Mercer International (MERC) Q2 2024 earnings summary

Executive summary

• Q2 2024 Operating EBITDA was $30.4M, down from $64M in Q1 2024 but up from negative $68.7M in Q2 2023, mainly due to 37 days of planned maintenance downtime and improved pulp sales realizations.

• Net loss for Q2 2024 was $67.6M ($1.01/share), including a $34.3M non-cash goodwill impairment at Torgau, compared to a $17M loss in Q1 2024 and $98.3M in Q2 2023.

• Pulp segment benefited from higher prices and lower costs, while solid wood remained challenged by weak markets and high interest rates.

• Mass timber business delivered strong results, with Q2 sales boosted by delayed projects and a $55M order file.

• Dividend of $0.075/share declared for Q2 2024.

Financial highlights

• Q2 2024 revenues were $499.4M, down 6% year-over-year, mainly due to lower pulp and lumber sales volumes.

• Q2 2024 Operating EBITDA was $30.4M; net loss was $67.6M; cash used in Q2 was $11M, with liquidity at $580.6M at quarter-end.

• Interest expense rose 33% year-over-year in Q2 2024 to $26.8M, mainly due to new senior notes.

• $34.3M non-cash goodwill impairment recognized at Torgau.

• $45M of revolving credit facility borrowings repaid in Q2 2024.

Outlook and guidance

• Pulp prices expected to soften slightly in Q3 2024 due to seasonal demand, with improvement anticipated in late Q3 and Q4.

• Lumber prices expected to remain flat in Q3 2024; any long-term improvement depends on economic recovery.

• 2024 capital expenditures projected at $95M–$120M, focused on high-return projects at Torgau and Spokane.

• Maintenance downtime at pulp mills planned for 18 days (approx. 19,700 ADMTs) in Q3 2024; no Q4 shutdowns.

• Mass timber sales expected to double 2023 levels, reaching about $110M in 2024.