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MERCER INTERNATIONAL INC. (MERC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a sharp inflection: revenue $0.488B, Operating EBITDA $99.2M, and EPS $0.25, driven by stronger softwood pulp pricing, no planned downtime, and FX tailwinds; EBITDA margin expanded to ~20.3% from ~10.0% in Q3 and ~4.5% in Q4 2023 .
  • EPS materially beat public consensus (~$0.02), while revenue was mixed versus sources ($483–$497M range); S&P Global consensus was unavailable due to an API error. The stock rallied ~11% after-hours post-print, aided by the magnitude of the EPS beat .
  • Guidance tone improved: modestly higher softwood pulp realizations expected in Q1 2025; hardwood seen at/near the floor and trending up; lumber pricing seen modestly higher on tighter supply; dividend maintained at $0.075/share; capex planned at $100–$120M for 2025 .
  • Key catalysts: strong softwood fundamentals, FX tailwinds (~$26M benefit vs Q3), debt reduction ($100M redeemed), and tariff scenario planning that could redirect hardwood volumes and preserve softwood economics .

What Went Well and What Went Wrong

What Went Well

  • Strong softwood pulp pricing and operational execution: EBITDA nearly doubled q/q with no planned maintenance downtime; average NBSK realizations $794/ADMT (vs $814 in Q3, $709 in Q4’23) and NBHK at $578/ADMT (vs $632 in Q3, $593 in Q4’23) .
  • FX benefit and liquidity: ~$26M positive FX impact vs Q3 supported operating income; liquidity stood at ~$488.6M (cash $184.9M + revolvers $303.7M) at year-end .
  • Balance sheet actions: redeemed $300M 2026 notes via $200M add-on 2028 notes and $100M cash, extending maturities and reducing long-term debt by >$100M; dividend held at $0.075/share .

Quote: “Our EBITDA of almost $100 million highlights the strength of the softwood pulp market and the cash generating potential for pulp assets… we benefited from the rapid appreciation of the U.S. dollar and not having a planned major maintenance quarter” — CEO Juan Carlos Bueno .

What Went Wrong

  • Hardwood weakness and inventory impairment: NBHK realizations fell q/q, prompting a ~$5M non-cash inventory impairment at Peace River; hardwood price pressure persisted due to earlier capacity additions .
  • Solid Wood headwinds: segment EBITDA remained negative (-$4.7M), with elevated fiber costs (+18% y/y in Q4) and interest-rate-driven construction sluggishness in Europe; pallet demand remained weak .
  • Tariff uncertainty: management outlined risks across pulp and lumber flows, with potential cost inflation in Canada and competitive pressure in Europe; mitigation plans include redirection of hardwood and flexible market allocation .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$470.5 $470.8 $502.1 $488.4
Operating Income ($USD Millions)$(56.4) $(43.8) $8.8 $50.4
Operating EBITDA ($USD Millions)$21.1 $30.4 $50.5 $99.2
Net Income ($USD Millions)$(87.2) $(67.6) $(17.6) $16.7
Diluted EPS ($USD)$(1.31) $(1.01) $(0.26) $0.25
EBITDA Margin %4.5% (21.1/470.5) 6.5% (30.4/470.8) 10.0% (50.5/502.1) 20.3% (99.2/488.4)
Operating Margin %-12.0% (−56.4/470.5) -9.3% (−43.8/470.8) 1.8% (8.8/502.1) 10.3% (50.4/488.4)
Net Income Margin %-18.5% (−87.2/470.5) -14.4% (−67.6/470.8) -3.5% (−17.6/502.1) 3.4% (16.7/488.4)

Segment Revenue and EBITDA

SegmentQ4 2023Q3 2024Q4 2024
Pulp Revenues ($M)$364.2 $373.3 $375.5
Solid Wood Revenues ($M)$105.4 $125.1 $111.6
Corporate & Other Revenues ($M)$0.9 $3.8 $1.3
Pulp Segment Operating EBITDA ($M)$32.0 $54.6 $106.1
Solid Wood Segment Operating EBITDA ($M)$(5.6) $(1.9) $(4.7)
Corporate & Other ($M)$(5.3) $(2.3) $(2.2)

KPIs (Selected Operational Metrics)

KPIQ4 2023Q3 2024Q4 2024
NBSK Avg Sales Realizations ($/ADMT)$709 $814 $794
NBHK Avg Sales Realizations ($/ADMT)$593 $632 $578
Pulp Sales Volumes (000 ADMTs, total)491.2 448.9 451.9
Energy Sales (000 MWh)213.2 187.0 204.7
Energy Sales Realizations ($/MWh)$92 $86 $105
Lumber Sales Volumes (MMfbm)112.0 108.8 123.6
Lumber Avg Realizations ($/Mfbm)$427 $451 $474

