MERC - Earnings call 4 2023 | Mercer International Inc.

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Operator

Good morning, and welcome to Mercer International's Fourth 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

Thanks, Abigail. everyone. morning, Good us joining Thanks today. for further I will joined that of strategic operating website. to initiatives. Also, to the markets, today's provide and attached for material those that by touching of by Juan operations the have our our to call call on presentation highlights the fourth financial turning telephone, we section the is you begin have quarter and into Investors color of the Carlos our before there results, would conference statements like our you to we will forward-looking remind turning making that in before But I call. to be morning's this According fully to like Commission. Litigation to provisions in and release described statements, risks financial the I'd Reform attention your Private these to the our with Exchange press the Securities and safe company's the harbor Securities call related the XXXX, more Act filings are of to of which

of in to million prices the were QX. year, EBITDA pulp fiscal had in the of fiber as costs lower that higher million. EBITDA been well and increased downtime lower and entire This of EBITDA quarter, $XX impaired and had million to major compared XXXX the XXXX EBITDA due lumber costs $XX pulp industry. significantly million than energy weaker we markets, QX's our compared in In sales $XXX as QX realizations of spot impacted to inventory more was that offset Higher previously $XX maintenance fiber sale by

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

In or and price compared a in all sales net be increase were segment markets or $X,XXX that QX our of $XX QX modest to relative $XXX the NBSK are We in NBSK price European and QX. averaged from benefiting restocking per an up and had increased increase NBHK average or found list up was average to customers tonne, demand. In website NBHK our NBSK average paper in QX $X,XXX per In the was $XX XX% about the per list from price which average QX, price. up price Europe, or we China, in QX tonne was higher as North The quarter, XX% prices tonne, our QX. per additional XX-K X% our from X% in can QX. American tonne, $XXX disclosures find the can both You of $XX the SEC. net to realizations QX. on current $XXX compared Form China,

and in about in when As QX a QX sorry, in $XXX consequence, NBSK NBHK maintenance scheduled in between increased when maintenance QX. to -- $XXX compared China per had narrowed QX the from QX. in tonne market downtime to gap price ton We increased compared downtime per

in QX, scheduled while of XX,XXX third the QX approximately compared XX logistics-related for increased production flat in QX The negatively In in quarter. Total which pulp tons, from pulp we about of days. to XX impacted downtime, was QX, curtailments which maintenance had offset having any impact days not by million EBITDA when partially QX the in by we had $XX planned tonnes QX. and was was sales shot Celgar's compared third up quarter relative production the were QX to adjusting to the After fourth curtailment, XXX,XXX volumes quarter.

pricing For in that of $XXX. was price #X more in SPF is were pricing to subdued U.S., to U.S. solid and rates. the thousand The $XXX overall benchmark feet the high interest Western offset Benchmark end QX. demand at for remains increases better European at per board U.S. compared around lumber Lengths' end than of $XXX our segment, Random market Despite Today, wood due the in the market. improvements modest lumber the lower by QX, the

term driven house near modest increase a housing building levels. expecting and low activity are We by U.S. inventory in increased the in prices lumber

For XXX weak. in was annual Lumber board remain flat to the maintenance production feet expecting demand remains the less due prices work. European XX% million from as we scheduled QX quarter, to market, are up almost

were prior approximately and feet, megawatt from to board the due in flat about to $XX essentially quarter, prices QX XXX which in million decreased QX. sales as spot Canada. sales in Lumber Electricity hour XXX to compared lower in quarter. which hours both same Germany $XXX was the also volumes QX gigawatt about was totaled the per Pricing

from beetle pulp wood QX Germany. supply strong lower-cost currently into to segments wood had and keep for and demand will abundant in costs wood We fiber this significantly. remains solid as prices fiber from expect falling the benefited lower In our be likely damaged XXXX, than of wood QX, availability damaged solid segment but stable the beetle

segment timber positive solid wood ramp up continues modest contribution its QX. resulting operations, Our in a to mass EBITDA in

business million of from QX and of $XXX coming This almost these course to order to in of Revenues the we the to over $XX due has expect decreased million, its timing grown fulfill in majority $XX projects. year. million and orders the the book to QX

