Transforming biomass into bioproducts for a more sustainable world Q1 2025 Earnings Call May 2, 2025 Juan Carlos Bueno – President & CEO Richard Short – CFO, Executive VP & Secretary Mercer International Inc. Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial con ...

Financial Data and Key Metrics Changes - The company's EBITDA for Q1 2025 was $47 million, a significant decrease from $99 million in Q4 2024, primarily due to 22 days of planned maintenance downtime at the Celgar mill, which adversely impacted EBITDA by approximately $30 million [3][11] - The consolidated net loss for Q1 2025 was $22 million, or $0.33 per share, compared to a net income of $17 million, or $0.25 per share in Q4 2024 [11] - Cash consumption in Q1 was about $3 million, a decrease from $54 million in Q4 2024, with a net working capital increase of roughly $23 million due to seasonal movements [11][12] Business Segment Data and Key Metrics Changes - The pulp segment contributed an EBITDA of $50 million in Q1 2025, while the solid wood segment's EBITDA was essentially breakeven [4] - Pulp sales volumes increased by 26,000 tonnes to 478,000 tonnes in Q1, attributed to the timing of sales despite the planned downtime [6] - Lumber production reached a near-record 128 million board feet in Q1, up 12% from Q4, with sales volumes also hitting a new record at 131 million board feet, up about 6% from Q4 [8][9] Market Data and Key Metrics Changes - MBSK prices in Europe averaged $15.50 per ton in Q1, an increase of $50 from Q4, while North American MBSK prices averaged $17.53 per ton, up $66 from Q4 [4][5] - In China, the MBSK net price was $793 per tonne, an increase of $26 from Q4, while hardwood sales realizations were flat due to offsetting price changes in North America [5] - The North American MBHT average price was $12.68, down $30 from Q4, indicating mixed pricing trends across different markets [6] Company Strategy and Development Direction - The company is targeting a $100 million improvement in operational efficiency and cost savings by the end of 2026 compared to 2024, alongside a $20 million reduction in inventories and capital expenditures in 2025 [17] - The company is focusing on maximizing mill operating rates and generating cash to reduce debt, with a strong emphasis on improving asset reliability across all businesses [24][25] - The mass timber operations are expected to grow, with the company confident in its ability to capture market growth due to its significant production capacity and broad product offerings [30][37] Management's Comments on Operating Environment and Future Outlook - Management noted that the weakening U.S. dollar could enhance purchasing power for U.S.-sourced fiber, while also indicating potential modest fiber cost inflation and lower energy sales prices in Q2 [20][21] - The company anticipates stable demand for softwood pulp in the mid-term, with upward pricing pressure expected due to reduced supply [22][23] - Management expressed concerns about global economic uncertainty impacting buying patterns and pricing, particularly in China, but remains optimistic about the long-term outlook for softwood pulp [20][23] Other Important Information - The company plans for major maintenance shutdowns throughout the year, with a total of 79 days of planned downtime compared to 57 in 2024 [34] - A quarterly dividend of $0.75 per share has been approved for shareholders of record on June 26, 2025 [12] - The company is committed to its 2030 carbon reduction targets and believes its products will play a significant role in addressing climate change [38][39] Q&A Session Summary Question: Can you elaborate on the secondary effects related to tariffs? - Management explained that secondary effects include the weakening U.S. dollar impacting costs and a slowdown in demand in China, which has put pressure on prices, particularly hardwood [44] Question: What is the outlook for pulp prices in Q2? - Management indicated that they expect more positive than negative impacts on pulp prices in Q2 compared to Q1, despite some recent softness in lumber prices [47] Question: Can you provide context on the $100 million cost savings objectives? - Management detailed that the cost reduction program targets various operational aspects, with expectations to capture $40 to $50 million in savings by 2025 [52] Question: How would meaningful Section 232 tariffs impact lumber markets? - Management noted that Canadian lumber would become less competitive due to countervailing duties, which would favor their products from Germany [64] Question: Are there any changes in order patterns from pulp customers? - Management reported no significant changes in order patterns in Europe or North America, although there is some caution in China [106]

