Mercer International Inc. Reports First Quarter 2022 Results and Announces Quarterly Cash Dividend of $0.075
Mercer International Inc. reported a robust first quarter of 2022, with net income of $88.9 million ($1.35 per share) and Operating EBITDA of $154.5 million, up from $82.0 million in Q1 2021. Total revenues soared by 44% to a record $592.7 million, driven by increased pulp, lumber, and energy prices, alongside strong sales volumes. The company also announced a $0.075 per share dividend payable on July 7, 2022. Despite challenges with rising input costs and global logistics issues, Mercer remains optimistic about pricing trends and its new cross-laminated timber facility's potential.
- Record total revenues of $592.7 million, up 44% year-over-year.
- Net income increased to $88.9 million, showing strong profitability.
- Operating EBITDA improved significantly to $154.5 million, up from $82.0 million in Q1 2021.
- Strong performance in the pulp segment with revenues reaching $446.9 million.
- Quarterly dividend of $0.075 reflects confidence in future earnings.
- Increased costs of key inputs, including fiber and energy, which may impact profit margins.
- Global logistics challenges affecting production, particularly in Canadian pulp mills.
Selected Highlights
- First quarter net income of
$88.9 million and Operating EBITDA* of$154.5 million - Record quarterly pulp, lumber and energy revenues
NEW YORK, April 28, 2022 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported first quarter 2022 Operating EBITDA increased to a
In the first quarter of 2022, net income was
Mr. David Gandossi, the Chief Executive Officer, stated: “Our robust first quarter operating results were driven by strong sales volumes, increased pulp, lumber and energy pricing and our German mills’ sales of surplus energy into the spot market. These positive effects were only partially offset by higher costs for key inputs including fiber, energy and chemicals. Despite the impact of such cost inflation, we believe that our cost control measures will help mitigate the effect of increases going forward and we see our surplus energy sales as a strong hedge for higher energy prices.
Overall, our first quarter pulp results compared to the fourth quarter of 2021, benefitted from higher pulp pricing and the Rosenthal turbine running for most of the quarter allowing for surplus energy sales and minimal energy purchases, which were partially offset by higher fiber and natural gas costs. Also, our fourth quarter 2021 results included
In the first quarter of 2022, our Friesau sawmill’s production continued its strong performance and its results were materially improved over the trailing fourth quarter primarily due to improved lumber pricing in the U.S. In the first quarter of 2022, our solid wood segment generated operating income of
Pulp prices improved in all markets during the first quarter as low customer inventory levels and limited supply, including as a result of global logistical slowdowns, led to higher pricing. As of March 31, 2022, third party industry quoted NBSK list prices were approximately
Global logistics challenges continue to impact our business primarily with regards to North American rail traffic which led to us having to slow production at our Canadian pulp mills. We primarily managed these logistical challenges by using additional trucking which is higher cost compared to rail. We are seeing the railways beginning to make headway with the unwinding of their system backlogs and we are currently optimistic that such logistics issues will be much improved over the coming summer months.
As we move into the second quarter, we currently expect some continued upward pricing pressure on pulp prices as a result of current supply-demand dynamics. While lumber prices in the United States have declined in the last few weeks, we generally expect them to remain at historically strong levels into the summer. Further, we currently expect strong energy demand and prices in Germany to continue in the second quarter of 2022.
Currently our 2022 capital expenditures are on track to total approximately
What I am most excited about is our recently acquired cross-laminated timber facility (the "CLT Facility") located near Spokane, Washington. It is a state-of-the-art facility that produces cross-laminated timber ("CLT") which is a wood panel product made from adhering layers of solid sawn timber. CLT is a more sustainable alternative for use in construction and home building. In the first quarter we built out our senior sales and marketing team which interfaces directly with developers, architects and builders to support and work with them to incorporate our CLT products. We have also started ramping up the business and have identified new offerings to build out and expand the CLT Facility's product line. Over time, as we continue to ramp up and expand its business and with some small targeted capital expenditures to expand its product offerings, I believe the CLT Facility will be a key foundation of our solid wood business.
While many countries globally have eased pandemic restrictions and the global roll-out of vaccines continues, health and infection risks from COVID-19, including from variants, continue. Consequently, we will maintain our measures and procedures put in place to protect our people and allow us to operate our business safely and efficiently.
Finally, as you are likely aware, I have announced my retirement as CEO and President of Mercer effective May 1, 2022. The Board has appointed Juan Carlos Bueno, a globally recognized leader in the biomaterials space, to take the Company through the next stage of its development. Our new leadership, combined with an excellent management team and outstanding employees, will continue to advance our growth strategy into the future. Although I will no longer be leading Mercer I will support Juan Carlos’ transition and will enjoy watching Mercer’s progress”.
