MERC - Earnings call 3 2023 | Mercer International Inc.

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Operator

Good morning, and welcome to Mercer International's Third Quarter 2023 Earnings Conference Call.

On the call today is Juan Carlos Bueno, Mercer's President and Chief Executive Officer; and Richard Short, Mercer's Chief Financial Officer and Secretary.

I will now hand the call over to Richard.

Richard Short

Good morning, everyone. Thanks for joining us today. color touching quarter financial over initiatives. before Carlos provide by of operating to begin our to third markets, the turning further will on our and the highlights Juan operations I and the strategic into the call for Investors have the section website. telephone, you of call we have that material a our presentation that of attached those by Also, joined there's in the

company's would in like be But morning's to you Reform of before to results, with Exchange turning and to to these call described the will statements to like XXXX, are Act Commission. that provisions Private which According making call. I attention the more forward-looking harbor fully of I'd release this to filings our related conference statements, press we safe Securities in Securities the remind risks our your the the in Litigation and

million. QX's over $XX QX's EBITDA pulp other This of of lower -- impairment Composed production our quarter costs, prior downtime, the this realizations. to compared lower million, fewer maintenance offset due inventory partially was was fiber quarter, scheduled days and sales to by and of EBITDA significant $XX reversal negative annual improvement

EBITDA quarterly pulp segment and million. wood our solid EBITDA $XX Our contributed was of million segment $X negative

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

QX. In significantly QX, in fiber our pulp had segment costs lower

inventory. included a impairment $X the this QX million million results At about closing end for against a As only inventory. our remains impairment, QX, reminder, $XX inventory primarily of hardwood of

to wood availability compared unit We wood fiber expect in to beetle be XXXX. of lower lower-cost wood solid QX, in costs per damaged into Our QX available also Germany. to damaged currently beetle had when the due segment

NBHK by driven more and prices compared inventory in America, demand. modestly paper pressure. we prices as higher low to NBSK to our similar by lower were upward due in than in to decreased sales America see offset China, realizations efforts North Late created QX weak restocking both started customer QX, In North quarter, pricing in and Europe which and modest the Europe both levels,

the is list tonne to that net in about per NBSK noting prices $XXX pulp $XX $X,XXX It China this average compared from NBSK QX. QX. the quarter, current China, decrease point price $XXX per per tonne, averaged worth relative are to prices up of tonne In QX year. the low $XX a in tonne European a up was

down to tonne, $XXX market per The $XX QX up between North XX% from price or QX the about The gap price NBHK $XXX was in in American average $X,XXX of list In to QX. compared per from net $XXX tonne NBSK QX. per was average tonne, China narrowed tonne QX per about the in and price average NBHK QX. China, $XXX

mills had mills, we days days curtailment. of logistics-related XX our which XX of curtailment, less QX, market QX downtime mills, downtime at our XX for days maintenance downtime for when quarter. XX planned our well consisted and QX, of of compared In for in days XX planned a XX days total in All ran scheduled QX. had a which this And we we consisted to had and maintenance of for while at days

timing about quarter adjusting The down production when to for QX EBITDA pulp quarter. XX,XXX scheduled pulp tonnes volumes sales to due third the about X% second down was shuts million impacted tonnes, of compared quarter lower the were downtime in curtailments, from maintenance Total $XX in about approximately and sales. by the XXX,XXX the positively from planned After second QX.

remains in pricing lumber weak the the due the by U.S. Europe lumber high market. were pricing in lower solid segment, in increases Despite rates. demand market wood the modest to our price For improvements U.S., interest offset overall

U.S. QX $XXX. per of is at $XXX to the thousand The board end the feet $XXX for SPF Random at was benchmark Lengths Today, Western the around compared better and end #X benchmark of QX.

anticipating term and the improvements the due to not in construction interest lumber rates high near We pricing to in activity. significant seasonal are slowdown