this fourth fourth on strategic resulted to the the the Carlos noncash million estimated business, the to market will made a decision we we being this or Into pursue quarter, Juan in at sale sandalwood recording more of shortly. which business $X.XX the and per quarter, -- of share. valued in the of net impairment this assets say our have $XX made fair roughly for value

share of quarter, consolidated net a million in fourth for compared share loss million We to net reported a QX. $X.XX $XX the per loss of $X.XX $XX or per

of $X.XX consolidated or compared or $X.XX are share we to million income year, net $XXX basic loss full per XXXX. in the net share million per of $XXX a reporting For

invested million QX. million about senior was in of by after cash driven compared a pulp to consumed $XXX about of capital result the due $XX usage increased about increase adjusting of higher offering usage primarily capital in improved and mills. was receivables We we million a fourth for million cash in The our working The note of working to smaller quarter increase the $XX QX $XX QX, in In reduced CapEx. capital prices.

$XXX spending end of capital of $XX million between million liquidity be million totaled about the and Looking currently position $XXX of cash to million revolvers. undrawn $XXX XXXX. At ahead, and expect of QX, our $XXX in comprised million, we

have would our noted ends results. overview you approved which the will on our on share as press XXXX. made for record of X, March of be release, of Finally, That per my April financial from dividend payment $X.XXX Board quarterly XX, for has shareholders a

call I will the over to now Carlos. turn Juan

Juan Bueno

Thanks, Rich.

timber improved modest a costs Our fiber pulp lower QX contribution impacted were results and pricing, by our positively mass from business.

mills our very this quarter. all well went addition, In

to of impact and in items compared that lower were due compared QX QX incremental results maintenance the to QX. However, major to noncash recur didn't

saw market step in some most a Generally we one QX. markets took back small notable QX. us Overall, remain CapEx. lower positive even demand in though that The of producer exception was inventories handle tight the challenging after in normal market remains our a improvements speaking, our European weak, conditions than have momentum dynamics to with led weaker and These on keep unchanged market demand. lumber

target the roughly expenditures beginning with to of year. year $XXX original an capital compared the $XXX at of million of million closed the We

CapEx are before. we of XXXX, of ahead as is $XX million Rich essentially and Looking This targeting maintenance currently business million mentioned $XXX to a between budget.

continue operating year will greenlight and to additional improve could market results projects However, should as the we progresses. our high-return monitoring be

working to also manage capital will continue closely. costs We and our

Europe While while the upward a in we're improvement significant the we recovery at demand, pricing seeing will but expecting in markets Year result gradual. China, over the be has, in moment a activity. expected, Lunar weak, XXXX to pressure remain holiday limited as some buying believe uptick 'XX, pulp be are Overall, a of as we slight

production tons has indefinitely X been upward that shuttered either permanently the be pressures Looking softwood on we ahead that to of XXXX, will believe prices. put roughly million or

we improves. until don't moving noticeably see significantly demand However, prices

producers in is paper but economic On paper Similarly, than the weak. the slightly run and normal China, government continued their production as but pushing on higher pursuing have economy demand steps, weak demand, have remains continue. economic lower conditions stimulus increased side, at to rates measured European

continue pulp reduced chain increase prices we globally slowly Looking forward, modest supports to expect to price improvements. supply as

that the as QX. QX, curtailment major quarter in port XX-day Our Rosenthal Stendal maintenance for the maintenance and shut, XX a Columbia shut British very day a one when totaling Celgar Remember strike XX-day and a comparing of took took well mills maintenance. result major in took while Celgar days, QX, ran a QX to in took

to equals maintenance shuts with year will XX,XXX maintenance a Looking a for XXXX, QX XX-month shut of schedule. Stendal forward Celgar tonnes. XX-day normal this moved to combined we shut, XX-day the have take and we're into expecting an no have which exception Peace River maintenance that XXXX, a and has downtime QX of major will maintenance In scheduled roughly

to Celgar XXXX, will maintenance In take XX,XXX X-day shut, a will amounts XX-day and take short a Rosenthal combined tonnes. about mini QX of shut which

to on solid Moving segment. our wood

Our reflected while fourth results. was and was on mass European improved quarter The average, U.S. QX. the lumber slightly compared market down up to timber market

the to rates of season. We're expecting market improve remain lumber first and weigh general, starts in XXXX. lumber housing pricing as on expecting weak continue U.S. the Although in building high into European we to spring are slightly half interest construction to we move the

