Mercer International Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Consolidated revenues for Q2 2026 were $460.3 million, a modest increase from $453.5 million in Q2 2025, and decreased from $489.3 million in Q1 2026.
• Net loss for Q2 2026 was $76.0 million ($1.13 per share), compared to a net loss of $86.1 million ($1.29 per share) in Q2 2025 and $52.0 million ($0.78 per share) in Q1 2026.
• Operating EBITDA for Q2 2026 was negative $21.0 million, compared to negative $20.9 million in Q2 2025 and positive $7.8 million in Q1 2026.
• Year-to-date (YTD) revenues through June 30, 2026, were $949.6 million, down from $960.5 million in the same period of 2025.
• YTD Operating EBITDA for the first half of 2026 was negative $13.1 million, a decrease from positive $26.2 million in the same period of 2025.
• Costs and expenses for Q2 2026 were $519.3 million, compared to $511.9 million in Q2 2025.
• Q2 2026 costs included a non-cash inventory impairment of $29.0 million, compared to $11.0 million in Q2 2025.
• YTD costs and expenses were $1,041.4 million, up from $1,012.2 million in the same period of 2025, including $51.0 million in inventory impairment charges.
• Cash and cash equivalents were $78.8 million as of June 30, 2026, down from $186.8 million as of December 31, 2025.
• Total shareholders' equity was a deficit of $98.0 million as of June 30, 2026, compared to positive equity of $68.1 million as of December 31, 2025.
• Current liabilities increased to $600.9 million as of June 30, 2026, from $283.6 million as of December 31, 2025.
• Long-term liabilities decreased to $1,367.0 million as of June 30, 2026, from $1,689.7 million as of December 31, 2025.
• Working capital was $182.5 million as of June 30, 2026, down from $582.2 million as of December 31, 2025.

Guidance and Future Outlook

• Mercer expects more balanced markets toward the end of 2026.
• Per unit fiber costs for German mills are expected to remain elevated in Q3 2026 with a slight increase, driven by strong demand for wood as an energy source due to geopolitical conflicts.
• Per unit fiber costs at Canadian pulp mills and sawmills are expected to modestly decrease in Q3 2026 as regional curtailments improve fiber supply.
• Softwood pulp prices are expected to be slightly lower in Q3 2026 as supply reductions are offset by lower seasonal demand.
• Hardwood pulp pricing is expected to modestly decrease in Q3 2026 as global supply constraints ease.
• Overall demand is expected to remain weak in Q3 2026 due to high U.S. interest rates and continued European economic headwinds.
• North American lumber prices are expected to continue an upward trend driven by lower customer inventory levels and capacity curtailments, with expectations of a strong recovery and further price increases as conditions improve.
• Mass timber contracts, currently valued at approximately $151 million, are expected to begin contributing to results in late 2026 and into 2027.
• The "One Goal One Hundred" program aims to achieve $100 million in cost savings and operational efficiencies by year-end 2026.