Lumber production million approximately volumes feet, was almost down QX. feet XX due prior QX in the down about million quarter, quarter. in maintenance the Lumber to work board from sales XX% scheduled annual XX% board were from completed XXX

from fewer Canada. totaled Pricing in of sales in modestly due which higher days in QX downtime the QX megawatt increased XXX Electricity hour up to scheduled from QX to both quarter, in is gigawatt in QX. $XXX $XXX to prices per hours modestly due and about Germany

mass business to compared the of that order revenue has This ramp QX. QX $XX expect million a operations, up to $XX in to continues growing timber book over also Our resulting coming in we business fulfill months. million in

in positive inventory by generated net higher working a despite a a of net Cash was note we third from share, All capital share balance, EBITDA to tax reported for and interest levels. loss QX. of quarter, per in net million quarter payments consolidated $X.XX In or $XX of a to the reduction in totaled senior QX, of due in offset loss per $XX compared cash all, million compared $XX the or million timing $X.XX primarily the used QX. in cash offering generated million to and the $XXX

in be spending expect further about million expect In of million invested we in looking and raw modest to -- inventories. we in $XXX working reductions further ahead, material capital restrictions capital we reduction our And XXXX. in $XX to about QX, currently a finished capital due sorry, goods mills. Looking ahead, QX

the million XXXX by availability facility million. XX liquidity EUR XX.XXX%. interest of took Mercer's private our of EUR business a and carrying rate of XXXX well the in liquidity These steps senior XXX included to revolving The steps as German million due In as about increasing completing to to through enhance credit cycle. new September, for position notes ensure offering $XXX we important strong notes' senior

comprised press release, liquidity of our made our and of million, QX, be have revolvers. $XXX shareholders million per approved cash our payment $XXX from And would of of dividend on of December on you December end share Board totaled million has $X.XXX as noted which about XX, for record a quarterly will of XX. for $XXX undrawn position the At

ends my results. the financial of That overview Juan the I'll turn to now Carlos. over call

Juan Bueno

our Thank everybody. Good Financially, than morning, better was you, Rich. QX significantly quarter. second

and combined Lower still some operate at of expected, improved Our modest although than this all relatively weaker demand markets, EBITDA but some production historically costs, down in significantly selective costs, pricing by And including we're levels low geography. increases modest price trended to are where fiber, our a led we seeing result. quarter. markets recovery the with have of varying

continue to year our result And discipline we planned signaled land market at a of year. same as time, we we in proactive expect measures previous quarter, the CapEx, focus uncertain As this aggressively remain third had will around we At actions throughout full have already continue taken to and inventories the cost-saving for $XXX while conditions, the our and reduce markets this financial million our weak. our managing this on quarter. during now

efforts liquidity increase our with pleased our am quarter. this I to

credit plan execute XX business facility senior to strategic million to German Our felt uncertainty a our positioned our continue leave EUR well senior through XX.XXX%. increase and prudent the we We this cycle. cost around million But note cycle. revolving $XXX placement our to recognize private us this ensure at and high the these depth downcycle in liquidity XXXX strong markets, with has to given it through come notes this Mercer that

were wood our important the returns acquisition we fullness new in in solid also excess segment over cost done the in primarily own have made the investments note and to our well these of to year, investments expected Structurlam, namely cash. of of the Torgau these notes. time, with that is are the last It And provide of

in with remain Overall, have increases but pulp early either hit price floors QX. their appear markets QX markets or to modest weak, implemented all

NBSK, from to mill paper reaction positively the market, are of annualized begins million on down X that impact to the the pulp be supply likely tonnes curtailments. closures, improve. that demand producer is markets will and which For is pulp an increases basis these tonnes permanently softwood roughly to when appear restocking, conversions Most realization removed a result due these of between

real side, to economic at reduced remains the estate war. to capacity in Similarly, weak. demand with continues the run economic the faced pursuing in paper growth significant rates European China, the by deal economy Plus light continue is it But government the industry. as On weak measured producers the Ukraine steps. effects of European risks stemming from stimulus continues

pulp in as QX forward, supply Europe North prices supports price improvements. continue to America and in increase expect we slowly modest to reduced Looking

during lightly to XX-day the strike, mill. take not manage issues created by the curtailment necessary a but result our British of Celgar to at we goods mill of at were made logistical This a we August. Columbia was temporary inventory decision a forced was As the month port the finished the recent

And we our contracts to is the come visible in already used are it renegotiate costs time our fiber results. and as our this now wood down, and this of benefits seeing have supply