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

progress prices expect a weak in the mix warm to sales U.S. volumes current Once sold the overall. and markets. value. Shipping will our European back recovery, of return deliver to of our We integration to prices weather. allowing In pellet remainder conditions. optimize remain to economy to to asset Heating levels, to weak pallets to Torgau signs of QX in in customers European of significant pallet XX% of the was winter QX, and show continues The other products down were normal lumber economy market continue with shareholder this sold we European lumber due the market well. the on begins

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

continue us We our customer strong allowed in file. order interest to mass products which significant timber build see a to has

of order almost totaled file $XXX end the million. our At December,

EBITDA our business timber positive modest QX addition, contributed planned. mass as In a in

for We this in as EBITDA expect business up. we ramp XXXX continue to grow to

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

Looking sawlog ahead, we in expect and our further XXXX. costs modest at pulpwood in declines early mills

we business In the QX, sell made to Australia. as in decision our mentioned sandalwood before, Rich

we to process is have in positive a no Although of believe more this direction. longer this that about to strategic fits A and this time, business flow in our we it say generator, will the hope fullness coming be cash underway business, to sell months.

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

As to pilot a begin plant towards able a commercializing new this reminder, lignin. Mercer step lignin large is being

future fossil in products, to product a as excited name fuel-based of a only few. are We this to elements advanced adhesives and alternative battery about sustainable the as such prospects

products expanding involves that This carbon aligns which perfectly strategy, into are and compatible secular green economy. with with chemicals a our

emissions, concrete becomes for construction believe increasingly green world or carbon-intensive sensitive roles and play the energy, mass and that products in carbon like timber, plastic packaging. like to important or displacing lignin, will we pulp steel products, products reducing As more lumber

very XXXX has our demand committed believe to potential the Furthermore, targets carbon form We're is to substitutes fossil significant be the the change products fuel and wood reduction climate for potential our the products industry. sustainable transformative solution. and of part to

looks will increase its we to fact, believe time, emissions. for dramatically as reduce the demand for products world low-carbon the that In carbon solutions in fullness of

pulp better and in timber of balance value our We committed our are on company lumber remain bullish growth long-term through faster to and the businesses. mass

have In closing, we're us. XXXX happy behind to

a expect we predict results. we stronger continue Although a recovery financial do to slow in XXXX, much

we reduction, will focused pulp relatively our on period prices. while remain lumber and of this working low initiatives, We cost capital and navigate CapEx

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

I and will questions. operator listening, for back Thank the to turn now Thanks you. for call the

Operator

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

Hamir Patel

European your play see wood how you trending baskets and fiber sawlogs just availability Could beetle as fiber effects coming you the costs the spruce would out? on and of in for comment across pulpwood both years

Juan Bueno

Of element question. on of this We and very that is calamity obviously structure, our Because a course, end. thank in developments cost some that Good Germany that Hamir, wood still benefits significant some you. very important a of part of there's XXXX. later significant benefits the And we're is obviously already some the XXXX. factor, of we're know those in of seeing in seeing it

So of the overall, wood, it quite a pulp of -- obviously, cost decrease amount we to slight created demand. on for this significant though, are expecting and a It decrease has say, important both and continued Germany, calamity that lumber. is especially in fiber buzz

there's prefer go plenty also people it of this priced to there's lower though uptick obviously even it, for So as an demand in wood.

us yes, for with collapse. to prices we there trend is prices expect So a positive overall. lower necessarily coming don't But

think sense, will positive cautious how big what that it's to to we in come. see I'm coming that drop in I But months as So the be.

