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Mercer(MERC) - 2021 Q4 - Earnings Call Transcript
MERCMercer(MERC)2022-02-18 20:56
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Financial Data and Key Metrics Changes - The company achieved record EBITDA in Q4 2021 of almost 165million,comparedtoapproximately165 million, compared to approximately 148 million in Q3 2021 [8] - For the full year 2021, record EBITDA totaled almost 479million,exceedingthepreviousrecordbyover479 million, exceeding the previous record by over 100 million [9] - Net income for Q4 was 74.5million,or74.5 million, or 1.13 per basic share, compared to 69million,or69 million, or 1.05 per share in Q3 [14] - Cash generated in Q4 was approximately 7million,asignificantimprovementfromcashusedof7 million, a significant improvement from cash used of 46 million in Q3 [15] Business Segment Data and Key Metrics Changes - The pulp segment contributed record quarterly EBITDA of roughly 143million,whilethewoodproductssegmentcontributedalmost143 million, while the wood products segment contributed almost 24 million [8] - Q4 sales totaled almost 516,000 tons, an increase of about 68,000 tons from Q3 [11] - Lumber realizations were mixed, with U.S. benchmark prices averaging 711per1,000boardfeetinQ4,up711 per 1,000 board feet in Q4, up 217 from Q3, while European sales realizations decreased by approximately 44per1,000boardfeet[12]MarketDataandKeyMetricsChanges−AverageNBSKnetpriceinChinaforQ4was44 per 1,000 board feet [12] Market Data and Key Metrics Changes - Average NBSK net price in China for Q4 was 723 per ton, down 109fromQ3,whileEuropeanlistpricesaveraged109 from Q3, while European list prices averaged 1,302 per ton, down from 1,345pertoninQ3[9][10]−Pulpdemandremainedstrong,butaveragepulppricesfellmodestlyinQ4duetonegativemarketsentiment[28]−ThecompanyexperiencedhigherfiberpricesinCanadaandGermany,alongwithincreasedfreightcostsduetoextremeweatherandsupplychainissues[6][33]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonmaintainingworld−classassetsanddiversifyingitsproductofferings,includingmasstimberandengineeredwoodproducts[25][43]−Plansfor2022includeanambitiouscapitalexpenditureprogramofapproximately1,345 per ton in Q3 [9][10] - Pulp demand remained strong, but average pulp prices fell modestly in Q4 due to negative market sentiment [28] - The company experienced higher fiber prices in Canada and Germany, along with increased freight costs due to extreme weather and supply chain issues [6][33] Company Strategy and Development Direction - The company is focused on maintaining world-class assets and diversifying its product offerings, including mass timber and engineered wood products [25][43] - Plans for 2022 include an ambitious capital expenditure program of approximately 175 million, targeting high-return projects [44] - The company aims to optimize its mix of lumber products and customers to achieve sustainable realizations [33] Management's Comments on Operating Environment and Future Outlook - Management noted that high energy prices in Europe are a significant factor, with expectations for continued upward pricing pressure in the pulp market due to supply chain restrictions [34][36] - The company anticipates strong lumber demand driven by positive homebuilder sentiment, despite potential mortgage rate increases [31] - Management expressed confidence in the company's ability to generate strong cash flow and shareholder value through its growth strategy [50] Other Important Information - The company settled a business interruption insurance claim related to the Peace River mill, which positively impacted Q4 EBITDA by about 32million[7]−A1532 million [7] - A 15% quarterly dividend increase was approved, raising it to 0.075 per share for shareholders of record on March 30, 2022 [20] - The company has entered into a new C160 million revolving credit facility for its Canadian operations, enhancing financial flexibility [19] Q&A Session Summary Question: Can you provide context on chemical costs for pulp mills? - Management indicated that there have not been material changes in chemical costs in 2021, but inflationary pressure is expected in 2022 [57] Question: Can you quantify the business interruption insurance claim related to the Rosenthal generator? - Management clarified that the generator's downtime negatively impacted EBITDA by approximately 41 million for the year, and the insurance claim is complex and still under discussion [58][59] Question: Are logistics improving? - Management noted improvements at the Celgar mill, but challenges remain at the Peace River mill due to logistics issues, which are expected to resolve in the coming months [61] Question: What is the status of energy prices in Europe? - Management reported a significant increase in energy prices, with gray market rates rising dramatically, which will positively impact revenues [63] Question: What are the acquisition opportunities in pulp or lumber? - Management stated that the focus is on lumber and mass timber, with no current plans to pursue pulp mill acquisitions [64][65] Question: What is the current status of the Mercer Mass Timber operation? - Management indicated that the operation is ramping up and is not a burden on the company, with expectations for a good internal rate of return [68][69] Question: What are the plans for investor relations activities? - Management plans to enhance ESG communication and engage more with retail and family office investors [77][79]