Financial Performance - Total revenues for Q1 2025 decreased by approximately 8% to $506.974 million from $553.430 million in Q1 2024, primarily due to lower pulp sales volumes [102]. - Net loss for Q1 2025 was $22.339 million, or $0.33 per share, compared to a net loss of $16.703 million, or $0.25 per share, in Q1 2024 [110]. - Operating EBITDA decreased by approximately 26% to $47.088 million from $63.601 million in Q1 2024, primarily due to higher planned maintenance downtime and increased per unit fiber costs [111]. - Selling, general and administrative expenses decreased by approximately 6% to $29.7 million in Q1 2025 from $31.7 million in Q1 2024, attributed to lower selling costs [104]. - Cash used in operating activities was $2.99 million in Q1 2025, a significant improvement from $29.19 million in Q1 2024 [141]. Revenue Breakdown - Pulp segment revenues were $381.080 million, down from $432.404 million in the same period last year, while solid wood segment revenues increased to $122.720 million from $119.023 million [98]. - Pulp revenues fell by approximately 13% to $357.0 million in Q1 2025 from $408.3 million in Q1 2024, attributed to lower sales volumes [114]. - Solid wood segment revenues increased modestly to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, driven by higher lumber and manufactured products revenues [130]. - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, primarily due to higher sales realizations [130]. Production and Sales - Pulp production for Q1 2025 was 370.4 thousand ADMTs, down from 453.2 thousand ADMTs in Q1 2024, indicating a reduction in output [100]. - Solid wood segment lumber production was 128.0 million board feet, with sales of 130.9 million board feet, compared to 127.0 million and 121.4 million board feet respectively in Q1 2024 [100]. - Total pulp production decreased by approximately 15% to 458,909 ADMTs in Q1 2025 from 538,907 ADMTs in Q1 2024, impacted by planned maintenance downtime [116]. Market Conditions - Average NBSK pulp prices in Europe were $1,550 per ADMT, while in North America they were $1,753 per ADMT, reflecting strong market conditions [91]. - The company expects modest increases in pulp prices in Europe and North America in Q2 2025, while anticipating lower prices in China due to economic conditions [92]. - Average lumber sales realizations increased by approximately 8% to $499 per Mfbm in Q1 2025 from $460 per Mfbm in Q1 2024, supported by lower supply and stronger demand [135]. Costs and Expenses - Per unit fiber costs for the pulp segment were steady in Q1 2025, but are expected to rise in Q2 2025 due to strong demand and reduced supply [95]. - Segment Operating EBITDA for the pulp segment decreased by approximately 27% to $49.9 million in Q1 2025 from $68.5 million in Q1 2024, mainly due to higher maintenance downtime [127]. - Cash paid for interest expense decreased to $25.0 million in Q1 2025 from $34.7 million in Q1 2024, reflecting a reduction of 28.0% [147]. Assets and Liabilities - Total assets increased to $2,336.17 million as of March 31, 2025, compared to $2,262.93 million as of December 31, 2024 [145]. - Long-term liabilities rose to $1,600.43 million as of March 31, 2025, up from $1,576.62 million as of December 31, 2024 [145]. - Planned capital expenditures for fiscal 2025 are expected to be between $90.0 million and $100.0 million, indicating a reduction from previous estimates [149]. Future Outlook - The company anticipates that cash flow from operations and available cash will be sufficient to finance capital requirements and pay dividends over the next 12 months [151]. - Future acquisitions may require substantial capital resources, which will be generated from cash flow, cash on hand, or borrowing [152]. Risks and Compliance - The company faces risks from geopolitical conflicts, including Russia's invasion of Ukraine, which could disrupt operations and financial results [167]. - The company’s operations are subject to extensive environmental regulations, which could incur substantial compliance costs [171]. - The company relies on third-party certifications for sustainable management standards, which are increasingly important to customers [177]. - The company’s profitability is highly dependent on managing its cost structure, particularly raw materials, which represent a significant component of operating costs [178].

