Mercer International Inc. Reports First Quarter 2021 Results and Announces Quarterly Cash Dividend of $0.065
Mercer International reported a strong first quarter for 2021, showcasing significant growth with an Operating EBITDA of $82.0 million and a net income of $5.9 million ($0.09 per share). This represents an increase from both the previous quarter and the same period last year. Revenue surged to $412.7 million, an 18% rise year-over-year, driven by higher lumber and pulp sales. The company will pay a quarterly dividend of $0.065 per share on July 7, 2021, with strong market demand anticipated for both pulp and lumber.
- Operating EBITDA increased to $82.0 million, up 44% year-over-year.
- Net income of $5.9 million marks a significant turnaround from net losses in the previous year.
- Total revenues increased by 18% to $412.7 million, driven by robust pulp and lumber pricing.
- Record operating income of $28.0 million in the wood products segment, up from $5.6 million in Q1 2020.
- Quarterly dividend of $0.065 per share to be paid on July 7, 2021.
- Loss of $30.4 million recorded on the redemption of senior notes.
- NBSK pulp production decreased by 13% due to maintenance downtime.
- Planned significant maintenance downtime in Q2 2021 could impact future production.
Selected Highlights
- Record quarterly wood products segment results
- First quarter Operating EBITDA* of
$82.0 million and net income of$5.9 million
NEW YORK, April 29, 2021 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported first quarter 2021 Operating EBITDA increased to
In the first quarter of 2021, net income was
Mr. David Gandossi, the Chief Executive Officer, stated: “In the first quarter, our mills continued to run well and safely due to our extensive COVID-19 protection measures. Our Friesau sawmill’s strong operating results allowed us to take full advantage of the strong U.S. lumber market.
Our strong first quarter results reflected improved pulp pricing across all of our markets. First quarter average European NBSK list prices were up
Our wood products segment achieved another record quarterly result and continues to benefit from strong demand and robust pricing, particularly in the U.S. market. In the current quarter, approximately
In January 2021, we refinanced (the “Refinancing”) a significant portion of our debt by issuing
We have significant major maintenance scheduled this quarter, which requires a large number of specialty contractors at our mills. Consequently, we continue to maintain measures and procedures to operate our business safely and efficiently and to protect our people, including regular COVID-19 testing of employees and contractors.
While I am encouraged by the significant ramp up in the administration of vaccines globally, there has also been a widespread increase in infection rates which has led various countries to re-impose restrictions on certain activities.
Looking ahead to the second quarter, we are pleased with the strong pulp market fundamentals, which are being supported by steady demand. As well, lumber demand and pricing are expected to remain robust in all markets. Strong markets combined with our ample liquidity leave us well positioned to accelerate our strategic plan, including pursuing high return opportunities.”
____________________
*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 (loss) to Operating EBITDA.
Consolidated Financial Results
| Q1 | Q4 | Q1 | |||||||||
| 2021 | 2020 | 2020 | |||||||||
| (in thousands, except per share amounts) | |||||||||||
| Revenues | $ | 412,720 | $ | 398,195 | $ | 350,599 | |||||
| Operating income | $ | 51,029 | $ | 15,616 | $ | 24,062 | |||||
| Operating EBITDA | $ | 81,996 | $ | 49,506 | $ | 57,008 | |||||
| Loss on early extinguishment of debt | $ | (30,368 | ) | (1) | $ | — | $ | — | |||
| Net income (loss) | $ | 5,933 | $ | (12,977 | ) | $ | (3,392 | ) | |||
| Net income (loss) per common share | |||||||||||
| Basic and diluted | $ | 0.09 | $ | (0.20 | ) | $ | (0.05 | ) | |||
______________
(1) Redemption of
Consolidated – Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Total revenues for the three months ended March 31, 2021 increased by approximately
Costs and expenses in the current quarter increased by approximately
In the first quarter of 2021, Operating EBITDA increased by approximately
For the first quarter of 2021, our net income was
Segment Results
Pulp
| Three Months Ended March 31, | ||||||
| 2021 | 2020 | |||||
| (in thousands) | ||||||
| Pulp revenues | $ | 317,582 | $ | 278,948 | ||
| Energy and chemical revenues | $ | 22,174 | $ | 24,657 | ||
| Operating income | $ | 25,296 | $ | 21,439 | ||
Pulp segment operating income increased by approximately
In the first quarter of 2021, our NBSK pulp sales realizations increased by approximately
