MERC - Earnings call transcript Q2 2024 | Mercer International Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to Mercer International's Second Quarter 2024 Earnings Conference Call.

On the call today is Juan Carlos Bueno, President and Chief Executive Officer of Mercer International; and Robert Short, CFO and Secretary. I will now hand the call over to Richard Short.

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

$XX pulp split totaled The days to EBITDA downtime the maintenance lower downtime our mills downtime results million. maintenance realizations. adversely $XX EBITDA were EBITDA approximately the million. of driven by for by adjusting After results impact, quarter, million by XX QX. We planned driven compared higher primarily to the improved downtime between of in were impacted major $XX no compared This X operating our estimate planned sales QX's planned

of Our million. million pulp segment and contributed EBITDA quarterly of $X $XX contributed segment EBITDA our quarterly Solid Wood

list tonne, on from and for at no QX, tonne, in startups. days eucalyptus disposition for of maintenance interest our mill decreased the After our volumes of in the equity had mills, hardwood The averaged in $XXX per QX. the NBSK our all QX per combined the the China up interruptions segment in tonne, $X,XXX price net $XXX $XXX an and per was additional narrowed QX. quarter American our current QX, find in list Finland, price was $XXX $X,XXX $X,XXX the pushed major North prices prices net between supply and average of disclosures from QX of tonne the total maintenance $XXX mill adjusting the to in NBSK end be annual downtime. by softwood downtime pulp markets. In North days QX. our tonne website list average tonnes, in from the higher In up QX from we per of hardwood first XX from can European in from averaged and price found with maintenance the of impact QX, the tonnes planned due XXX,XXX quarter. QX, Cariboo interest In which sales production downtime slower-than-expected planned days production at the equity QX. All disposition maintenance we at to this mills ran $XX in had Total per second QX. well quarter pulp by our of gap $XX which NBSK Strong The And Cariboo X XXX,XXX the You the pulp lower flat than softwood pulp and quarter, included an price XX-Q, the planned our driven average QX quarter. from a end increase demand was China, Form current SECs. at quarter with in for planned NBHK American of the XX price QX. this up slightly increase can of

as was higher offset modestly For were in Solid U.S. market. Wood Europe in lower prices segment, mostly lumber flat prices our pricing by the

QX. average and #X from thousand $XXX QX. for Western about The Today, QX of Average Western was Overall, feet, per in around price $XXX compared Lengths better thousand and decrease SPF Random for in to lumber benchmark markets benchmark XX% QX, per SPF U.S. in remained board board that better. price weak. the feet is beginning $XXX

European will million have generally impairment and expecting In Carlos Lumber in $XX recognized pallet ongoing volumes production. million more as a this the XXX are noncash biofuel the planned U.S. the as quarter, QX a second down million board to demand goodwill remain to to we down production on weakness feet we X%, were flat weak. a European of of QX, share in for to lower Lumber result the and due is feet, lumber markets. Juan XX% was facility Torgau lumber, prices in say reflecting sales or moment. expected markets XXX For maintenance. per the related $X.XX board

of from XX% timing was to a cash $X.XX $XX or We fiber a XX QX increase compared our the sales the flat net to Our volume from reflecting QX compared million million an XX,XXX Pricing net $X.XX gigawatt projects. meters, about timber in mass gigawatt share production hour per for consolidated at QX megawatt segment's QX from electricity strong consolidated pulp QX loss and Production in Wood of per supply $XX to for about share in flat at XXX QX, Solid totaled about both mass of in essentially of $XX at costs or quarter, quarter million mills. lower of QX. $XX in Wood reported hours down million the loss in Solid our compared hours $XX second due segment's to QX. We about was the timber about per in consumed $XX as our remains were operations cubic QX, stable. QX. In

by cash borrowings Our of which $XX to in QX facilities. $XX repay net working provided was million million, revolving capital credit the on roughly lower

As end improvement of million modest our operating target totaled a and improves, undrawn of position reduction. flow revolvers. our million, $XXX QX $XXX comprised million we the about and $XXX QX, from will to cash continue liquidity cash opportunistic debt of At

Carlos. approved X, will of be overview Juan to dividend has the now September quarterly of $X.XXX the call I'll financial per a payment our Finally, my XX, shareholders on for That Board on share for ends October XXXX. turn made over results. which of record

Juan Bueno

Thanks, Rich.

