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Mercer International sees Q2 net loss of $8.4M

Mercer International Inc. has reported its second-quarter 2020 results, citing a net loss of $8.4 million (or $0.13 per share), compared to net income of $10.3 million (or $0.16 per share) in the second quarter of 2019.

This is also compared to a net loss of $3.4 million (or $0.05 per share) in the first quarter of 2020.

The company also saw a decrease in operating EBITDA – $40.5 million from $70 million in the second quarter of 2019 and from $57 million in the first quarter of 2020.

In the first half of 2020, operating EBITDA decreased by 50 per cent to $97.5 million from $193.8 million in the same period of 2019.

In the first half of 2020, net loss was $11.8 million compared to net income of $61.9 million in the same period of 2019.

David Gandossi, chief executive officer, says, “While the world continues to be impacted by the COVID-19 pandemic, I am proud to say that our people have remained resilient and we implemented measures and procedures to meet the challenges of operating our business safely and efficiently. We are constantly monitoring our operations and guidance from governmental and health organizations to ensure that we continue to take appropriate and necessary actions to protect our people.

“All of our mills ran well this quarter. Pulp production was down slightly in the quarter primarily due to a previously announced short-term planned curtailment.

“Our Q2 results reflect strong cost control and steady production. On average, pulp pricing was modestly up compared to Q1. However, late in the current quarter, overall pulp demand was modestly weaker as continued strong tissue demand was more than offset by weaker demand from printing and writing customers.

“Our wood products segment had another strong quarter. Our Friesau mill ran well with strong demand in our U.S. market creating upward pricing pressure late in the quarter. In the current quarter approximately 38 per cent of our lumber sales volumes were to the U.S. which was our single largest market.

“As we move into Q3 we will remain focused on controlling our costs, managing our working capital and conservatively managing our strong liquidity position.”

Consolidated Q2 from year-ago period

Total revenues for the three months ended June 30, 2020 decreased by approximately 20 per cent to $341.2 million from $425.8 million in the same quarter of 2019,primarily due to lower pulp sales realizations and pulp sales volumes.

Costs and expenses in the current quarter decreased by approximately 15 per cent to $330.9 million from $387.9 million in the second quarter of 2019 primarily due to lower per unit fibre costs and lower pulp sales volumes and the positive impact of a stronger dollar on the Canadian dollar and euro denominated costs and expenses.

In the second quarter of 2020, operating EBITDA decreased by approximately 42 per cent to $40.5 million from $70 million in the same quarter of 2019 primarily due to lower pulp sales realizations partially offset by lower per unit fibre costs and the positive impact of a stronger dollar.

Pulp

In the second quarter of 2020, pulp segment operating income decreased to $8.1 million from $42.3 million in the same quarter of 2019. The decrease was primarily due to lower pulp sales realizations partially offset by the positive impact of lower per unit fibre costs and a stronger dollar.

In the current quarter of 2020, NBSK pulp sales realizations decreased by approximately 18 per cent to $573 per ADMT from $699 per ADMT in the same quarter of the prior year due to high producer inventory levels.

NBSK sales volumes decreased by approximately four per cent to 422,586 ADMTs in the current quarter from 438,520 ADMTs in the same quarter of 2019 due to lower production.

Our Canadian pulp mills recorded a non-cash write down of our inventory carrying values of $12.3 million in the current quarter as a result of lower pulp sales realizations and high fibre costs.

Per unit fibre costs decreased in the current quarter by approximately 16 per cent from the same quarter of 2019 due to lower per unit fibre costs for all of Mercer’s mills.

In Germany, per unit fibre costs benefitted from the continuing availability of beetle damaged wood. Per unit fibre costs in Canada declined but remained at historically high levels due to strong fibre demand in the mills’ fibre procurement areas.

Current market environment

Currently Mercer says it is unable to predict the outcome or pace of such economic reopening, the strength or timing of any recovery or whether they will result in such a material resurgence of the virus that causes governments to re-impose restrictive measures.

As a result of the continuing global economic impact and uncertainty resulting from the COVID-19 pandemic and the seasonal third quarter pulp market slowdown, the company is expecting an overall weakening in pulp demand in the upcoming quarter with some modest price improvements towards the end of the quarter.

On the pulp supply side, to date various pulp mills globally have delayed their annual maintenance schedules as a result of the current pandemic. As a result, Mercer currently expects mills to curtail production to implement such delayed maintenance in the later part of this year or the early part of next year. As previously announced, in July the Celgar mill is taking a 30-day market related curtailment.

Read the full Mercer International Q2 2020 financial report.