Mercer International (MERC) Q4 2023 earnings summary

Executive summary

• Q4 Operating EBITDA was $21.1 million, down from $37.5 million in Q3 as planned maintenance and sales of previously impaired inventory outweighed improved pulp realizations and fibre costs.

• FY 2023 Operating EBITDA was $17.5 million versus $536.5 million in FY 2022; net loss was $242.1 million versus net income of $247.0 million.

• Weaker pulp and lumber markets, lower energy prices and higher fibre costs made 2023 challenging.

Financial highlights

• Q4 net loss was $87.2 million, or $1.31 per share; FY net loss was $242.1 million, or $3.65 per share.

• Q4 revenue fell 19% YoY to $470.5 million; FY revenue declined 13% to $1,993.8 million.

• FY costs and expenses rose 16% to $2,182.6 million, reflecting a full year of Torgau, higher fibre costs, the sandalwood impairment and higher sales volumes; lower energy and freight costs and higher insurance proceeds partly offset increases.

• Q4 operating loss was $56.4 million; the reconciliation included $43.8 million of depreciation and amortization and a $33.7 million impairment add-back to reach $21.1 million Operating EBITDA.

Outlook and guidance

• 2024 capex is projected at $75 million to $100 million, with cash preservation and tight cost control continuing.

• Planned 2024 pulp mill maintenance is expected to affect ~76,000 tonnes of production; no maintenance is scheduled in Q1 or Q4.

• Modest NBSK price increases are expected in Europe in H1 2024; China and North America pulp prices are expected to remain generally stable.

• Mass timber is expected to make a meaningful EBITDA contribution in 2024; its order book was almost $100 million at the start of the year.