pricing, mills effects were by by positive These offset energy results than negatively impacted all maintenance well impacted operating but and related which sales sales record EBITDA about downtime, positively more were our QX's compared QX pulp our pulp lower planned QX million. timber planned Our volumes. costs. when our significantly our business negatively quarter, improved to impacted mass to and ran by startups volume downtime slow relative QX Overall, this $XX the

lower Our reflect QX of end the Cariboo sales volumes also QX. the the at mill divestment of

quarter, a within to operating in was I deadlines am more our wood results. resulted some also positive in about business I which tight to will execute note moment. pleased to our segment, massive able this this solid have on say

construction of impact of the which addition, negative strategy. write-down, the realize shareholder lumber on we for in goodwill Regardless the technical critical the quarter, and lumber this business off the around fact acquisition of impact accounting identified we continue including rules for this unprecedented our the is noted, reduced Rich As value with we prices. And wrote acquisition dramatic part has on to the goodwill, a expect pallet But recorded from is with business. significant the to factors, And Torgau. we for businesses slowdown rate as longer of of than the to the due in number Europe of Europe we pallet despite economy in anticipated. environment commercialization that goods, German investment direct the a have this the synergies interest had high a including is has been weaker this

capital that and ahead We schedule dimensional planned QX, investment in us at XXXX has on outlook we of capacity to mill's to invested million benefit the stronger our allowed announced, lumber $XX will the in roughly our begin Torgau our capital expect to this mid-XXXX. In adjust expand between as of are investment million. be previously currently spending operations, our $XXX operating results see to

and cash about debt generation that challenges result years, seeing and downward be the of of provide line logistical prioritizing increases forecast most the paper To pulp in created Both originally paper The at we mills also demand Finnish permanent unplanned primarily downtime into significant forward. Overall, remainder pulp destocking last significantly You for extent, will significant our and merchant contemplated demand. supply demand the added American to last softwood the and them modest will strike part imports. supply-demand our the improvement. were and tissue a X mill. both remain restarted XXXX seasonal closure We the impact transport America. lesser producers. with tightening we North strategy Finland's quarter, the lumber North both forward, showing the This project slower European move our the pressure the for and value markets recall and expansion demand as Spokane the seeing in as markets of quarter Chinese around due of European price expect one we of largest further dynamics. And we in the each were the of improved looking was mills quarter, We sorting NBSK from investment project. Torgau challenges third improved reduction we'll were optimistic of

However, some softwood the to reduction may plus QX. in to maintenance divestment we the it have. In QX. that monitoring of the taken QX due XX Railway pressure QX, increased labor at ongoing late was of XXX,XXX pulp compared QX, tonnes we mill mitigate impact challenges the of positive to expect XXX,XXX days the This potential had issues of and and global through We're tonnes supply produced closely pricing of in both due paper we major the QX have Cariboo seasonal Canadian end to demand. in and impact Union steps

Our tonnes Rosenthal in will we in a take remaining will a loss is XX,XXX shutdown major XX-day shut plant will production X-day any QX. scheduled and in QX, maintenance take maintenance mini maintenance to as total. have about which And downtime in follows: won't amount Celgar XXXX shut,

an Celgar has maintenance XX-month schedule. XXXX not have major moved to in as the a reminder, shut mill maintenance a As

segment in and while rates improved on enough mass prices timber compensate with on lumber but Wood weakened. interest in not to some the general. Solid housing impact sales of improvement of the globally in starts market Our QX continue U.S. was small benefited weigh average pockets High construction Europe, lower results to for from

relatively stay upside be production situation lumber shortages for railway will and current forest strike. curtailments, that are low essentially we construction Canadian strong flat. very QX business lumber believe by this a fire in lumber wood still midterm. QX, the optimize short-term balance due pressure the prolonged recently industry, number pricing of mass curtailments housing said, continue and the this to of sawmill the stock, economic pricing the would on fundamentals Western our improvement conditions. Today, potential There on million. products expect potential about timber may Any of Canada sold in be to announced long-term order some U.S. to We conditions. That improved was dependent our our sits lumber and as large low to lumber to inventories, $XX and in the current we file markets sales In at Canadian volume mix created for continue fires forest of demographics put supply-demand sustained positive homeowner XX% the target meaningful

receive inbound taking improve meaningfully rate the to to demand are continue our execute projects finding developers ready stability environment improves. to project of inquiries, and timber. Economic being We mass the will many the interest short-term for point once their

