Mercer International Inc. · NASDAQ:MERC
Mercer International — Q3 2024 Earnings Presentation
20 slides from Mercer International's earnings presentation, Nov 1, 2024
Slide 1: Mercer International Inc. Q3 2024 Earnings Call
Mercer International Inc. Transforming biomass into bioproducts for a more sustainable world Q3 2024 Earnings Call November 1, 2024 Juan Carlos Bueno – President & CEO Richard Short – CFO, Executive VP & Secretary
Slide 2: Forward-looking Statements
Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a For more information regarding these “safe harbor” for forward-looking statements. risks and uncertainties, review Mercer’s filings with the United States Securities and Exchange Commission. Certain informatio
Slide 3: Financial Results Overview
Financial Results Overview EBITDA Increased Quarter-Over-Quarter Highlights Change • Quarter-over-quarter EBITDA EBITDA (US$ millions) Q2 2024 Q3 2024 increase driven by fewer days of planned (+/-) maintenance downtime Pulp Segment $32 $55 $23 • Unrelated events reduced Q3 pulp production • Unfavora
Slide 4: Pulp Prices
Pulp Segment Pulp Prices Pricing Overview Robust NBSK Prices Despite Weaker Seasonal Demand Realized Pulp Price (US$ / tonne) Region Q2 2024 Q3 2024 NBSK List Price (US$ / tonne) $1,000 Domestic $1,697 $1,762 $800 China (net) $811 $771 $600 Europe $1,602 $1,573 NBHK List Price (US$ / tonne) $400 Dom
Slide 5: Pulp Segment Key Performance Indicators
Pulp Segment Key Performance Indicators Sales Volume (000s tonnes) Mill Planned Downtime (Days) 433 449 Q2 2024 Q3 2024 7 Production Volume (000s tonnes) 487 37 422 416 438 20 Q2 2024 Q3 2024 Q2 2024 Q3 2024 Planned Start-up Production (Actual) Production (Adjusted) (1) 1) Adjusted production adds b
Slide 6: Solid Wood Segment Lumber Overview
Solid Wood Segment Lumber Overview Benchmark Lumber Price Lumber Operations (mmfbm) Random Lengths WSPF 2&btr 2x4 (US$ / mfbm) $1,500 $1,200 122 111 117 109 $900 $600 $300 $0 2021 2022 2023 2024 Q2 2024 Q3 2024 Production Sales 6
Slide 7: Electricity and Mass Timber
Electricity and Mass Timber Electricity Mass Timber Production (000s m3) 219 205 11 10 Q2 2024 Q3 2024 Sales Volume (GWh) $91 $91 Q2 2024 Q3 2024 Strong production supported by completion of two Q2 2024 Q3 2024 large mass timber projects Price ($ / MWh) 7
Slide 8: Financial Position
Financial Position Summary Highlights US$mm unless otherwise stated • FX negatively impacted Q3 operating income by ~$10 Measure Q2 2024 Q3 2024 Change (+/-) million compared to Q2 • Refinancing in October reduced Net Loss ($68) ($18) $50 the principal balance of senior debt by $100 million while Lo
Slide 9: Performance Recap
Performance Recap + Positive • Resilient softwood pulp markets in a period of traditionally weaker seasonal demand • Reduced planned downtime improved EBITDA by ~$42 million • Continued strong performance from mass timber segment • Realized ~$5 million in synergies from fiber optimization with Torga
Slide 10: Capital Allocation
Capital Allocation Refinancing • Completed refinancing of $300 million 2026 Senior Notes in Capital Expenditure Summary October 2024 using cash on hand and proceeds from issuing $200 million of additional 2028 Senior notes • Total Q3 capex of ~$27 million – Overall reduction in principal balance of
Slide 11: Pulp Markets
Pulp Markets NBSK NBHK • Permanent closures of NBSK mills, along with • Weaker prices as additional capacity that came temporary curtailments due to fiber shortages are online in 2024 is being absorbed in the market all creating tightness in NBSK markets Significant differences in supply-demand fund
Slide 12: Pulp Operations
Pulp Operations Past Quarter: Q3 2024 • Lower production vs. Q2 as unplanned downtime in Q3 more than offset planned downtime in Q2 • Stendal unplanned downtime was a result of supplier delays in installation of new equipment • Peace River unplanned downtime was the result of operator error • Determ
Slide 13: Lumber Markets
Lumber Markets • European lumber market was up slightly in Q3 while US market weakened • High interest rates continue to weigh on housing starts and construction around the world • US prices in Q4 are expected to moderately improve due to housing starts and announced lumber curtailments; some modest
Slide 14: Growing Spectrum of Products
Growing Spectrum of Products Pallets & • Shipping pallet markets remain weak due to overhang of European economy; prices expect to Pellets improve with signs of economic recovery (current price of $11 vs. $14 historically) • Higher heating pellet prices in Q3 due to expected seasonality; expected de
Slide 15: High-Return Capex Projects
High-Return Capex Projects Strategic and high-return capex projects at our Torgau and Spokane mills have been restarted • Project will increase lumber production capacity • Project focuses on wood infeed and sorting and volume of dimensional lumber available for process at Spokane to allow utilizati
Slide 16: Fiber Costs
Fiber Costs Fiber Costs Remained Flat for both Pulp and Lumber Per Unit Fiber Costs Steady German sawmill chips, Peace River woodroom and Celgar wood strategy kept pulp fiber costs in check Q4 '22 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 Pulp (US$ / ADMT) Lumber (US$ / m3) Looking ahead, fib
Slide 17: Bioproducts for a More Sustainable World
Bioproducts for a More Sustainable World Lignin Extraction Plant • New lignin extraction pilot plant at Rosenthal; ramp-up and expected commercialization are going as planned • Aligned with strategy to expand into green chemicals and other circular economy-compatible products • Reinforces commitment
Slide 18: Contact Information
Contact Mercer International Inc. Information P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada www.mercerint.com V6C 1G8
Slide 19: Reconciling Net Loss to Operating EBITDA
Reconciling Net Loss to Operating EBITDA Consolidated (US$ millions) Q2 2024 Q3 2024 Net loss ($67.6) ($17.6) Income tax provision (recovery) 1.3 ($0.1) Interest expense 26.8 26.4 Other expense (income) (4.3) 0.1 Operating income (loss) (43.8) 8.8 Add: Depreciation and amortization 39.9 41.6 Add: Go
Slide 20: Reconciling Net Loss to Operating EBITDA
Reconciling Net Loss to Operating EBITDA Note: For other reconciliations of Net Loss to Operating EBITDA in periods not shown, please refer to that period’s respective Form 10-Q or 10-K, which can be found on our website (www.mercerint.com) Operating EBITDA is defined as operating income (loss) plus