Mercer International Inc. (NASDAQ:MERC) Q3 2023 Earnings Conference Call November 3, 2023 10:00 AM ET

Company Participants

Richard Short - Chief Financial Officer

Juan Carlos Bueno - President and Chief Executive Officer

Conference Call Participants

Hamir Patel - CIBC Capital Markets

Matthew McKellar - RBC Capital Markets

Sam McGovern - UBS Group AG

Operator

Good morning, and welcome to Mercer International’s Third Quarter 2023 Earnings Conference Call. On the call today is Juan Carlos Bueno, Mercer’s President and Chief Executive Officer; and Richard Short, Mercer’s Chief Financial Officer and Secretary.

I will now hand the call over to Richard.

Richard Short

Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the third quarter, before turning the call over to Juan Carlos to provide further color into the markets, our operations, and our strategic initiatives. Also, for those of you that have joined the call by telephone, there is a presentation material that we have attached in the investor section of our website.

Before turning to our results, I would like to remind you that we will be making forward-looking statements in this morning’s conference call. According to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, I would like to call your attention to the risks related to these statements, which are more fully described in our press release and in the company’s filings with the Securities and Exchange Commission.

This quarter, our EBITDA was $38 million compared to Q2’s negative EBITDA of $69 million, this significant improvement over the prior quarter was due to lower fiber and other production costs. Inventory impairment reversal and fewer days of scheduled annual maintenance downtime, partially offset by lower pulp sales realizations. Our pulp segment contributed quarterly EBITDA of $49 million, and our solid wood segment EBITDA was negative $7 million. You can find additional segment disclosures in our Form 10-Q, which can be found on our website, and that of the SEC.

In Q3, our pulp segment had significantly lower fiber costs than Q2. As a reminder, Q2 results included a $51 million inventory impairment, primarily for hardwood. At the end of Q3, only about $9 million of this impairment remains against our closing inventory.

Our solid wood segment also had lower per unit fiber cost in Q3, when compared to Q2, due to the availability of lower cost beetle damaged wood in Germany. We currently expect beetle damaged wood to be available into 2024. In Q3, both our NBSK and NBHK sales realizations decreased compared to Q2 as modestly higher prices in China, driven by low customer inventory levels, were more than offset by lower prices in Europe and North America due to weak paper demand.