Mercer International Inc. (NASDAQ:MERC) Q2 2023 Earnings Call Transcript August 4, 2023 10:00 AM ET

Company Participants

Richard Short - Chief Financial Officer

Juan Carlos Bueno - President and CEO

Conference Call Participants

Sean Stewart - TD Securities

Matthew McKellar - RBC

Cole Hathorn - Jefferies

CJ Baldoni - Principal

Operator

Good morning and welcome to Mercer International's Second 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

Thank you. Good morning everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the second quarter, before returning the call to Juan Carlos to provide further color on the markets, our capital plan, and our strategic initiatives. Also, for those of you who join today's call by telephone, there is presentation material that has been attached to the Investor Relations section of our website.

But before turning to our results, I'd like to remind you that we will make forward-looking statements in this morning's call. According to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, I'd 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 negative $69 million, compared to Q1 positive EBITDA of $27 million. After adjusting for our $51 million non-cash inventory impairments EBITDA in Q2 was roughly negative $17 million

The EBITDA decrease in Q2 from Q1 is primarily due to the significantly weaker pulp prices in all of our markets caused by weak demand created by global economic uncertainty. We also had more scheduled downtime at our pulp mills compared to Q1. In Q2, we had 60 days of scheduled downtime compared to 10 days in Q1.

Our pulp segment had negative quarterly EBITDA of $56 million, which after adjusting for the $51 million non-cash inventory impairment, leaves a negative $5 million result. Our solid wood segment EBITDA was negative $10 million and was driven by poor lumber prices. You can find additional segment disclosures in our Form 10-Q, which can be found on our website, and that of the SEC.

In addition to the $51 million non-cash impairment charge, lower pulp prices resulted in a negative EBITDA impact of about $81 million in Q2 compared to Q1. In Q2 average NBSK and NBHK list prices were down in all our markets compared to Q1 as economic uncertainty continued to negatively impact paper demand and was compounded by the impact of New South American hardwood capacity.