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Mercer International shares first quarter 2023 results and announces quarterly dividend

Mercer International reported first quarter 2023 operating EBITDA of $27.5 million, net of a $15.2 million non-cash inventory impairment charge, a decrease from $154.5 million in the first quarter of 2022 and $96.1 million in the fourth quarter of 2022.

In the first quarter of 2023, net loss was $30.6 million (or $0.46 per share) compared to net income of $88.9 million (or $1.35 per basic share and $1.34 per diluted share) in the first quarter of 2022 and net income of $20.0 million (or $0.30 per share) in the fourth quarter of 2022.

Juan Carlos Bueno, CEO of Mercer, stated the following:

“In the first quarter, we achieved strong operational performance in both our pulp and solid wood segments. Our results in the quarter were negatively impacted by the lingering effects of inflation on our key inputs such as fibre and chemicals. We also experienced lower prices for most of our products in the quarter. Lower pulp prices were primarily the result of weak demand out of China, while lumber prices were weak through the first quarter as high interest rates and uncertain economic indicators impacted residential construction. Our per unit fibre costs reached a peak in the first quarter of 2023 due to reduced wood chip availability for our Canadian pulp mills as a result of sawmill curtailments and high fibre prices for our German pulp mills as we work through high cost inventory acquired in late 2022 when there was strong demand for wood as an energy source.

Our pulp segment had strong production in the first quarter of 2023 with an increase of approximately seven percent compared to the fourth quarter of 2022. Pulp sales volumes decreased six percent relative to the fourth quarter as a result of weaker demand.

Looking forward to the second quarter of 2023, we currently believe pulp prices will decline, with additional downward pricing pressure on hardwood pulp as the market adjusts to new South American supply. We expect lower softwood pulp prices to be short-lived because of low customer inventory levels. Lumber demand is expected to see a modest increase as we move into the residential construction season, which we believe will also create some upward pricing pressure.

Although economic uncertainty and high inflation have negatively impacted our short term financial results, we are now experiencing reductions in input costs such as fibre and chemicals. In addition, we have strong liquidity and a strong operational foundation that give us many options to continue to grow and diversify our solid wood and bio-product revenues. We will continue to manage our liquidity and working capital prudently and run the Company based on continuous improvement to enhance efficiency and lower costs.”