Mercer International Inc. (Nasdaq: MERC) today reported third
quarter 2022 Operating EBITDA of $140.9 million similar to $148.1
million in the third quarter of 2021 and $145.1 million in the
second quarter of 2022.
In the third quarter
of 2022, net income was $66.7 million (or $1.01 per basic share and
$1.00 per diluted share) compared to $69.1 million (or $1.05 per
basic share and $1.04 per diluted share) in the third quarter of
2021 and net income of $71.4 million (or $1.08 per basic share and
$1.07 per diluted share) in the second quarter of 2022.
In the first nine
months of 2022, Operating EBITDA increased by 40% to $440.4 million
from $313.9 million in the same period of 2021. In the first nine
months of 2022, net income increased to $227.0 million (or $3.43
per basic share and $3.41 per diluted share) from $96.5 million (or
$1.46 per share) in the same period of 2021.
Mr. Juan Carlos Bueno,
the Chief Executive Officer, stated: “I am pleased with our third
quarter operating results. Strong energy and pulp prices combined
with favorable foreign exchange movements and lower planned major
maintenance were the main factors behind our operating results
relative to the second quarter.
We are excited about
the addition of the HIT Torgau mill to the Mercer group. This
acquisition will increase our lumber capacity to almost one billion
board feet and diversifies our product offering with the addition
of both pallets and wood pellets. The Torgau mill acquisition also
brings additional green energy production capacity to our business.
Since the acquisition closed on September 30th, we have focused on
integrating this business and also ensuring we begin capitalizing
on the estimated $16 million of annual synergies that we have
identified.
Total pulp production
in the current quarter decreased by approximately 11% compared to
the same quarter of 2021, primarily due to lower production at our
Stendal mill, which had a fire in its woodyard. The fire resulted
in the mill being down for most of July, and after its restart, it
has operated at approximately 90% of its capacity. We currently
expect to install replacement equipment at our Stendal mill in the
fourth quarter of 2022 and first quarter of 2023. We maintain
property and business interruption insurance for the Stendal mill
and we expect the property damage and business interruption to be
covered.
Our Friesau sawmill
ran well in the third quarter, but significantly weaker lumber
prices in the United States negatively impacted both sales prices
and volumes compared to the prior quarter of 2022.
The negative impact of
increased key production costs such as fiber, energy and chemicals
in the third quarter is expected to continue in the fourth quarter
of 2022. In particular, fiber costs in Germany increased because of
materially higher demand for wood for energy purposes. Our
production costs are primarily incurred in euros and Canadian
dollars. However, our pulp and a material portion of our lumber
sales are priced in dollars. During the third quarter of 2022, the
dollar continued to strengthen against the euro and the Canadian
dollar which had a positive impact on our euro and Canadian dollar
denominated costs and expenses and partially offset the negative
impact of such inflationary pressures. The strengthening of the
dollar increased our operating income by approximately $13.8
million compared to the prior quarter of 2022 and by approximately
$37.0 million compared to the third quarter of 2021.
Looking forward to the
fourth quarter, we currently expect pulp prices and demand to
remain generally strong with some modest price declines as a result
of inflationary pressures negatively impacting paper demand. Lumber
demand and prices are expected to be generally similar to the third
quarter due to continued economic uncertainty caused by inflation
and higher interest rates.
Strong energy demand
and prices in Germany are expected to continue in the fourth
quarter of 2022. In October, 2022, in response to restricted energy
supply and price increases, the EU implemented a temporary
mandatory cap on market revenues at €180 per MWh for intra-marginal
generators such as renewables, nuclear and lignite producers. The
cap applies to both electricity traded in the market as well as
bilateral trading and will be in effect from December 1, 2022, to
June 30, 2023."
Mr. Bueno concluded:
"With our expanded solid wood operations and product lines combined
with our world-class assets, we believe we are well positioned to
enhance value for our stakeholders going forward."
____________________
*Operating EBITDA is
not a measure of financial performance under accounting principles
generally accepted in the United States ("GAAP") and should not be
considered in isolation or as a substitute for analysis of our
results as reported under GAAP. See page 6 of the financial tables
included in this press release for a reconciliation of net income
to Operating EBITDA.
