Mercer(MERC) - 2024 Q4 - Earnings Call Transcript

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$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]