____________________
*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
| Q1 | Q4 | Q1 | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Revenues | $ | 592,741 | $ | 518,957 | $ | 412,720 | ||||||
| Operating income | $ | 122,351 | $ | 129,963 | $ | 51,029 | ||||||
| Operating EBITDA | $ | 154,467 | $ | 164,925 | $ | 81,996 | ||||||
| Loss on early extinguishment of debt | $ | — | $ | — | $ | (30,368 | ) | (1) | ||||
| Net income | $ | 88,897 | $ | 74,522 | $ | 5,933 | ||||||
| Net income per common share | ||||||||||||
| Basic | $ | 1.35 | $ | 1.13 | $ | 0.09 | ||||||
| Diluted | $ | 1.34 | $ | 1.12 | $ | 0.09 | ||||||
______________
(1) Redemption of
Consolidated – Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Total revenues in the first quarter of 2022 increased by approximately
In the first quarter of 2022, our energy and chemical revenues increased by
Costs and expenses in the first quarter of 2022 increased by approximately
In the first quarter of 2022, Operating EBITDA increased by approximately
Segment Results
Pulp
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Pulp revenues | $ | 446,911 | $ | 317,582 | ||||
| Energy and chemical revenues | $ | 39,020 | $ | 22,174 | ||||
| Operating income | $ | 86,236 | $ | 25,296 | ||||
In the first quarter of 2022, pulp segment operating income increased to
Pulp revenues in the first quarter of 2022 increased by approximately
Energy and chemical revenues increased by approximately
In the first 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 and global logistics issues restricting supply. Average NBSK pulp sales realizations increased by approximately
Costs and expenses in the first quarter of 2022 increased by approximately
In the first quarter of 2022 per unit fiber costs increased by approximately
Wood Products
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Lumber revenues | $ | 92,366 | $ | 67,311 | ||||
| Energy revenues | $ | 5,177 | $ | 2,114 | ||||
| Wood residual revenues | $ | 3,490 | $ | 1,562 | ||||
| Operating income | $ | 40,479 | $ | 27,977 | ||||
In the first quarter of 2022, our wood products segment had operating income of
Average lumber sales realizations increased by approximately
In the comparative quarter of 2021, per unit fiber costs were lower as a result of a large supply of beetle damaged wood. As producers have worked through such wood, more green wood is being harvested. In the first quarter of 2022 per unit fiber costs increased by approximately
Liquidity
As of March 31, 2022, we had cash and cash equivalents of approximately
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 29, 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/t6i78rsg 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, USA and Canada with consolidated annual production capacity of 2.3 million tonnes of pulp, 550 million board feet of lumber and 140 thousand cubic meters of CLT. 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", "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. 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 | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Pulp segment revenues | $ | 485,931 | $ | 436,345 | $ | 339,756 | ||||||
| Wood products segment revenues | 101,033 | 78,932 | 70,987 | |||||||||
| Corporate and other revenues | 5,777 | 3,680 | 1,977 | |||||||||
| Total revenues | $ | 592,741 | $ | 518,957 | $ | 412,720 | ||||||
| Pulp segment operating income | $ | 86,236 | $ | 113,172 | $ | 25,296 | ||||||
| Wood products segment operating income | 40,479 | 19,876 | 27,977 | |||||||||
| Corporate and other operating loss | (4,364 | ) | (3,085 | ) | (2,244 | ) | ||||||
| Total operating income | $ | 122,351 | $ | 129,963 | $ | 51,029 | ||||||
| Pulp segment depreciation and amortization | $ | 27,684 | $ | 30,298 | $ | 27,046 | ||||||
| Wood products segment depreciation and amortization | 3,637 | 3,712 | 3,723 | |||||||||
| Corporate and other depreciation and amortization | 795 | 952 | 198 | |||||||||
| Total depreciation and amortization | $ | 32,116 | $ | 34,962 | $ | 30,967 | ||||||
| Operating EBITDA | $ | 154,467 | $ | 164,925 | $ | 81,996 | ||||||