Our the quarter. the at mills ran the pulp very logistics-related port resulting this from second curtailment through although impacted issue in well relatively quarter, production Celgar negatively

or Rosenthal, Our XX of in as in a planned. days from reducing down XX well-executed tonnes in shot XX,XXX all days, XX,XXX was to QX, at roughly only scheduled very tonnes concentrated maintenance production QX,

all taking the QX, in a maintenance in tonnes schedule short of fourth in repairs year; to damaged final this yards' fire maintenance system Celgar taking major XX,XXX the for include QX last production a X-day shut conveyor Now quarter, of that roughly our will the by Stendal wood total. or and was that XX-day annual includes

solid our to Moving wood segment.

results slightly expected while High market housing in was U.S. quarter up weigh compared on on rates lumber, reflected to to continue mixed keep QX. which down third markets to the the particularly average Our lumber range-bound starts, QX. through interest are prices European with markets, being

fires the fundamentals this low the that are the the channel relatively inventories, balance believe number wood created and lumber to construction stock, And mid-term. on shortages continue recent industry. business by low this forest put strong will curtailments, homeowners' demographics We in sawmill of still housing of for positive supply-demand Canadian very constructive large pressure

to will conditions. our mix customers of We to continue current market and products optimize lumber

the As volumes otherwise were sold would such, destined sales Europe markets. of in and other QX, slightly less that half U.S., our than in substituting lumber for be volumes

shareholder we economy to lumber through to the sales. recovery, on weak significant to pallets of demand were prices pallet European to up remain begins economy pallet XX% the show continues well, overall return shipping to heating Once to back relative Torgau allowing deliver this of prices increased the value and European integration markets levels, signs pellet due while to weak The roughly QX. a asset expect of of sale normal although seasonal progress

American North mass of In production broader addition, North as competitive footprint, market. planned. to a the and larger integration access capacity, the to assets a now timber offerings continues product the of much us progress roughly have of entire Structurlam gives We range geographic American which XX%

timber We which that now see in customer products, several made interest our we're of. including very continue strong stronger our proud and to order mass marquee projects file large has

a overall. pulpwood QX. in of in costs of decreases. of woodroom steady Canadian in River's costs our fiber down In to We on Moving of the contracts fiber pushed and cost in mills, experienced ramp-up Celgar, a chips resulted Germany, QX. renegotiation But decrease our work including supply the Peace in sawmill prices at done

pulpwood of in declines Looking modest mills QX. costs expect further in our we at all ahead,

continues Our plant pilot its planned. as new ramp-up lignin extraction

begin involves towards about step to fuel-based reminder, prospects alternative We're such chemicals and plant large a a of a into new only As products as battery product sustainable and aligns Mercer with as to expanding being future a of perfectly this excited products, the This few. advanced able this carbon fossil in our to lignin the elements with commercialization is economy. that lignin. green compatible are which strategy, name adhesives circular

potential sensitive to and increasingly products lignin, the like we to construction the reducing potential timber, for fuel believe important or that green sustainable roles As emissions, be steel plastic the Furthermore, will for very fossil more packaging. significant mass is and and displacing energy, substitutes carbon-intensive products, to demand industry. has transformative pulp lumber products products the carbon world wood play becomes like for in concrete

our believe solution. We of are targets climate the form change committed our to part and XXXX carbon reduction products

value to will low-carbon of In carbon as fact, bullish committed in company dramatically on for that are demand long-term in we through remain of fullness solutions increase time, for emissions. looks world and products balance believe our better lumber its We businesses. mass and the our to reduce timber the faster growth our pulp the

and we working low prices. cost will reduction, on QX, this looking while initiatives to CapEx and of navigate capital remain period forward our In closing, focused pulp lumber we

our continue manage in continue our plan line on rebalancing work liquidity will cash execution prudently. of assets our and strategic and with the will to We to

the the Thanks for turn And Thanks. now listening. questions. to back I call will operator for

Operator

[Operator Instructions] Our with Patel CIBC. comes question Hamir first from

Hamir Patel

how Juan to term, longer benefit the about And how out longer just Europe? much fiber you would Carlos, expect played think in in from the risks cheaper to you how wood beetle Columbia? beetle availability, the British do given

Juan Bueno

Hamir. beetle look closely majority of for that one XXXX. what for only dialed year in, we're of next we've estimates, but by impact thank should lower issue already benefiting very of our like that very and so infestation wood would Yes, important XXXX be thinking you, We into about large a what support the infestation. beetle not QX most the Yes, throughout obvious that that's And would reasons. following prices believe

