Financial Reports & Markets
Mercer International shares results for fourth quarter of 2022
February 16, 2023 By P&PC Staff/Mercer International
Mercer International reported results for the fourth quarter and for the full year of 2022.
Operating EBITDA was $96.1 million, a decrease from $164.9 million in the fourth quarter of 2021 and $140.9 million in the third quarter of 2022.
In the fourth quarter of 2022, net income was $20 million (or $0.30 per share) compared to $74.5 million (or $1.13 per basic share and $1.12 per diluted share) in the fourth quarter of 2021 and net income of $66.7 million (or $1.01 per basic share and $1.00 per diluted share) in the third quarter of 2022.
In 2022, operating EBITDA increased by 12 percent to a record $536.5 million from $478.8 million in 2021. In 2022, net income was a record $247.0 million (or $3.74 per basic share and $3.71 per diluted share) from $171 million (or $2.59 per basic share and $2.58 per diluted share) in 2021.
“Our solid fourth quarter operating results reflect strong pulp sales, which were however more than offset by lower sales prices, higher planned maintenance and fibre costs and the negative impact of the weaker US dollar compared to our third quarter operating results,” said CEO Juan Carlos Bueno in a press statement.
“Total pulp production increased approximately six percent compared to the third quarter primarily due to improved production at our Stendal mill as they ramped up production following the third quarter shut down caused by a fire in its wood yard. The Stendal mill is currently running at or about capacity and the repairs related to the fire are expected to be completed in the second quarter. Pulp sales volumes also increased relative to the third quarter in proportion to the pulp production increase.
Our solid wood segment’s fourth quarter operating results include the results of our recently acquired Torgau mill. Overall, this segment’s operating results were negatively impacted by lower sales prices, which were partially offset by improved lumber and energy sales volumes. During the quarter we achieved approximately $6 million of synergies on an annualized basis from our Torgau operations. These primarily came in the form of optimizing fibre utilizations among our mills. Our integration efforts are ongoing as we work to capture all available synergies.
Lower energy prices and the impact of the German energy windfall tax negatively affected our fourth quarter results by approximately $49 million compared to the prior quarter. The decline is the result of lower energy prices in Germany in the fourth quarter as warm weather and strong natural gas storage levels took significant pressure off the market electricity price. Effective December 1, 2022, Germany implemented a windfall tax which taxes revenues at 90 percent above a “base threshold”. Energy prices in Germany ended the year at about such base threshold level.
In the fourth quarter we also experienced significant fibre cost increases as demand for low quality pulp wood in Germany was being driven by the energy sector and in Western Canada there was lower fibre availability due to sawmill curtailments. In the fourth quarter our fibre costs increased roughly $21 million compared to the prior quarter. Planned major maintenance negatively impacted EBITDA by almost $20 million in the current quarter compared to the third quarter.
In China we currently expect modestly higher NBSK pulp prices in the first part of 2023 due to China’s reopening after lifting of COVID-19 restrictions and the seasonal demand increase after the lunar new year. We currently expect modestly declining NBSK pulp prices in Europe and North America in the first half of 2023 as a result of lower demand due to inflationary pressures negatively impacting paper demand. For NBHK pulp we currently expect prices to decrease in the first half of 2023 due to additional supply coming online.
In our solid wood segment, we currently expect lumber prices to modestly increase in the first half of 2023 due to producer curtailments, low customer inventory levels and the start of the construction season. These positive impacts will be partially offset by lower demand caused by continued economic uncertainty due to inflation and higher interest rates.
As I look to 2023, I am excited about Mercer’s strong operational foundation and the many options it gives us as we look to continue to grow and diversify our solid wood and bio-products revenues.”
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