In at that a pace economic building will aesthetic addition, confident in this that mass grow seen we environmental, product similar and of to we've timer popularity allow the to what Europe. remain benefits in

of mass access We market. us and advantage of broad geographic entire as North large giving a competitive roughly market range a American American offerings are production to well North growth XX% capacity, the timber to take positioned we that footprint, of have product

weak On the of shipping the due pallets European remain the in to other Germany. particularly hand, economy, overhang

prices to our to pallet begins product expect to show average prices QX. improve QX mix, Heating our we in in allowing QX down seasonality significant stocks. in we saw as build recovery, shareholder efforts slightly this signs return in normal the market, expected to to Once slight a but asset of demand we their deliver to prices levels, expect and increase winter this due economy customers in to value. to increase due pallets However, pallet were

our mid-XXXX, to wanted our investment Spokane also originally wood restarted wood steady chips will already room high-return room both our overall high-quality source strategy this Torgau part the for Peace strategy significantly mills' costs. strategy costs decreases Torgau's Spokane you to projects and supply into project mill. will this of In about mill strategic I and were CapEx Germany, fiber and Celgar reduce it lamp noted, process in-feed in cost fiber of is As a Mills. at stock. in we cost kept envisioned sandal a feedstock QX, previously Canada, and processes. Once I've fiber our remind project, also wood resulted costs ramp-up on in and the this lower QX. able from our was modest sorting the project spoken I Ultimately, focused In complete be project have River's our in as and and mill's Wood This pulp is check. flat of

to expect to product. lignin and ahead, extraction fiber we am support our I have our of partnerships this the QX. in product and Pulp with remain our Looking this stable both share the in future. pleased cost solid our for into ramp-up businesses vision I plant for commercialization entered the new expect to future wood near we

and this excited a strategy, As among a it. with Mercer carbon plant economy expanding value. as chemicals being offerings of develop is battery advanced our alternative product to shareholder portfolio while to sustainable reminder, fossil that such We're before lignin towards adding are circular the commercial which with many a perfectly products, novel new a others. This involves step fuel-based and this able going aligns green prospect adhesives with of large products future into compatible a in as elements about

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

mass In remain better the markets expecting we I company the timber through long-term in that fullness We and pulp increase maintenance pleased and to low In of for carbon as that the our us. of We're the have closing, products half fact, solutions am demand major are and results behind will bullish balance operating for our our segment improved lumber value this from faster majority our growth we in in time, to our that have businesses. reduce of believe looks dramatically second committed carbon of pulp world the on emissions. strong its XXXX.

segment, pressure and continue on Wood products conditions keep economic for Solid weak we our to to demand expect pallets. Regarding construction

the listening. and I Finally, focused remain prudently. we debt call our as Thanks liquidity for continue reduction we'll back now the will our will to and questions. initiatives, on prioritize cost-saving manage for cash we And turn operator to

Operator

Instructions] [Operator

with Our first CIBC. Patel question comes from Hamir

Hamir Patel

see that Carlos, mid-XXXX, slated once the U.S. lumber projects percent are Juan to changing? Torgau the of sell completed, I shipments which at think are for how the you do your you

Juan Bueno

capacity. we Hamir, increase concluded, everything yes, what our have we'll timber these are is a is that XX% once investments expecting in about with

XXX,XXX So capacity. When that add least able our we cubic may to at mill. be with be of finding our meters into we're cubic will able about wood lumber of thinking meters total at to look we capacity, XXX,XXX plain more work we

to on to the we be that will So how versus determined be based U.S. U.S. obviously, in the the prices normally destined as How will Europe developing we part do, of U.S. a see much goes

think U.S. think I the quarter quarters the how you . the our we or I going much back. was U.S., before was that, last we a XX% up talking going If were to a to think of were for it minute, quarter, to few business about

Ireland is this divert of at because And more closed important to decided U.K. we we we improvements XX%. a And quarter, market. that some in the little This to space. and lumber bit saw therefore,

given in on fluctuation, So U.S. average that to the would a I point as at maximum anywhere up any to flow amount having would XX be that time. into we will the would on between say, XX% keep