NBSK pulp production decreased by approximately
In the second quarter of 2021, our pulp mills currently have 95 days of planned annual maintenance downtime (approximately 140,400 ADMTs) of which approximately 63 days will be at our Peace River mill and primarily relates to boiler work which was deferred from last year and resulted from an incident in 2017. We expect insurance to cover the estimated remaining costs of about
In the current quarter of 2021 compared to the same quarter of 2020, primarily as a result of the weaker dollar on our Canadian dollar and euro denominated costs and expenses, we had a negative impact of approximately
In the first quarter of 2021, per unit fiber costs decreased by approximately
Wood Products
| Three Months Ended March 31, | ||||||
| 2021 | 2020 | |||||
| (in thousands) | ||||||
| Lumber revenues | $ | 67,311 | $ | 40,986 | ||
| Energy revenues | $ | 2,114 | $ | 2,631 | ||
| Wood residual revenues | $ | 1,562 | $ | 2,161 | ||
| Operating income | $ | 27,977 | $ | 5,555 | ||
In the first quarter of 2021, our wood products segment had record operating income of
Average lumber sales realizations increased by approximately
Per unit fiber costs increased by approximately
Liquidity
The following table is a summary of selected financial information as of the dates indicated:
| March 31, | December 31, | |||||
| 2021 | 2020 | |||||
| (in thousands) | ||||||
| Cash and cash equivalents | $ | 395,083 | $ | 361,098 | ||
| Working capital | $ | 704,896 | $ | 663,056 | ||
| Total assets | $ | 2,178,266 | $ | 2,129,126 | ||
| Long-term liabilities | $ | 1,380,445 | $ | 1,316,303 | ||
| Total shareholders' equity | $ | 567,638 | $ | 601,027 | ||
As of March 31, 2021, we had cash and cash equivalents of approximately
Included in our cash and cash equivalents is approximately
As a result of such new woodroom projects, our expected 2021 capital expenditures, excluding amounts financed by government grants and expected insurance proceeds, will increase to about
Current Market Environment
Although there is continued economic uncertainty resulting from the resurgence of the COVID-19 pandemic, we are currently expecting further modest pulp price improvements in the second quarter of 2021 due to stable pulp demand, particularly in China, and reduced supply.
We currently expect continuing strong lumber demand and prices in the U.S. market along with modestly improving sales realizations in the European market in the second quarter of 2021.
Quarterly Dividend
A quarterly dividend of
Earnings Release Call
In 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 April 30, 2021 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/wt6dyuct 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 and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber. To obtain further information on the company, please visit its web site at https://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", "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. Lee
Executive Chairman
(604) 684-1099
David M. Gandossi, FCPA, FCA
Chief Executive Officer
(604) 684-1099
-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
| Q1 | Q4 | Q1 | |||||||||
| 2021 | 2020 | 2020 | |||||||||
| (in thousands, except per share amounts) | |||||||||||
| Pulp segment revenues | $ | 339,756 | $ | 344,077 | $ | 303,605 | |||||
| Wood products segment revenues | 70,987 | 53,091 | 45,778 | ||||||||
| Corporate and other revenues | 1,977 | 1,027 | 1,216 | ||||||||
| Total revenues | $ | 412,720 | $ | 398,195 | $ | 350,599 | |||||
| Pulp segment operating income | $ | 25,296 | $ | 4,650 | $ | 21,439 | |||||
| Wood products segment operating income | 27,977 | 12,859 | 5,555 | ||||||||
| Corporate and other operating loss | (2,244 | ) | (1,893 | ) | (2,932 | ) | |||||
| Total operating income | $ | 51,029 | $ | 15,616 | $ | 24,062 | |||||
| Pulp segment depreciation and amortization | $ | 27,046 | $ | 30,104 | $ | 30,371 | |||||
| Wood products segment depreciation and amortization | 3,723 | 3,585 | 2,377 | ||||||||
| Corporate and other depreciation and amortization | 198 | 201 | 198 | ||||||||
| Total depreciation and amortization | $ | 30,967 | $ | 33,890 | $ | 32,946 | |||||
| Operating EBITDA | $ | 81,996 | $ | 49,506 | $ | 57,008 | |||||
| Loss on early extinguishment of debt | $ | (30,368 | ) | (1) | $ | — | $ | — | |||
| Income tax provision | $ | (2,698 | ) | $ | (1,645 | ) | $ | (5,344 | ) | ||
| Net income (loss) | $ | 5,933 | $ | (12,977 | ) | $ | (3,392 | ) | |||
| Net income (loss) per common share | |||||||||||
| Basic and diluted | $ | 0.09 | $ | (0.20 | ) | $ | (0.05 | ) | |||
| Common shares outstanding at period end | 65,988 | 65,868 | 65,800 | ||||||||
______________
(1) Redemption of the 2024 and 2025 Senior Notes.
