Mercer International Inc. (NASDAQ:MERC) Q3 2019 Earnings Conference Call Transcript

Nov 01, 2019 • 10:00 am ET

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Mercer International Inc. (NASDAQ:MERC) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning and welcome to Mercer International's Third Quarter 2019 Earnings Conference Call. On the call today is, David Gandossi, President and Chief Executive Officer, of Mercer International; and David Ure, Senior Vice President, Finance Chief Financial Officer and Secretary.

I will now hand the call over to you, David Ure.

Executive
David K. Ure

Good morning, everyone. I'll begin by, reviewing the third quarter's financial highlights. Following my remarks I'll pass the call to David who will comment on our key markets operational performance progress on our strategic initiatives along with our outlook into the final quarter of 2019. Please note that in this morning's conference call we will make forward-looking statements, and according to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention, to the risks related to these statements, which are more fully described in our press release, and in the company's filings with the Securities and Exchange Commission. Overall, we are pleased with our operating performance this quarter. We achieved solid pulp and lumber production and we are able to take advantage of modest improvements in pulp demand across most markets to reduce our finished goods inventory to more normal levels. Q3 consolidated EBITDA was almost $51 million compared to $70 million in Q2. The decrease in EBITDA was principally due to lower European pulp prices which were partially offset by stronger U.S. dollar lower fiber costs and higher sales volumes. In addition we recorded the reversal of previously accrued wastewater fees related to our Rosenthal mill during the quarter.

Our pulp segment contributed $51.1 million of EBITDA and our wood products segment contributed EBITDA of $2.6 million. Our improving wood products segment results reflect steady production despite the construction activities currently underway on site along with the benefit of lower sawlog prices. As usual you will find additional segment disclosures in our 10-Q. Quarterly average list prices for both softwood and hardwood pulp were down sequentially in all markets. Compared to Q2 our average pulp realizations negatively impacted EBITDA, by about $52 million. Our pulp sales volume totaled 542000 tonnes which was up 22000 tonnes from Q2 due to increased demand in all of our largest markets and in particular China. On the wood products side of our business we sold the equivalent of about 97 million board feet of lumber in the quarter, with about 30% of this volume being sold into the U.S. market. Our lumber sales were down four million board feet from Q2 due to minor interruptions in production as a result of the construction activities combined with lower yields from the increased supply of lower quality storm and beetle damaged logs. Electricity sales totaled 239 gigawatt hours in the quarter which is down roughly 7% compared to Q2 due to annual maintenance at Rosenthal and the ongoing construction at our Friesau mill.

Our Cariboo pulp joint venture which is accounted for using the equity method added another 12 gigawatt hours to this total. We reported