[10-Q] MERCER INTERNATIONAL INC. Quarterly Earnings Report
Mercer International (MERC) reported a wider quarterly loss as pulp markets softened. For the three months ended September 30, 2025, revenue was $458.1 million, down from $502.1 million a year ago. Operating loss was $67.6 million versus operating income of $8.8 million last year, and net loss was $80.8 million (basic and diluted loss per share $1.21) compared with a $17.6 million loss ($0.26 per share) a year earlier.
Nine‑month revenue was $1.4186 billion versus $1.5550 billion, with a net loss of $189.2 million versus $101.8 million. The quarter included $20.4 million of inventory impairment charges, primarily a result of low pulp prices. Segment Operating EBITDA turned negative: pulp $(12.7) million and solid wood $(9.3) million, compared with a total of $52.7 million in the prior‑year quarter.
Cash and cash equivalents were $98.1 million as of September 30, 2025, down from $184.9 million at year‑end, and long‑term debt was $1.547 billion. Interest expense was $28.5 million in the quarter. Dividends declared year‑to‑date were $0.150 per share. Shares outstanding were 66,982,506 as of November 4, 2025.
- None.
- None.
Insights
Losses widened on softer pulp pricing and write‑downs.
Mercer International posted a Q3 net loss of
Management recorded an inventory impairment of
Liquidity showed cash of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission File No.:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction |
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(I.R.S. Employer |
of incorporation or organization) |
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Identification No.) |
(Address of office)
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The Registrant had
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
(Unaudited)
FORM 10-Q
QUARTERLY REPORT - PAGE 2
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of U.S. dollars, except per share data)
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Three Months Ended |
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Nine Months Ended |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Costs and expenses |
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Cost of sales, excluding depreciation and amortization |
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Cost of sales depreciation and amortization |
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Selling, general and administrative expenses |
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Loss on disposal of investment in joint venture |
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Goodwill impairment |
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Operating income (loss) |
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Other income (expenses) |
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Interest expense |
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Other income (expenses) |
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Total other expenses, net |
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Loss before income taxes |
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( |
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( |
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Income tax recovery |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per common share |
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Basic |
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$ |
( |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Dividends declared per common share |
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$ |
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$ |
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$ |
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$ |
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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended September 30, |
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Nine Months Ended |
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2025 |
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2024 |
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2025 |
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2024 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive income (loss) |
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Loss related to defined benefit pension plans |
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( |
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( |
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( |
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Income tax provision |
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Loss related to defined benefit pension plans, net of tax |
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( |
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( |
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( |
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( |
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Foreign currency translation adjustments |
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( |
) |
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( |
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Other comprehensive income (loss), net of tax |
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( |
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( |
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Total comprehensive income (loss) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 3
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
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September 30, |
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December 31, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other |
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Assets classified as held for sale |
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Total current assets |
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Property, plant and equipment, net |
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Amortizable intangible assets, net |
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Operating lease right-of-use assets |
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Pension asset |
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Deferred income tax assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and other |
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$ |
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$ |
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Pension and other post-retirement benefit obligations |
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Liabilities associated with assets held for sale |
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Total current liabilities |
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Long-term debt |
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Pension and other post-retirement benefit obligations |
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Operating lease liabilities |
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Deferred income tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Shareholders’ equity |
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Common shares $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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Commitments and contingencies (Note 14) |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 4
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands of U.S. dollars)
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Common shares |
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Three Months Ended September 30: |
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Number |
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Amount, |
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Additional |
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Retained |
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Accumulated |
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Total |
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Balance as of June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of September 30, 2025 |
|
|
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|
$ |
|
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$ |
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$ |
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$ |
( |
) |
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$ |
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||||||
Balance as of June 30, 2024 |
|
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$ |
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|
$ |
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$ |
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$ |
( |
) |
|
$ |
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|||||
Stock compensation expense |
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— |
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— |
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|
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|
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— |
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|
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— |
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||
Net loss |
|
|
— |
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|
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— |
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|
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— |
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( |
) |
|
|
— |
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( |
) |
Dividends declared |
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— |
|
|
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— |
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|
|
— |
|
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( |
) |
|
|
— |
|
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( |
) |
Other comprehensive income |
|
|
— |
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|
|
— |
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|
— |
|
|
|
— |
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|
|
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Balance as of September 30, 2024 |
|
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|
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
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||||||
Nine Months Ended September 30: |
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||||||
Balance as of December 31, 2024 |
|
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Shares issued on grants of restricted shares |
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( |
) |
|
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Dividends declared |
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— |
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— |
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|
— |
|
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( |
) |
|
|
— |
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( |
) |
Other comprehensive income |
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— |
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— |
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— |
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— |
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Balance as of September 30, 2025 |
|
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|
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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||||||
Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
Shares issued on grants of restricted shares |
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( |
) |
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— |
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— |
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— |
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Shares issued on grants of performance share units |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Dividends declared |
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— |
|
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— |
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— |
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( |
) |
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— |
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( |
) |
Disposal of investment in joint venture |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of September 30, 2024 |
|
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|
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 5
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended |
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Nine Months Ended |
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2025 |
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2024 |
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2025 |
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2024 |
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Cash flows from (used in) operating activities |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to cash flows from operating activities |
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Depreciation and amortization |
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Deferred income tax recovery |
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( |
) |
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( |
) |
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( |
) |
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( |
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Inventory impairment |
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Loss on disposal of investment in joint venture |
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Goodwill impairment |
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Defined benefit pension plans and other post-retirement benefit plan expense |
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Stock compensation expense |
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Foreign exchange transaction losses (gains) |
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( |
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( |
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Other |
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Defined benefit pension plans and other post-retirement benefit plan contributions |
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( |
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( |
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Changes in working capital |
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Accounts receivable |
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( |
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Inventories |
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( |
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Accounts payable and accrued expenses |
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( |
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( |
) |
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( |
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Prepaid expenses and other |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net cash from (used in) operating activities |
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( |
) |
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( |
) |
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( |
) |
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Cash flows from (used in) investing activities |
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Purchase of property, plant and equipment |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds from government grants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows from (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds from (repayment of) revolving credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Dividend payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payment of finance lease obligations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net cash from (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental cash flow disclosure: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for interest |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Leased production and other equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 6
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 1. The Company and Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
The Interim Consolidated Financial Statements contained herein include the accounts of Mercer International Inc. (“Mercer Inc.”) and all of its subsidiaries (collectively the “Company”). Mercer Inc. owns
The Interim Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The consolidated balance sheet information as of December 31, 2024 was derived from the Company’s audited Consolidated Financial Statements, but does not contain all of the footnote disclosures from the annual Consolidated Financial Statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States (“GAAP”). The unaudited Interim Consolidated Financial Statements should be read together with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2024. In the opinion of the Company, the unaudited Interim Consolidated Financial Statements contained herein have been prepared on a consistent basis with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2024 and contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.
In these Interim Consolidated Financial Statements, unless otherwise indicated, all amounts are expressed in United States dollars (“U.S. dollars” or “$”). The symbol “€” refers to euros and the symbol “C$” refers to Canadian dollars.
Use of Estimates
Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, future cash flows associated with impairment testing for goodwill and long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, revenues under long-term contracts, inventory impairment, assets and liabilities classified as held for sale and the fair value of disposal groups, legal liabilities and contingencies. Actual results could differ materially from these estimates and changes in these estimates are recorded when known.
New Accounting Pronouncements
Improvements to Income Tax Disclosures
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, which requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid. The amendments improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company continues to assess the impact of ASU 2023-09.
FORM 10-Q
QUARTERLY REPORT - PAGE 7
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, which expands disclosures about specific expense categories presented on the face of the statement of operations and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods thereafter with early adoption permitted. The Company is currently assessing the impact of ASU 2024-03.
Note 2. Assets and Liabilities Classified as Held for Sale
For the three months ended September 30, 2025, the Company decided to retain the current assets and current liabilities of the sandalwood business. These assets and liabilities were previously designated as held for sale but have now been reclassified as held in use. As of September 30, 2025, the remaining asset classified as held for sale includes a parcel of land, which was sold in the fourth quarter of 2025.
