MERC — Mercer International Inc.

Summary of Mercer International's Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• EBITDA: Negative $28 million, down from negative $21 million in Q2 2025, impacted by a $20 million noncash inventory impairment.
• Net Loss: Reported at $81 million ($1.21 per share), an improvement from a net loss of $86 million ($1.29 per share) in Q2.
• Cash Consumption: $48 million in Q3, up from $35 million in Q2, primarily due to lower EBITDA.
• Pulp Sales Volumes: Increased by 26,000 tonnes to 453,000 tonnes; production remained flat at 459,000 tonnes.
• Solid Wood Segment: Negative EBITDA of $9 million; lumber production decreased by 4% to 150 million board feet.
• Liquidity Position: Strong at $376 million, comprised of $98 million cash and $278 million undrawn revolvers.

2. Strategic Updates and Business Highlights:

• One Goal One Hundred Initiative: Aiming for $100 million in cost savings and operational efficiencies by the end of 2026, with an expected $30 million in savings by the end of 2025.
• Mass Timber Operations: Stable revenues with a growing order book; potential sales volumes of $400 million across over 100 projects per quarter.
• Capital Expenditures: $30 million invested in Q3, primarily for maintenance and upgrades. Planned CapEx for 2025 is about $100 million, focusing on maintenance and environmental projects.

3. Forward Guidance and Outlook:

• Pulp Pricing: Anticipated modest improvements in NBSK prices late in Q4 2025 and into Q1 2026 due to curtailments and reduced inventories.
• Market Dynamics: Expect continued pressure from trade uncertainties and economic conditions, particularly in the European and U.S. markets.
• Solid Wood Segment: Anticipated volatility in U.S. lumber pricing due to high mortgage rates and economic conditions, but potential for upward pressure from countervailing duties.

4. Bad News, Challenges, or Points of Concern:

• Market Headwinds: Significant pressure on pulp pricing and demand due to global economic uncertainties, trade disputes, and high inventory levels.
• Inventory Impairment: A $20 million noncash inventory impairment primarily due to lower pulp prices.
• Fiber Costs: Expected increases in fiber costs for both pulp and sawmill businesses due to reduced availability and competition for wood chips.
• Trade Uncertainty: Ongoing trade disputes impacting market dynamics and pricing, particularly concerning Canadian lumber tariffs.

5. Notable Q&A Insights:

• Asset Sales: Management is considering potential asset sales but acknowledges current market conditions are not ideal for divestitures.
• Pulp Capacity Adjustments: There is a belief that further mill closures may be necessary to right-size the industry, especially in Canada where tariffs are impacting operations.
• Substitution Issues: Substitution of hardwood for softwood pulp is ongoing, driven by significant price differentials, but there are limits to how much this can continue without affecting product quality.
• Liquidity Management: Discussions with banks regarding liquidity and refinancing are ongoing, with proactive measures being taken to ensure financial stability during challenging market conditions.

Overall, Mercer International's Q3 2025 results reflect significant challenges in the pulp and solid wood markets, driven by economic uncertainties and trade issues, while the company continues to focus on cost-saving initiatives and strategic investments for future growth.