Financial Performance - First quarter 2025 Operating EBITDA was $47.1 million, down 26% from $63.6 million in Q1 2024 and 53% from $99.2 million in Q4 2024[2][5][16] - Net loss for Q1 2025 was $22.3 million ($0.33 per share), compared to a net loss of $16.7 million ($0.25 per share) in Q1 2024 and net income of $16.7 million ($0.25 per share) in Q4 2024[2][14] - Total revenues for Q1 2025 decreased by approximately 8% to $507.0 million from $553.4 million in Q1 2024, primarily due to lower pulp sales volumes[14] - The pulp segment generated revenues of $381.080 million in Q1 2025, compared to $432.404 million in Q1 2024, reflecting a decrease of approximately 11.9%[40] - Total revenues for Q1 2025 were $506.974 million, down from $553.430 million in Q1 2024, representing a decrease of about 8.4%[40] - Net loss for Q1 2025 was $22.339 million, compared to a net loss of $16.703 million in Q1 2024[46] - Operating EBITDA for Q1 2025 was $47,088 thousand, a decrease from $63,601 thousand in Q1 2024, reflecting a decline of approximately 26%[55] Revenue Breakdown - Pulp revenues in Q1 2025 decreased by approximately 13% to $357.0 million from $408.3 million in Q1 2024, driven by lower sales volumes[19][22] - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, attributed to higher sales realizations and volumes[29] - The solid wood segment's revenues increased to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, primarily due to higher lumber and manufactured products revenues[28] - Average NBSK pulp sales realizations increased by approximately 7% to $783 per ADMT in Q1 2025 from $732 per ADMT in Q1 2024[20] - Average sales realizations for lumber in Q1 2025 were $499 per MMfbm, up from $460 per MMfbm in Q1 2024[42] Cost Management and Savings - The company is targeting approximately $100 million in cost savings by the end of 2026 through operational efficiency initiatives[5][7] - The company expects a reduction of inventories by $20 million and a decrease in capital expenditures by $20 million in 2025[7] - The company expects higher per unit fiber costs in Q2 2025 due to continued strong demand, with a 12% increase in fiber costs noted in Q1 2025 compared to Q1 2024[32] Production and Operational Impact - Planned maintenance downtime at the Celgar mill impacted production volumes by 22 days, resulting in a loss of approximately 29,700 ADMTs in Q1 2025[11][24] - Lumber production in Q1 2025 was 128.0 MMfbm, slightly up from 127.0 MMfbm in Q1 2024[42] - The company has a consolidated annual production capacity of 2.1 million tonnes of pulp and 960 million board feet of lumber[37] Liquidity and Assets - Cash and cash equivalents as of March 31, 2025, were $181.5 million, with total liquidity of approximately $470.7 million[33] - Total assets as of March 31, 2025, were $2.336 billion, an increase from $2.263 billion as of December 31, 2024[34] - Total assets increased to $2,336,167 thousand as of March 31, 2025, up from $2,262,932 thousand on December 31, 2024, representing a growth of approximately 3.2%[48] - Cash and cash equivalents decreased to $181,473 thousand at the end of Q1 2025, down from $184,925 thousand at the beginning of the period, a reduction of about 2.5%[50] Debt and Liabilities - Long-term debt increased to $1,503,203 thousand as of March 31, 2025, up from $1,473,986 thousand at the end of 2024, representing an increase of approximately 2%[48] - Total current liabilities rose to $298,382 thousand as of March 31, 2025, compared to $256,538 thousand at the end of 2024, an increase of approximately 16.3%[48] Shareholder Information - A quarterly dividend of $0.075 per share will be paid on July 3, 2025, to shareholders of record on June 26, 2025[35] Other Financial Metrics - The company reported a depreciation and amortization expense of $40,355 thousand for Q1 2025, slightly down from $40,404 thousand in Q1 2024[50] - The company experienced a foreign exchange transaction loss of $8,418 thousand in Q1 2025, compared to a gain of $3,449 thousand in Q1 2024[50] - Shareholders' equity increased to $437,351 thousand as of March 31, 2025, up from $429,775 thousand at the end of 2024, reflecting a growth of approximately 1.3%[48]