Note 3. Inventories
Inventories as of September 30, 2025 and December 31, 2024, were comprised of the following:
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Spare parts and other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
For the three and nine months ended September 30, 2025, the Company recorded inventory impairment charges of $
For the three and nine months ended September 30, 2024, the Company recorded an inventory impairment charge of $
Note 4. Accounts Payable and Other
Accounts payable and other as of September 30, 2025 and December 31, 2024, was comprised of the following:
|
|
September 30, |
|
|
December 31, |
|
||
Trade payables |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Interest payable |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Payroll-related accruals |
|
|
|
|
|
|
||
Wastewater fee (a) |
|
|
|
|
|
|
||
Finance lease liability |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
FORM 10-Q
QUARTERLY REPORT - PAGE 8
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 5. Debt
Debt as of September 30, 2025 and December 31, 2024, was comprised of the following:
|
|
Maturity |
|
September 30, |
|
|
December 31, |
|
||
Senior notes (a) |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||
Credit arrangements |
|
|
|
|
|
|
|
|
||
€ |
|
|
|
|
|
|
|
|||
C$ |
|
|
|
|
|
|
|
|||
€ |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Finance lease liability |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less: unamortized senior note issuance costs |
|
|
|
|
( |
) |
|
|
( |
) |
Less: finance lease liability due within one year |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
|
|
$ |
|
||
The maturities of the principal portion of the senior notes and credit arrangements as of September 30, 2025 were as follows:
|
|
Senior Notes and Credit Arrangements |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
|
|
$ |
|
|
Certain of the Company’s debt instruments were issued under agreements which, among other things, may limit its ability and the ability of its subsidiaries to make certain payments, including dividends. These limitations are subject to specific exceptions.
The following table presents the redemption prices (expressed as percentages of principal amount) and the redemption periods of the Senior Notes:
2028 Senior Notes |
|
2029 Senior Notes |
||||
12 Month Period Beginning |
|
Percentage |
|
12 Month Period Beginning |
|
Percentage |
October 1, 2025 |
|
|
February 1, 2025 |
|
||
October 1, 2026 |
|
|
February 1, 2026 and thereafter |
|
||
October 1, 2027 and thereafter |
|
|
|
|
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 9
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 6. Pension and Other Post-Retirement Benefit Obligations
Defined Benefit Plans
Pension benefits are based on employees’ earnings and years of service. The defined benefit plans are funded by contributions from the Company based on actuarial estimates and statutory requirements.
|
|
Three Months Ended September 30, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
Pension |
|
|
Other Post- |
|
|
Pension |
|
|
Other Post- |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of unrecognized items |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net benefit costs (gains) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
Pension |
|
|
Other Post- |
|
|
Pension |
|
|
Other Post- |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of unrecognized items |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net benefit costs (gains) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 10
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
The components of the net benefit costs (gains) other than service cost are recorded in “Other income (expenses)” in the Interim Consolidated Statements of Operations. The amortization of unrecognized items relates to actuarial losses (gains) and prior service costs.
Defined Contribution Plan
Effective December 31, 2008, the defined benefit plans at the Celgar mill were closed to new members and the service accrual ceased. Effective January 1, 2009, the members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan. During the three and nine months ended September 30, 2025, the Company made contributions of $
Multiemployer Plan
The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three and nine months ended September 30, 2025, the Company made contributions of $
Note 7. Income Taxes
Differences between the U.S. Federal statutory rate and the Company’s effective tax rate for the three and nine months ended September 30, 2025 and 2024 were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
U.S. Federal statutory rate |
|
|
|
|
|
|
|
|
||||||||
Income tax recovery using U.S. Federal statutory rate on loss before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Tax differential on foreign loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of foreign earnings (a) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Valuation allowance |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Tax benefit of partnership structure |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Non-taxable foreign subsidies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-deductible goodwill impairment |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
True-up of prior year taxes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Annual effective tax rate adjustment |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income tax recovery |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Comprised of: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current income tax recovery (provision) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Deferred income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax recovery |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 11
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 8. Shareholders’ Equity
Dividends
During the nine months ended September 30, 2025, the Company’s board of directors declared the following:
Date Declared |
|
Dividend Per |
|
|
Amount |
|
||
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
||
Stock Based Compensation
The Company’s stock incentive plan consists of stock options, restricted stock units (“RSUs”), deferred stock units (“DSUs”), restricted shares, performance shares, performance share units (“PSUs”) and stock appreciation rights. During the three and nine months ended September 3
The following table summarizes non-vested PSU activity during the period:
|
|
|
|
Number of PSUs |
|
|
Balance as of January 1, 2025 |
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
Forfeited |
|
|
|
|
( |
) |
Balance as of September 30, 2025 |
|
|
|
|
|
|
The following table summarizes non-vested restricted share and DSU activity during the period:
|
|
Equity Based Awards |
|
|
Liability Based Awards |
|
||||||
|
|
Number of Restricted Shares |
|
|
Number of Equity DSUs |
|
|
Number of Cash Only DSUs |
|
|||
Balance as of January 1, 2025 |
|
|
|
|
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
There were
FORM 10-Q
QUARTERLY REPORT - PAGE 12
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 9. Net Loss Per Common Share
The reconciliation of basic and diluted net loss per common share for the three and nine months ended September 30, 2025 and 2024 was as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The calculation of diluted net loss per common share does not assume the exercise of any instruments that would have an anti-dilutive effect on net loss per common share. Non-vested
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
PSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity DSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 13
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 10. Accumulated Other Comprehensive Loss
The change in the accumulated other comprehensive loss by component (net of tax) for the three and nine months ended September 30, 2025 and 2024 was as follows:
|
|
Foreign Currency Translation Adjustments |
|
|
Defined Benefit Pension and Other Post-Retirement Benefit Items |
|
|
Total |
|
|||
Three Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|||
Balance as of June 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Balance as of June 30, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance as of September 30, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Nine Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance as of September 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Disposal of investment in joint venture |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Note 11. Related Party Transactions
For the three and nine months ended September 30, 2025, services from the Company’s
For the three and nine months ended September 30, 2025, services from the Company’s
FORM 10-Q
QUARTERLY REPORT - PAGE 14
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 12. Segment Information
The Company is managed based on the primary products it manufactures: pulp and solid wood. The Company’s
Change in segment measure of profit or loss
Total assets and the income or loss items following Segment Operating EBITDA, other than depreciation, amortization and impairment of long-lived assets, are not allocated to the segments, as those items are reviewed separately by management.
FORM 10-Q
QUARTERLY REPORT - PAGE 15
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Information about certain segment data for the three and nine months ended September 30, 2025 and 2024 was as follows:
Three Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Three Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
( |
) |
||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other income |
|
|
|
|
|
|
|
|
|
|||
Corporate expenses and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Consolidated loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 16
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 17
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Three Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
|
|||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Corporate expenses and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Consolidated loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 18
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 19
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Nine Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Nine Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
|
|||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Corporate expenses and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Consolidated loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 20
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Nine Months Ended September 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 21
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Nine Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Purchase of pulp from CPP (d) |
|
|
|
|
|
|
|
|
|
|||
Other (e) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Nine Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
|
|||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on disposal of investment in joint venture |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Goodwill impairment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other income |
|
|
|
|
|
|
|
|
|
|||
Corporate expenses and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Consolidated loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 22
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Nine Months Ended September 30, 2024 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 13. Financial Instruments and Fair Value Measurement
Due to their short-term maturity, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and other approximates their fair value.
|
|
Fair value measurements as of |
|
|||||||||||||
|
|
|
|
September 30, 2025 using: |
|
|
||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair value measurements as of |
|
|||||||||||||
|
|
|
|
December 31, 2024 using: |
|
|
||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The carrying value of the revolving credit facilities classified as Level 2 approximates the fair value as the variable interest rates reflect current interest rates for financial instruments with similar characteristics and maturities.
The fair value of the senior notes classified as Level 2 was determined using quoted prices in a dealer market, or using recent market transactions. The Company’s senior notes are not carried at fair value in the Interim Consolidated Balance Sheets as of September 30, 2025 or December 31, 2024. However, fair value disclosure is required. The carrying value of the Company’s senior notes, net of unamortized note issuance costs, was $
FORM 10-Q
QUARTERLY REPORT - PAGE 23
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Credit Risk
The Company’s exposure to credit losses may increase if its customers' production and other costs are adversely affected by inflation, interest rate levels and tariffs. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables if the cash flows of the Company’s customers are adversely impacted by inflation, interest rate levels and tariffs. As of September 30, 2025, the Company has not had significant credit losses.
As of September 30, 2025, the carrying amount of cash and cash equivalents of $
Note 14. Commitments and Contingencies
FORM 10-Q
QUARTERLY REPORT - PAGE 24
NON-GAAP FINANCIAL MEASURES
This quarterly report on Form 10-Q contains “non-GAAP financial measures”, that is, financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with the generally accepted accounting principles in the United States, referred to as “GAAP”. Specifically, we make use of the non-GAAP financial measure “Operating EBITDA”.
We define Operating EBITDA as operating income (loss) plus depreciation and amortization and long-lived asset impairment charges. We use Operating EBITDA as a benchmark measurement of our own operating results and as a benchmark relative to our competitors. We consider it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and long-lived asset impairment charges are not actual cash costs, and depreciation expense varies widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of our operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net loss, including financing costs, income taxes and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net loss or operating income (loss) as a measure of performance, or as an alternative to net cash from (used in) operating activities as a measure of liquidity. Operating EBITDA is an internal measure and therefore may not be comparable to other companies.
Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Operating EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt; (iv) the impact of realized or marked to market changes in our derivative positions, which can be substantial; and (v) the impact of impairment charges against our investments or assets. Because of these limitations, Operating EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP financial statements.
Operating EBITDA is a non-GAAP financial measure at the consolidated level and is considered different from Operating EBITDA at the segment level, referred to as “Segment Operating EBITDA”, which is our single measure of segment profit or loss presented in our financial statements under GAAP. For more information on Segment Operating EBITDA, refer to the segment information note within our consolidated financial statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of September 30, 2025, unless otherwise stated; (iv) our reporting currency is dollars and references to “€” mean euros and “C$” mean Canadian dollars; (v) “ADMTs” mean air-dried metric tonnes; (vi) “CLT” mean cross-laminated timber; (vii) “glulam” mean glue-laminated timber; (viii) “m3” mean cubic meters; (ix) “NBSK” mean northern bleached softwood kraft; (x) “NBHK” mean northern bleached hardwood kraft; (xi) “MW” mean megawatts and “MWh” mean megawatt hours; (xii) “Mfbm” mean thousand board feet of lumber and “MMfbm” mean million board feet of lumber; and (xiii) our lumber metrics are converted from m3 to Mfbm using a conversion ratio of 1.6 m3 of lumber equaling one Mfbm, which is the ratio commonly used in the industry.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figure.
The following discussion and analysis of our results of operations and financial condition for the three and nine months ended September 30, 2025 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission, referred to as the “SEC”.
Results of Operations
General
We have two reportable operating segments:
Each segment offers primarily different products and requires different manufacturing processes, technology and sales and marketing.
Current Market Environment
In the third quarter of 2025, both our NBSK and NBHK pulp sales realizations decreased compared to the second quarter of 2025 as a result of lower prices across all markets. Pulp prices decreased in Europe and China, driven by weaker demand, stemming from the current economic climate and continuing global trade policy uncertainty, and increased substitution of softwood pulp for lower-cost hardwood pulp. The price decline in China was further impacted by an oversupplied paper market. In North America, pulp prices decreased in the third quarter of 2025 compared to the second quarter of 2025 as a result of downward price pressure from other markets.
In the third quarter of 2025, our lumber sales realizations were relatively stable in both the U.S. and Europe compared to the second quarter of 2025.
As of September 30, 2025, the third-party industry quoted NBSK pulp list prices in Europe and North America were approximately $1,495 per ADMT and $1,660 per ADMT, respectively, and the third-party industry quoted NBSK pulp net price in China was approximately $690 per ADMT. Prices for China are net of discounts, allowances and rebates.
In the fourth quarter of 2025, we currently expect both NBSK and NBHK pulp prices to remain weak.
FORM 10-Q
QUARTERLY REPORT - PAGE 26
In the fourth quarter of 2025, we currently expect lumber prices to modestly increase in Europe primarily due to higher fiber costs. In the U.S., we currently expect slightly higher prices in the latter part of the fourth quarter of 2025 driven by the combined impact of duties and tariffs imposed on producers reducing supply and supporting higher prices. In the fourth quarter of 2025, we currently expect pallet prices to remain flat due to continued weak economic conditions in Europe and mass timber prices to remain relatively steady.
Per unit fiber costs for the pulp and solid wood segments were relatively steady in the third quarter of 2025 compared to the second quarter of 2025. For the fourth quarter of 2025, we currently expect per unit fiber costs to increase for all our mills due to supply constraints and, in Germany, strong competing demand for pellets.
Demand and pricing for our products may be further impacted by ongoing developments in international trade policies, including tariffs proposed or imposed by the United States on goods originating from Canada, the European Union and other countries, and related countermeasures. As these developments are ongoing and subject to change, it is difficult to predict such impact at this time. See Item 1A. Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2024 for further information.
FORM 10-Q
QUARTERLY REPORT - PAGE 27
Summary Financial Highlights
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in thousands, other than per share amounts) |
|
|||||||||||||
Statement of Operations Data |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp segment |
|
$ |
339,038 |
|
|
$ |
373,268 |
|
|
$ |
1,052,426 |
|
|
$ |
1,173,043 |
|
Solid wood segment |
|
|
117,234 |
|
|
|
125,093 |
|
|
|
357,222 |
|
|
|
374,354 |
|
Corporate and other |
|
|
1,796 |
|
|
|
3,780 |
|
|
|
8,918 |
|
|
|
7,558 |
|
Total revenues |
|
$ |
458,068 |
|
|
$ |
502,141 |
|
|
$ |
1,418,566 |
|
|
$ |
1,554,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp Segment Operating EBITDA(1) |
|
$ |
(12,686 |
) |
|
$ |
54,645 |
|
|
$ |
26,924 |
|
|
$ |
154,784 |
|
Solid wood Segment Operating EBITDA(1) |
|
|
(9,268 |
) |
|
|
(1,933 |
) |
|
|
(14,421 |
) |
|
|
296 |
|
Corporate and other |
|
|
(6,123 |
) |
|
|
(2,257 |
) |
|
|
(14,373 |
) |
|
|
(10,585 |
) |
Operating EBITDA(2) |
|
$ |
(28,077 |
) |
|
$ |
50,455 |
|
|
$ |
(1,870 |
) |
|
$ |
144,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(80,779 |
) |
|
$ |
(17,559 |
) |
|
$ |
(189,189 |
) |
|
$ |
(101,848 |
) |
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(1.21 |
) |
|
$ |
(0.26 |
) |
|
$ |
(2.83 |
) |
|
$ |
(1.53 |
) |
Diluted |
|
$ |
(1.21 |
) |
|
$ |
(0.26 |
) |
|
$ |
(2.83 |
) |
|
$ |
(1.53 |
) |
Common shares outstanding at period end |
|
|
66,983 |
|
|
|
66,871 |
|
|
|
66,983 |
|
|
|
66,871 |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(80,779 |
) |
|
$ |
(17,559 |
) |
|
$ |
(189,189 |
) |
|
$ |
(101,848 |
) |
Income tax recovery |
|
|
(14,777 |
) |
|
|
(120 |
) |
|
|
(15,909 |
) |
|
|
(5,222 |
) |
Interest expense |
|
|
28,506 |
|
|
|
26,429 |
|
|
|
85,072 |
|
|
|
80,831 |
|
Other expenses (income) |
|
|
(539 |
) |
|
|
91 |
|
|
|
766 |
|
|
|
(9,147 |
) |
Operating income (loss) |
|
|
(67,589 |
) |
|
|
8,841 |
|
|
|
(119,260 |
) |
|
|
(35,386 |
) |
Add: Depreciation and amortization |
|
|
39,512 |
|
|
|
41,614 |
|
|
|
117,390 |
|
|
|
121,959 |
|
Add: Loss on disposal of investment in joint venture |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,645 |
|
Add: Goodwill impairment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34,277 |
|
Operating EBITDA |
|
$ |
(28,077 |
) |
|
$ |
50,455 |
|
|
$ |
(1,870 |
) |
|
$ |
144,495 |
|
FORM 10-Q
QUARTERLY REPORT - PAGE 28
Selected Production, Sales and Other Data
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Pulp Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp production ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
366.7 |
|
|
|
374.4 |
|
|
|
1,140.3 |
|
|
|
1,185.4 |
|
NBHK |
|
|
92.0 |
|
|
|
41.4 |
|
|
|
234.4 |
|
|
|
191.0 |
|
Annual maintenance downtime ('000 ADMTs) |
|
|
21.3 |
|
|
|
22.1 |
|
|
|
84.2 |
|
|
|
86.9 |
|
Annual maintenance downtime (days) |
|
|
20 |
|
|
|
20 |
|
|
|
65 |
|
|
|
57 |
|
Pulp sales ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
385.9 |
|
|
|
376.2 |
|
|
|
1,135.4 |
|
|
|
1,242.0 |
|
NBHK |
|
|
67.0 |
|
|
|
72.6 |
|
|
|
222.1 |
|
|
|
205.8 |
|
Average NBSK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
1,497 |
|
|
|
1,573 |
|
|
|
1,533 |
|
|
|
1,525 |
|
China |
|
|
690 |
|
|
|
771 |
|
|
|
739 |
|
|
|
776 |
|
North America |
|
|
1,700 |
|
|
|
1,762 |
|
|
|
1,758 |
|
|
|
1,633 |
|
Average NBHK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
503 |
|
|
|
635 |
|
|
|
538 |
|
|
|
677 |
|
North America |
|
|
1,203 |
|
|
|
1,467 |
|
|
|
1,261 |
|
|
|
1,376 |
|
Average pulp sales realizations ($/ADMT)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
728 |
|
|
|
814 |
|
|
|
756 |
|
|
|
781 |
|
NBHK |
|
|
528 |
|
|
|
632 |
|
|
|
559 |
|
|
|
650 |
|
Energy production ('000 MWh)(3) |
|
|
490.5 |
|
|
|
509.8 |
|
|
|
1,528.7 |
|
|
|
1,580.2 |
|
Energy sales ('000 MWh)(3) |
|
|
171.1 |
|
|
|
187.0 |
|
|
|
552.9 |
|
|
|
592.6 |
|
Average energy sales realizations ($/MWh)(3) |
|
|
98 |
|
|
|
86 |
|
|
|
97 |
|
|
|
86 |
|
Solid Wood Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production (MMfbm) |
|
|
115.4 |
|
|
|
122.5 |
|
|
|
363.6 |
|
|
|
360.9 |
|
Sales (MMfbm) |
|
|
110.2 |
|
|
|
108.8 |
|
|
|
361.8 |
|
|
|
346.8 |
|
Average sales realizations ($/Mfbm) |
|
|
553 |
|
|
|
451 |
|
|
|
533 |
|
|
|
458 |
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production and sales ('000 MWh) |
