Mercer International Inc.

Second-quarter operating EBITDA was negative $21 million, down from positive $8 million in Q1. Consolidated net loss was $76 million, or $1.13 per share, versus a net loss of $52 million, or $0.78 per share in Q1. The quarter included a $29 million non-cash inventory impairment, which management said was mainly driven by high fiber costs in Germany and low pulp prices. Softwood pulp realizations were $682 per ton, down from $696 per ton in Q1; hardwood realizations improved to $607 per ton from $564 per ton. Aggregate liquidity fell by $37 million to about $192 million, including $79 million of cash and $113 million of undrawn revolvers. Capital spending was $12 million. For Q3, management expects cash flow items to be pretty similar to Q2, and it guided to about 40 days of planned maintenance downtime across three mills, with incremental cost of roughly $1.5 million per day.

Juan Carlos Bueno said the quarter was disappointing because both segments were negative on EBITDA, driven by extremely high German fiber costs and a delayed pulp price recovery. He stressed that Mercer is taking decisive actions, including restructuring Torgau, extending Rosenthal’s maintenance shut, and slowing production at Stendal and Rosenthal to match fiber availability. He also framed the current environment as validation of Mercer’s long-term strategy to transform pulp mills into bio-refineries with added revenue streams and a more resilient product mix.

Richard Short highlighted that operating EBITDA fell to negative $21 million, with the decline driven primarily by higher fiber costs in Germany and a $29 million non-cash inventory impairment. He said liquidity was about $192 million at quarter-end, made up of $79 million of cash and $113 million of undrawn revolvers, and that the company invested $12 million of capital, mostly maintenance capex. He also noted the going-concern disclosure, the Canadian revolver maturity in January 2027, the German revolver waiver through September 30, 2026, and said the company expects Q3 cash flow items to be similar to Q2.

Analysts pressed on whether the German mills are below cash break-even and on the company’s 2026 cash flow profile. Short said the German mills are negative cash and estimated that an improvement of roughly $35 million to $40 million would be needed to get on top of capex. On cash flow, he said Q3 should be pretty similar to Q2. Another question focused on maintenance and energy costs; Short clarified that the $67 million maintenance figure is regular operating maintenance, not major shutdown work, and explained that mills generally self-generate electricity while natural gas is a key market-priced input at the pulp mills.