Having wood or in to that access we around of allows a the in of very wood has supply a that, our advantage is of we we us rate And closely obviously, efficient very Europe things is this to Mercer way. all monitor that from in whole Europe entity take keep Holz one fiber progressed. said how something on the

making So monitor fiber evolution on these sure a we on while on side lot supply keep infestation. putting we from differentiator we that the emphasis maintain of our beetle that of

Hamir Patel

you'd are Fair what just for year? Rich, projects next for enough. CapEx I last thinking expect had And to the And about larger the growth question advance how that are XXXX? you

Richard Short

Yes.

to subdued CapEx pretty have for going So a plan we're year. still think next I

we're probably $XXX year million not it's end, how at a And to the of I sort it going this of in lot But neighborhood, strategic think So will be I out. see point. the initiatives. think, plays the lower on

Operator

from question with Sean next Securities. Steuart TD Our comes

Sean Steuart

and are China. sustainability your It consumption. Juan at aggressively restocking how that markets wondering the China I your in the happening efforts interested versus bottom guess, of price just arbitrage we're be aren't assessment momentum buying in now. of And Carlos, of this so in paper actual you is strong, necessarily much feels pulp right the in on like I'm would seeing mentioned perspective inventory

Juan Bueno

say say absolutely correct. I Yes, would only little -- Thank what of is of you, Sean. attribute you There's factors. wouldn't both. and a to there's bit one I these

that products just the some weakness up, is increase actual in that think tissue in for from have paper, What of plants I the that the in are in point onwards. I sake pulp. consumption that put there both obviously China on those new the see from demanding been and though is market

So while might I -- does. it think, those the usually products, longer consumed, will take than pulp is be of paper marketing

are America, And of in any do in China. we we picking you on. that On of fact, out of up. lot the side and the going in inventory believe as things your there's that We right Europe spectrum, other now question, of arbitrage started about North cautious see that's a remain why increases

China So they are now. right obviously lower than

But still wouldn't optimistic have prices demand about we along until developing overly pick up quarter. some much be in. they space really the I to see stronger kicking China So

recovery we up view, America, supply it's Europe picture Now dormant could from in said with is, start prices. side, the or would be when many closures everybody different a is as see many that happening has there a even not North that America that, mills, been in Europe could catalyst strong tight for North equation having clearly very we since momentum. knows, or real and picking so demand nowadays reaction in in that do But NBSK a curtailments if the believe particularly of a so our so

the about to quarters. for pricing have few next we'll very cautious see. So We're

Sean Steuart

helpful. That's

question, on is wood product seem ongoing Torgau segment. like the of an it does Second results drag

How on thinking product pallet which at changing something before? a Torgau? sheet You broader touched take thoughts markets. mix company? the backseat that of about clarity to product respect has mix, you until the talked the is for the Any balance have with on Does repositioning improvement evolved on you

Juan Bueno

and to new our we capacity them produce changed can them on some depressed very, value Europe at for an based in we've When pallets of are markets is fact markets open that portfolio a more us. historically the things matter. that little in we right markets have the for which perspective, installed are product pallets, is look Torgau, moving prices since higher that have important we one rearranged and what we're slow. that, Based very since to doing Very things very serve pallet little the and have able now from you bit for go done, type of on the produce -- are of very into, we Europe economic

that's Torgau behind we've to had kind little made pallet acquisition. that the scenes had sales the we've a the done market. we or bit prior So of And organization throughout the what changes on of our

So that's existing been the one end with our change footprint. from

Now on that of some can we can the so started of take mill hand, the lumber significantly transformation projects capacity a Torgau we perspective. the that from offer the other advantage in have

Some of for fruition. burner time them, into being. We back be of once that kind those we will know they put we've the soon on projects the restart

transformative higher as then. the when market So we of of trigger to cautiously up of volumes produce -- pick lumber we're the well It give so lot the and us whole by ready liquidity lumber. now want projects of a can right produce to advantage larger how and therefore be lot having evolves at the production prices obviously develops, of we're But current capacity sense continuation much the do wouldn't make whole a to larger how cash lumber a flow that cautiously at which we would said, our and looking our for us finalize a you Torgau, those prices.

