Mercer International Inc. (NASDAQ:MERC) Q4 2023 Earnings Call Transcript February 16, 2024 10:00 AM ET

Company Participants

Richard Short - CFO & Secretary

Juan Carlos Bueno - President & CEO

Conference Call Participants

Hamir Patel - CIBC Capital Markets

Richard Stevens - Amundi USA

Kasia Trzaski Kopytek - TD Securities

Sam McGovern - UBS

Operator

Good morning and welcome to the Mercer International's Fourth 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

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

But 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'd like to call your attention to the risks related to these statements, which are more fully described in our press release and the company's financial filings with the Securities and Exchange Commission.

This quarter, our EBITDA was $21 million, compared to Q3's EBITDA of $38 million. Higher pulp sales realizations and lower fiber costs were more than offset by the sale of inventory in Q3 that had previously been impaired, as well as increased major maintenance downtime in Q4. In the 2023 fiscal year, we had EBITDA of $17 million compared to EBITDA of $537 million in 2022 due to significantly weaker pulp and lumber markets, lower spot energy prices, and higher fiber costs that impacted the entire industry. Our pulp segment contributed quarterly EBITDA of $32 million and our solid wood segment EBITDA was negative $6 million. You can find additional segment disclosures in our Form 10-K, which can be found on our website and that of the SEC.

In Q4, both our NBSK and NBHK sales realizations increased compared to Q3. We had higher prices in all our markets as customers were restocking, and in Europe, we are benefiting from a modest increase in paper demand. In China, the Q4 average NBSK net price was $748 per ton, up $68 or 10% relative to Q3. European NBSK list price averaged $1,245 per ton in the current quarter, an increase of $85 or 7% from Q3. In China, the Q4 average NBHK net price was $643 per ton, up $113 or about 21% compared to the Q3 average price. The North American average Q4 list price was $1,083 per ton, up $60, or 6% from Q3. As a consequence, the market price gap between NBSK and NBHK in China narrowed to about $105 per ton in Q4 from $150 per ton in Q3.