|
|
32.7 |
|
|
|
17.9 |
|
|
|
101.5 |
|
|
|
90.2 |
|
Average sales realizations ($/MWh) |
|
|
150 |
|
|
|
145 |
|
|
|
138 |
|
|
|
130 |
|
Manufactured products(4) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 m3) |
|
|
9.2 |
|
|
|
9.8 |
|
|
|
24.1 |
|
|
|
28.1 |
|
Sales ('000 m3) |
|
|
6.8 |
|
|
|
9.9 |
|
|
|
20.8 |
|
|
|
25.0 |
|
Average sales realizations ($/m3) |
|
|
1,615 |
|
|
|
3,463 |
|
|
|
1,843 |
|
|
|
3,260 |
|
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 units) |
|
|
2,265.2 |
|
|
|
2,525.5 |
|
|
|
6,494.5 |
|
|
|
8,129.7 |
|
Sales ('000 units) |
|
|
2,144.5 |
|
|
|
2,446.7 |
|
|
|
6,521.3 |
|
|
|
7,933.4 |
|
Average sales realizations ($/unit) |
|
|
12 |
|
|
|
11 |
|
|
|
12 |
|
|
|
10 |
|
Biofuels(5) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 tonnes) |
|
|
33.3 |
|
|
|
40.6 |
|
|
|
103.1 |
|
|
|
119.6 |
|
Sales ('000 tonnes) |
|
|
39.8 |
|
|
|
43.5 |
|
|
|
99.6 |
|
|
|
132.1 |
|
Average sales realizations ($/tonne) |
|
|
256 |
|
|
|
213 |
|
|
|
246 |
|
|
|
217 |
|
Average Spot Currency Exchange Rates |
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ / €(6) |
|
|
1.1685 |
|
|
|
1.0987 |
|
|
|
1.1196 |
|
|
|
1.0870 |
|
$ / C$(6) |
|
|
0.7261 |
|
|
|
0.7331 |
|
|
|
0.7154 |
|
|
|
0.7352 |
|
FORM 10-Q
QUARTERLY REPORT - PAGE 29
Consolidated – Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Total revenues for the third quarter of 2025 decreased by approximately 9% to $458.1 million from $502.1 million in the same quarter of 2024. This was primarily due to lower pulp and manufactured products sales realizations partially offset by higher lumber sales realizations.
Costs and expenses in the third quarter of 2025 increased by approximately 7% to $525.7 million from $493.3 million in the same quarter of 2024. This was primarily due to higher per unit fiber costs and the negative foreign exchange impact from a weaker dollar on our euro denominated costs and expenses compared to the same quarter of 2024. In the third quarter of 2025, costs and expenses included a non-cash impairment of $20.4 million primarily against pulp inventory as a result of lower prices.
In the third quarter of 2025, cost of sales depreciation and amortization was relatively flat at $39.4 million compared to $41.5 million in the same quarter of 2024.
Selling, general and administrative expenses were relatively steady at $28.8 million in the third quarter of 2025 compared to $29.2 million in the same quarter of 2024.
In the third quarter of 2025, we had a negative foreign exchange impact of approximately $8.6 million on our operating loss compared to the same quarter of 2024. This negative impact was primarily due to the effect of a weaker dollar on our euro denominated costs and expenses compared to the same quarter of 2024.
In the third quarter of 2025, our operating loss was $67.6 million compared to operating income of $8.8 million in the same quarter of 2024 primarily due to lower pulp and manufactured products sales realizations, higher per unit fiber costs, the negative foreign exchange impact from a weaker dollar and the non-cash inventory impairment. These adverse impacts were partially offset by higher lumber sales realizations.
Interest expense increased by approximately 8% to $28.5 million in the third quarter of 2025 from $26.4 million in the same quarter of 2024. This increase was primarily driven by debt refinancing activities in October 2024, which replaced maturing senior notes with new senior notes carrying extended maturities and a higher interest rate.
In the third quarter of 2025, we had an income tax recovery of $14.8 million, or an effective tax rate of 15%, and in the same quarter of 2024, we had an income tax recovery of $0.1 million, or an effective tax rate of 1%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate as we do not recognize tax recoveries for certain entities which we do not expect to realize a tax benefit.
In the third quarter of 2025, our net loss was $80.8 million, or $1.21 per share, compared to $17.6 million, or $0.26 per share, in the same quarter of 2024.
In the third quarter of 2025, Operating EBITDA decreased to negative $28.1 million from positive $50.5 million in the same quarter of 2024. This primarily resulted from lower pulp and manufactured products sales realizations, higher per unit fiber costs, the negative foreign exchange impact from a weaker dollar and the non-cash inventory impairment. These adverse impacts were partially offset by higher lumber sales realizations.
FORM 10-Q
QUARTERLY REPORT - PAGE 30
Pulp Segment – Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Selected Financial Information
|
|
|
|
|
|
Three Months Ended |
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Pulp revenues |
|
|
|
|
|
$ |
318,622 |
|
|
$ |
354,176 |
|
Energy and chemical revenues |
|
|
|
|
|
$ |
20,416 |
|
|
$ |
19,092 |
|
Segment Operating EBITDA(1) |
|
|
|
|
|
$ |
(12,686 |
) |
|
$ |
54,645 |
|
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the third quarter of 2025 decreased by approximately 9% to $339.0 million from $373.3 million in the same quarter of 2024 due to lower pulp revenues.
Pulp revenues in the third quarter of 2025 decreased by approximately 10% to $318.6 million from $354.2 million in the same quarter of 2024 as a result of lower sales realizations.
Energy and chemical revenues in the third quarter of 2025 were relatively steady at $20.4 million compared to $19.1 million in the same quarter of 2024.
Total pulp production in the third quarter of 2025 increased by approximately 10% to 458,708 ADMTs from 415,837 ADMTs in the same quarter of 2024 primarily as a result of improved production reliability in the third quarter of 2025. In the third quarter of 2025, our pulp mills had 32 days of downtime (approximately 35,700 ADMTs) which included 20 days of planned annual maintenance and 12 days of unplanned downtime at the Celgar mill due to a mechanical failure. In the same quarter of 2024, our pulp mills had 43 days of downtime (approximately 57,600 ADMTs) which included 20 days of planned annual maintenance and 23 days of unplanned downtime at the Peace River mill due to a mechanical failure.
We estimate that planned annual maintenance downtime in the third quarter of 2025 adversely impacted our Segment Operating EBITDA by approximately $26.3 million, comprised of approximately $17.3 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their financial results using International Financial Reporting Standards, referred to as “IFRS”, capitalize their direct costs of maintenance downtime.
In the fourth quarter of 2025, we currently expect a total of 18 days of planned annual maintenance downtime (approximately 35,600 ADMTs) at our Stendal mill.
Total pulp sales volumes in the third quarter of 2025 were relatively flat at 452,840 ADMTs compared to 448,856 ADMTs in the same quarter of 2024.
In the third quarter of 2025, the third-party industry quoted average list price for NBSK pulp in Europe and the third-party industry quoted average net price for NBSK pulp in China decreased from the same quarter of 2024. These decreases stemmed from weaker demand driven by the current economic climate, global trade policy uncertainty, and increased substitution of softwood pulp for lower-cost hardwood pulp. Oversupply in the paper market also contributed to the pricing decrease in China. In the third quarter of 2025, the third-party industry quoted average list price for NBSK pulp in North America decreased from the same quarter of 2024 driven by downward price pressure from other markets. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,497 per ADMT and $1,700 per ADMT, respectively, in the third quarter of 2025 compared to approximately $1,573 per ADMT and $1,762 per ADMT, respectively, in the same quarter of 2024. The third-party industry quoted average net price for NBSK pulp in China was approximately $690 per ADMT in the third quarter of 2025 compared to approximately $771 per ADMT in the same quarter of 2024. Prices quoted for China are net of discounts, allowances and rebates whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
FORM 10-Q
QUARTERLY REPORT - PAGE 31
In the third quarter of 2025, the third-party industry quoted average list price for NBHK pulp in North America decreased from the same quarter of 2024 due to downward price pressure from other markets. The third-party industry quoted average net price for NBHK pulp in China decreased in the third quarter of 2025 from the same quarter of 2024 due to an oversupplied paper market and weak demand driven by the current economic climate and global trade policy uncertainty. The third-party industry quoted average list price for NBHK pulp in North America was approximately $1,203 per ADMT in the third quarter of 2025 compared to approximately $1,467 per ADMT in the same quarter of 2024. The third-party industry quoted average net price for NBHK pulp in China was approximately $503 per ADMT in the third quarter of 2025 compared to approximately $635 per ADMT in the same quarter of 2024.