| Loss on early extinguishment of debt | $ | — | $ | — | $ | (30,368 | ) | (1) | ||||
| Income tax provision | $ | (24,236 | ) | $ | (43,706 | ) | $ | (2,698 | ) | |||
| Net income | $ | 88,897 | $ | 74,522 | $ | 5,933 | ||||||
| Net income per common share | ||||||||||||
| Basic | $ | 1.35 | $ | 1.13 | $ | 0.09 | ||||||
| Diluted | $ | 1.34 | $ | 1.12 | $ | 0.09 | ||||||
| Common shares outstanding at period end | 66,132 | 66,037 | 65,988 | |||||||||
______________
(1) Redemption of
Summary Operating Highlights
| Q1 | Q4 | Q1 | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| Pulp Segment | ||||||||||||
| Pulp production ('000 ADMTs) | ||||||||||||
| NBSK | 435.5 | 476.2 | 396.9 | |||||||||
| NBHK | 56.8 | 48.8 | 81.6 | |||||||||
| Annual maintenance downtime ('000 ADMTs) | — | — | 37.8 | |||||||||
| Annual maintenance downtime (days) | — | — | 27 | |||||||||
| Pulp sales ('000 ADMTs) | ||||||||||||
| NBSK | 505.1 | 465.6 | 418.6 | |||||||||
| NBHK | 49.9 | 50.7 | 69.0 | |||||||||
| Average NBSK pulp prices ($/ADMT)(1) | ||||||||||||
| Europe | 1,330 | 1,302 | 1,037 | |||||||||
| China | 899 | 723 | 883 | |||||||||
| North America | 1,527 | 1,472 | 1,302 | |||||||||
| Average NBHK pulp prices ($/ADMT)(1) | ||||||||||||
| China | 668 | 562 | 692 | |||||||||
| North America | 1,312 | 1,262 | 1,020 | |||||||||
| Average pulp sales realizations ($/ADMT)(2) | ||||||||||||
| NBSK | 812 | 784 | 668 | |||||||||
| NBHK | 695 | 649 | 520 | |||||||||
| Energy production ('000 MWh)(3) | 531.5 | 480.9 | 519.1 | |||||||||
| Energy sales ('000 MWh)(3) | 194.7 | 184.2 | 201.1 | |||||||||
| Average energy sales realizations ($/MWh)(3) | 186 | 184 | 97 | |||||||||
| Wood Products Segment | ||||||||||||
| Lumber production (MMfbm) | 115.6 | 111.3 | 117.8 | |||||||||
| Lumber sales (MMfbm) | 109.9 | 104.4 | 108.2 | |||||||||
| Average lumber sales realizations ($/Mfbm) | 840 | 689 | 622 | |||||||||
| Energy production and sales ('000 MWh) | 24.5 | 23.2 | 16.4 | |||||||||
| Average energy sales realizations ($/MWh) | 211 | 213 | 129 | |||||||||
| Average Spot Currency Exchange Rates | ||||||||||||
| $ / €(4) | 1.1216 | 1.1437 | 1.2045 | |||||||||
| $ / C$(4) | 0.7897 | 0.7936 | 0.7902 | |||||||||
______________
(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, | |||||||||
| 2022 | 2021 | ||||||||
| Revenues | $ | 592,741 | $ | 412,720 | |||||
| Costs and expenses | |||||||||
| Cost of sales, excluding depreciation and amortization | 416,095 | 310,197 | |||||||
| Cost of sales depreciation and amortization | 32,097 | 30,946 | |||||||
| Selling, general and administrative expenses | 22,198 | 20,548 | |||||||
| Operating income | 122,351 | 51,029 | |||||||
| Other income (expenses) | |||||||||
| Interest expense | (17,464 | ) | (19,019 | ) | |||||
| Loss on early extinguishment of debt | — | (30,368 | ) | ||||||
| Other income | 8,246 | 6,989 | |||||||
| Total other expenses, net | (9,218 | ) | (42,398 | ) | |||||
| Income before income taxes | 113,133 | 8,631 | |||||||
| Income tax provision | (24,236 | ) | (2,698 | ) | |||||
| Net income | $ | 88,897 | $ | 5,933 | |||||
| Net income per common share | |||||||||
| Basic | $ | 1.35 | $ | 0.09 | |||||
| Diluted | $ | 1.34 | $ | 0.09 | |||||
| Dividends declared per common share | $ | 0.0750 | $ | 0.0650 | |||||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| March 31, | December 31, | ||||||||
| 2022 | 2021 | ||||||||
| ASSETS | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 410,705 | $ | 345,610 | |||||
| Accounts receivable, net | 387,779 | 345,345 | |||||||
| Inventories | 353,407 | 356,731 | |||||||
| Prepaid expenses and other | 17,494 | 16,619 | |||||||
| Total current assets | 1,169,385 | 1,064,305 | |||||||
| Property, plant and equipment, net | 1,130,337 | 1,135,631 | |||||||
| Investment in joint ventures | 49,574 | 49,651 | |||||||
| Amortizable intangible assets, net | 47,237 | 47,902 | |||||||
| Operating lease right-of-use assets | 9,172 | 9,712 | |||||||
| Pension asset | 4,009 | 4,136 | |||||||
| Other long-term assets | 45,887 | 38,718 | |||||||
| Deferred income tax | 1,343 | 1,177 | |||||||