Summary Operating Highlights
| Q1 | Q4 | Q1 | |||||||||
| 2021 | 2020 | 2020 | |||||||||
| Pulp Segment | |||||||||||
| Pulp production ('000 ADMTs) | |||||||||||
| NBSK | 396.9 | 436.9 | 455.2 | ||||||||
| NBHK | 81.6 | 87.4 | 78.9 | ||||||||
| Annual maintenance downtime ('000 ADMTs) | 37.8 | 21.5 | 2.3 | ||||||||
| Annual maintenance downtime (days) | 27 | 16 | 2 | ||||||||
| Pulp sales ('000 ADMTs) | |||||||||||
| NBSK | 418.6 | 469.5 | 438.3 | ||||||||
| NBHK | 69.0 | 93.6 | 66.0 | ||||||||
| Average NBSK pulp prices ($/ADMT)(1) | |||||||||||
| Europe | 1,037 | 880 | 833 | ||||||||
| China | 883 | 637 | 573 | ||||||||
| North America | 1,302 | 1,138 | 1,127 | ||||||||
| Average NBHK pulp prices ($/ADMT)(1) | |||||||||||
| China | 692 | 480 | 460 | ||||||||
| North America | 1,020 | 868 | 890 | ||||||||
| Average pulp sales realizations ($/ADMT)(2) | |||||||||||
| NBSK | 668 | 588 | 561 | ||||||||
| NBHK | 520 | 454 | 468 | ||||||||
| Energy production ('000 MWh)(3) | 519.1 | 568.1 | 578.4 | ||||||||
| Energy sales ('000 MWh)(3) | 201.1 | 225.3 | 231.7 | ||||||||
| Average energy sales realizations ($/MWh)(3) | 97 | 96 | 95 | ||||||||
| Wood Products Segment | |||||||||||
| Lumber production (MMfbm) | 117.8 | 111.4 | 116.4 | ||||||||
| Lumber sales (MMfbm) | 108.2 | 104.0 | 117.7 | ||||||||
| Average lumber sales realizations ($/Mfbm) | 622 | 467 | 348 | ||||||||
| Energy production and sales ('000 MWh) | 16.4 | 25.7 | 22.8 | ||||||||
| Average energy sales realizations ($/MWh) | 129 | 122 | 116 | ||||||||
| Average Spot Currency Exchange Rates | |||||||||||
| $ / €(4) | 1.2045 | 1.1925 | 1.1022 | ||||||||
| $ / C$(4) | 0.7902 | 0.7675 | 0.7438 | ||||||||
______________
(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
(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 Ended March 31, | |||||||
| 2021 | 2020 | ||||||
| Revenues | $ | 412,720 | $ | 350,599 | |||
| Costs and expenses | |||||||
| Cost of sales, excluding depreciation and amortization | 310,197 | 276,056 | |||||
| Cost of sales depreciation and amortization | 30,946 | 32,911 | |||||
| Selling, general and administrative expenses | 20,548 | 17,570 | |||||
| Operating income | 51,029 | 24,062 | |||||
| Other income (expenses) | |||||||
| Interest expense | (19,019 | ) | (20,084 | ) | |||
| Loss on early extinguishment of debt | (30,368 | ) | — | ||||
| Other income (expenses) | 6,989 | (2,026 | ) | ||||
| Total other expenses, net | (42,398 | ) | (22,110 | ) | |||
| Income before income taxes | 8,631 | 1,952 | |||||
| Income tax provision | (2,698 | ) | (5,344 | ) | |||
| Net income (loss) | $ | 5,933 | $ | (3,392 | ) | ||
| Net income (loss) per common share | |||||||
| Basic and diluted | $ | 0.09 | $ | (0.05 | ) | ||
| Dividends declared per common share | $ | 0.0650 | $ | 0.1375 | |||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 395,083 | $ | 361,098 | ||||
| Accounts receivable, net | 237,318 | 227,055 | ||||||
| Inventories | 288,111 | 271,696 | ||||||
| Prepaid expenses and other | 14,567 | 15,003 | ||||||
| Total current assets | 935,079 | 874,852 | ||||||
| Property, plant and equipment, net | 1,099,412 | 1,109,740 | ||||||
| Investment in joint ventures | 46,616 | 46,429 | ||||||
| Amortizable intangible assets, net | 50,525 | 51,571 | ||||||
| Operating lease right-of-use assets | 12,403 | 13,251 | ||||||
| Other long-term assets | 32,960 | 31,928 | ||||||
| Deferred income tax | 1,271 | 1,355 | ||||||
| Total assets | $ | 2,178,266 | $ | 2,129,126 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and other | $ | 229,324 | $ | 210,994 | ||||
| Pension and other post-retirement benefit obligations | 859 | 802 | ||||||
| Total current liabilities | 230,183 | 211,796 | ||||||
| Debt | 1,197,790 | 1,145,294 | ||||||
| Pension and other post-retirement benefit obligations | 31,033 | 31,810 | ||||||