Core Insights - Mercer International Inc. reported a significant decline in Operating EBITDA for Q1 2025, amounting to $47.1 million, down from $63.6 million in Q1 2024 and $99.2 million in Q4 2024 [2][14] - The company experienced a net loss of $22.3 million in Q1 2025, compared to a net loss of $16.7 million in Q1 2024 and a net income of $16.7 million in Q4 2024 [2][41] - The decline in financial performance was attributed to planned maintenance downtime at the Celgar mill and the impact of a weaker dollar against the euro [3][14] Financial Performance - Total revenues for Q1 2025 decreased by approximately 8% to $507.0 million from $553.4 million in Q1 2024, primarily due to lower pulp sales volumes [12] - Costs and expenses decreased by approximately 10% to $500.2 million in Q1 2025 from $553.9 million in Q1 2024, influenced by lower pulp sales volumes and a stronger dollar [13] - The pulp segment's revenues decreased by approximately 12% to $381.1 million in Q1 2025 from $432.4 million in Q1 2024, mainly due to lower pulp revenues [18] Market Conditions - The pulp market showed continued strength, with third-party softwood pulp list prices increasing due to stable demand and global supply constraints [6] - Lumber sales realizations increased in both the U.S. and Europe during Q1 2025, driven by reduced supply and steady demand [7] - However, the company anticipates a modest decrease in lumber prices in the U.S. in Q2 2025 due to economic impacts on customer demand [7] Operational Insights - The company is implementing cost reduction initiatives targeting approximately $100 million in savings by the end of 2026 [5] - Planned maintenance downtime at the Celgar mill impacted production volumes, with 22 days of downtime in Q1 2025 [9][23] - The company expects to reduce inventories by $20 million in 2025 and has cut expected capital expenditures by $20 million [5] Segment Performance - The pulp segment's Operating EBITDA decreased by approximately 27% to $49.9 million in Q1 2025 from $68.5 million in Q1 2024, primarily due to higher planned maintenance downtime [17] - Lumber revenues increased by approximately 17% to $65.4 million in Q1 2025 from $55.9 million in Q1 2024, attributed to higher sales realizations and volumes [29] - The solid wood segment's revenues modestly increased to $122.7 million in Q1 2025 from $119.0 million in Q1 2024, driven by higher lumber and manufactured products revenues [28] Liquidity and Capital Structure - As of March 31, 2025, the company had cash and cash equivalents of $181.5 million and total liquidity of approximately $470.7 million [33] - Total assets increased to $2.34 billion as of March 31, 2025, compared to $2.26 billion at the end of 2024 [33] - The company declared a quarterly dividend of $0.075 per share, to be paid on July 3, 2025 [35]

Company Overview - Mercer International Inc. is a global forest products company with operations in Germany, the United States, and Canada [4] - The company has a consolidated annual production capacity of 2.1 million tonnes of pulp, 960 million board feet of lumber, 210,000 cubic meters of cross-laminated timber, 45,000 cubic meters of glulam, 17 million pallets, and 230,000 metric tonnes of biofuels [4] Upcoming Financial Results - Mercer International will release its first quarter results for the period ending March 31, 2025, on May 1, 2025, after the market closes [1] - A conference call to discuss the results will be hosted by President and CEO Juan Carlos Bueno and CFO Richard Short on May 2, 2025, at 10:00 am ET [1] Access to Conference Call - The conference call will be available live over the Internet through a webcast [2] - For those unable to participate live, a replay of the webcast will be archived and accessible on the company's website [2] - Audio access to the call can be obtained by dialing specific numbers for the USA, Canada, and Germany [3]