Consolidated Financial
Results
|
Q3 |
|
|
Q2 |
|
|
Q3 |
|
|
YTD |
|
|
YTD |
|
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands, except per share amounts) |
|
|
Revenues |
$ |
532,814 |
|
|
$ |
572,326 |
|
|
$ |
469,746 |
|
|
$ |
1,697,881 |
|
|
$ |
1,284,298 |
|
|
Operating income |
$ |
108,723 |
|
|
$ |
114,031 |
|
|
$ |
113,755 |
|
|
$ |
345,105 |
|
|
$ |
216,620 |
|
|
Operating EBITDA |
$ |
140,867 |
|
|
$ |
145,059 |
|
|
$ |
148,070 |
|
|
$ |
440,393 |
|
|
$ |
313,857 |
|
|
Loss
on early extinguishment of debt |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(30,368 |
) |
(1) |
Net
income |
$ |
66,746 |
|
|
$ |
71,372 |
|
|
$ |
69,118 |
|
|
$ |
227,015 |
|
|
$ |
96,466 |
|
|
Net
income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.01 |
|
|
$ |
1.08 |
|
|
$ |
1.05 |
|
|
$ |
3.43 |
|
|
$ |
1.46 |
|
|
Diluted |
$ |
1.00 |
|
|
$ |
1.07 |
|
|
$ |
1.04 |
|
|
$ |
3.41 |
|
|
$ |
1.46 |
|
|
____________________
(1) Redemption of
6.50% senior notes due 2024 and 7.375% senior notes due
2025.Consolidated – Three Months Ended September 30, 2022
Compared to Three Months Ended September 30, 2021Total
revenues in the third quarter of 2022 increased by approximately
13% to $532.8 million from $469.7 million in the same quarter of
2021 primarily due to higher energy and pulp sales realizations
partially offset by lower sales volumes and lower lumber sales
realizations.
In the third quarter of 2022, energy and
chemical revenues increased by approximately 169% to $71.2 million
from $26.5 million in the same quarter of 2021 primarily as a
result of higher energy prices in Germany, which were more than
triple those in the same quarter of 2021. In the third quarter of
2022, our average energy sales realizations in Germany were
approximately €388 per MWh compared to about €104 per MWh in the
comparative quarter of 2021.
Costs and expenses in the third quarter of 2022
increased by approximately 19% to $424.1 million from $356.0
million in the third quarter of 2021 driven by higher key
production costs, such as fiber, chemicals and energy, and higher
freight costs. Such cost increases were partially offset by the
positive impact of a stronger dollar on our euro and Canadian
dollar denominated costs and expenses.
In the third quarter of 2022, Operating EBITDA
decreased by approximately 5% to $140.9 million from $148.1 million
in the same quarter of 2021 primarily due to higher per unit fiber
costs, higher other production and freight costs and lower sales
volumes partially offset by higher energy and pulp sales
realizations and the positive impact of a stronger dollar.
Segment
ResultsPulp
|
Three Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
|
|
Pulp revenues |
$ |
395,459 |
|
|
$ |
374,287 |
|
|
Energy and chemical revenues |
$ |
61,198 |
|
|
$ |
22,456 |
|
|
Operating income |
$ |
109,985 |
|
|
$ |
99,918 |
|
|
In the third quarter of 2022, pulp segment
operating income increased by approximately 10% to $110.0 million
from $99.9 million in the same quarter of 2021 primarily due to
higher sales realizations and the positive impact of a stronger
dollar, partially offset by higher per unit fiber costs, higher
other production and freight costs and lower sales volumes.
Pulp revenues in the third quarter of 2022
increased by approximately 6% to $395.5 million from $374.3 million
in the same quarter of 2021 due to higher sales realizations
partially offset by lower sales volumes.
In the third quarter of 2022, third-party
industry quoted average list prices for NBSK pulp increased from
the same quarter of 2021 primarily as a result of low customer
inventory levels. Our average NBSK pulp sales realizations
increased by approximately 8% to $911 per ADMT in the third quarter
of 2022 from approximately $847 per ADMT in the same quarter of
2021.
Energy and chemical revenues increased to a
record $61.2 million in the third quarter of 2022 from $22.5
million in the same quarter of 2021 due to higher sales
realizations. During the third quarter of 2022, we benefitted from
strong energy demand and higher energy prices in Germany.
In the third quarter of 2022 compared to the
same quarter of 2021, we had a positive impact of approximately
$32.6 million in operating income due to foreign exchange,
primarily as a result of the effect of the stronger dollar on costs
and expenses.
Costs and expenses in the third quarter of 2022
increased by approximately 17% to $346.7 million from $296.9
million in the third quarter of 2021 primarily due to higher per
unit fiber, chemical, energy and freight costs. The higher costs
were partially offset by the positive impact of a stronger dollar
and lower pulp sales volumes.
