Summary of Mercer International Q2 2026 Earnings Call

1Key Financial Results and Metrics

Operating EBITDA: Negative $21 million, down from positive $8 million in Q1 2026.

Net Loss: $76 million, or $1.13 per share, compared to a net loss of $52 million, or $0.78 per share in Q1 2026. This includes a $29 million non-cash inventory impairment charge.

Pulp Segment EBITDA: Negative $13 million; Solid Wood Segment EBITDA: Negative $8 million.

Liquidity: Decreased by $37 million to approximately $192 million, comprising $79 million in cash and $113 million in undrawn revolvers.

Pulp Production: 456,000 tons, a slight decrease from 466,000 tons in Q1 2026.

Sales Realizations: Softwood pulp realizations decreased to $682 per ton from $696 per ton in Q1; hardwood pulp realizations improved to $607 per ton from $564 per ton.

2Strategic Updates and Business Highlights

One Goal One Hundred Program: Achieved $24 million in improvements in H1 2026, on track for a total of $100 million by year-end.

Restructuring Initiatives: Launched a restructuring plan for the Torgau mill and adjusted production rates at various facilities to address fiber supply constraints.

Mass Timber Operations: Revenues increased over 25% compared to Q1, with a backlog of $151 million, indicating strong future growth potential.

3Forward Guidance and Outlook

Third Quarter Expectations: Anticipate elevated fiber costs in Germany but expect costs to moderate for sawmills. Pulp pricing is expected to remain under pressure due to high inventory levels but may tighten later in the year.

Production Plans: Scheduled maintenance shutdowns in Q3 and Q4, with a focus on maintaining operational reliability.

Market Conditions: Continued volatility in pulp markets due to geopolitical tensions and economic uncertainty, with a cautious outlook for the remainder of 2026.

4Bad News, Challenges, or Points of Concern

High Fiber Costs: Persistently high fiber costs in Germany are impacting profitability, exacerbated by supply constraints and competition for resources.

Negative EBITDA Across Segments: Both pulp and solid wood segments reported negative EBITDA, indicating operational challenges.

Debt and Liquidity Concerns: The company is evaluating strategic alternatives to enhance liquidity and strengthen its balance sheet, with potential risks related to upcoming debt maturities.

Geopolitical Risks: Ongoing geopolitical conflicts are creating market volatility and increasing operational costs.

5Notable Q&A Insights

Cash Break-Even for German Mills: The pulp segment is currently negative by approximately $25 million, with a need for $30-$40 million in improvements to reach cash break-even.

Maintenance Costs: Ongoing maintenance costs are expected to remain similar to Q2 levels, with major maintenance shutdowns planned that will incur significant costs.

Torgau Mill Restructuring: Expected to incur $3 million in severance costs this year, with a potential uplift of over $20 million in contributions post-restructuring, aiming for profitability by next year. This summary encapsulates the key financial outcomes, strategic initiatives, and challenges faced by Mercer International during Q2 2026, providing a balanced view of the company's current position and future outlook.