Hamir Patel

wanted think that That's some And side. of get impact the on I redirected of Okay. to the more U.S.? European lumber do Red the -- to expect ask have whether Great. perhaps What lumber helpful. on would that you just about disruptions Sea and exports you to

Juan Bueno

the In to lumber don't large on on our Red case business, to impacts the on we're usually we're U.S., the European the side, we ship lumber in are Sea, when a focusing of more the as right side extent. pulp seeing now, than market the Hamir, the that

more impact then So much limited. is the

which do this more obviously, actual cost, of has very -- still bit that have impact translated logistic uptick impact, small added we In probably time, a it's at an in of though pulp, case even in the and which now of in the relatively relative bit small tightened but a delays bad. sentiment flip side, time, these China, if lot a It in means in shipments. the is supply it a into it not transit you more market, -- more put tightness creates from the little a

really, very stays small. impact so far it this So the we is hope obviously. And way,

Operator

Stevens USA. from question Richard next with comes Our Amundi

Richard Stevens

had I housekeeping. one two questions, just more

you million. availability. revolver on covenant there no correct? I availability think My is that that $XXX the limitations that Is are was that sense mentioned

Richard Short

revolver, That's correct, generally. that Canadian but a There's into we factored cap on number. the that in

Richard Stevens

Got it.

to And there. bottom last? long you and a the the I in cycles there was next last? you decade seen How XXXX, I how you're of maybe the Typically, these from historical was a been cycle Just 'XX of through been long you at at want Okay. in back earlier the know past? there's more the of quarters? the maybe shut tonnes a cycle a and when that's get typically million X these question going typically, capacity bit had moment. perspective. sense? Obviously, I go the do one Have in to how over to But cycles, some many mentioned does say

Juan Bueno

X years, easily cycles, a X than more have some that. bit in Normally, pulp when can cycles, these look years and at cases, we they duration

we mathematical have behind question years yes, few a -- but there's them, really behind don't obviously, a them. it So

why what the have think we're So of a I we our -- looking partial recovery 'XX, into recovery plans. for holds when a much 'XX in think a bit we that's what healthier future about and 'XX. little in That's a us,

see we same coherent we of the very in Everybody And picking for almost the pricing years. thing. in projecting a particularly next see some projections, when pulp, few at we up analysts' look the way,

Operator

question Kasia TD Trzaski next Our Kopytek Securities. from comes

Kasia Trzaski Kopytek

like pulp couple and pulp inventories at where speak Can markets, point. Europe? you mill balanced decently talking buyer starting it are to with about of A China are, Maybe inventories seems this questions.

Juan Bueno

Yes.

balanced, inventories our of year. on this quite in time is to think I situation probably favor more the the

bit inventories, revealed on is relatively customer In terms proper. days producer levels, China think in and you that the softwood, uncertain. average a more situation at we levels you of believe that's for look about recently that when statistics good inventory, the low show XX in When

big more There We there. stacking into product with for New of in came celebration, Year swings quarter preparation in the the obviously, inventory year. inventory were new a as that. actually, prior of very year the might they into be China the saw they to And last up

will point lot and past expectations what from So demand-wise, on of once demand up obviously, Year us how is onwards. there's will pick that celebration happen a New that

an demand see again, do we What very, level. is important and in uptick a this, Europe, coming from very is low

customers at but running coming running when So they than were we think before, our are they're paper their machines, running again, very from low levels. about that better

we it's And So the is. there's upside. market what significant think far traditionally why being very a that's from

paper European supply then comes what many would down. again, in factor Because, economy that be the back that believe are said, very comes recovery. a if we There price -- back, a significant be so the and stronger have there. in paper is to tightness as well If would you much mills closed

X that of almost capacity, with capacity to cope of much is lot an supply So there whole has but incremental shut, out a tonnes there not been million softwood, of demand.

new lot a back price won't a China thing it much us. schedule for So strongly whole come take situation. better to to and into -- wake need to up move in Europe the actually for year But a after stronger again, to this we

Kasia Trzaski Kopytek

delivering your Europe much what costs Okay. Per to for X,XXX? now are freight right -- Eastern lumber And how from Seaboard? the

Richard Short

board good a That's around probably $XXX feet. Kasia. It's question, a X,XXX

Kasia Trzaski Kopytek

land as $XXX, -- Richard, okay. transportation well? that And the overland includes

