Financial Reports & Markets
Mercer International shares Q2 and first half results for 2022
July 28, 2022 By P&PC Staff/Mercer International
Mercer International reported that its second-quarter 2022 operating EBITDA increased to a $145.1 million from $83.8 million in the second quarter of 2021 and decreased from $154.5 million in the first quarter of 2022.
In the second quarter of 2022, the company’s net income was $71.4 million (or $1.08 per basic share and $1.07 per diluted share) compared to $21.4 million (or $0.32 per share) in the second quarter of 2021 and net income of $88.9 million (or $1.35 per basic share and $1.34 per diluted share) in the first quarter of 2022.
In the first half of 2022, operating EBITDA increased by 81 percent to $299.5 million from $165.8 million in the same period of 2021. In the first half of 2022, net income was $160.3 million (or $2.43 per basic share and $2.41 per diluted share) compared to $27.3 million (or $0.41 per share) in the same period of 2021.
“Our strong second quarter operating results were driven by increased pulp and lumber pricing continued strong energy pricing and our Stendal mill’s reversal of its wastewater fee accrual. These positive effects were offset by higher planned maintenance costs, higher costs for key inputs including fibre, energy and chemicals, and lower pulp sales volumes. We continue to see cost inflation for certain inputs, including energy costs. However, we see our surplus energy sales as a strong hedge against higher energy prices and we are focused on developing strategies to manage the cost of our key inputs,” said Mercer CEO Juan Carlos Bueno.
He added, “When comparing our second quarter pulp results to the first quarter, our second quarter was negatively impacted by higher planned maintenance costs, lower pulp sales volumes and higher per unit fibre costs. During the quarter our mills were down for planned maintenance a total of 43 days compared to none in the first quarter and our Celgar mill was down an additional six days due to a slower than plan startup. As expected, our fibre costs were up quarter over quarter, but we are currently expecting that these costs will be flat in the third quarter with a modest increase in Germany and a modest decrease in Canada. ”
“Pulp supply demand fundamentals remained strong throughout the second quarter and resulted in price improvements in all of our markets. Low customer inventory levels and limited pulp supply were the main drivers in market tightness. As of June 30, 2022, third party industry quoted NBSK list prices were approximately $1,485 per ADMT in Europe and net prices were approximately $1,008 per ADMT in China.
Global logistics challenges are slowly easing but continue to impact our business primarily in the form of irregular North American rail traffic, which forces us to use additional higher cost trucking. We are seeing the railways making slow progress in unwinding their system backlogs and expect that these logistics issues will continue to improve going forward.
As we move into the third quarter, we expect stable pulp prices as a result of low customer inventory levels and supply constraints. We expect lumber prices in the United States to be generally stable and prices in Europe to decline from the second quarter but remain at historically attractive levels in both markets. Further, we expect continued strong energy demand and prices in Germany in the third quarter of 2022,” said Carlos Bueno.
In the second quarter of 2022, pulp segment operating income increased to $75.5 million from $13.3 million in the same quarter of 2021 primarily due to higher sales realizations and sales volumes and the positive impact of a stronger dollar, partially offset by higher per unit fibre costs and other production costs.
Pulp revenues in the second quarter of 2022 increased by approximately 41 percent to $418.6 million from $297.2 million in the same quarter of 2021 due to both higher sales volumes and sales realizations.
Energy and chemical revenues increased to a record $41.7 million in the second quarter of 2022 from $13.1 million in the same quarter of 2021 primarily due to higher sales realizations. During the second quarter of 2022, Mercer benefitted from strong energy demand and higher energy prices in Germany.
In the second quarter of 2022, third-party industry quoted average list prices for NBSK pulp increased from the same quarter of 2021 primarily as a result of low customer inventory levels. Mercer’s average NBSK pulp sales realizations increased by approximately seven percent to $890 per ADMT in the second quarter of 2022 from approximately $830 per ADMT in the same quarter of 2021.
Costs and expenses in the second quarter of 2022 increased by approximately 30 percent to $384.8 million from $297.0 million in the second quarter of 2021 primarily due to higher pulp sales volumes, per unit fibre costs and energy, chemical and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and in the second quarter of 2022, the company received German regulatory approval to reverse a wastewater fee accrual of $13.3 million as a result of completing certain capital projects.
In the second quarter of 2022 per unit fibre costs increased by approximately 32 percent from the same quarter of 2021 primarily due to higher per unit fibre costs for the company’s German mills as a result of higher demand from other wood consumers such as heating pellet manufacturers. For Mercer’s Canadian mills, per unit fibre costs were flat as demand remained strong in the mills’ fibre baskets. The company currently expects per unit fibre costs to be flat in the third quarter of 2022 with a modest increase in Germany and a modest decrease in Canada.
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