Financial Reports & Markets
Mercer International reports financial results for Q3 and announces quarterly dividend
November 3, 2023 By P&PC Staff/Mercer International
Mercer International reported that its operating EBITDA in the third quarter was $37.5 million compared to $140.9 million in the same quarter of 2022 and improved from negative $68.7 million in the prior quarter of 2023.
In the third quarter of 2023, net loss was $26 million or $0.39 per share compared to net income of $66.7 million or $1.01 per basic share and $1.00 per diluted share in the third quarter of 2022 and a net loss of $98.3 million or $1.48 per share in the second quarter of 2023.
In the nine months ended September 30, 2023, operating EBITDA was negative $3.7 million compared to positive $440.4 million in the same period of 2022. In the nine months ended September 30, 2023, net loss was $154.8 million or $2.33 per share compared to net income of $227 million or $3.43 per basic share and $3.41 per diluted share in the same period of 2022.
Juan Carlos Bueno, the chief executive officer, stated: “Our third quarter results were significantly better than the second quarter due to lower fibre and other production costs as inflationary pressures eased. Fibre costs for all our mills decreased in the third quarter from the prior quarter driven by the availability of calamity wood in Germany, our renegotiation of fibre costs for Celgar and the ramp-up of our wood room at the Peace River mill.
During the third quarter of this year, we continued to be negatively impacted by the overall weakness in the pulp and lumber markets. Pulp prices in China showed modest signs of recovery as customers started restocking. At the end of September, softwood pulp prices in China were $67 per tonne higher and hardwood pulp prices were $55 per tonne higher compared to the end of the second quarter. Late in the third quarter we also started to see modest price improvements in Europe and stabilization in North America.
In the third quarter we had 39 days of downtime (approximately 48,400 ADMTs) at our pulp mills which included 13 days for planned maintenance and 26 days for market curtailment at our Celgar mill. All other mills ran very efficiently during the quarter. In the fourth quarter of 2023, we are planning for a total of 29 days of maintenance downtime (41,200 ADMTs) at our pulp mills.
Since 2021, we have invested approximately $396.6 million to expand our solid wood activities and product mix to acquire the Mercer Spokane Mass Timber facility, Torgau facility and the recent acquisitions of mass timber facilities in Arkansas and Canada. During the quarter both sales volumes and revenues for our mass timber business increased as we continued the integration activities of these operations. The new operations increased both our production capacity and our product range to include glulam products sought by our customers. We saw strong growth in our mass timber business by securing major customer contracts and building up our order book. The scale of these contracts has significantly ramped up operations. The mass timber business is a key component of our strategy and we expect strong growth for the coming years as we continue to ramp up our operations.
In September, we reinforced our liquidity position by completing a private offering of the $200 million 2028 senior notes and increasing the availability of our German revolving credit facility by €70 million to €370 million.”
Bueno concluded, “Although year to date, the pulp and lumber markets have been soft, we are now seeing some improvements, including modestly higher pulp pricing across all our markets and lower costs, particular for fibre. Our team has demonstrated resilience by focusing on the variables we can control such as reducing our inventories and capital spending, and cutting discretionary spending to ensure our cash and liquidity levels continue to be healthy. As a result of our strong liquidity, we are well positioned to continue to execute our strategic plan through this business cycle, while maintaining a strong focus on lowering costs and liquidity.”
Pulp segment results
In the third quarter of 2023, pulp segment operating income was $21.2 million compared to $110 million in the same quarter of 2022 primarily as a result of lower pulp and energy sales realizations and the negative impact of a weaker dollar partially offset by lower per unit fibre, freight and other production costs, higher sales volumes, and the receipt of insurance proceeds of $8.2 million.
Mercer’s pulp segment revenues decreased by approximately 24 percent to $348.9 million from $456.7 million in the same quarter of 2022 primarily because of the overall weak pulp market and lower energy revenues.
Pulp revenues in the third quarter of 2023 decreased by approximately 20 percent to $318.1 million from $395.5 million in the same quarter of 2022 due to lower sales realizations only partially offset by higher sales volumes.
Total pulp sales volumes increased by approximately 14 percent to 487,199 ADMTs in the third quarter of 2023 from 425,854 ADMTs in the same quarter of 2022 primarily because of higher production and the timing of sales.
In the third quarter of 2023, third-party industry quoted average list prices for NBSK pulp were materially lower in all of the company’s markets compared to the same quarter of 2022. Its average NBSK pulp sales realizations decreased by approximately 27 percent to $666 per ADMT in the third quarter of 2023 from approximately $911 per ADMT in the same quarter of 2022. In the third quarter of 2023, its average NBHK pulp sales realizations decreased by approximately 46 percent compared to the same quarter of 2022.
Energy and chemical revenues decreased by approximately 50 percent to $30.8 million in the third quarter of 2023 from $61.2 million in the same quarter of 2022 as a result of lower energy sales realizations partially offset by higher sales volumes.
Costs and expenses in the third quarter of 2023 decreased by approximately five percent to $327.9 million from $346.7 million in the same quarter of 2022 primarily due to lower per unit fibre, freight and other production costs and the receipt of insurance proceeds in 2023, partially offset by a higher sales volume.
In the third quarter of 2023 per unit fiber costs decreased by approximately 12 percent from the same quarter of 2022 due to the sale and revaluation in the current quarter of inventory for which Mercer took an impairment charge in the prior quarter. After giving effect to such impairment, per unit fibre costs increased as a result of strong demand in the mills’ fibre baskets and lower wood chip availability for our Celgar mill because of regional sawmill curtailments. Mercer currently expects per unit fibre costs to decrease in the fourth quarter of 2023 driven by improved supply.
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