Financial Reports & Markets
Mercer shares results for first quarter of 2022; declares quarterly dividend
May 2, 2022 By P&PC Staff/Mercer International
Mercer International reported its results for the first quarter of 2022. Operating EBITDA increased to $154.5 million from $82 million in the first quarter of 2021 and decreased from $164.9 million in the fourth quarter of 2021.
In the first quarter of 2022, net income was $88.9 million (or $1.35 per basic share and $1.34 per diluted share) compared to $5.9 million (or $0.09 per share) in the first quarter of 2021 and net income of $74.5 million (or $1.13 per basic share and $1.12 per diluted share) in the fourth quarter of 2021.
David Gandossi, CEO of the company, stated, “Our robust first-quarter operating results were driven by strong sales volumes, increased pulp, lumber and energy pricing and our German mills’ sales of surplus energy into the spot market. These positive effects were only partially offset by higher costs for key inputs including fibre, energy and chemicals. Despite the impact of such cost inflation, we believe that our cost control measures will help mitigate the effect of increases going forward and we see our surplus energy sales as a strong hedge for higher energy prices.
Overall, our first quarter pulp results compared to the fourth quarter of 2021, benefitted from higher pulp pricing and the Rosenthal turbine running for most of the quarter allowing for surplus energy sales and minimal energy purchases, which were partially offset by higher fibre and natural gas costs. Also, our fourth quarter 2021 results included $31.9 million of business interruption insurance proceeds.
Pulp prices improved in all markets during the first quarter as low customer inventory levels and limited supply, including as a result of global logistical slowdowns, led to higher pricing. As of March 31, 2022, third party industry quoted NBSK list prices were approximately $1,345 per ADMT in Europe and net prices were approximately $985 per ADMT in China.
Global logistics challenges continue to impact our business primarily with regards to North American rail traffic which led to us having to slow production at our Canadian pulp mills. We primarily managed these logistical challenges by using additional trucking which is a higher cost compared to rail. We are seeing the railways beginning to make headway with the unwinding of their system backlogs and we are currently optimistic that such logistics issues will be much improved over the coming summer months.
As we move into the second quarter, we currently expect some continued upward pricing pressure on pulp prices as a result of current supply-demand dynamics. While lumber prices in the United States have declined in the last few weeks, we generally expect them to remain at historically strong levels into the summer. Further, we currently expect strong energy demand and prices in Germany to continue in the second quarter of 2022.
Currently, our 2022 capital expenditures are on track to total approximately $175 to $200 million. The majority of these investments are designed to deliver high returns, help us achieve our ESG objectives and enhance shareholder value.
Finally, as you are likely aware, I have announced my retirement as CEO and President of Mercer effective May 1, 2022. The Board has appointed Juan Carlos Bueno, a globally recognized leader in the biomaterials space, to take the Company through the next stage of its development. Our new leadership, combined with an excellent management team and outstanding employees, will continue to advance our growth strategy into the future. Although I will no longer be leading Mercer I will support Juan Carlos’ transition and will enjoy watching Mercer’s progress.”
In the first quarter of 2022, pulp segment operating income increased to $86.2 million from $25.3 million in the same quarter of 2021 as higher sales realizations and lower maintenance costs were partially offset by higher per unit fibre costs and other production costs.
Pulp revenues in the first quarter of 2022 increased by approximately 41 percent to a record $446.9 million from $317.6 million in the same quarter of 2021 due to higher sales realizations and sales volumes.
Energy and chemical revenues increased by approximately 76 percent to a record $39.0 million in the first quarter of 2022 from $22.2 million in the same quarter of 2021 primarily due to higher sales realizations.
In the first 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 and global logistics issues restricting supply. Average NBSK pulp sales realizations increased by approximately 22 percent to $812 per ADMT in the first quarter of 2022 from approximately $668 per ADMT in the same quarter of 2021.
Costs and expenses in the first quarter of 2022 increased by approximately 27 percent to $399.7 million from $314.6 million in the first quarter of 2021 primarily due to higher pulp sales volumes, per unit fibre costs and energy, chemical and freight costs partially offset by lower maintenance costs. In the first quarter of 2022, we had no annual maintenance downtime compared to maintenance downtime of 27 days (approximately 37,800 ADMTs) in the same quarter of 2021.
In the first quarter of 2022 per unit fibre costs increased by approximately 25 percent from the same quarter of 2021 due to higher per unit fibre costs for all of our mills. Per unit fibre costs for our German mills increased due to strong demand and reduced availability of lower-cost beetle damaged wood. For our Canadian mills, per unit fibre costs increased due to strong demand in the mills’ fibre baskets. We currently expect per unit fibre costs will increase in the second quarter of 2022 due to continued strong demand.
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