Hamir Patel

on recently side. [Operator was something wanted playing with do pulp created of helpful. the from compete are that That's to see that some [indiscernible] side. out threat hybrid to This new a on report means I we of ask softwood, innovations Suzano piloting some see hardwood the you kind how NBSK the to Instructions] the strong

Juan Bueno

always, team, the end work sales market products custom and our finding it As customers technical that on working teams some and that strengthening is sure up set up their with our our we that are we only furnaces up but through we way space. teams, keep folks see end development they will our not closely The are their as guys producing further. that further make properly that bond, for those

So substituting that it's with challenging. to an unknown going grade, I be know quite

ends sure relationship will that And long-standing we a So softwood less I a into some bit product our going where pulp have a this confidence it's like those of this we making if with quality But significant of wouldn't had flexible. whether more or that others customers customers play, we've a the those remain. with be play the that we therefore, as bit of very don't some up I markets is case China threat. we see more surprised in the that flowing market, be it's challenging. that that more demanding a in with think to

Operator

question next Our CISC Brandon Asset with comes from Hole Management.

Brandon Hole

that between prices Just in Europe? what if a you're right pulp Could what of what see seeing trade were the give you the a little substantially seeing guess as week. and to and in you some market just publications last color the wanted question moving of in seeing there down I us saying play that you're it see what Asia real were you're quick about I now. sort on on pretty interplay happens

Juan Bueno

distinctions. there's need -- make we to Absolutely, Yes, obviously, X Brandon.

is million The tonnes. Suzano China in on project the undeniable from correction first was [ in Liangxiang there's what's also coming up was And X.X China, tonnes. Cerrado about X.X of product that Hardwood, hardwood, And hardwood million back this important the an one, that softwood. on ] that been -- correction on it's a versus what's happening happening $XXX. on probably and

So a coming that corrections quickly, happened. that that puts to -- very and in It would pressure. seeing you start that market what that sense all market. Obviously, some pulp has is oversupplied, is makes that

the very it is However, a in situation when softwood tightness anything, is situation still under supply. softwood If comes to different.

softwood we is from seeing see where go evolving, at different to that to down capacity very XX% hardwood. and very, we the we're So year going it's ratio, when hardwood Even that to to saying we're way going look demand next the XX%. about is

in will again, situation. a the be different So on will softwood remain very hardwood pressure while

the mill that stop thinking months on be it it's is about there's big But so pressure what week, about it's was tonnes XXX,XXX from another months, on stopping think Finland and off for, then think if mean it softwood months. the another very mill. If of away would I almost taking they're to I some and going for -- X think being That there fundamentals I tight substitution whatnot. obviously, I was another spread be and understood will already relevant. X pulp expand only to going year, -- that between supply this the given you still in Even recently the any they think if and are it's in announcement X market was X people this laying a from for

limited. like in even that just drop And on the will is softwood would into it we progress. drops The softwood even by be that very what and be will be it continues exacerbates to supply tighter mitigated and again, So pretty tight -- much hardwood XXX did. if would that translate that as fact

they that's we they come the down I most bit, have where think likely And softwood remain. than So $XX. will or less would less say, prices, probably more a far,

China. the up and demand, a season, the that ground the get and we is past this Demand ground will that be and QX. pick with belief we Brandon. helps, that obviously QX. in little expect low prices, as of year in and recover bit in progresses we lost Our Hope Again, can Europe to don't both significant in which summer very comes

Brandon Hole

low the Germany, of improvement of any along level? the economic struggles signs and Or this you is And struggle, talked obviously, about good bouncing That's it you there there. Yes. color. Are in then yet? seeing sort

Juan Bueno

authorities very is down, that good which still timid. sign. at Obviously, European interests we come are see to least starting It's the a

contrary that another. in lumber you as bit little in keeps construction is the case, the itself, what for a either everybody more However, pace. recovery, half what that And the And Europe, lagging go in the the expect bit. believe one XXXX Germany German improvement. economy case is that to the immediately to sector we a one and expect a to from lag of a that's is what the is hoping a Because is or we of probably would used country for if rest some a signs for that's it's pallet rates improvement the of conservative mean on that doesn't and is between can more what the impact that especially prices why term. We're prices behind we of immediately. can and think We a of lagging second now, are longer of in reason prices behind bit even when lumber we short -- believe interest leading action what this expect commencement cut an itself is have probably will Germany the different. us take is which you there in going than bit the It

in timing So the of that's a planning. we that our bit little have

Operator

Instructions] [Operator

from Kopytek next Kasia with Our question TD Cowen. comes

Kasia Trzaski Kopytek

Kasia on the line.

