the profitability, I certainly what’s do and been here great mills, and businesses breakeven. the today. British market energy are more in of see the Columbia right with Canadian now and vocal risk coming I've quite Canadian our out It's in with less normal cost happening European are our

the deteriorates, unfortunately circumstance. make that if the to impacts of So, situation this decision we'll unfortunate right minimize

DeForest Hinman

issues the… Is with any there

David Ure

the wood would front in of and the cost I'm scales The to wood the and mill? spent. having already the come open keep that not deploys mills no, on we've do Sorry, remind security the today, to saying you, to that. average make decisions we $XXX like, I'm going we're is allow got to

would and pile our through of there's burn mill time. period unfortunately out we if sawmills no for take then to we So running, have that

DeForest Hinman

to on is to of in And if message this about what's to any do we way then is then relay be government issue an as structure in union going the a well? shut? union had And to mill, the able at that terms going the the

David Ure

Yes.

workforce well-aligned some on with they're tremendous in team. the very are We all our unionized they're employees, same and

executive MLA’s of and so Noah's all unsuccessful. all been need Mayors and have provincial our and all everything of lobby like but doing we front, putting seen to we've we we're Chambers kinds a Ark, to do support and the engagement. do And together or on us Commerce we're So Community we flexibility are leaders, this something on government pressure different, far union

DeForest Hinman

Okay. Thank you.

David Ure

change COVID normalize. things Once comeback again. sawmills the But everything will would recovery at

DeForest Hinman

Okay. taking questions. Thanks my for

Operator

line of with the comes [Operator AIG. Instructions] question Austin Nelson Your next from

Austin Nelson

see to question. would that walk you and of a back kind have kind the the where through in recognizing taking a down. layer supply Coronavirus. and of takes summers think then have very go it's pricing. for a and assuming but coming of puts through, demand at I we do don't can going bottom little to ramp, is walked any don't hard We've thanks and And of kind outlook, back in QX we're bit on second and expect you'd you that wanted some Hi, you just maybe half weaker this a

capital correct? if the that things just went, you'll the potentially around generate just CapEx, have how If you any cash could this dividend and looking that is of kind being year? the understand generate the shouldn't I'm prudent that's swings, on to liquidity, at running actually and I burn you depending looks it is back then capital but the working positive reduction think that cash you're problems the they'll flow, with like cash really in progress quarter cut, case, will the how on math it of fair way the that, envelope progress working think move,

David Ure

and to it's I great generating operating that of fiber these normal to Well, not the assets the cash can this back But that's how with pandemic what own, opinion a we company smart supply under suite question of half directly point And I'm of a enough to on is potential me year the this that's asking great conditions. understand be. going my unwinds. assets;

want that's opening see it's clairvoyant. I going with don't the testing into want the economy efforts about all nervous about in to So very pretend I very to some locations. that energy and nervous it. this certain in about of how I'm know the unfolds, things -- I pandemic I'm really, I up and don't place geographic don't the be I'm

don't what I be going misleading. of like to can company doing want prudent under can we I'm the and guessing as we're conditions. back in in don't it and everything be to it's we cautious just know to I or And these it, unknown, leave half looks So, year as the

answer… that Sorry for

Austin Nelson

fair. That’s

David Ure

can I --but that's the best do.

Austin Nelson

depends question that. No, just on the hard of makes of to willing have you're understand. progress of maintenance this and I just it is in come was is it is XXXX, just, also because down understand, the we actual sense done. comfortable you're we're that to year, to I it of I event CapEx I we that and actually pandemic, that that that understand it guess, some get If doing? market things lot also in Then understand it's I cash but the fair thinking any how with it crews just having other a question XXXX? essentially the kind spike return the those about see a CapEx flow high and my the comes you to think how projects are deferring versus continue of accelerate

David Ure

there supply us at that for that believe mill folks the a We while, on you growth. Investors about really our economics for having logistics we logistics, the can we're we our mill for fantastic superior would very that talk compete the our anything. whole, sawmill believe the Stendal. and I focused its wood think with sawmill would been pulp is have a and be heard aspirations there's that Yes, who've with and is me super decided a scale of long-term sawmill, there like -- would underpin ultimately I the

even that's there so hardwood. or softwood softwood, we maybe And a enough We and sized River. a build priority we've in Peace to believe just a have good got sawmill, sawmill initiative similar wood combination

various so done need projects communities preliminary of work speak we these those things, of and and we work a to agencies lot a strategic to forward. on we've that bit moving the quite keep And the can that engineering

moving able there's be is two of Peace always lot we'll things. is when that moving move examples is forward are forward, are Friesau M&A then those growth so organic and on. time of the Stendal spending right, and forward time at we opportunities, And to looking a

coming So, about to talk in will the years. there lots

Austin Nelson

helpful. Thank That's you.

Operator

additional There I remarks. for closing are the this At speakers any now no callback further like would to time, the or to questions. turn over

David Ure

you all Thank joining you, for and Okay. our call. Samantha thank

and I to do just to wants Google do any very other, are Meet, a be see Dave always anybody talk or fact, a in that. As if happy Zoom to and time available each we'd to

earnings on again. in call feeling that all July. I'm So for to speaking to Bye next we'll you Thanks look again our forward now.

Operator

This does conclude today's conference call.

may disconnect You now lines. your

Mercer International (MERC) 1 May 202020 Q1 Earnings call transcript