Our average NBSK pulp sales realizations in the third quarter of 2025 decreased by approximately 11% to $728 per ADMT from $814 per ADMT in the same quarter of 2024. In the third quarter of 2025, average NBHK pulp sales realizations decreased by approximately 16% to $528 per ADMT from $632 per ADMT in the same quarter of 2024. The lower sales realizations are due to lower prices in all our markets.
In the third quarter of 2025, we had a negative foreign exchange impact of approximately $5.3 million on Segment Operating EBITDA compared to the same quarter of 2024. This negative impact was primarily due to the effect of a weaker dollar on our euro denominated costs and expenses compared to the same quarter of 2024.
In the third quarter of 2025, we recorded a non-cash inventory impairment of $18.9 million as a result of low pulp prices.
Costs and expenses in the third quarter of 2025 increased by approximately 9% to $378.6 million from $348.6 million in the same quarter of 2024 due to higher per unit fiber costs, the negative foreign exchange impact of a weaker dollar and the non-cash inventory impairment.
Overall average per unit fiber costs in the third quarter of 2025 increased by approximately 14% compared to the same quarter of 2024 primarily due to reduced supply in Germany and Canada. For the fourth quarter of 2025, we currently expect per unit fiber costs to increase due to continued supply constraints and, in Germany, strong competing demand for pellets.
Transportation costs for our pulp segment in the third quarter of 2025 decreased by approximately 7% to $33.8 million from $36.5 million in the same quarter of 2024 driven by lower freight rates.
In the third quarter of 2025, Segment Operating EBITDA for our pulp segment decreased to negative $12.7 million from positive $54.6 million in the same quarter of 2024. This primarily resulted from lower pulp sales realizations, higher per unit fiber costs, the negative foreign exchange impact from a weaker dollar and the non-cash inventory impairment.
FORM 10-Q
QUARTERLY REPORT - PAGE 32
Solid Wood Segment – Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Selected Financial Information
|
|
|
|
|
|
Three Months Ended |
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Lumber revenues |
|
|
|
|
|
$ |
60,971 |
|
|
$ |
49,093 |
|
Energy revenues |
|
|
|
|
|
$ |
4,894 |
|
|
$ |
2,593 |
|
Manufactured products revenues(1) |
|
|
|
|
|
$ |
12,171 |
|
|
$ |
35,798 |
|
Pallet revenues |
|
|
|
|
|
$ |
26,650 |
|
|
$ |
26,525 |
|
Biofuels revenues(2) |
|
|
|
|
|
$ |
10,183 |
|
|
$ |
9,262 |
|
Wood residuals revenues |
|
|
|
|
|
$ |
2,365 |
|
|
$ |
1,822 |
|
Segment Operating EBITDA(3) |
|
|
|
|
|
$ |
(9,268 |
) |
|
$ |
(1,933 |
) |
Solid wood segment revenues in the third quarter of 2025 decreased by approximately 6% to $117.2 million from $125.1 million in the same quarter of 2024 primarily due to lower manufactured products revenues partially offset by higher lumber revenues.
In the third quarter of 2025, lumber revenues increased by approximately 24% to $61.0 million from $49.1 million in the same quarter of 2024 primarily as a result of higher sales realizations.
Energy, biofuels and wood residuals revenues in the third quarter of 2025 increased by approximately 27% to $17.4 million from $13.7 million in the same quarter of 2024 primarily due to higher sales realizations and energy sales volumes.
In the third quarter of 2025, manufactured products revenues decreased by approximately 66% to $12.2 million from $35.8 million in the same quarter of 2024 driven by lower sales realizations and volumes as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Pallet revenues in the third quarter of 2025 were flat at $26.7 million compared to $26.5 million in the same quarter of 2024 due to continued weak economic conditions in Europe.
Lumber production in the third quarter of 2025 decreased by approximately 6% to 115.4 MMfbm from 122.5 MMfbm in the same quarter of 2024 driven by the timing of planned maintenance downtime.
Lumber sales volumes in the third quarter of 2025 were flat at 110.2 MMfbm compared to 108.8 MMfbm in the same quarter of 2024.
Average lumber sales realizations in the third quarter of 2025 increased by approximately 23% to $553 per Mfbm from $451 per Mfbm in the same quarter of 2024 due to lower supply and improved demand in both the U.S. and European markets. The U.S. market accounted for approximately 48% of our lumber revenues and approximately 44% of our lumber sales volumes in the third quarter of 2025. The balance of our lumber sales were mainly to Europe.
Manufactured products sales realizations decreased to $1,615 per m3 in the third quarter of 2025 from $3,463 per m3 in the same quarter of 2024 as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Fiber costs were approximately 75% of our lumber cash production costs in the third quarter of 2025. In the third quarter of 2025, per unit fiber costs for lumber production increased by approximately 35% compared to the same quarter of 2024 due to reduced supply and strong demand. For the fourth quarter of 2025, we currently expect higher
FORM 10-Q
QUARTERLY REPORT - PAGE 33
per unit fiber costs due to continued supply constraints and strong demand.
Transportation costs for our solid wood segment in the third quarter of 2025 increased by approximately 4% to $13.1 million from $12.6 million in the same quarter of 2024 primarily as a result of higher freight rates.
In the third quarter of 2025, Segment Operating EBITDA for the solid wood segment decreased to negative $9.3 million from negative $1.9 million in the same quarter of 2024. This primarily resulted from lower manufactured products sales realizations and higher per unit fiber costs. These adverse impacts were partially offset by higher lumber sales realizations.
Consolidated – Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Total revenues for the nine months ended September 30, 2025 decreased by approximately 9% to $1,418.6 million from $1,555.0 million in the same period of 2024. This was primarily due to lower pulp and manufactured products sales volumes and realizations partially offset by higher lumber sales realizations.
Costs and expenses in the nine months ended September 30, 2025 modestly decreased to $1,537.8 million from $1,590.3 million in the same period of 2024 primarily as a result of lower pulp and pallet sales volumes. This was partially offset by higher per unit fiber costs, negative foreign exchange impacts from a weaker dollar and inventory impairment charges of $31.4 million recorded in 2025 which were primarily non-cash and against pulp inventory. In the nine months ended September 30, 2024, costs and expenses included a non-cash goodwill impairment of $34.3 million related to the Torgau facility, which was recognized as a result of ongoing weakness in lumber, pallet and biofuels markets in Europe stemming from high interest rates and other economic conditions, and a non-cash loss of $23.6 million in connection with the dissolution of the CPP joint venture.
In the nine months ended September 30, 2025, cost of sales depreciation and amortization was relatively steady at $117.2 million compared to $121.8 million in the same period of 2024.
Selling, general and administrative expenses were flat at $89.0 million in the nine months ended September 30, 2025 compared to $90.6 million in the same period of 2024.
In the nine months ended September 30, 2025, we had a negative foreign exchange impact of approximately $19.7 million on our operating loss compared to the same period of 2024. This negative impact was primarily due to the effect of a weaker dollar compared to the euro on the revaluation of dollar denominated accounts receivables held at our operations and on our euro denominated costs and expenses.
In the nine months ended September 30, 2025, our operating loss was $119.3 million compared to $35.4 million in the same period of 2024. This was primarily due to higher per unit fiber costs, lower pulp sales realizations, lower manufactured products sales realizations and volumes, negative foreign exchange impacts from a weaker dollar and the inventory impairment. These adverse impacts were partially offset by higher lumber sales realizations. In the nine months ended September 30, 2024, our operating loss included a non-cash goodwill impairment of $34.3 million related to the Torgau facility and a non-cash loss of $23.6 million recognized in connection with the dissolution of the CPP joint venture.
Interest expense in the nine months ended September 30, 2025 increased by approximately 5% to $85.1 million from $80.8 million in the same period of 2024. This increase was primarily driven by debt refinancing activities in October 2024, which replaced maturing senior notes with new senior notes carrying extended maturities and a higher interest rate.
In the nine months ended September 30, 2025, other expenses were $0.8 million compared to other income of $9.1 million in the same period of 2024. Other expenses in the nine months ended September 30, 2025 primarily consisted of foreign exchange losses on the revaluation of dollar denominated cash held at our operations due to the weakening dollar mostly offset by interest earned on cash. In the nine months ended September 30, 2024, other income primarily consisted of interest earned on cash.