articulated the focus over on You midterm. deleveraging

your potential about updated asset on curious thoughts expedite Just to that? divestitures

Richard Short

right now sale is is for that thing we that books and any only write-down on and that. the . expect we've on Santanol don't the process got further Has ongoing,

Kasia Trzaski Kopytek

to be Got throughout to your Okay. and order if that lags there's in price average you timing realization. order how Rich, about file any the file reflected can a -- your getting varies QX you. cycle? get sense Just going trying talk

Richard Short

referring to you Are mass timber?

Kasia Trzaski Kopytek

pulp. No, sorry,

Richard Short

Yes.

board. mills you out expand low And little guess got spot month. because Asia. the mean in we've a inventories sell maybe the sell by we So primarily Yes, what every order across pretty bit I Europe, file basically in on we

Kasia Trzaski Kopytek

you. Got

Okay.

customer, ship So let's you're for, at every or wouldn't X if but weeks does like. what this that a selling it weeks say, Or X look sell lag to point? you it month,

Richard Short

Okay.

again, weeks, For generally XX to it's X where days going. yes, it Asia, a weeks it's X depends delivery it take depends XX it where to But in deliver. times, would number of to

Kasia Trzaski Kopytek

Okay.

it. all is to into but maybe here, trying going a Got that QX that Just be not Okay. some sense, are of of to will just reflected get trying the prices sense Yes. But get good QX? color. that's off timing. a I'm and rolling of bleed maybe to in

Richard Short

Yes.

Great. Okay.

Kasia Trzaski Kopytek

ahead. go Sorry,

You to say were about something.

Richard Short

Yes, I was just it modeling purposes. going your to say, if like you're trying to be XX-day a for use probably like an average average would

Kasia Trzaski Kopytek

Okay. Yes. it. Got

line So mass a business. good at for top point? that Is pickup on the the positive timber this EBITDA

Juan Bueno

Yes, was EBITDA it is. It positive.

was QX I time was since the very was strong strong. EBITDA quarter. first positive. last it It of It think that this was It year.

point QX. delivered. And mills at no in that this on our all on more delivered the the of shift twice to the spec, expecting being $XXX delayed projects was the of year. particularly that the strong. be XXXX. that we So amount the to had it some that whatsoever. from produced business looking in forward allowed in into of kind on end There run We and And around clock made all well QX to time. against by QX only up we're us of the XXXX, QX everything be sales million running very projects it us Quality We're growth complaints time was in should compounded ended one efficiently and

QX. were would slack customers up they is we that's QX therefore, is. of situation that some what as with a we we a of and that's beginning picking schedule for And very at we any had or on this than big projects the I whatever big, QX So have the have or customer planned planning stronger say, followed back little of the stronger their was don't adjust little QX. more in to -- have of and delaying year. QX, projects, from the And of that large-scale the more the why In bit

It's smaller during half that year. change going projects dynamic. second of little So be we that's a to in bit attend to of a the the

Kasia Trzaski Kopytek

margins That's kind -- helpful. are Juan you can what that me for at looking EBITDA for Carlos, sales? remind those of you

Juan Bueno

do it's the That's to talk the margins long more be timber. now. EBITDA around and expect we And between for going XX% in about what what of in XX% we specifically right We long we XX% run, than aim or term, mass more.

Kasia Trzaski Kopytek

Okay. imagine something digits, But probably sort low I of range? in now, right that you're single

Juan Bueno

Yes. in that now, just expand And full facilities. X with only on not thing, QX, seeing to shifts important in Kasia, the had right that And our being that, the keep margins able running shift. practically we've those mind we're is in

margins expand Going as we can business, we can those as facilities. shifts shifts this forward, -- even when X grow obviously, the into we X put or

for on installed therefore, fixed have So we costs. of way grow and business a have those the is better this is that that and key thing a more can here we to return add shifts us that take advantage the capacity

Operator

turn further questions at for Bueno over no this remarks. Carlos like to the I'd showing I'm Juan time. to call closing

Juan Bueno

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

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

Operator

This program. concludes the

now You day. a great may disconnect. Everyone, have

Mercer International (MERC) 9 Aug 242024 Q2 Earnings call transcript