Business Segments and Product Lines

• Pulp Segment:
  • Revenues were $325.1 million in Q2 2026, down from $332.3 million in Q2 2025.
  • Pulp revenues were $303.3 million, down from $313.7 million in Q2 2025, due to lower sales realizations partially offset by higher sales volumes.
  • Total pulp sales volumes increased 6% to 450,329 ADMTs in Q2 2026 compared to Q2 2025.
  • Average NBSK pulp sales realizations decreased approximately 10% to $682 per ADMT in Q2 2026 from $758 per ADMT in Q2 2025.
  • Average NBHK pulp sales realizations increased approximately 6% to $607 per ADMT in Q2 2026 from $575 per ADMT in Q2 2025.
  • Energy and chemical revenues increased 17% to $21.7 million in Q2 2026.
  • Segment Operating EBITDA was negative $12.7 million in Q2 2026, compared to negative $10.3 million in Q2 2025, including a $26.0 million non-cash inventory impairment.
  • Pulp production was relatively flat at 455,769 ADMTs in Q2 2026; German mills reduced production due to high fiber prices.
• Solid Wood Segment:
  • Revenues were $134.2 million in Q2 2026, up 14% from $117.3 million in Q2 2025.
  • Lumber revenues decreased 15% to $56.6 million in Q2 2026 due to lower sales volumes, though average sales realizations increased to $565 per Mfbm.
  • Lumber sales volumes decreased 17% to 100.3 MMfbm in Q2 2026.
  • Manufactured products revenues (CLT and glulam) increased to $25.8 million in Q2 2026 from $12.4 million in Q2 2025; sales realizations increased 67% to $2,206 per cubic meter.
  • Pallet revenues were $31.9 million in Q2 2026, up from $26.6 million in Q2 2025.
  • Biofuels revenues were $10.7 million in Q2 2026, up from $5.1 million in Q2 2025.
  • Segment Operating EBITDA was negative $8.2 million in Q2 2026, compared to negative $4.9 million in Q2 2025.
  • Lumber production was stable at 123.8 MMfbm in Q2 2026.
  • Per unit fiber costs for lumber production increased 28% in Q2 2026 compared to Q2 2025.

Market and Competitive Landscape

• Global economic uncertainty and geopolitical conflicts (Middle East and Ukraine) are exerting inflationary pressures on fiber, freight, and production costs.
• European fiber costs rose due to regional supply shortages and intense competition for sawmill residuals from energy producers.
• NBSK pulp list prices in Europe increased in Q2 2026 due to supply constraints, while prices in North America and China decreased due to weak demand and oversupply in China.
• NBHK pulp prices increased in North America and China due to global supply constraints.
• The U.S. market accounted for approximately 49% of lumber revenues and 43% of lumber sales volumes in Q2 2026.
• Tariff impacts have been immaterial to date, though indirect impacts are reshaping global supply dynamics.

Risks and Challenges

• Ongoing economic uncertainty and weak market conditions have delayed market recovery.
• Rising European fiber costs driven by supply shortages and energy demand.
• Geopolitical conflicts continue to drive inflationary pressures on raw materials and energy.
• High U.S. interest rates and European economic headwinds are limiting demand.
• The company is actively evaluating strategic alternatives to address debt maturities and strengthen its capital structure, with no assurance that discussions will result in a transaction.
• The company faces significant inventory impairment charges due to the disparity between low pulp prices and high fiber costs.

Management Commentary and Tone

• CEO Juan Carlos Bueno stated that pulp sales realizations remained steady but results were weighed down by rising European fiber costs and economic uncertainty.
• Management emphasized immediate priorities are managing costs, maintaining liquidity, and optimizing the capital structure.
• The company remains confident in achieving the $100 million cost savings target by year-end 2026.
• Management is proactively taking steps to enhance liquidity and strengthen the balance sheet, including engaging advisors to review strategic alternatives.
• The tone reflects a focus on preservation and restructuring in response to challenging market conditions.

Other Key Points

• The company implemented operational restructuring at the Torgau facility, including a workforce reduction of approximately 100 contractor positions in July 2026, with an expected total reduction of 350 positions by Q2 2027.
• The "One Goal One Hundred" program has achieved approximately $54.0 million in cost savings to date since its launch in April 2025, with an additional $13.0 million realized in Q2 2026.
• Discussions are ongoing with holders of 2028 and 2029 senior notes and other stakeholders regarding potential financing and liquidity-enhancing transactions.
• The company has a mass timber order book and commitments valued at approximately $151 million at the end of Q2 2026.
• No dividends were declared in Q2 2026 or Q1 2026, compared to $0.075 per share in Q2 2025 and $0.150 per share YTD 2025.
• The company has approximately $191.7 million in aggregate liquidity as of June 30, 2026, including $78.8 million in cash and $112.9 million available under revolving credit facilities.