During the nine months ended September 30, 2025, we had an income tax recovery of $15.9 million, or an effective tax rate of 8%, and in the same period of 2024, we had an income tax recovery of $5.2 million, or an effective tax rate
FORM 10-Q
QUARTERLY REPORT - PAGE 34
of 5%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate as we do not recognize tax recoveries for certain entities which we do not expect to realize a tax benefit. In the nine months ended September 30, 2024, the effective tax rate was also impacted by the non-deductibility of the non-cash goodwill impairment.
In the nine months ended September 30, 2025, our net loss was $189.2 million, or $2.83 per share, compared to $101.8 million, or $1.53 per share in the same period of 2024. The net loss in the nine months ended September 30, 2024 included the non-cash goodwill impairment of $34.3 million, or $0.51 per share, and the non-cash loss of $23.6 million, or $0.35 per share, recognized in connection with the dissolution of the CPP joint venture.
In the nine months ended September 30, 2025, Operating EBITDA decreased to negative $1.9 million from positive $144.5 million in the same period of 2024. This primarily resulted from higher per unit fiber costs, lower pulp sales realizations, lower manufactured products sales realizations and volumes, negative foreign exchange impacts from a weaker dollar and the inventory impairment. These adverse impacts were partially offset by higher lumber sales realizations.
Pulp Segment – Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Selected Financial Information
|
|
|
|
|
|
Nine Months Ended |
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Pulp revenues |
|
|
|
|
|
$ |
989,291 |
|
|
$ |
1,109,279 |
|
Energy and chemical revenues |
|
|
|
|
|
$ |
63,135 |
|
|
$ |
63,764 |
|
Segment Operating EBITDA(1) |
|
|
|
|
|
$ |
26,924 |
|
|
$ |
154,784 |
|
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the nine months ended September 30, 2025 decreased by approximately 10% to $1,052.4 million from $1,173.0 million in the same period of 2024 driven by lower pulp revenues.
Pulp revenues in the nine months ended September 30, 2025 decreased by approximately 11% to $989.3 million from $1,109.3 million in the same period of 2024 as a result of lower sales volumes and realizations.
Energy and chemical revenues in the nine months ended September 30, 2025 were relatively flat at $63.1 million compared to $63.8 million in the same period of 2024.
Total pulp production in the nine months ended September 30, 2025 was relatively flat at 1,374,734 ADMTs compared to 1,376,436 ADMTs in the same period of 2024 as improved production reliability was offset by the dissolution of the CPP joint venture in March 2024. In the nine months ended September 30, 2025, our pulp mills had 91 days of downtime (approximately 117,900 ADMTs) which included 65 days of planned annual maintenance, 20 days of unplanned downtime at our Celgar mill due to mechanical failures and six additional days due to slower than expected start-up after the planned downtime. In the nine months ended September 30, 2024, our pulp mills had 87 days of downtime (approximately 135,100 ADMTs) which included 57 days of planned annual maintenance, 23 days of unplanned downtime at our Peace River mill due to a mechanical failure and seven additional days due to slower than expected start-up after the planned downtime.
We estimate that planned annual maintenance downtime in the nine months ended September 30, 2025 adversely impacted our Segment Operating EBITDA by approximately $82.2 million, comprised of approximately $57.9 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their financial results using International Financial Reporting Standards, referred to as “IFRS”, capitalize their direct costs of maintenance downtime.
Total pulp sales volumes in the nine months ended September 30, 2025 decreased by approximately 6% to 1,357,450
FORM 10-Q
QUARTERLY REPORT - PAGE 35
ADMTs from 1,447,840 ADMTs in the same period of 2024 driven by weaker demand and the timing of sales.
In the nine months ended September 30, 2025, the third-party industry quoted average list price for NBSK pulp in Europe was relatively stable, while North America increased compared to the same period of 2024. The price increase in North America was primarily due to stable demand and supply constraints. In the nine months ended September 30, 2025, the third-party industry quoted average net price for NBSK pulp in China decreased from the same period of 2024 as a result of an oversupplied paper market and weaker demand driven by the current economic climate and global trade policy uncertainty. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,533 per ADMT and $1,758 per ADMT, respectively, in the nine months ended September 30, 2025 compared to approximately $1,525 per ADMT and $1,633 per ADMT, respectively, in the same period of 2024. The third-party industry quoted average net price for NBSK pulp in China was approximately $739 per ADMT in the nine months ended September 30, 2025 compared to approximately $776 per ADMT in the same period of 2024. Prices quoted for China are net of discounts, allowances and rebates whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
In the nine months ended September 30, 2025, the third-party industry quoted average list price for NBHK pulp in North America decreased from the same period of 2024 as a result of downward price pressure from other markets. The third-party industry quoted average net price for NBHK pulp in China decreased from the same period of 2024 due to weaker demand driven by the current economic climate and global trade policy uncertainty and the market absorbing increased hardwood capacity, which came online in 2024. The third-party industry quoted average list price for NBHK pulp in North America was approximately $1,261 per ADMT in the nine months ended September 30, 2025 compared to approximately $1,376 per ADMT in the same period of 2024. The third-party industry quoted average net price for NBHK pulp in China was approximately $538 per ADMT in the nine months ended September 30, 2025 compared to approximately $677 per ADMT in the same period of 2024.
Our average NBSK pulp sales realizations in the nine months ended September 30, 2025 modestly decreased to $756 per ADMT from $781 per ADMT in the same period of 2024 as lower prices in China were partially offset by higher prices in North America. In the nine months ended September 30, 2025, average NBHK pulp sales realizations decreased by approximately 14% to $559 per ADMT from $650 per ADMT in the same period of 2024 driven by lower prices in North America and China.
In the nine months ended September 30, 2025, we had a negative foreign exchange impact of approximately $15.0 million on Segment Operating EBITDA compared to the same period of 2024. This negative impact was primarily due to foreign exchange losses on the revaluation of dollar denominated accounts receivables held at our operations as the dollar weakened relative to the euro and Canadian dollar at the end of September 2025.
In the nine months ended September 30, 2025, we recorded inventory impairment charges of $29.9 million which were primarily non-cash and a result of low pulp prices.
Costs and expenses in the nine months ended September 30, 2025 modestly decreased to $1,108.3 million from $1,129.1 million in the same period of 2024 driven by lower pulp sales volumes. This decrease was partially offset by higher per unit fiber costs, the inventory impairment and the negative foreign exchange impact from a weaker dollar. In the nine months ended September 30, 2024, costs and expenses included a non-cash loss of $23.6 million recognized in connection with the dissolution of the CPP joint venture.
Overall average per unit fiber costs increased by approximately 8% in the nine months ended September 30, 2025 compared to the same period of 2024 primarily as a result of reduced supply in Germany and Canada.
Transportation costs for our pulp segment in the nine months ended September 30, 2025 decreased by approximately 10% to $102.2 million from $113.9 million in the same period of 2024 driven by lower pulp sales volumes.
In the nine months ended September 30, 2025, Segment Operating EBITDA for the pulp segment decreased to $26.9 million from $154.8 million in the same period of 2024. This primarily resulted from lower pulp sales realizations, higher per unit fiber costs, the inventory impairment and the negative foreign exchange impact from a weaker dollar.
FORM 10-Q
QUARTERLY REPORT - PAGE 36
Solid Wood Segment – Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Selected Financial Information
|
|
|
|
|
|
Nine Months Ended |
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Lumber revenues |
|
|
|
|
|
$ |
192,689 |
|
|
$ |
158,885 |
|
Energy revenues |
|
|
|
|
|
$ |
14,002 |
|
|
$ |
11,732 |
|
Manufactured products revenues(1) |
|
|
|
|
|
$ |
43,413 |
|
|
$ |
87,892 |
|
Pallet revenues |
|
|
|
|
|
$ |
76,413 |
|
|
$ |
81,286 |
|
Biofuels revenues(2) |
|
|
|
|
|
$ |
24,502 |
|
|
$ |
28,671 |
|
Wood residuals revenues |
|
|
|
|
|
$ |
6,203 |
|
|
$ |
5,888 |
|
Segment Operating EBITDA(3) |
|
|
|
|
|
$ |
(14,421 |
) |
|
$ |
296 |
|
Solid wood segment revenues in the nine months ended September 30, 2025 decreased by approximately 5% to $357.2 million from $374.4 million in the same period of 2024 as higher lumber revenues were more than offset by lower revenues from manufactured products.
Lumber revenues in the nine months ended September 30, 2025 increased by approximately 21% to $192.7 million from $158.9 million in the same period of 2024 primarily due to higher sales realizations and volumes.
Energy, biofuels and wood residuals revenues in the nine months ended September 30, 2025 modestly decreased to $44.7 million from $46.3 million in the same period of 2024 primarily as a result of lower biofuels sales volumes partially offset by higher energy sales volumes.