In the third quarter of 2022 per unit fiber
costs increased by approximately 32% from the same quarter of 2021
due to higher per unit fiber costs for all of our mills. Our German
mills had higher per unit fiber costs as a result of strong demand
from other wood consumers such as heating pellet manufacturers. For
our Canadian mills, per unit fiber costs increased due to strong
demand in the mills' fiber baskets and for our Celgar mill a
decrease in the availability of wood chips due to regional sawmill
curtailments. We currently expect per unit fiber costs to increase
in the fourth quarter of 2022 with an increase in Germany due to
continued strong demand and generally flat per unit fiber costs in
Canada.
Solid Wood
|
Three Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
|
|
Lumber revenues |
$ |
61,444 |
|
|
$ |
67,605 |
|
|
Energy revenues |
$ |
8,111 |
|
|
$ |
1,801 |
|
|
Wood
residual revenues |
$ |
4,711 |
|
|
$ |
1,317 |
|
|
Operating income |
$ |
2,896 |
|
|
$ |
17,949 |
|
|
In the third quarter of 2022,
operating income decreased by approximately 84% to $2.9 million
from $17.9 million in the same quarter of 2021 primarily due to
higher per unit fiber costs and other production costs, lower
lumber sales realizations and sales volumes partially offset by
higher energy and wood residuals sales realizations.
Average lumber sales realizations decreased by
approximately 13% to $605 per Mfbm in the third quarter of 2022
from approximately $692 per Mfbm in the same quarter of 2021 due to
lower demand in the European market. Demand in both the European
and U.S. markets is being negatively impacted by concerns over
rising interest rates, inflationary pressures and a weaker economic
outlook.
Fiber costs were approximately 70% of our lumber
cash production costs in the third quarter of 2022. In the third
quarter of 2022, per unit fiber costs modestly increased compared
to the same quarter of 2021. Higher per unit fiber costs in euros
due to strong fiber demand in Germany were partially offset by the
positive impact of a stronger dollar on our euro denominated fiber
costs. We currently expect per unit fiber costs to modestly
increase in the fourth quarter of 2022.
Consolidated – Nine Months Ended
September 30, 2022 Compared to Nine Months Ended September 30,
2021Total revenues for the nine months ended September 30,
2022 increased by approximately 32% to $1,697.9 million from
$1,284.3 million in the nine months ended September 30, 2021
primarily due to higher sales realizations and higher pulp sales
volumes.
In the nine months ended September 30, 2022,
energy and chemical revenues increased by approximately 137% to
$165.2 million from $69.7 million in the same period of 2021
primarily as a result of higher energy prices in Germany, which
were more than double those in the same period of 2021. In the nine
months ended September 30, 2022, our average energy sales
realizations in Germany were approximately €241 per MWh compared to
about €89 per MWh in the comparative period of 2021.
Costs and expenses in the nine months ended
September 30, 2022 increased by approximately 27% to $1,352.8
million from $1,067.7 million in the nine months ended September
30, 2021 primarily due to higher per unit fiber, freight, energy
and chemical costs and a higher pulp sales volume partially offset
by the positive impact of a stronger dollar on our euro and
Canadian dollar denominated costs and expenses.
In the nine months ended September 30, 2022,
Operating EBITDA increased by approximately 40% to $440.4 million
from $313.9 million in the same period of 2021 primarily due to
higher sales realizations, the positive impact of a stronger dollar
and higher pulp sales volumes partially offset by higher per unit
fiber costs and higher other production and freight costs.
LiquidityAs of September 30,
2022, we had cash, cash equivalents and a term deposit aggregating
$362.3 million and approximately $258.9 million available under our
revolving credit facilities providing us with aggregate liquidity
of about $621.2 million.
Quarterly DividendA quarterly
dividend of $0.075 per share will be paid on December 29, 2022 to
all shareholders of record on December 21, 2022. Future dividends
will be subject to Board approval and may be adjusted as business
and industry conditions warrant.
Earnings Release CallIn
conjunction with this release, Mercer International Inc. will host
a conference call, which will be simultaneously broadcast live over
the Internet. Management will host the call, which is scheduled for
October 28, 2022 at 10:00 AM ET. Listeners can access the
conference call live and archived for 30 days over the Internet at
https://edge.media-server.com/mmc/p/tr7ugjbz or through a link on
the company's home page at https://www.mercerint.com. Please allow
15 minutes prior to the call to visit the site and download and
install any necessary audio software.
Mercer International Inc. is a global forest
products company with operations in Germany, the USA and Canada
with a consolidated annual production capacity of 2.3 million
tonnes of pulp, 960 million board feet of lumber, 140 thousand
cubic meters of CLT, 17 million pallets and 150,000 metric tonnes
of wood pellets. To obtain further information on the company,
please visit its website at www.mercerint.com.