Financial Data and Key Metrics Changes - Operating EBITDA for Q4 2024 totaled $99 million, a significant increase from $50 million in Q3 2024, driven by no planned major maintenance downtime and higher sales volumes [5][6] - For the fiscal year 2024, EBITDA rose to $244 million compared to $17 million in 2023, attributed to stronger pulp markets and cost reduction initiatives [6][18] - Consolidated net income for Q4 was $17 million or $0.25 per share, compared to a net loss of $18 million or $0.26 per share in Q3 [18] - The company reported a consolidated net loss of $85 million or $1.27 per share for the full year 2024, an improvement from a net loss of $242 million or $3.65 per share in 2023 [18] Business Segment Data and Key Metrics Changes - The pulp segment contributed an EBITDA of $106 million in Q4, while the solid wood segment recorded a negative EBITDA of $5 million [7] - Softwood pulp sales realizations were $794 per ton in Q4, down from $814 per ton in Q3, while hardwood prices in China decreased to $578 per ton, a drop of $54 from Q3 [8][10] - Lumber sales volumes increased by 14% quarter-over-quarter to 124 million board feet, while production decreased by 6% to 115 million board feet due to planned downtime [15] Market Data and Key Metrics Changes - North American MBSK list price averaged $1,687 per ton in Q4, down about $75 from Q3, while European MBSK list price averaged $1,500 per ton, also down by $75 [8] - The average price gap in China between softwood and hardwood pulp increased to about $20, with hardwood prices expected to stabilize around $550 per ton [10][29] - The random lengths US benchmark for Western SPF number two and better average price was $435 per thousand board feet in Q4, compared to $366 in Q3, with current prices around $488, indicating a 20% increase [13] Company Strategy and Development Direction - The company is focused on reducing leverage through strategic projects, cost reduction programs, and prudent capital management [50] - Plans for capital spending in 2025 are estimated to be between $100 million and $120 million, heavily weighted towards maintenance and environmental projects [21][43] - The company aims to enhance the reliability of its assets and is optimistic about the growth potential of its mass timber business, which is expected to be a growth engine [34][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the softwood pulp market and the ability to navigate uncertainties related to tariffs [23][24] - The company anticipates modest price increases for lumber in both the US and Europe due to limited supply and increased demand [14][38] - Management highlighted the importance of maintaining open dialogue with customers and government officials to adapt to changing market conditions [24] Other Important Information - The company redeemed $300 million of 2026 senior notes using proceeds from the issuance of $200 million of additional 2028 senior notes and $100 million in cash [6] - Foreign exchange positively impacted operating income by about $26 million in Q4 due to a stronger US dollar [18] - The board approved a quarterly dividend of $0.075 per share for shareholders of record on March 26, 2025 [21] Q&A Session Summary Question: Can you provide more detail on input cost trends this quarter? - Management noted a 5% decrease in pulp costs in Canadian and German mills, while a 5% increase was observed in lumber costs in FreeCell [55][56] Question: What is the outlook for the European wood business? - Management indicated that FreeCell is resilient due to its efficiency, while Torghao is expected to improve as lumber production increases [60][62] Question: What are the expected trends for fiber costs in Germany? - Fiber costs are expected to increase by about 6% in Germany and 10% for lumber due to reduced harvesting [57] Question: How do you see the mass timber demand evolving? - Management expects mass timber sales to remain flat in 2025, with a focus on smaller projects rather than large ones [75] Question: What is the impact of tariffs on your business? - Management believes that tariffs could create opportunities, particularly if Canadian lumber is impacted, allowing European products to be more competitive in the US market [106][110]

Financial Performance - Fourth quarter 2024 Operating EBITDA increased to $99.2 million, up from $21.1 million in Q4 2023 and $50.5 million in Q3 2024[2][6][17] - Net income for Q4 2024 was $16.7 million ($0.25 per share), a significant recovery from a net loss of $87.2 million (negative $1.31 per share) in Q4 2023[3][6] - Full year 2024 Operating EBITDA rose to $243.7 million, compared to a loss of $242.1 million in 2023[6] - Operating EBITDA increased to $243.7 million in 2024 from $17.5 million in 2023, driven by higher sales realizations in pulp, manufactured products, and lumber[36] - Operating income for the year ended December 31, 2024, was $15.0 million, compared to a loss of $188.8 million in 2023[50] Revenue Growth - Total revenues for Q4 