| Finance lease liabilities | 51,618 | 41,329 | ||||||
| Operating lease liabilities | 9,043 | 9,933 | ||||||
| Other long-term liabilities | 14,566 | 10,909 | ||||||
| Deferred income tax | 76,395 | 77,028 | ||||||
| Total liabilities | 1,610,628 | 1,528,099 | ||||||
| Shareholders’ equity | ||||||||
| Common shares | 65,920 | 65,800 | ||||||
| Additional paid-in capital | 346,186 | 345,696 | ||||||
| Retained earnings | 218,750 | 217,106 | ||||||
| Accumulated other comprehensive loss | (63,218 | ) | (27,575 | ) | ||||
| Total shareholders’ equity | 567,638 | 601,027 | ||||||
| Total liabilities and shareholders’ equity | $ | 2,178,266 | $ | 2,129,126 | ||||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from (used in) operating activities | ||||||||
| Net income (loss) | $ | 5,933 | $ | (3,392 | ) | |||
| Adjustments to reconcile net income (loss) to cash flows from operating activities | ||||||||
| Depreciation and amortization | 30,967 | 32,946 | ||||||
| Deferred income tax provision (recovery) | 1,204 | (1,331 | ) | |||||
| Inventory impairment | — | 5,734 | ||||||
| Loss on early extinguishment of debt | 30,368 | — | ||||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 919 | 762 | ||||||
| Stock compensation expense (reversal) | 610 | (46 | ) | |||||
| Foreign exchange transaction gains | (8,606 | ) | (6,144 | ) | ||||
| Other | (616 | ) | (497 | ) | ||||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (923 | ) | (915 | ) | ||||
| Changes in working capital | ||||||||
| Accounts receivable | (12,423 | ) | (20,926 | ) | ||||
| Inventories | (20,799 | ) | (18,120 | ) | ||||
| Accounts payable and accrued expenses | 4,436 | (57,660 | ) | |||||
| Other | (782 | ) | (253 | ) | ||||
| Net cash from (used in) operating activities | 30,288 | (69,842 | ) | |||||
| Cash flows from (used in) investing activities | ||||||||
| Purchase of property, plant and equipment | (25,262 | ) | (23,018 | ) | ||||
| Purchase of amortizable intangible assets | (641 | ) | (438 | ) | ||||
| Other | (394 | ) | 51 | |||||
| Net cash from (used in) investing activities | (26,297 | ) | (23,405 | ) | ||||
| 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 | (15,070 | ) | 51,260 | |||||
| Dividend payments | — | (9,047 | ) | |||||
| Repurchase of common shares | — | (162 | ) | |||||
| Payment of debt issuance costs | (14,414 | ) | — | |||||
| Proceeds from government grants | 8,532 | — | ||||||
| Other | 1,921 | (9,801 | ) | |||||
| Net cash from (used in) financing activities | 31,412 | 32,250 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,418 | ) | (3,562 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 33,985 | (64,559 | ) | |||||
| Cash and cash equivalents, beginning of period | 361,098 | 351,085 | ||||||
| Cash and cash equivalents, end of period | $ | 395,083 | $ | 286,526 | ||||
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 (loss), 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 (loss) 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 (loss) to Operating EBITDA:
| Q1 | Q4 | Q1 | |||||||||
| 2021 | 2020 | 2020 | |||||||||
| Net income (loss) | $ | 5,933 | $ | (12,977 | ) | $ | (3,392 | ) | |||
| Income tax provision | 2,698 | 1,645 | 5,344 | ||||||||
| Interest expense | 19,019 | 20,690 | 20,084 | ||||||||
| Loss on early extinguishment of debt | 30,368 | — | — | ||||||||
| Other expenses (income) | (6,989 | ) | 6,258 | 2,026 | |||||||
| Operating income | 51,029 | 15,616 | 24,062 | ||||||||
| Add: Depreciation and amortization | 30,967 | 33,890 | 32,946 | ||||||||
| Operating EBITDA | $ | 81,996 | $ | 49,506 | $ | 57,008 | |||||
FAQ
What is the net income for Mercer International in Q1 2021?
What was the Operating EBITDA for Mercer International in Q1 2021?
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What challenges did Mercer International face in Q1 2021?