The preceding includes forward looking
statements which involve known and unknown risks and uncertainties
which may cause our actual results in future periods to differ
materially from forecasted results. Words such as "expects",
"anticipates", "are optimistic that", "projects", "intends",
"designed", "will", "believes", "estimates", "may", "could" and
variations of such words and similar expressions are intended to
identify such forward-looking statements. Among those factors which
could cause actual results to differ materially are the following:
the highly cyclical nature of our business, raw material costs, our
level of indebtedness, competition, foreign exchange and interest
rate fluctuations, our use of derivatives, expenditures for capital
projects, environmental regulation and compliance, disruptions to
our production, market conditions and other risk factors listed
from time to time in our SEC reports.
APPROVED BY:Jimmy S.H. LeeExecutive Chairman(604) 684-1099
Juan Carlos BuenoChief Executive Officer (604) 684-1099
-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
|
Q3 |
|
|
Q2 |
|
|
Q3 |
|
|
YTD |
|
|
YTD |
|
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands, except per share amounts) |
|
|
Pulp segment revenues |
$ |
456,657 |
|
|
$ |
460,304 |
|
|
$ |
396,743 |
|
|
$ |
1,402,892 |
|
|
$ |
1,046,748 |
|
|
Solid wood segment revenues |
|
74,266 |
|
|
|
110,985 |
|
|
|
70,723 |
|
|
|
290,048 |
|
|
|
232,149 |
|
|
Corporate and other revenues |
|
1,891 |
|
|
|
1,037 |
|
|
|
2,280 |
|
|
|
4,941 |
|
|
|
5,401 |
|
|
Total revenues |
$ |
532,814 |
|
|
$ |
572,326 |
|
|
$ |
469,746 |
|
|
$ |
1,697,881 |
|
|
$ |
1,284,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp segment operating income |
$ |
109,985 |
|
|
$ |
75,471 |
|
|
$ |
99,918 |
|
|
$ |
271,692 |
|
|
$ |
138,552 |
|
|
Solid wood segment operating income |
|
2,896 |
|
|
|
43,726 |
|
|
|
17,949 |
|
|
|
84,923 |
|
|
|
88,240 |
|
|
Corporate and other operating loss |
|
(4,158 |
) |
|
|
(5,166 |
) |
|
|
(4,112 |
) |
|
|
(11,510 |
) |
|
|
(10,172 |
) |
|
Total operating income |
$ |
108,723 |
|
|
$ |
114,031 |
|
|
$ |
113,755 |
|
|
$ |
345,105 |
|
|
$ |
216,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp segment depreciation and amortization |
$ |
28,174 |
|
|
$ |
27,001 |
|
|
$ |
29,982 |
|
|
$ |
82,859 |
|
|
$ |
84,995 |
|
|
Solid wood segment depreciation and amortization |
|
3,733 |
|
|
|
3,792 |
|
|
|
4,025 |
|
|
|
11,719 |
|
|
|
11,496 |
|
|
Corporate and other depreciation and amortization |
|
237 |
|
|
|
235 |
|
|
|
308 |
|
|
|
710 |
|
|
|
746 |
|
|
Total depreciation and
amortization |
$ |
32,144 |
|
|
$ |
31,028 |
|
|
$ |
34,315 |
|
|
$ |
95,288 |
|
|
$ |
97,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating EBITDA |
$ |
140,867 |
|
|
$ |
145,059 |
|
|
$ |
148,070 |
|
|
$ |
440,393 |
|
|
$ |
313,857 |
|
|
Loss on early extinguishment
of debt |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(30,368 |
) |
(1) |
Income tax provision |
$ |
(31,294 |
) |
|
$ |
(34,126 |
) |
|
$ |
(32,490 |
) |
|
$ |
(89,656 |
) |
|
$ |
(45,873 |
) |
|
Net income |
$ |
66,746 |
|
|
$ |
71,372 |
|
|
$ |
69,118 |
|
|
$ |
227,015 |
|
|
$ |
96,466 |
|
|
Net income per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.01 |
|
|
$ |
1.08 |
|
|
$ |
1.05 |
|
|
$ |
3.43 |
|
|
$ |
1.46 |
|
|
Diluted |
$ |
1.00 |
|
|
$ |
1.07 |
|
|
$ |
1.04 |
|
|
$ |
3.41 |
|
|
$ |
1.46 |
|
|
Common shares outstanding at
period end |
|
66,167 |
|
|
|
66,167 |
|
|
|
66,037 |
|
|
|
66,167 |
|
|
|
66,037 |
|
|
____________________
(1) Redemption of 6.50%
senior notes due 2024 and 7.375% senior notes due 2025.
