Financial Reports & Markets
Mercer International sees strong Q1 buoyed by lumber, improved pulp prices
By P&PC Staff/Mercer International
By P&PC Staff/Mercer International
Mercer International has posted its Q1 2021 financial results, citing operating EBITDA of $82 million, up from $57 million in Q1 2020 and from $49.5 million in Q4 2020.
In the first quarter of 2021, net income was $5.9 million (or $0.09 per share) compared to a net loss of $3.4 million (or $0.05 per share) in the first quarter of 2020 and a net loss of $13.0 million (or $0.20 per share) in the fourth quarter of 2020.
“In the first quarter, our mills continued to run well and safely due to our extensive COVID-19 protection measures,” says David Gandossi, chief executive officer of Mercer International, says in a statement. “Our Friesau sawmill’s strong operating results allowed us to take full advantage of the strong U.S. lumber market.
“Our strong first quarter results reflected improved pulp pricing across all of our markets. First quarter average European NBSK list prices were up $157 per ADMT, and average net prices in China were up $246 per ADMT compared to the prior quarter.
“Our wood products segment achieved another record quarterly result and continues to benefit from strong demand and robust pricing, particularly in the U.S. market. In the current quarter, approximately 67 per cent of our lumber revenues and 44 per cent of lumber sales volumes were to the U.S., which was our single largest market.”
Consolidated results for Q1 2021 over year-ago
Total revenues for the three months ended March 31, 2021 increased by approximately 18 per cent to $412.7 million from $350.6 million in the same quarter of 2020 primarily due to higher pulp and lumber sales realizations partially offset by lower sales volumes.
In the first quarter of 2021, operating EBITDA increased by approximately 44 per cent to $82 million from $57 million in the same quarter of 2020 primarily due to higher pulp and lumber sales realizations and lower per unit fibre costs partially offset by the negative impact of a weaker dollar on the Canadian dollar and euro denominated costs and higher maintenance costs.
For the first quarter of 2021, net income was $5.9 million, or $0.09 per share after giving effect to the loss on the redemption of $30.4 million compared to a net loss of $3.4 million, or $0.05 per share, in the same quarter of 2020.
Pulp segment operating income increased by approximately 18 per cent to $25.3 million from $21.4 million in the same quarter of 2020 as higher pulp sales realizations and lower per unit fibre costs were only partially offset by the negative impact of a weaker dollar and higher maintenance costs.
In the first quarter of 2021, NBSK pulp sales realizations increased by approximately 19 per cent to $668 per ADMT from $561 per ADMT in the same quarter of the prior year. NBSK pulp sales volumes decreased by approximately four per cent to 418,645 ADMTs in the current quarter from 438,326 ADMTs in the same quarter of 2020 primarily due to lower production.
NBSK pulp production decreased by approximately 13 per cent to 396,865 ADMTs in the current quarter from 455,192 ADMTs in the same quarter of 2020 primarily due to higher annual maintenance downtime. In the current quarter of 2021, planned annual maintenance downtime at the Celgar mill of 20 days was extended to 27 days (approximately 37,800 ADMTs) for additional boiler work.
In the comparative quarter of 2020, the company only had two days of annual maintenance downtime (approximately 2,300 ADMTs). Mercer estimates that such downtime in the first quarter of 2021 adversely impacted operating income by approximately $30.3 million, comprised of approximately $21.8 million in direct out-of-pocket expenses and the balance in reduced production.
In the second quarter of 2021, the company’s pulp mills currently have 95 days of planned annual maintenance downtime (approximately 140,400 ADMTs) of which approximately 63 days will be at the Peace River mill and primarily relates to boiler work which was deferred from last year and resulted from an incident in 2017.
The company expects insurance to cover the estimated remaining costs of about $27 million for the boiler work and to receive business interruption insurance for the extra downtime relating to such work. Additionally, in the second quarter of 2021, Mercer had 14 days of downtime at the Celgar mill related to its slower-than-planned restart.
In the first quarter of 2021, per unit fibre costs decreased by approximately 10 per cent from the same quarter of 2020 due to lower per unit fibre costs for all of our mills. In Germany, per unit fibre costs benefited from the continued availability of beetle damaged wood. In Canada, per unit fibre costs declined due to improved chip supply as a result of increased sawmill activity.
“We have significant major maintenance scheduled this quarter, which requires a large number of specialty contractors at our mills. Consequently, we continue to maintain measures and procedures to operate our business safely and efficiently and to protect our people, including regular COVID-19 testing of employees and contractors,” says Gandossi.
“While I am encouraged by the significant ramp up in the administration of vaccines globally, there has also been a widespread increase in infection rates which has led various countries to re-impose restrictions on certain activities.
“Looking ahead to the second quarter, we are pleased with the strong pulp market fundamentals, which are being supported by steady demand. As well, lumber demand and pricing are expected to remain robust in all markets. Strong markets combined with our ample liquidity leave us well positioned to accelerate our strategic plan, including pursuing high-return opportunities.”
Although there is continued economic uncertainty resulting from the resurgence of the COVID-19 pandemic, the company says it currently expects further modest pulp price improvements in the second quarter of 2021 due to stable pulp demand, particularly in China, and reduced supply.
The company also expects continuing strong lumber demand and prices in the U.S. market along with modestly improving sales realizations in the European market in the second quarter of 2021.
For the full Q1 2021 financial report from Mercer International, including the wood products segment, click here.