Operator

question with from Matthew comes RBC. McKellar Our next

Matthew McKellar

the stick Should just to recovery the Europe looking market with think in in markets? tighten general Or pallet what finite even economic kind absent given in as cause could larger have of a Europe could start and negative to to pallet to the a that like we a begin that with. facilities we lives, recovery? Torgau recovery I'd is likely be is one and broader of pallets EBITDA the economic market about

Juan Bueno

Germany very When believe about do not all about to think this pallets, all at and that the it's probably you basically, there. that overall, it's And commerce. Europe, and when most It's suffered the has the one economy in of going Germany being important is Europe's products is we moving. a shipping look actually here about you economies one most Matthew, linked under much recession.

we believe will higher economic we only higher with that perspective, use towards expect GDP would see higher from do demand, So see when move prices. overall pallets. Europe, some we And immediate an we in therefore, recovery an a of

So on we believe we're of what against. And all true. up believe really where based our that chips which kind what that's we're our -- premise, are very holds we -- that's

Matthew McKellar

products to in switching for of business to of reasonable mass positive at And talk this point? kind that Okay. at are seeing a Maybe you're then we target over and manufactured timber, how inbound XXXX about able backlog business, about revenues think that in given EBITDA whether and should terms present? you're inquiries what you in just

Juan Bueno

has of in required that teams pressure Since a lot being is on acquired close business, to as The to for Structurlam, business any the design prior progressing Yes. call, of pretty to work interest the this on inquiries be deals. able we our the significantly, level able putting we multiplied deliver well. and to the mentioned all been

in have least when you we of of already growth, seeing only very would twice year, at look will to as As but close when versus question QX. next revenue back a at it we we also significant such, terms we we as QX -- -- most in in we're likely be saw QX not your

year. the And next very, of now. So of year, twice breakeven will for we're this end million-plus $XXX sales. around should we're finish being thinking And be that close very to we terms what again of by we in that's

we're So to our a contributor will very confident soon again positive company. be that very it overall

Matthew McKellar

company here debt? one it to when credit you'd and comes you to the as about Last level you like I'd commitment liquidity it the think view just just Do Great. close, do and to And on the of ask the like given That's the getting to dividend? focus cost it. something broader optimizing maintain, maintaining helpful. you're of dividend for

Richard Short

you take Carlos, me want Juan to one? that do

Juan Bueno

Rich. feel Yes, free,

Richard Short

think the metrics, at is sheet fair Matt, Board so say it's leverage, mean, through Yes, -- to balance very look the our our dividend probably Every plans. the cycle. allocation committed capital the they I I to quarter, our

modestly this financial through for the and we're results as rest was sure. big discussion XXXX. And But a this improving we year projecting go so into of

to be didn't committed the very time to the now think they're just is dividend it. but So changing

Operator

Instructions] McGovern Sam next question [Operator Our UBS. comes from with

Samuel McGovern

you lots guys also have liquidity. the can Following for liquidity think the excess be? a you discuss And level? a recent bond once to what level about possible of How deal, you normalized would return normalized do more uses earnings

Richard Short

Okay.

liked would $XXX that So years. businesses. to we able our say, have as powder, we just been in always because used Torgau probably like we averaged probably to and things say dry to probably, about last mass invest timber use the million have liquidity liquidity I We've of to X over

that our the I'd to given have industry. like volatility So in especially available,

target. So would our that's probably say I

for and there's bit value-add of sort area we there. little cost investments timber mill we to as a this as a big our at mentioned efficiency of things lower focus of some for Carlos is business Juan the at downcycle, our mass us want as out Conway as our well. But come Spokane to well, more plant And do Torgau earlier, some there

the So will those as be I areas forward. main of we think focus move

Operator

Bueno for Carlos closing turn I'd to back And any like now call over to the remarks. Juan

Juan Bueno

thank now. on at call of next so any very Otherwise, in Bye to and joining and to for available call our Rich are to hesitate forward February. look all don't one we our more again much, either I for operator, us. you time, earnings to you call. you Thank talk speaking

Operator

today's call. participating. Thank conference you concludes This for you. Thank

disconnect. now may You

Mercer International (MERC) 3 Nov 232023 Q3 Earnings call transcript