Summary Operating Highlights
|
Q3 |
|
|
Q2 |
|
|
Q3 |
|
|
YTD |
|
|
YTD |
|
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Pulp Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp production ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBSK |
|
362.9 |
|
|
|
418.3 |
|
|
|
443.0 |
|
|
|
1,216.7 |
|
|
|
1,195.0 |
|
|
NBHK |
|
82.1 |
|
|
|
51.6 |
|
|
|
57.8 |
|
|
|
190.4 |
|
|
|
143.9 |
|
|
Annual maintenance downtime ('000 ADMTs) |
|
17.3 |
|
|
|
54.2 |
|
|
|
42.8 |
|
|
|
71.5 |
|
|
|
253.7 |
|
|
Annual maintenance downtime (days) |
|
17 |
|
|
|
43 |
|
|
|
44 |
|
|
|
60 |
|
|
|
188 |
|
|
Pulp sales ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBSK |
|
356.6 |
|
|
|
405.7 |
|
|
|
402.2 |
|
|
|
1,267.4 |
|
|
|
1,151.3 |
|
|
NBHK |
|
69.3 |
|
|
|
65.8 |
|
|
|
45.7 |
|
|
|
185.0 |
|
|
|
145.1 |
|
|
Average NBSK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
1,500 |
|
|
|
1,437 |
|
|
|
1,345 |
|
|
|
1,422 |
|
|
|
1,223 |
|
|
China |
|
969 |
|
|
|
1,008 |
|
|
|
832 |
|
|
|
959 |
|
|
|
892 |
|
|
North America |
|
1,800 |
|
|
|
1,743 |
|
|
|
1,542 |
|
|
|
1,690 |
|
|
|
1,481 |
|
|
Average NBHK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China |
|
855 |
|
|
|
815 |
|
|
|
623 |
|
|
|
779 |
|
|
|
694 |
|
|
North America |
|
1,620 |
|
|
|
1,517 |
|
|
|
1,320 |
|
|
|
1,483 |
|
|
|
1,212 |
|
|
Average pulp sales realizations ($/ADMT)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBSK |
|
911 |
|
|
|
890 |
|
|
|
847 |
|
|
|
865 |
|
|
|
777 |
|
|
NBHK |
|
990 |
|
|
|
843 |
|
|
|
684 |
|
|
|
858 |
|
|
|
604 |
|
|
Energy production ('000 MWh)(3) |
|
484.2 |
|
|
|
496.6 |
|
|
|
464.5 |
|
|
|
1,512.4 |
|
|
|
1,345.6 |
|
|
Energy sales ('000 MWh)(3) |
|
174.3 |
|
|
|
199.3 |
|
|
|
185.8 |
|
|
|
568.3 |
|
|
|
517.8 |
|
|
Average energy sales realizations ($/MWh)(3) |
|
339 |
|
|
|
186 |
|
|
|
114 |
|
|
|
233 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solid Wood Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumber production (MMfbm) |
|
97.1 |
|
|
|
112.2 |
|
|
|
102.1 |
|
|
|
324.8 |
|
|
|
336.6 |
|
|
Lumber sales (MMfbm) |
|
89.8 |
|
|
|
111.0 |
|
|
|
97.7 |
|
|
|
310.7 |
|
|
|
315.3 |
|
|
Average lumber sales realizations ($/Mfbm) |
|
605 |
|
|
867 |
|
|
692 |
|
|
|
782 |
|
|
702 |
|
|
Energy production and sales ('000 MWh) |
|
20.6 |
|
|
|
25.5 |
|
|
|
14.1 |
|
|
|
70.6 |
|
|
|
51.4 |
|
|
Average energy sales realizations ($/MWh) |
|
394 |
|
|
198 |
|
|
128 |
|
|
260 |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Spot Currency Exchange Rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ / €(4) |
|
1.0066 |
|
|
|
1.0646 |
|
|
|
1.1784 |
|
|
|
1.0636 |
|
|
|
1.1958 |
|
|
$ / C$(4) |
|
0.7659 |
|
|
0.7836 |
|
|
0.7937 |
|
|
0.7796 |
|
|
0.7996 |
|
|
____________________
(1) Source: RISI
pricing report. Europe and North America are list prices. China are
net prices which include discounts, allowances and rebates.
(2) Sales realizations after customer discounts, rebates and
other selling concessions. Incorporates the effect of pulp price
variations occurring between the order and shipment
dates.(3) Does not include our 50% joint venture interest in
the Cariboo mill, which is accounted for using the equity
method.(4) Average Federal Reserve Bank of New York Noon
Buying Rates over the reporting period.
