Mercer International Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sean Stewart - TD Cowen - Analyst : Thanks, good morning. Congratulations on a much-improved result. A couple questions I want to dig into. First on pulp costs and I appreciate the better productivity and the currency tailwinds. Wondering if you can do a little more unpacking of input cost trends this quarter as well. It would appear to us that even adjusting for currency and the maintenance schedule, there were some tailwinds there as well. Can you give us a bit more detail between Europe and Canada, any trends you might have seen there?

Question: Sean Stewart - TD Cowen - Analyst : That's great detail. I appreciate that. Question on your European wood business which continues to struggle in your reference, some of the factors there. We're hearing reports of capacity coming out of the European market on the lumber side more in Scandinavia than Germany, but any sense that conditions are -- there's any tension apparent in that market headed into early 2025 and your ability to improve margins, those operations with a fairly conservative CapEx budget? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 3:00PM, MERC.OQ - Q4 2024 Mercer International Inc Earnings Call

Question: Sean Stewart - TD Cowen - Analyst : That's great detail. I really appreciate it. Thanks very much. That's all I have.

Question: Matthew McKellar - RBC Capital Markets - Analyst : Good morning. Thanks very much for taking my questions. I'd like to just follow up on Sean's question on the outlook for fiber costs in Germany. Your commentary on 2025 was certainly helpful. If we take a slightly longer-term perspective, where do you expect your fiber cost in the country to trend over the next two or three years? Does that trend get better in '26 and '27? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 3:00PM, MERC.OQ - Q4 2024 Mercer International Inc Earnings Call

Question: Matthew McKellar - RBC Capital Markets - Analyst : Okay, thanks. That's helpful. And actually, I was just wondering if you could provide a bit more color around how you're managing your manufactured products business right now, given the slack you're seeing. You described the outlook is muted. Should we assume no revenue growth in 2025 if we don't see relief on interest rates? We're expecting flat results, even generous given the conditions you're seeing today. And then, are the steel tariffs at all helpful for the medium-term outlook for mass timber demand from a comparative cost perspective? Thanks.

Question: Matthew McKellar - RBC Capital Markets - Analyst : Great, that's helpful. Thanks very much. I'll turn it back.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Hi, good morning. Juan Carlos, could you help us understand how the returns on lumber sales within Europe compares to North America now? Seems like we've had a further movement in domestic prices here, but I'm curious what you're seeing on the continent.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay, great. Thanks, Rich, I appreciate that, the detail. And then just following up on the tariff discussion, you mentioned, I think in your prepared remarks that Celgar sources 40% of its chips from the US. If tariffs do come in and the counter tariffs don't end up actually exempting chips from the US, would you still be able to find fiber within BC at an acceptable cost or would Celgar likely then have to reduce its operating rate?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay, no, I appreciate that. But I guess Juan Carlos, if there are tariffs and the counter tariffs do not actually end up exempting chips coming from the US to Canada, in that situation, would you still be buying chips from the US?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay, fair enough, that makes sense. That's all I had. I'll turn it over. Thanks.

Question: Sandy Burns - Stifel Nicolaus - Analyst : Hi, good morning and congrats on a good quarter. Just wanted to kind of follow up with the downtime schedule for the first quarter. I guess, was the company planning this pretty far in advance? So you built up your inventories in anticipation of it, so we should expect to see, especially NBSK sales much higher than the production for the quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 3:00PM, MERC.OQ - Q4 2024 Mercer International Inc Earnings Call

Question: Sandy Burns - Stifel Nicolaus - Analyst : Right, but you're saying you think sales volumes will probably still be down from the fourth quarter? Is kind of how demand is playing out?

Question: Sandy Burns - Stifel Nicolaus - Analyst : Okay, and then my second question would be -- a lot of questions about the tariffs and you did make the comment that there could be positive impacts and opportunities. Could you elaborate on that a little bit? What you're thinking could be, a positive for the company if they do all play out as harshly as the worst case?

Question: Sandy Burns - Stifel Nicolaus - Analyst : Okay, great. Thank you. Good luck.

Question: Cole Hathorn - Jefferies - Analyst : Good morning. Thanks for taking my question. Just a bit of a follow-up or clarification question on the fiber costs in Germany. We're seeing quite a bit of a divergence in the Nordic players between sawlog costs and effectively, pulp wood and wood chips. When you're talking about the fiber cost inflation, are you predominantly talking about the sawlogs for your lumber operations or are you also talking about related wood chips and kind of pulpwood into the pulp side? I'm just wondering if it's just sawlogs or both pulpwood and sawlogs. And then secondly, the European packaging players have talked about improvements in some of their order books, and I'm just wondering, are you seeing anything on the pallet side of your business? Any kind of green shoots there? Thank you.

Question: Cole Hathorn - Jefferies - Analyst : And then maybe while we're still on that, is there any other end markets besides autos that would really move the needle for that, the pallets business? And then I wanted to ask on softwood pulp, we've seen Suzano raise prices consecutive for the last 3 months and they're trying to get something in March. We've seen softwood pulp move up in Europe, but it's effectively to cover the increase in discount. Do you think the gap narrows first before softwood can move higher? Or how do you think the softwood price dynamic might play out from here if hardwood prices are rising? Thank you.

Question: Cole Hathorn - Jefferies - Analyst : It was just on pallets, if there's any other big sector driver that might come back to help besides (inaudible). Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 21, 2025 / 3:00PM, MERC.OQ - Q4 2024 Mercer International Inc Earnings Call

Question: Cole Hathorn - Jefferies - Analyst : Thank you.