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Softwood pulp realizationsQ1 2025Stable in Q4 2024 Modestly higher on stable demand and constrained supply Raised
Hardwood pulpQ1 2025Stabilizing in Q4 2024 At/near floor, trending upward with LatAm maintenance Raised
Lumber pricingQ1 2025Modest increments in Q4 2024 U.S./UK Modestly higher U.S./EU on limited supply Maintained/Raised
Pulp fiber costsQ1 2025Relatively stable in Q4 2024 Generally stable at pulp mills Maintained
Solid wood fiber costsQ1 2025Modestly higher in Q4 2024 Increase due to tight supply Raised
Planned maintenance2025No major shut in Q4 2024 21 days at Celgar in Q1; full-year plan totals 78 days New detail
CapexFY 2025Similar to 2024 range $100–$120M Maintained/Specified
DividendQ4 2024 / Q1 2025$0.075 in Q3 $0.075; Pay 4/2/2025, record 3/26/2025 Maintained
Debt reductionOngoingRefinanced $300M 2026 notes Focus on leverage reduction continues Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Tariffs/macroHighlighted risks; softwood tight vs hardwood oversupply Softwood supply tight; tariff uncertainty into U.S. election Detailed scenario planning; potential redirection of hardwood; softwood exposure ~200k tonnes to U.S.; lumber exports ~200MMbf to U.S. Higher focus, active mitigation
Fiber costsStable across segments Flat q/q; expected slight increase in Solid Wood Pulp stable; Solid Wood +~10% in Q1; Germany sawlog > pulpwood inflation Mixed: stable pulp, rising Solid Wood
Product performanceMass timber EBITDA-positive; order file ~$55M Mass timber strong; pallet weakness; lumber mixed Mass timber order file ~$36M; 2025 sales ~$100M expected; profitability constrained by smaller projects; pallets still weak Mass timber steady demand, pallets weak
Regional trendsU.K./Europe soft; softwood price strength NA/EU U.K. recovery; U.S. lumber volatile; Japan demand improving U.S./EU lumber modestly higher; Japan niche demand supports margins; energy pricing higher in Germany Gradual improvement
R&D/green productsLignin pilot ramp-up; commercialization path Continued lignin development Lignin pilot progressing; potential green chemicals business Advancing
Supply chainPeace River digester issue in Q3; downtimes reduced Built inventories for Celgar Q1 shut Planned 78 days maintenance in 2025; Celgar 21 days in Q1 Proactive planning

Management Commentary

  • Strategic posture: “We’re prepared to take swift action, redirecting products to other geographies if necessary and adjusting our operations accordingly… we might see some wood cost inflation at our Celgar mill due to… tariffs” — CEO Juan Carlos Bueno .
  • Capital and operations: “We expect to spend between $100 million and $120 million on capital projects in 2025… Torgau lumber expansion… Celgar’s woodroom… Spokane to reduce fiber costs” .
  • Non-GAAP framing: Operating EBITDA is defined as operating income plus D&A and impairment charges; reconciliation provided (Q4 Operating EBITDA $99.2M) .
  • Debt and liquidity: “Reduced our long-term debt by over $100 million… finished 2024 with approximately $488.6 million in aggregate liquidity” — CEO .

Q&A Highlights

  • Fiber costs split: Germany sawlog inflation outpaces pulpwood/chips; 2025 sawlog +~10%, pulpwood +~5–6% expected; Canada fiber stable with Celgar U.S. sourcing strategy .
  • Lumber returns Europe vs North America: U.K. driving European stability; U.S. up ~20% recently; mix managed dynamically (U.S. ~38% of lumber volume in Q4) .
  • Pallet demand: Still subdued; large industry overcapacity; recovery tied to German industrials (autos, chemicals) .
  • Celgar chip sourcing: ~40% chips from U.S.; secured long-term contracts; contingency if counter-tariffs include chips .
  • Inventory planning: Built inventories to cover Celgar’s 21-day Q1 shutdown; expect modestly lower sales for that mill during the outage .

Estimates Context

S&P Global consensus was unavailable due to an API error; we used public sources for context. Consensus varied across sources, but all indicate a significant EPS beat.

MetricActual Q4 2024Consensus (Investing.com)Consensus (MarketBeat)
EPS ($)$0.25 $0.02 $0.02
Revenue ($M)$488.41 $483.37 $497.00

Note: S&P Global consensus unavailable due to daily request limit error. Values above reflect third-party public sources; EPS beat was significant; revenue was slightly above Investing.com and modestly below MarketBeat.

Stock reaction: MERC up ~11.31% after-hours following the release .

Key Takeaways for Investors

  • Q4 marked a decisive profitability turn, with EBITDA margin ~20% and EPS $0.25; the setup remains favorable given softwood tightness, FX tailwinds, and no major planned downtime in Q4 driving operational leverage into 2025 .
  • Softwood pricing momentum should carry into Q1 2025; hardwood looks to have bottomed; this supports margin resilience as mix is ~85% softwood volumes .
  • Lumber remains cyclical but improving modestly; exposure is actively managed across U.S., Europe, and Japan; tariff outcomes could favor European shipments versus Canadian competitors due to higher antidumping duties in Canada .
  • Solid Wood near-term headwinds persist (fiber inflation, muted construction, pallets weak); mass timber demand intact, but smaller project mix restrains 2025 profitability despite ~$36M order file .
  • Balance sheet actions de-risked maturities and reduced debt; management is prioritizing leverage reduction through capex discipline, reliability, and potential asset monetization (e.g., prior Santanol process referenced) .
  • 2025 maintenance schedule (78 days) should be modeled for volume impacts, with Celgar’s extended Q1 downtime; inventories are planned to mitigate customer impacts .
  • Trading lens: Positive EPS surprise and guidance tone on softwood/lumber support near-term momentum; watch tariff headlines, FX, and hardwood pricing recovery for volatility catalysts .