MERCER
INTERNATIONAL INC.INTERIM CONSOLIDATED STATEMENTS
OF OPERATIONS(Unaudited)(In
thousands, except per share data)
|
|
Three Months EndedSeptember
30, |
|
|
Nine Months EndedSeptember
30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Revenues |
|
$ |
532,814 |
|
|
$ |
469,746 |
|
|
$ |
1,697,881 |
|
|
$ |
1,284,298 |
|
|
Costs
and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation and amortization |
|
|
367,710 |
|
|
|
302,221 |
|
|
|
1,187,476 |
|
|
|
910,244 |
|
|
Cost of sales depreciation and amortization |
|
|
32,122 |
|
|
|
34,294 |
|
|
|
95,223 |
|
|
|
97,175 |
|
|
Selling, general and administrative expenses |
|
|
24,259 |
|
|
|
19,476 |
|
|
|
70,077 |
|
|
|
60,259 |
|
|
Operating income |
|
|
108,723 |
|
|
|
113,755 |
|
|
|
345,105 |
|
|
|
216,620 |
|
|
Other
income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(17,935 |
) |
|
|
(16,882 |
) |
|
|
(52,731 |
) |
|
|
(53,031 |
) |
|
Loss on early extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,368 |
) |
|
Other income |
|
|
7,252 |
|
|
|
4,735 |
|
|
|
24,297 |
|
|
|
9,118 |
|
|
Total
other expenses, net |
|
|
(10,683 |
) |
|
|
(12,147 |
) |
|
|
(28,434 |
) |
|
|
(74,281 |
) |
|
Income
before income taxes |
|
|
98,040 |
|
|
|
101,608 |
|
|
|
316,671 |
|
|
|
142,339 |
|
|
Income
tax provision |
|
|
(31,294 |
) |
|
|
(32,490 |
) |
|
|
(89,656 |
) |
|
|
(45,873 |
) |
|
Net
income |
|
$ |
66,746 |
|
|
$ |
69,118 |
|
|
$ |
227,015 |
|
|
$ |
96,466 |
|
|
Net
income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.01 |
|
|
$ |
1.05 |
|
|
$ |
3.43 |
|
|
$ |
1.46 |
|
|
Diluted |
|
$ |
1.00 |
|
|
$ |
1.04 |
|
|
$ |
3.41 |
|
|
$ |
1.46 |
|
|
Dividends declared per common share |
|
$ |
0.075 |
|
|
$ |
0.065 |
|
|
$ |
0.225 |
|
|
$ |
0.195 |
|
|
MERCER INTERNATIONAL
INC.INTERIM CONSOLIDATED BALANCE
SHEETS(Unaudited)(In thousands,
except share and per share data)
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2022 |
|
|
2021 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
287,254 |
|
|
$ |
345,610 |
|
|
Term deposit |
|
|
75,000 |
|
|
|
— |
|
|
Accounts receivable, net |
|
|
324,343 |
|
|
|
345,345 |
|
|
Inventories |
|
|
385,961 |
|
|
|
356,731 |
|
|
Prepaid expenses and other |
|
|
24,130 |
|
|
|
16,619 |
|
|
Total current assets |
|
|
1,096,688 |
|
|
|
1,064,305 |
|
|
Property, plant and equipment, net |
|
|
1,249,056 |
|
|
|
1,135,631 |
|
|
Investment in joint ventures |
|
|
45,262 |
|
|
|
49,651 |
|
|
Amortizable intangible assets, net |
|
|
57,406 |
|
|
|
47,902 |
|
|
Goodwill |
|
|
33,037 |
|
|
|
— |
|
|
Operating lease right-of-use assets |
|
|
12,620 |
|
|
|
9,712 |
|
|
Pension asset |
|
|
3,543 |
|
|
|
4,136 |
|
|
Other long-term assets |
|
|
46,371 |
|
|
|
38,718 |
|
|
Deferred income tax |
|
|
— |
|
|
|
1,177 |
|
|
Total assets |
|
$ |
2,543,983 |
|
|
$ |
2,351,232 |
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable and other |
|
$ |
322,368 |
|
|
$ |
282,307 |
|
|
Pension and other post-retirement benefit obligations |
|
|
725 |
|
|
|
817 |
|
|
Total current liabilities |
|
|
323,093 |
|
|
|
283,124 |
|
|
Long-term debt |
|
|
1,339,086 |
|
|
|
1,237,545 |
|
|
Pension and other post-retirement benefit obligations |
|
|
18,126 |
|
|
|
21,252 |
|
|
Operating lease liabilities |
|
|
8,306 |
|
|
|
6,574 |
|
|
Other long-term liabilities |
|
|
12,163 |
|
|
|
13,590 |
|
|
Deferred income tax |
|
|
122,860 |
|
|
|
95,123 |
|
|
Total liabilities |