In the nine months ended September 30, 2025, manufactured products revenues decreased by approximately 51% to $43.4 million from $87.9 million in the same period of 2024 due to lower sales realizations and volumes as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Pallet revenues in the nine months ended September 30, 2025 decreased by approximately 6% to $76.4 million from $81.3 million in the same period of 2024 primarily as a result of lower sales volumes, as weak economic conditions in Europe continue to negatively impact demand. This decrease was partially offset by modestly higher sales realizations.
Lumber production in the nine months ended September 30, 2025 was relatively flat at 363.6 MMfbm compared to 360.9 MMfbm in the same period of 2024.
Lumber sales volumes in the nine months ended September 30, 2025 increased by approximately 4% to 361.8 MMfbm from 346.8 MMfbm in the same period of 2024 due to the timing of sales.
Average lumber sales realizations in the nine months ended September 30, 2025 increased by approximately 16% to $533 per Mfbm from $458 per Mfbm in the same period of 2024 as a result of lower supply and improved demand in both the U.S. and European markets. The U.S. market accounted for approximately 47% of our lumber revenues and approximately 41% of our lumber sales volumes in the nine months ended September 30, 2025. The balance of our lumber sales were mainly to Europe.
Manufactured products sales realizations decreased to $1,843 per m3 in the nine months ended September 30, 2025 from $3,260 per m3 in the same period of 2024 as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
FORM 10-Q
QUARTERLY REPORT - PAGE 37
Fiber costs were approximately 75% of our lumber cash production costs in the nine months ended September 30, 2025. In the nine months ended September 30, 2025, per unit fiber costs for lumber production increased by approximately 24% compared to the same period of 2024 due to reduced supply and strong demand.
Transportation costs for our solid wood segment in the nine months ended September 30, 2025 were relatively flat at $39.8 million compared to $40.5 million in the same period of 2024.
In the nine months ended September 30, 2025, Segment Operating EBITDA for the solid wood segment decreased to negative $14.4 million from positive $0.3 million in the same period of 2024. This primarily resulted from higher per unit fiber costs and lower manufactured products sales realizations and volumes partially offset by higher lumber sales realizations.
Liquidity and Capital Resources
Summary of Cash Flows
|
|
|
|
|
|
Nine Months Ended |
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Net cash from (used in) operating activities |
|
|
|
|
|
$ |
(37,569 |
) |
|
$ |
19,046 |
|
Net cash used in investing activities |
|
|
|
|
|
|
(70,246 |
) |
|
|
(60,541 |
) |
Net cash from (used in) financing activities |
|
|
|
|
|
|
26,932 |
|
|
|
(33,731 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
(5,940 |
) |
|
|
229 |
|
Net decrease in cash and cash equivalents |
|
|
|
|
|
$ |
(86,823 |
) |
|
$ |
(74,997 |
) |
We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for production costs, such as fiber, chemicals and energy costs, and other material operating costs for maintenance, freight and labor. Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and sales and the payment of payables and expenses.
On August 1, 2025, we announced that our board of directors had suspended our quarterly dividend. In making this determination, the change was considered prudent from a capital allocation standpoint in light of ongoing market and global trade environment uncertainties. The declaration, timing and amount of any future dividends will be subject to the discretion and approval of our board of directors based upon consideration of, among other things, our financial condition, capital allocation strategy, liquidity requirements, earnings and market conditions.
Cash Flows from (used in) Operating Activities. In the nine months ended September 30, 2025, cash used in operating activities was $37.6 million compared to cash provided from operating activities of $19.0 million in the same period of 2024. A decrease in accounts receivable provided cash of $25.0 million in the nine months ended September 30, 2025 and an increase in accounts receivable used cash of $40.9 million in the same period of 2024. Adjusting for inventory impairments of $31.4 million, an increase in inventories used cash of $4.0 million in the nine months ended September 30, 2025 and adjusting for inventory impairments of $4.0 million, a decrease in inventories provided cash of $25.2 million in the same period of 2024. An increase in accounts payable and accrued expenses provided cash of $13.2 million in the nine months ended September 30, 2025 and a decrease in accounts payable and accrued expenses used cash of $25.4 million in the same period of 2024. An increase in prepaid expenses and other used cash of $34.1 million in the nine months ended September 30, 2025, primarily related to prepaid interest payments on our senior notes due 2028, and $8.5 million in the same period of 2024.
Cash Flows from (used in) Investing Activities. In the nine months ended September 30, 2025, investing activities used cash of $70.2 million. In the nine months ended September 30, 2025, we incurred $74.4 million of capital expenditures primarily related to completion of the wood room project at our Celgar mill, log yard upgrades at our Torgau facility and Friesau mill, lime kiln improvement at our Stendal mill, sorting line upgrades and other strategic projects at our mass timber facilities, and maintenance projects across our operating segments. In the nine months ended September 30, 2025, we received $5.0 million in government grants for capital projects at our Celgar mill and mass timber facilities.
FORM 10-Q
QUARTERLY REPORT - PAGE 38
In the nine months ended September 30, 2024, investing activities used cash of $60.5 million. In the nine months ended September 30, 2024, we incurred $63.6 million of capital expenditures primarily related to log yard upgrades and other strategic projects at our Torgau facility, equipment enhancements at our Peace River mill, optimization projects at our mass timber facilities and maintenance projects across all mills and facilities. In the nine months ended September 30, 2024, we received proceeds from the sale of property, plant and equipment of $5.2 million primarily related to the sale of land from our sandalwood business.
Cash Flows from (used in) Financing Activities. In the nine months ended September 30, 2025, financing activities provided cash of $26.9 million. In the nine months ended September 30, 2025, we borrowed approximately $46.6 million under our revolving credit facilities and we paid dividends of $10.0 million.
In the nine months ended September 30, 2024, financing activities used cash of $33.7 million. In the nine months ended September 30, 2024, we repaid approximately $15.5 million under our revolving credit facilities and we paid dividends of $10.0 million.
Balance Sheet Data
The following table is a summary of selected financial information as of the dates indicated:
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
|
|
|
|
$ |
98,102 |
|
|
$ |
184,925 |
|
Working capital |
|
|
|
|
|
$ |
579,668 |
|
|
$ |
653,466 |
|
Total assets |
|
|
|
|
|
$ |
2,290,563 |
|
|
$ |
2,262,932 |
|
Long-term liabilities |
|
|
|
|
|
$ |
1,642,880 |
|
|
$ |
1,576,619 |
|
Total shareholders’ equity |
|
|
|
|
|
$ |
359,532 |
|
|
$ |
429,775 |
|
Sources and Uses of Funds
Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand. Our principal uses of funds consist of operating expenditures, capital expenditures and interest payments on our senior notes.
The following table sets out our total capital expenditures and interest expense for the periods indicated:
|
|
|
|
|
|
Nine Months Ended |
|
|
|||||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
|
||
|
|
|
|
|
|
(in thousands) |
|
|
|||||
Capital expenditures |
|
|
|
|
|
$ |
74,430 |
|
|
$ |
63,608 |
|
|
Cash paid for interest expense(1) |
|
|
|
|
|
$ |
79,200 |
|
|
$ |
84,912 |
|
|
Interest expense(2) |
|
|
|
|
|
$ |
85,072 |
|
|
$ |
80,831 |
|
|
As of September 30, 2025, we had cash and cash equivalents of $98.1 million, approximately $278.0 million available under our revolving credit facilities and aggregate liquidity of about $376.1 million.
We have reduced our planned capital expenditures for fiscal 2025 and currently expect them to be between $90.0 million to $100.0 million.
FORM 10-Q
QUARTERLY REPORT - PAGE 39
We currently consider the majority of undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no U.S. income tax has been provided on such earnings. However, if we were required to repatriate funds to the U.S., we believe that we currently could repatriate the majority thereof without incurring any material amount of taxes as a result of our shareholder advances and U.S. tax reform. However, it is currently not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S. Substantially all of our undistributed earnings are held by our foreign subsidiaries outside of the U.S.
Based upon the current level of operations and our current expectations for future periods in light of the current economic environment, and in particular, current and expected pulp and lumber pricing and foreign exchange rates, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facilities, will be adequate to finance the capital requirements for our business for the next 12 months.
In the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, capital resources will be required. Depending on the size of a transaction, the capital resources that will be required can be substantial. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets or the issuance of securities.
Debt Covenants
Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements. See our annual report on Form 10-K for the fiscal year ended December 31, 2024.
As of September 30, 2025, we were in full compliance with all of the covenants of our indebtedness.
Contractual Obligations and Commitments
There were no material changes outside the ordinary course to any of our material contractual obligations during the nine months ended September 30, 2025.
Foreign Currency
As a majority of our assets, liabilities and expenditures are held or denominated in euros or Canadian dollars, our consolidated financial results are subject to foreign currency exchange rate fluctuations.
We translate foreign denominated assets and liabilities into dollars at the rate of exchange on the balance sheet date. Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recorded in other comprehensive income (loss) and do not affect our net earnings.