| Total assets | $ | 2,456,944 | $ | 2,351,232 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities | |||||||||
| Accounts payable and other | $ | 280,366 | $ | 282,307 | |||||
| Pension and other post-retirement benefit obligations | 818 | 817 | |||||||
| Total current liabilities | 281,184 | 283,124 | |||||||
| Long-term debt | 1,264,525 | 1,237,545 | |||||||
| Pension and other post-retirement benefit obligations | 20,884 | 21,252 | |||||||
| Operating lease liabilities | 6,110 | 6,574 | |||||||
| Other long-term liabilities | 13,270 | 13,590 | |||||||
| Deferred income tax | 102,637 | 95,123 | |||||||
| Total liabilities | 1,688,610 | 1,657,208 | |||||||
| Shareholders’ equity | |||||||||
| Common shares | 66,083 | 65,988 | |||||||
| Additional paid-in capital | 348,756 | 347,902 | |||||||
| Retained earnings | 454,864 | 370,927 | |||||||
| Accumulated other comprehensive loss | (101,369 | ) | (90,793 | ) | |||||
| Total shareholders’ equity | 768,334 | 694,024 | |||||||
| Total liabilities and shareholders’ equity | $ | 2,456,944 | $ | 2,351,232 | |||||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended March 31, | |||||||||
| 2022 | 2021 | ||||||||
| Cash flows from (used in) operating activities | |||||||||
| Net income | $ | 88,897 | $ | 5,933 | |||||
| Adjustments to reconcile net income to cash flows from operating activities | |||||||||
| Depreciation and amortization | 32,116 | 30,967 | |||||||
| Deferred income tax provision | 8,383 | 1,204 | |||||||
| Loss on early extinguishment of debt | — | 30,368 | |||||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 438 | 919 | |||||||
| Stock compensation expense | 949 | 610 | |||||||
| Foreign exchange transaction gains | (3,828 | ) | (8,606 | ) | |||||
| Other | (801 | ) | (616 | ) | |||||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (1,194 | ) | (923 | ) | |||||
| Changes in working capital | |||||||||
| Accounts receivable | (52,127 | ) | (12,423 | ) | |||||
| Inventories | (1,725 | ) | (20,799 | ) | |||||
| Accounts payable and accrued expenses | (567 | ) | 4,436 | ||||||
| Other | (1,731 | ) | (782 | ) | |||||
| Net cash from (used in) operating activities | 68,810 | 30,288 | |||||||
| Cash flows from (used in) investing activities | |||||||||
| Purchase of property, plant and equipment | (33,293 | ) | (25,262 | ) | |||||
| Insurance proceeds | 6,410 | — | |||||||
| Purchase of amortizable intangible assets | (60 | ) | (641 | ) | |||||
| Other | 153 | (394 | ) | ||||||
| Net cash from (used in) investing activities | (26,790 | ) | (26,297 | ) | |||||
| 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 | 30,504 | (15,070 | ) | ||||||
| Payment of debt issuance costs | (1,184 | ) | (14,414 | ) | |||||
| Proceeds from government grants | 1,067 | 8,532 | |||||||
| Payment of finance lease obligations | (4,935 | ) | (1,703 | ) | |||||
| Other | (843 | ) | 3,624 | ||||||
| Net cash from (used in) financing activities | 24,609 | 31,412 | |||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,534 | ) | (1,418 | ) | |||||
| Net increase in cash and cash equivalents | 65,095 | 33,985 | |||||||
| Cash and cash equivalents, beginning of period | 345,610 | 361,098 | |||||||
| Cash and cash equivalents, end of period | $ | 410,705 | $ | 395,083 | |||||
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:
| Q1 | Q4 | Q1 | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| Net income | $ | 88,897 | $ | 74,522 | $ | 5,933 | ||||||
| Income tax provision | 24,236 | 43,706 | 2,698 | |||||||||
| Interest expense | 17,464 | 17,016 | 19,019 | |||||||||
| Loss on early extinguishment of debt | — | — | 30,368 | |||||||||
| Other income | (8,246 | ) | (5,281 | ) | (6,989 | ) | ||||||
| Operating income | 122,351 | 129,963 | 51,029 | |||||||||
| Add: Depreciation and amortization | 32,116 | 34,962 | 30,967 | |||||||||
| Operating EBITDA | $ | 154,467 | $ | 164,925 | $ | 81,996 | ||||||
FAQ
What were Mercer International's Q1 2022 earnings results?
What is the dividend payout for Mercer International in 2022?
How did Mercer International's total revenues change in Q1 2022?
What challenges is Mercer International currently facing?
How did pulp and lumber prices perform in Q1 2022?