|
|
1,823,634 |
|
|
|
1,657,208 |
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
Common shares $1 par value; 200,000,000 authorized; 66,167,000
issued and outstanding (2021 – 66,037,000) |
|
|
66,132 |
|
|
|
65,988 |
|
|
Additional paid-in capital |
|
|
351,438 |
|
|
|
347,902 |
|
|
Retained earnings |
|
|
583,057 |
|
|
|
370,927 |
|
|
Accumulated other comprehensive loss |
|
|
(280,278 |
) |
|
|
(90,793 |
) |
|
Total shareholders’
equity |
|
|
720,349 |
|
|
|
694,024 |
|
|
Total liabilities and
shareholders’ equity |
|
$ |
2,543,983 |
|
|
$ |
2,351,232 |
|
|
MERCER INTERNATIONAL
INC.INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In
thousands)
|
|
Three Months EndedSeptember
30, |
|
|
Nine Months EndedSeptember
30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Cash flows from (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
66,746 |
|
|
$ |
69,118 |
|
|
$ |
227,015 |
|
|
$ |
96,466 |
|
|
Adjustments to reconcile net income to cash flows from operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
32,144 |
|
|
|
34,315 |
|
|
|
95,288 |
|
|
|
97,237 |
|
|
Deferred income tax provision |
|
|
620 |
|
|
|
5,005 |
|
|
|
15,627 |
|
|
|
7,485 |
|
|
Loss on early extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,368 |
|
|
Defined benefit pension plans and other post-retirement benefit
plan expense |
|
|
424 |
|
|
|
879 |
|
|
|
1,301 |
|
|
|
2,654 |
|
|
Stock compensation expense |
|
|
1,214 |
|
|
|
1,005 |
|
|
|
3,680 |
|
|
|
2,590 |
|
|
Foreign exchange transaction gains |
|
|
(11,283 |
) |
|
|
(5,721 |
) |
|
|
(24,702 |
) |
|
|
(12,361 |
) |
|
Other |
|
|
(3,726 |
) |
|
|
(844 |
) |
|
|
(4,497 |
) |
|
|
(1,104 |
) |
|
Defined benefit pension plans and other post-retirement benefit
plan contributions |
|
|
(511 |
) |
|
|
(1,065 |
) |
|
|
(2,905 |
) |
|
|
(3,190 |
) |
|
Changes in working capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(17,679 |
) |
|
|
(31,441 |
) |
|
|
(4,297 |
) |
|
|
(27,500 |
) |
|
Inventories |
|
|
(8,803 |
) |
|
|
(39,512 |
) |
|
|
(23,870 |
) |
|
|
(82,275 |
) |
|
Accounts payable and accrued expenses |
|
|
34,323 |
|
|
|
12,180 |
|
|
|
37,569 |
|
|
|
46,783 |
|
|
Other |
|
|
(6,809 |
) |
|
|
(3,775 |
) |
|
|
(10,198 |
) |
|
|
(5,569 |
) |
|
Net cash from (used in) operating activities |
|
|
86,660 |
|
|
|
40,144 |
|
|
|
310,011 |
|
|
|
151,584 |
|
|
Cash
flows from (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(48,554 |
) |
|
|
(38,306 |
) |
|
|
(128,875 |
) |
|
|
(125,692 |
) |
|
Acquisitions, net of cash acquired |
|
|
(257,367 |
) |
|
|
(51,258 |
) |
|
|
(257,367 |
) |
|
|
(51,258 |
) |
|
Insurance proceeds |
|
|
1,164 |
|
|
|
1,530 |
|
|
|
7,574 |
|
|
|
21,578 |
|
|
Purchase of term deposit |
|
|
— |
|
|
|
— |
|
|
|
(75,000 |
) |
|
|
— |
|
|
Purchase of amortizable intangible assets |
|
|
(69 |
) |
|
|
(460 |
) |
|
|
(154 |
) |
|
|
(1,669 |
) |
|
Other |
|
|
474 |
|
|
|
2,873 |
|
|
|
1,126 |
|
|
|
2,764 |
|
|
Net cash from (used in) investing activities |
|
|
(304,352 |
) |
|
|
(85,621 |
) |
|
|
(452,696 |
) |
|
|
(154,277 |
) |
|
Cash
flows from (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(824,557 |
) |
|
Proceeds from issuance of senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
875,000 |
|
|
Proceeds from (repayment of) revolving credit facilities, net |
|
|
99,065 |
|
|
|
3,967 |
|
|
|
116,503 |
|
|
|
(53,145 |
) |
|
Dividend payments |
|
|
(4,962 |
