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MERCER INTERNATIONAL INC. (MERC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was weak operationally: revenue $458.07M, Operating EBITDA -$28.08M, and net loss -$80.78M (-$1.21/share), hurt by broad pulp price declines, higher fiber costs, FX headwinds, and a $20.4M non-cash inventory impairment .
  • Versus S&P Global consensus, MERC modestly missed revenue and materially missed EPS and EBITDA: Revenue $458.07M vs $459.74M consensus (miss), EPS -$1.21 vs -$0.92 (miss), EBITDA -$27.54M vs -$13.8M (miss). Drivers: weaker pulp pricing across markets, softwood-to-hardwood substitution (~$200/ton price gap), and the impairment charge (non-cash) . Estimates marked with asterisk are from S&P Global data.*
  • Guidance tone turned more cautious: management expects pulp prices to remain weak in Q4, fiber costs to rise, and will take further liquidity actions; planned 18 days of Q4 maintenance at Stendal remains in place .
  • Medium-term catalysts: $100M “One Goal One Hundred” cost program (≈$30M savings by 2025), 2026 capex guided “meaningfully lower” (CFO ballpark ~$75M), carbon capture project at Peace River advancing toward FEED in Q2 2026; mass timber backlog ~$80M with plans to ramp to two shifts in early 2026 .

What Went Well and What Went Wrong

  • What Went Well

    • Lumber pricing resilience: lumber revenues +24% YoY to $61.0M; average realizations +23% YoY to $553/Mfbm; U.S. accounted for ~48% of lumber revenue and ~44% of volumes .
    • Operational reliability: pulp production +10% YoY to 458.7k ADMTs; total downtime reduced vs Q3’24 (32 days vs 43) .
    • Cost program traction and strategic projects: management expects ≈$30M savings by year-end 2025 and remains confident in the $100M target by 2026; progressing Peace River carbon capture pilot (FEL-2) with FEED expected in Q2 2026 .

  • What Went Wrong

    • Pulp price pressure and substitution: average NBSK realizations fell ~11% YoY to $728/ADMT; NBHK -16% YoY to $528/ADMT. Management cited intensified softwood-to-hardwood substitution given a ~$200/ton gap; estimated ~2% incremental substitution at this gap .
    • Non-cash inventory impairment of $20.4M (primarily pulp) on lower prices, following an $11M hardwood impairment in Q2 .
    • Solid wood profits deteriorated: segment Operating EBITDA -$9.3M (vs -$1.9M YoY) as manufactured products (CLT/glulam) realizations collapsed to $1,615/m3 from $3,463/m3 YoY amid high-rate-driven demand weakness .

Financial Results

Quarterly performance (oldest → newest):

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)502.14 453.52 458.07
Operating Income ($M)8.84 -58.40 -67.59
Operating EBITDA ($M)50.46 -20.88 -28.08
Net Loss ($M)-17.56 -86.07 -80.78
EPS (Basic, $)-0.26 -1.29 -1.21
EBITDA Margin %10.13%*-4.49%*-6.01%*
  • EBITDA Margin % marked with asterisk from S&P Global data.*

Q3 2025 vs S&P Global consensus:

MetricConsensusActual
Revenue ($M)459.74*458.07
EBITDA ($M)-13.80*-27.54 (Operating EBITDA -28.08)
EPS ($)-0.918*-1.21
# of Estimates (EPS / Rev)2 / 2*—
  • Consensus figures marked with asterisk from S&P Global data.*

Segment breakdown:

SegmentQ3 2024Q2 2025Q3 2025
Pulp Revenue ($M)373.27 332.31 339.04
Solid Wood Revenue ($M)125.09 117.27 117.23
Pulp Segment Operating EBITDA ($M)54.65 -10.26 -12.69
Solid Wood Segment Operating EBITDA ($M)-1.93 -4.86 -9.27

Operating KPIs (selected):

KPIQ3 2024Q2 2025Q3 2025
NBSK Avg Sales Realization ($/ADMT)756 758 728
NBHK Avg Sales Realization ($/ADMT)559 575 528
NBSK Sales (k ADMT)376.2 361.4 385.9
NBHK Sales (k ADMT)72.6 65.3 67.0
Lumber Avg Sales Realization ($/Mfbm)451 550 553
Lumber Sales (MMfbm)108.8 120.6 110.2
Manufactured Products Avg Realization ($/m3)3,463 1,318 1,615
Annual Maintenance (days)20 23 20