2024 increased by approximately 4% to $488.4 million from $470.5 million in Q4 2023, driven by higher pulp sales realizations[15] - Pulp revenues in Q4 2024 increased to $351.2 million from $340.7 million in Q4 2023, with average NBSK pulp sales realizations up approximately 12% to $794 per ADMT[21][22] - Solid wood segment revenues increased by approximately 6% to $111.6 million in Q4 2024, primarily due to higher lumber and biofuels revenues[29] - Lumber revenues in Q4 2024 rose by approximately 23% to $58.6 million from $47.8 million in Q4 2023, driven by higher sales realizations and volumes[30] - Pulp segment revenues for Q4 2024 were $375.5 million, compared to $364.2 million in Q4 2023, while solid wood segment revenues were $111.6 million in Q4 2024, up from $105.4 million in Q4 2023[45] Cost Management - In 2024, costs and expenses decreased by approximately 7% to $2,028.4 million from $2,182.6 million in 2023, primarily due to lower per unit production costs and foreign exchange gains[35] - Long-term debt decreased to $1.47 billion in 2024 from $1.61 billion in 2023, a reduction of approximately 8%[52] - The company reduced long-term debt by over $100 million in Q4 2024, focusing on debt reduction as a key goal moving forward[12][14] Liquidity and Assets - As of December 31, 2024, total liquidity was approximately $488.6 million, consisting of $184.9 million in cash and cash equivalents and $303.7 million available under revolving credit facilities[37] - Total assets decreased to $2,262.9 million in 2024 from $2,662.6 million in 2023, while total shareholders' equity fell to $429.8 million from $635.4 million[38] - Cash and cash equivalents at the end of 2024 were $184.9 million, down from $314.0 million in 2023, a decrease of 41%[54] - Inventory levels decreased to $361.7 million in 2024 from $414.2 million in 2023, a reduction of about 13%[52] Future Outlook - The company expects modestly higher softwood pulp sales realizations in Q1 2025 due to stable demand and global supply constraints[4] - The company expects to achieve further synergies from the Torgau acquisition as market conditions improve[35] Dividends - A quarterly dividend of $0.075 per share is scheduled for payment on April 2, 2025, subject to Board approval[39] - The company declared dividends of $0.075 per common share for both Q4 2024 and Q4 2023, maintaining the same level[50] Production and Sales - Lumber production in Q4 2024 was 114.7 million board feet, with sales of 123.6 million board feet, indicating strong demand[47] - Biofuels production in 2024 was 160.4 thousand tonnes, with sales of 184.4 thousand tonnes, showing an increase from 144.8 thousand tonnes in 2023[47] Price Changes - The average NBSK pulp price in North America was $1,687 per ADMT in Q4 2024, compared to $1,312 per ADMT in Q4 2023, reflecting a significant price increase[47] Impairments - The company reported an impairment of $34.3 million related to goodwill in 2024, which was not present in 2023[54]

Financial Performance - As of December 31, 2024, the company reported long-lived assets of $1,304.5 million, with depreciation and amortization recorded at $170.8 million for the year [451]. - The company recognized an impairment against all of the goodwill in 2024 due to the fair value of the Torgau facility being less than its carrying value, primarily influenced by weakness in the lumber, pallet, and biofuels markets in Europe [450]. - The company’s net periodic pension and other post-retirement benefit cost for 2024 was $1.3 million, reflecting various actuarial estimates [458]. - The company has revenues from long-term contracts recognized over the contract term, with revenue and cost estimates reviewed quarterly [466][467]. - The company recognizes revenue as costs are incurred for long-term contracts, which may significantly impact reported revenue [466]. Assets and Liabilities - The company’s pension and other post-retirement benefit obligations totaled $91.6 million as of December 31, 2024, with accumulated pension plan assets valued at $89.1 million [458]. - As of December 31, 2024, the company reported a net deferred income tax liability of $57.0 million, with deferred income tax assets net of a $81.8 million valuation allowance [463]. - A one-percentage point increase in the discount rate would decrease the 2024 net periodic benefit cost by $292, while a decrease would increase it by $351 [462]. - Contingent liabilities are disclosed when there is a reasonable possibility of loss, with assessments based on historical experience and legal counsel recommendations [471][472]. Market Conditions - The dollar was approximately 6% stronger against the euro and 8% stronger against the Canadian dollar as of December 31, 2024, compared to the previous year [440]. - The average exchange rate for the euro during 2023 was $1.0817, while the average for the Canadian dollar was $0.7412 [19]. - Changes in market conditions or tax planning opportunities may lead to adjustments in the valuation allowance for deferred income tax assets [465]. Accounting and Estimates - The company’s financial statements are prepared in accordance with GAAP, requiring management to make subjective judgments and estimates that could materially affect reported results [445]. - The company has incorporated information from various sources regarding market share and industry data, although the accuracy of this information is not guaranteed [14]. - The valuation of inventories is based on the lower of cost or net realizable value, requiring judgment on current and expected selling prices [468]. - Assets classified as held for sale are measured at the lower of carrying amount and fair value less cost to sell, with fair value estimates sensitive to market conditions [470]. - The company assesses the realizability of deferred income tax assets at each reporting period, considering both positive and negative evidence [463]. - The company applies judgment in estimating costs to complete long-term contracts, influenced by various economic factors [466]. - The company’s management estimates production capacity based on historical levels and maintenance downtime, which may affect future operational results [15].

Core Insights - Mercer International Inc. reported a significant improvement in financial performance for Q4 2024, with Operating EBITDA reaching $99.2 million, up from $21.1 million in Q4 2023 and $50.5 million in Q3 2024 [2][3][11] - The company achieved a net income of $16.7 million in Q4 2024, a turnaround from a net loss of $87.2 million in Q4 2023 and a net loss of $17.6 million in Q3 2024 [3][11] - The CEO highlighted strong pulp market conditions and a stable demand outlook for softwood pulp, which is expected to drive sales realizations higher in Q1 2025 [4][10] Financial Performance - Total revenues for Q4 2024 increased by approximately 4% to $488.4 million from $470.5 million in Q4 2023, primarily due to higher pulp sales realizations [14] - Costs and expenses decreased by approximately 17% to $438.0 million in Q4 2024 from $526.9 million in Q4 2023, driven by lower pulp sales volumes and foreign exchange gains [15][22] - For the full year 2024, total revenues modestly increased to $2,043.4 million from $1,993.8 million in 2023, with Operating EBITDA rising to $243.7 million from $17.5 million [33][35] Segment Performance - In the pulp segment, revenues increased by approximately 3% to $375.5 million in Q4 2024 from $364.2 million in Q4 2023, driven by higher pulp revenues despite lower sales volumes [19] - The solid wood segment saw revenues increase by approximately 6% to $111.6 million in Q4 2024 from $105.4 million in Q4 2023, primarily due to higher lumber and biofuels revenues [28] - Lumber revenues increased by approximately 23% to $58.6 million in Q4 2024 from $47.8 million in Q4 2023, attributed to higher sales realizations and volumes [29] Market Conditions - Softwood pulp prices remained strong in Q4 2024, with expectations for modestly higher sales realizations in Q1 2025 due to stable demand and global supply constraints [4][10] - Hardwood pulp prices in China and North America decreased in Q4 2024 but are expected to trend upwards in Q1 2025 as maintenance season begins in Latin America [5] - Lumber prices are anticipated to increase in Q1 2025 due to stronger demand from certain European countries and limited North American supply [6] Liquidity and Debt Management - As of December 31, 2024, the company had aggregate liquidity of approximately $488.6 million, including cash and cash equivalents of $184.9 million [36] - The company successfully reduced long-term debt by over $100 million in 2024, focusing on debt reduction as a key goal moving forward [11][12]