) |
|
|
(4,293 |
) |
|
|
(9,922 |
) |
|
|
(8,582 |
) |
|
Payment of debt issuance costs |
|
|
(1,849 |
) |
|
|
(69 |
) |
|
|
(3,033 |
) |
|
|
(14,483 |
) |
|
Proceeds from government grants |
|
|
— |
|
|
|
361 |
|
|
|
1,067 |
|
|
|
8,893 |
|
|
Payment of finance lease obligations |
|
|
(1,640 |
) |
|
|
(2,227 |
) |
|
|
(8,246 |
) |
|
|
(5,763 |
) |
|
Other |
|
|
(27 |
) |
|
|
(27 |
) |
|
|
(593 |
) |
|
|
3,598 |
|
|
Net cash from (used in) financing activities |
|
|
90,587 |
|
|
|
(2,288 |
) |
|
|
95,776 |
|
|
|
(19,039 |
) |
|
Effect
of exchange rate changes on cash and cash equivalents |
|
|
(5,502 |
) |
|
|
1,961 |
|
|
|
(11,447 |
) |
|
|
(636 |
) |
|
Net
decrease in cash and cash equivalents |
|
|
(132,607 |
) |
|
|
(45,804 |
) |
|
|
(58,356 |
) |
|
|
(22,368 |
) |
|
Cash and
cash equivalents, beginning of period |
|
|
419,861 |
|
|
|
384,534 |
|
|
|
345,610 |
|
|
|
361,098 |
|
|
Cash and
cash equivalents, end of period |
|
$ |
287,254 |
|
|
$ |
338,730 |
|
|
$ |
287,254 |
|
|
$ |
338,730 |
|
|
MERCER INTERNATIONAL
INC.COMPUTATION OF OPERATING
EBITDA(Unaudited)(In
thousands)
Operating EBITDA is defined as operating income
plus depreciation and amortization and non-recurring capital asset
impairment charges. Management uses Operating EBITDA as a benchmark
measurement of its own operating results, and as a benchmark
relative to its competitors. Management considers it to be a
meaningful supplement to operating income as a performance measure
primarily because depreciation expense and non-recurring capital
asset impairment charges are not an actual cash cost, and
depreciation expense varies widely from company to company in a
manner that management considers largely independent of the
underlying cost efficiency of our operating facilities. In
addition, we believe Operating EBITDA is commonly used by
securities analysts, investors and other interested parties to
evaluate our financial performance.
Operating EBITDA does
not reflect the impact of a number of items that affect our net
income, including financing costs and the effect of derivative
instruments. Operating EBITDA is not a measure of financial
performance under GAAP, and should not be considered as an
alternative to net income or operating income as a measure of
performance, nor as an alternative to net cash from (used in)
operating activities as a measure of liquidity. The following
tables set forth the net income to Operating EBITDA:
|
Q3 |
|
|
Q2 |
|
|
Q3 |
|
|
YTD |
|
|
YTD |
|
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Net income |
$ |
66,746 |
|
|
$ |
71,372 |
|
|
$ |
69,118 |
|
|
$ |
227,015 |
|
|
$ |
96,466 |
|
|
Income tax provision |
|
31,294 |
|
|
|
34,126 |
|
|
|
32,490 |
|
|
|
89,656 |
|
|
|
45,873 |
|
|
Interest expense |
|
17,935 |
|
|
|
17,332 |
|
|
|
16,882 |
|
|
|
52,731 |
|
|
|
53,031 |
|
|
Loss
on early extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,368 |
|
|
Other
income |
|
(7,252 |
) |
|
|
(8,799 |
) |
|
|
(4,735 |
) |
|
|
(24,297 |
) |
|
|
(9,118 |
) |
|
Operating income |
|
108,723 |
|
|
|
114,031 |
|
|
|
113,755 |
|
|
|
345,105 |
|
|
|
216,620 |
|
|
Add:
Depreciation and amortization |
|
32,144 |
|
|
|
31,028 |
|
|
|
34,315 |
|
|
|
95,288 |
|
|
|
97,237 |
|
|
Operating EBITDA |
$ |
140,867 |
|
|
$ |
145,059 |
|
|
$ |
148,070 |
|
|
$ |
440,393 |
|
|
$ |
313,857 |
|
|
Mercer (NASDAQ:MERC)
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