Financial Reports & Markets
Mercer International reports operating EBITDA of $83.8M in Q2 2021
By P&PC Staff/Mercer International
By P&PC Staff/Mercer International
Mercer International has posted its second-quarter 2021 results, citing an increase in operating EBITDA to $83.8 million.
This is up from $40.5 million in the second quarter of 2020 and from $82 million in the first quarter of 2021.
In the second quarter of 2021, net income was $21.4 million (or $0.32 per share) compared to a net loss of $8.4 million (or $0.13 per share) in the second quarter of 2020 and net income of $5.9 million (or $0.09 per share) in the first quarter of 2021.
In the first half of 2021, operating EBITDA increased by 70 per cent to $165.8 million from $97.5 million in the same period of 2020. In the first half of 2021, net income was $27.3 million (or $0.41 per share) compared to a net loss of $11.8 million (or $0.18 per share) in the same period of 2020.
David Gandossi, chief executive officer of Mercer International, says, “In the second quarter, we successfully and safely completed major capital programs to improve the performance of our Stendal and Peace River mills. At Stendal we have added 80,000 tonnes of NBSK pulp capacity with the addition of two new batch digesters, which are currently being ramped up. At Peace River, we rebuilt its recovery boiler and are ramping up its operations.
“Our Friesau sawmill’s strong second quarter production allowed it to continue significant sales into the very strong U.S. market and to achieve record quarterly operating income of $42.3 million. In the current quarter, approximately 39 per cent of lumber sales volumes were to the U.S.
“Pulp prices improved across all markets in the second quarter. Second quarter average European NBSK list prices were up $251 per ADMT and average net prices in China were up $79 per ADMT compared to the first quarter. Currently NBSK list prices are approximately $1,340 in Europe and net prices are approximately $850 in China.
“While I am encouraged by the global roll-out of vaccines and the reopening of economies, there remains ongoing uncertainty about the impact of COVID-19 variations and increases in infection levels. Consequently, we will maintain our measures and procedures put in place to protect our employees and contractors and which allow us to operate our business safely and efficiently.
“In the interior of British Columbia the wildfires situation so far has not disrupted our operations but has impacted logistics, increasing rail congestion, slowing pulp deliveries and causing the use of more expensive trucking. We are continuing to monitor the situation.
“Looking ahead to the third quarter, we expect strong pulp market fundamentals to support marginally higher NBSK pulp prices in Europe but we expect a modest price decline in China.
“As well, we expect lumber demand and pricing to remain steady in all markets. Although there was a recent significant price correction in the U.S. lumber market, prices remain at historically attractive levels. Further, we believe U.S. lumber prices are near a floor level and expect them to slowly increase once home construction ramps up in the early fall.
“Steady markets combined with our ample liquidity leave us well positioned to accelerate our strategic plan, including pursuing high return opportunities.”
Total revenues for the three months ended June 30, 2021 increased by approximately 18 per cent to $401.8 million from $341.2 million in the same quarter of 2020 primarily due to higher pulp and lumber sales realizations partially offset by lower pulp sales volumes.
Costs and expenses in the current quarter increased by approximately six per cent to $350 million from $330.9 million in the second quarter of 2020 primarily due to higher maintenance costs and the negative impact of a weaker dollar on the Canadian dollar and euro denominated costs and expenses partially offset by lower pulp sales volumes.
In the second quarter of 2021, operating EBITDA increased to $83.8 million from $40.5 million in the same quarter of 2020 primarily due to higher pulp and lumber sales realizations partially offset by higher maintenance costs, the negative impact of a weaker dollar and lower pulp sales volumes.
In the second quarter of 2021, pulp segment operating income increased by approximately 64 per cent to $13.3 million from $8.1 million in the same quarter of 2020 as higher pulp sales realizations were only partially offset by higher maintenance costs, the negative impact of a weaker dollar and lower pulp sales volumes.
In the current quarter of 2021, average NBSK pulp sales realizations increased by approximately 45 per cent to $830 per ADMT from $573 per ADMT in the same quarter of the prior year due to strong demand and low customer inventory levels. NBSK pulp sales volumes decreased by approximately 22 per cent to 330,425 ADMTs in the current quarter from 422,586 ADMTs in the same quarter of 2020 due to lower production.
NBSK pulp production declined by approximately 16 per cent to 355,103 ADMTs in the current quarter from 423,773 ADMTs in the same quarter of 2020 primarily due to capital projects and maintenance downtime.
In the current quarter of 2021, Mercer’s pulp mills had 117 days of maintenance downtime (approximately 173,100 ADMTs) including the 50 per cent–owned Cariboo mill.
Approximately 79 days of such downtime was at the Peace River mill and primarily related to boiler work, which was deferred from last year relating to a 2017 incident. The Peace River mill maintenance shut was about 25 days longer than planned, nine days of which were in July, but the company expects the majority of this extra downtime will be covered by the company’s insurance.
In the second quarter of 2021, the company received insurance proceeds of $20 million in connection with the costs of the Peace River mill boiler work along with an initial payment of $4.2 million for its business interruption insurance claims. Mercer currently expects remaining business interruption insurance claim to be in excess of $15 million.pu
Mercer estimates that annual maintenance downtime in the current quarter adversely impacted operating income by approximately $80.1 million, comprised of approximately $45.0 million in direct out-of-pocket expenses and the balance in reduced production (exclusive of business interruption insurance proceeds).
In the third quarter of 2021, excluding the 50 per cent–owned Cariboo mill, the company has 24 days of scheduled maintenance. Also, while the Rosenthal mill will be operating and producing pulp, in the third quarter of 2021 it will take down and rebuild its turbine. This work is expected to continue into the early fourth quarter and require the mill to purchase its energy requirements.
On average, in the current quarter overall per unit fibre costs were flat when compared to the same quarter of 2020.
For the full Mercer International Q2 2021 financial report, including wood products segment, click here.