As a result of a weaker dollar versus the euro and Canadian dollar as of September 30, 2025, during the nine months ended September 30, 2025, we recorded a non-cash increase of $126.4 million in the carrying value of our net assets denominated in euros and Canadian dollars, consisting primarily of our property, plant and equipment. This non-cash increase does not affect our net loss, Operating EBITDA or cash but is reflected in our other comprehensive income (loss) and as an increase to our total equity. As a result, our accumulated other comprehensive loss decreased to $105.2 million.
Based upon the exchange rate as of September 30, 2025, the dollar was approximately 3% weaker against the Canadian dollar and 13% weaker against the euro since December 31, 2024. See “Quantitative and Qualitative Disclosures about Market Risk”.
Credit Ratings of Senior Notes
We and our senior notes are rated by Standard & Poor's Rating Services, referred to as “S&P”, Moody’s Investors Service, Inc., referred to as “Moody’s” and Fitch Ratings, referred to as “Fitch”.
FORM 10-Q
QUARTERLY REPORT - PAGE 40
S&P, Moody’s and Fitch base their assessment of the credit risk on our senior notes on the business and financial profile of Mercer Inc. and our restricted subsidiaries under the indentures governing the senior notes. Factors that may affect our credit rating include changes in our operating performance and liquidity. Credit rating downgrades can adversely impact, among other things, future borrowing costs and access to capital markets.
In October 2025, S&P downgraded its rating on our senior notes from B to B- but maintained a stable outlook, while Fitch kept its B+ rating on our senior notes but revised its outlook from stable to negative.
Credit ratings are not recommendations to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect both the amount and the timing of the recording of assets, liabilities, revenues, and expenses in the consolidated financial statements and accompanying note disclosures. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increases, these judgments become even more subjective and complex.
Our significant accounting policies are disclosed in Note 1 to our audited annual financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2024. While all of the significant accounting policies are important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment. On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, future cash flows associated with impairment testing for goodwill and long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, revenues under long-term contracts, inventory impairment, assets and liabilities classified as held for sale and the fair value of disposal groups, legal liabilities and contingencies. Actual results could differ materially from these estimates and changes in these estimates are recorded when known.
For information about our significant and critical accounting policies, see our annual report on Form 10-K for the fiscal year ended December 31, 2024.
Cautionary Statement Regarding Forward-Looking Information
The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Generally, forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, or words of similar meaning, or future or conditional verbs, such as “will”, “should”, “could”, or “may”, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties and other factors, many of which are beyond our control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the following:
Risks Related to our Business
FORM 10-Q
QUARTERLY REPORT - PAGE 41
FORM 10-Q
QUARTERLY REPORT - PAGE 42
Risks Related to our Debt
Risks Related to Macroeconomic Conditions
Legal and Regulatory Risks
Risks Related to Ownership of our Shares
Given these uncertainties, you should not place undue reliance on our forward-looking statements. The foregoing review of important factors is not exhaustive or necessarily in order of importance and should be read in conjunction with the risks and assumptions including those set forth under “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024 and in the other reports and documents we have filed with or furnished to the SEC. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
FORM 10-Q
QUARTERLY REPORT - PAGE 43
Cyclical Nature of Business
Revenues
The pulp and lumber businesses are highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can materially affect prices. Pulp and lumber markets are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macroeconomic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is primarily determined by supply relative to demand.
Industry capacity can fluctuate as changing industry conditions can influence producers to idle production capacity or permanently close mills. In addition, to avoid substantial cash costs in idling or closing a mill, some producers will choose to operate at a loss, sometimes even a cash loss, which can prolong weak pricing environments due to oversupply. Oversupply of our products can also result from producers introducing new capacity in response to favorable pricing trends. Certain integrated pulp and paper producers have the ability to discontinue paper production by idling their paper machines and selling their pulp production on the market, if market conditions, prices and trends warrant such actions.
Demand for each of pulp and lumber has historically been determined primarily by general global macroeconomic conditions and has been closely tied to overall business activity. Pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
The third-party industry quoted average European list prices for NBSK pulp between 2016 and 2025 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,635 per ADMT in 2024. In the same period, third-party industry quoted average North American list prices for NBHK pulp have fluctuated between a low of $820 per ADMT in 2016 to a high of $1,620 per ADMT in 2022.
As a key construction material, the pricing and demand for lumber is also significantly influenced by the number of housing starts, especially in the U.S. In the U.S., third-party industry quoted monthly average western spruce/pine/fir (WSPF) 2 x 4 #2&Btr prices between 2016 and 2025 have fluctuated between a low of $259 per Mfbm in 2016 to a high of $1,604 per Mfbm in 2021. Similarly, the demand for CLT and glulam is primarily driven by the wood construction market and increased government policies focused on a low-carbon economy.
Our mills and operations voluntarily subject themselves to third-party certifications in compliance with internationally recognized, sustainable management standards because end use paper and lumber customers have shown an increased interest in understanding the origin of products they purchase. Demand for our products could be adversely affected if we, or our suppliers, are unable to achieve compliance, or are perceived by the public as failing to comply, with these standards or if our customers require compliance with alternate standards for which our operations are not certified.
A pulp producer's actual sales price realizations are net of customer discounts, rebates and other selling concessions. Accordingly, prices for pulp and lumber are driven by many factors outside our control, and we have little influence over the timing and extent of price changes, which are often volatile. Because market conditions beyond our control determine the prices for pulp and lumber, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our mills. Therefore, our profitability depends on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.
FORM 10-Q
QUARTERLY REPORT - PAGE 44
Costs
Our production costs are influenced by the availability and cost of raw materials, energy and labor, and our plant efficiencies and productivity. Our main raw material is fiber in the form of wood chips, pulp logs, sawlogs and lumber. Wood chip, pulp log and sawlog costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both highly cyclical. Higher fiber prices could affect producer profit margins if they are unable to pass along price increases to pulp and lumber customers or purchasers of surplus energy.
Currency
We have manufacturing operations in Germany, Canada and the U.S. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars. However, the majority of our sales are in products quoted in dollars. Our results of operations and financial condition are reported in dollars. As a result, our costs generally benefit from a strengthening dollar but are adversely affected by a decrease in the value of the dollar relative to the euro and to the Canadian dollar. Such declines in the dollar relative to the euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
FORM 10-Q
QUARTERLY REPORT - PAGE 45
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in interest rates and foreign currency exchange rates, particularly the exchange rates between the dollar and the euro and Canadian dollar. Changes in these rates may affect our results of operations and financial condition and, consequently, our fair value. We seek to manage these risks through internal risk management policies as well as the periodic use of derivatives.
For additional information, please refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our annual report on Form 10-K for the fiscal year ended December 31, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”), as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.
It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness and there can be no assurance that any design will succeed in achieving its stated goals.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORM 10-Q
QUARTERLY REPORT - PAGE 46
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to routine litigation incidental to our business, including that which is described in our latest annual report on Form 10-K for the fiscal year ended December 31, 2024. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes to the factors disclosed in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
FORM 10-Q
QUARTERLY REPORT - PAGE 47
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
|
|
31.1 |
|
Section 302 Certification of Chief Executive Officer |
|
|
|
31.2 |
|
Section 302 Certification of Chief Financial Officer |
|
|
|
32.1* |
|
Section 906 Certification of Chief Executive Officer |
|
|
|
32.2* |
|
Section 906 Certification of Chief Financial Officer |
|
|
|
101 |
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2025 of Mercer International Inc., formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Interim Consolidated Statements of Operations; (ii) Interim Consolidated Statements of Comprehensive Income (Loss); (iii) Interim Consolidated Balance Sheets; (iv) Interim Consolidated Statements of Changes in Shareholders’ Equity; (v) Interim Consolidated Statements of Cash Flows; and (vi) Notes to the Interim Consolidated Financial Statements. |
|
|
|
104 |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 has been formatted in iXBRL. |
* In accordance with Release No. 33-8212 of the SEC, these Certifications: (i) are “furnished” to the SEC and are not “filed” for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company’s registration statements filed under the Securities Act of 1933, as amended, for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein.
FORM 10-Q
QUARTERLY REPORT - PAGE 48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
|
MERCER INTERNATIONAL INC. |
||
|
|
|
|
|
By: |
|
/s/ Richard Short |
|
|
|
Richard Short |
|
|
|
Chief Financial Officer and Authorized Officer |
Date: November 6, 2025
FORM 10-Q
QUARTERLY REPORT - PAGE 49
FAQ
What were MERC’s Q3 2025 revenue and net loss?
How did MERC’s Segment Operating EBITDA perform in Q3 2025?
Did MERC record any inventory impairments?
What was MERC’s cash and debt position as of September 30, 2025?
What were MERC’s nine‑month 2025 results?
How much did MERC declare in dividends year‑to‑date 2025?
How many MERC shares were outstanding?