Richard Short

Yes, that be in. all would

Kasia Trzaski Kopytek

to markets. Okay. mass the Great. timber One gears last question, just switching

EBITDA year. favorably indicated for to a contributions would that to put going can from you the maybe expect Any You forward expect? around potential next And it how grow revenue cadence trend then the over that, you're you expecting any here? you numbers

Juan Bueno

we're is progressing. order this a Yes. -- it. of Richard excited very and business I great On The about timber, said book as indicator how well, we're as mass is

you where projects about $XX or QX, million that not $XX almost had $XXX in If of then we in only of was executing projects million we that book. from onwards. point closed we million we $XXX of book the in our with million think In locked would those part QX, order projects, start but order executed

believe up us amount. next we in at year twice we down gradually the gives this our with when with to year, ramp that million That add sites mills those at would more to way you later up can a and about very sales, ships that capacity we by as we if time that progresses. look in least continuing that have, that And know be strong we confidence $XX-plus close building

This our is a years business of sales provide down setup, just could with few us least the that $XXX road. million at a

have is EBITDA us that XX% So be not of a we meant commodity is on. obviously, this for is this specialties look that And -- provide we trend margins run. business. business. This is around long growth the for at this -- to work assets us Margin-wise, a in the to more XX%,

we of business what forward. that's expect So going this

Kasia Trzaski Kopytek

Okay. And just a quick follow-up.

right book that the in the be? What What lock a yet order is to now actually size of takes size after sales is $XXX it you're right book your the potential now locked pursuing? that in going that would while you're million appreciating So you and order order. haven't that

Juan Bueno

we're to in is, this XXXX. our quarters that When grow. At is very for lock or been we future What we executing to not order we order the example, -- in have continues projects, on to I reduces $XXX all and that order We so time want will talking book. in book, that on $XXX it projects, million that to keep it that year, confident close increase. of same as the million makes progress, continue No. book do for

already So looking of some are projects XXXX. into those

beyond X projects So you go already will locked the in year. have that

this So thing that's the way works.

some and bit these projects. a up quite it's to have time of You in individual lead all tied the cases, of schedules

So we grow. to will continue

overall. us, and on will pace to showing more revenue versus for as We projects keep that that allow this double the into said, XXXX sure, bring XXXX. will industry And our year this is I

a look at it's a XX% mass growing fact. North timber than America, When you year in as matter industry more of the at

us. a facilities obviously, wave do that And So even this in and make to and intend engine very is they're competitive. cost we significant sure for more our ride to investments growth more

advantage full ahead those we can opportunities us. So of take of

Operator

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

Samuel McGovern

to the of in increase that Hi, guys. With what in? to just terms sandalwood that? it plans do there the business? anything of it Is comes reinvest doing Good sale that cash business. Is the else regard liquidity? in the Or with morning. planning you're is with Any you're

Juan Bueno

it in. eager XXXX, all we that, put a as went in and Sam, lot obviously, to we back hold, to that unrest of that that have interesting through projects we of them we're the projects growth given some bring we're -- comes very kind on

So equation. that is obviously part of the

to eye obviously, so we will be overall As some and the we that projects to will something that be behave, improvement more these we prices the CapEx an see on year progresses be keeping what see fruition. in this market believe an we bring of how can we

The sandalwood sale process add that will obviously picture. to

can competitiveness to our to we bit quick ourselves over There's timber the company, quite increase things can we a have for and and what lumber we our a there. good that obviously, projects potential increase to Torgau with so quick do forward very that a there see we have into many So lined production other return looking up. in and take mass payback want

of So in work can additional things yes, to we on cash if hand. we plenty there's hold have that

Operator

call Thank Juan to concludes for like the the you. remarks. That turn would question-and-answer back I this closing to At time, Carlos session.

Juan Bueno

time. Rich you, you to for any all joining Abigail. at available Thank call. and Okay. talk are And I thanks of to more our

in call one So call Bye hesitate again to look any you our please to speaking next us. on of now. Otherwise, for May. forward don't we earnings to

Operator

your for the participation in program. conference. does This today's you conclude Thank

now disconnect. may You

Mercer International (MERC) 16 Feb 242023 Q4 Earnings call transcript