On August 8, 2024, Mercer International Inc (MERC, Financial) released its 8-K filing for the second quarter of 2024. Mercer International Inc is a forest products company with two reportable operating segments in pulp and solid wood. The pulp segment consists of the manufacture, sale, and distribution of pulp, electricity, and chemicals. The solid wood segment consists of the manufacture, sale, and distribution of lumber, manufactured products wood pallets, electricity, biofuels, and wood residuals from sawmills and other facilities located in Germany and the United States. The company has a geographical presence in the USA, Germany, China, and other countries, with the majority of revenue generated from the USA. The majority of the revenue is generated from the Pulp segment.
Performance and Challenges
Mercer International Inc reported a net loss of $67.6 million ($1.01 per share) for the second quarter of 2024, which included a non-cash impairment of $34.3 million ($0.51 per share) against goodwill related to the Torgau facility. This compares to a net loss of $98.3 million ($1.48 per share) in the same quarter of 2023 and a net loss of $16.7 million ($0.25 per share) in the first quarter of 2024. The company’s Operating EBITDA for the second quarter was $30.4 million, a significant improvement from negative Operating EBITDA of $68.7 million in the same quarter of 2023 but a decrease from $63.6 million in the first quarter of 2024.
Financial Achievements
Despite the challenges, Mercer International Inc saw improvements in its pulp segment due to strengthening markets. The company managed to reduce borrowings by approximately $45 million under its revolving credit facilities during the quarter, thanks to improved cash flow from operations. The company also announced a quarterly cash dividend of $0.075 per share.
Income Statement Highlights
| Metric | Q2 2024 | Q1 2024 | Q2 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|---|
| Revenues | $499.4 million | $553.4 million | $529.9 million | $1,052.8 million | $1,052.5 million |
| Operating Loss | $(43.8) million | $(0.4) million | $(108.8) million | $(44.2) million | $(129.0) million |
| Operating EBITDA | $30.4 million | $63.6 million | $(68.7) million | $94.0 million | $(41.2) million |
| Net Loss | $(67.6) million | $(16.7) million | $(98.3) million | $(84.3) million | $(128.9) million |
| Net Loss per Share | $(1.01) | $(0.25) | $(1.48) | $(1.26) | $(1.94) |
Segment Results
In the pulp segment, operating income increased to $4.5 million from an operating loss of $83.5 million in the same quarter of 2023, primarily due to higher pulp sales realizations and lower per unit fiber and other production costs. Pulp segment revenues decreased by approximately 9% to $367.4 million from $402.7 million in the same quarter of 2023 due to lower sales volumes and lower energy and chemical sales realizations.
In the solid wood segment, the company reported an operating loss of $43.7 million compared to $22.5 million in the same quarter of 2023, primarily due to the non-cash goodwill impairment charge. Solid wood segment revenues modestly increased to $130.2 million from $126.1 million in the same quarter of 2023, driven by higher manufactured products revenues.
Liquidity and Cash Flow
As of June 30, 2024, Mercer International Inc had cash and cash equivalents of $263.2 million, approximately $317.4 million available under its revolving credit facilities, and aggregate liquidity of about $580.6 million. The company’s strong liquidity position and the significant majority of its annual scheduled maintenance downtime completed position it well for the second half of 2024.
Conclusion
Mercer International Inc's second quarter results reflect a mixed performance with improvements in the pulp segment offset by challenges in the solid wood segment. The company's strategic investments and strong liquidity position provide a solid foundation for future growth as market conditions improve.
Explore the complete 8-K earnings release (here) from Mercer International Inc for further details.