Non-GAAP note: Operating EBITDA is a non-GAAP measure; reconciliation provided in the release .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Pulp price outlookQ4 2025“Regain momentum in Q4 after summer trough” “Expect pulp prices to remain weak” Lowered
Fiber costsQ4 2025Modest decrease for pulp; +~10% for solid wood (into Q3) Expect per-unit fiber costs to increase across mills; strong pellet demand in Germany Raised (costs)
Planned maintenanceQ4 2025Stendal 18 days/≈37k ADMT Stendal 18 days planned Maintained
2025 CapExFY 2025≈$100M, maintenance-weighted ≈$100M reiterated Maintained
2026 CapExFY 2026Not specified“Meaningfully lower”; CFO ~ $75M starting point New (lower)
Dividend2025Dividend suspended in Q2 to preserve cash No dividend declared in Q3; liquidity focus Maintained suspension
Liquidity actionsNear-termWorking capital and CapEx reductions underway Further cost cuts, lower 2026 capex, WC measures prioritized Reinforced
Carbon capture (Peace River)TimelineFEL-2 in progress Pilot commissioning in Q4; FEED expected Q2 2026 Schedule clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Tariffs/MacroTrade uncertainty weakening China pulp demand; USD weakness negative to EBITDA (~$26M in Q2) U.S. Section 232 10% tariff on imported lumber implemented in Oct; combined duties/tariffs for Canadian producers ~45–58% ; continued macro uncertainty Deteriorated
Pulp substitutionGap widening; substitution limits mostly reached ~$200/ton gap drove ~2% incremental substitution; holding down softwood pricing Intensified
Fiber costsPulp fiber costs stable-to-up; solid wood +~10% expected Expect fiber costs to increase across mills in Q4; strong pellet competition in Germany Higher cost pressure
Mass timberOrders slipping into 2026; backlog ~$24M in Q1 ; order growth, backlog ~$68M in Q2 Backlog ~$80M; plan to ramp a facility to two shifts early 2026 Improving backlog; 2026 ramp
Liquidity & CapExLiquidity $471M (Q1), $438M (Q2); CapEx ~$100M 2025; dividend suspended (Q2) Liquidity $376M at Q3-end; 2026 CapEx “meaningfully lower” ($75M) Liquidity down; CapEx path lower
Carbon capture (Peace River)FEL-2 initiated; significant potential economics outlined (Q2 Q&A) Pilot commissioning in Q4; FEED targeted Q2 2026 Advancing on schedule

Management Commentary

  • “Persistent global economic and trade uncertainties, fiber scarcity in Germany as well as the impact of pulp substitution accelerated the decline in pulp market demand and pricing… contributed to a $20.4 million non-cash inventory impairment” — CEO Juan Carlos Bueno .
  • “Liquidity remains our top priority… further cost reductions, lowering capital expenditures for 2026 and other working capital measures” — CEO .
  • “We currently expect to realize approximately $30 million in cost savings and reliability improvements by the end of 2025 and remain confident that we will achieve our target [of $100M] by the end of 2026” — CEO .
  • “We expect… modest NBSK price improvements late in Q4 and into Q1 of 2026” — CEO (call) .
  • “At the end of the third quarter, our strong liquidity position totaled $376 million” — CFO (also reflected in the release ).

Q&A Highlights

  • Balance sheet and asset options: Management acknowledged evaluating asset sales but noted current market not ideal; liquidity levers include revolver renewals (2027), debt maturity runway (2028–29), reduced CapEx, and working capital reduction .
  • 2026 CapEx: CFO indicated ~$75M as starting point for 2026, with scope to lower further .
  • Substitution quantification: At ~$200/ton softwood-hardwood gap, management observed ~2% incremental substitution, with quality limits that cap further substitution if the gap narrows toward $150–$170 .
  • Market/price outlook: Expect modest NBSK price improvement late Q4/Q1’26; tariffs and European curtailments could tighten supply; no energy rebates anticipated in Germany .
  • Mass timber: Backlog ~ $80M; order flow bolstered by data-center interest; planning two-shift ramp in early 2026 .

Estimates Context

  • S&P Global consensus for Q3 2025: Revenue $459.74M vs actual $458.07M (miss); EPS -$0.918 vs -$1.21 (miss); EBITDA -$13.8M vs -$27.54M (miss). Small sample size: 2 estimates for EPS and revenue.*

  • Likely estimate revisions: downward near term for EBITDA/EPS given management’s Q4 pricing caution, higher expected fiber costs, and planned maintenance at Stendal; potential medium-term upward bias for 2026 as cost savings accumulate, capex drops, and mass timber ramps .

  • Values marked with asterisk were retrieved from S&P Global.*

Key Takeaways for Investors

  • Q3 broadly missed consensus on EPS and EBITDA as pulp price declines, substitution, FX, and a non-cash inventory impairment weighed on results; Q4 set-up is cautious (weak pulp prices; higher fiber costs) .
  • Liquidity remains adequate but trending lower ($376M vs $438M in Q2); management is proactively pulling levers (costs, capex, working capital, refinancing dialogue) .
  • Structural levers: $100M cost program (≈$30M by 2025 year-end) and lower 2026 capex (≈$75M) should help bridge the trough and support deleveraging over time .
  • Strategic optionality: Peace River carbon capture (pilot in Q4; FEED in Q2’26) could be economically significant long-term; biorefinery pathway (lignin, SAF/gasification) adds embedded option value .
  • Solid wood: U.S. lumber pricing support likely as Canadian duties/tariffs (45–58% combined) pressure supply; Europe realizations supported by rising sawlog costs, though near-term demand remains rate-sensitive .
  • Mass timber: Backlog building (~$80M) with an early-2026 shift ramp planned; data-center end-markets emerging as a driver—watch for conversion of inquiries to awards .
  • Near-term trading setup skews to macro and policy catalysts (tariffs/curtailments, FX), cost program milestones, and any signs of pulp price stabilization into Q1’26 .

Appendix: Additional References

  • Q3 2025 8-K and press release with full financial tables and KPIs .
  • Q3 2025 Earnings Call (full transcript) -.
  • Prior quarters for trend analysis: Q2 2025 press release and call - -; Q1 2025 press release and call - -.

Notes: Consensus figures and EBITDA margin % marked with asterisk were retrieved from S&P Global.*