Mercer International Inc. — Third Quarter 2026 Earnings Summary

Financial Performance

• Consolidated revenues decreased 4% year-over-year to $440.7 million in Q3 2026 from $458.1 million in Q3 2025; year-to-date revenues were $1,390.3 million compared to $1,418.6 million in the prior year period.
• Operating EBITDA improved to negative $2.9 million in Q3 2026 from negative $28.1 million in Q3 2025 and negative $21.0 million in Q2 2026; year-to-date Operating EBITDA was negative $16.0 million compared to negative $1.9 million in the prior year period.
• Net loss was $59.2 million ($0.88 per share) in Q3 2026, an improvement from $80.8 million ($1.21 per share) in Q3 2025 and $76.0 million ($1.13 per share) in Q2 2026; year-to-date net loss was $187.2 million compared to $189.2 million in the prior year period.
• Costs and expenses decreased 9% year-over-year to $479.4 million in Q3 2026 from $525.7 million in Q3 2025, driven by lower sales volumes and cost reduction initiatives, partially offset by higher per unit fiber and freight costs.
• Q3 2026 costs included a $13.0 million benefit from government grants and an $8.0 million non-cash inventory impairment; Q3 2025 costs included a $20.4 million non-cash inventory impairment.
• Cash and cash equivalents were $71.0 million as of September 30, 2026, down from $186.8 million as of December 31, 2025.
• Total shareholders' equity turned to a deficit of $158.2 million as of September 30, 2026, compared to positive equity of $68.1 million as of December 31, 2025.
• Current liabilities increased to $615.0 million as of September 30, 2026, from $283.6 million as of December 31, 2025.

Guidance and Future Outlook

• The company expects to complete the recapitalization and Chapter 11 process by the end of 2026.
• For Q4 2026, per unit fiber costs for German pulp mills are expected to increase slightly due to strong demand for wood as an energy source and reduced supply.
• Per unit fiber costs for Canadian pulp mills are expected to decrease in Q4 2026 following contract renegotiations and improved supply.
• Sawmill per unit fiber costs are projected to remain flat in Q4 2026.
• Softwood pulp prices are expected to modestly increase in all markets in Q4 2026 due to global supply constraints; hardwood pulp prices are expected to remain stable.
• Lumber prices are expected to be relatively flat in Q4 2026 as weak demand offsets supply constraints, with expectations of price increases as market conditions improve.
• The "One Goal One Hundred" program is on track to achieve $100 million in cost savings by year-end 2026, with $76.0 million achieved to date.
• Mass timber contracts totaling approximately $151 million are expected to begin contributing to results in late 2026 and into 2027.

Business Segments and Product Lines

• Pulp Segment: Segment Operating EBITDA improved to positive $5.9 million in Q3 2026 from negative $12.7 million in Q3 2025. Pulp revenues decreased 12% to $281.1 million due to lower volumes and realizations. Energy and chemical revenues increased 43% to $29.1 million. Pulp sales volumes decreased 7% to 421,413 ADMTs.
• Solid Wood Segment: Segment Operating EBITDA improved to negative $7.0 million in Q3 2026 from negative $9.3 million in Q3 2025. Segment revenues increased 10% to $128.6 million. Lumber revenues increased 11% to $68.0 million driven by higher realizations and volumes. Manufactured products revenues increased 53% to $18.7 million.
• Lumber: Sales realizations increased 6% to $586 per Mfbm; sales volumes increased 5% to 116.0 MMfbm. Production decreased 6% to 108.6 MMfbm.
• Manufactured Products: Sales realizations increased 28% to $2,063 per cubic meter, driven by a shift toward higher-value mass timber projects.
• Biofuels: Sales realizations increased to $310 per tonne from $256 per tonne in the prior year period.
• Maintenance: Pulp mills experienced 44 days of planned annual maintenance downtime in Q3 2026, negatively impacting Operating EBITDA by approximately $34.1 million. Celgar mill is expected to have 18 days of planned downtime in Q4 2026.
• Operational Issues: The Rosenthal mill experienced 24 days of unplanned downtime in Q4 2026 due to effluent treatment issues, which were resolved and operations resumed.

Market and Competitive Landscape

• Industry-wide curtailments and permanent pulp mill closures helped balance supply, though soft market demand and regional overcapacity in China kept prices flat.
• NBSK pulp average sales realizations decreased 8% to $671 per ADMT; NBHK pulp average sales realizations increased 14% to $601 per ADMT.
• NBSK pulp prices in Europe increased but were offset by customer discounts; prices in North America and China decreased.
• NBHK pulp prices in North America and China increased due to global supply constraints.
• U.S. lumber market prices were driven by reduced supply; European lumber demand remained weak despite supply contraction.
• High interest rates and seasonal slowdowns contributed to weak lumber demand in Q4 2026.

Risks and Challenges

• Significant planned annual maintenance downtime negatively impacted Q3 2026 results.
• Higher per unit fiber costs, particularly at German mills, due to reduced supply and competition from energy producers.
• Ongoing regional overcapacity in China and weak global demand for pulp.
• Effluent treatment issues at the Rosenthal mill caused unplanned downtime.
• Macroeconomic and geopolitical uncertainty affecting the industry.
• The company faces risks related to the completion of the recapitalization, including regulatory approvals and Bankruptcy Court approval.
• Potential cancellation of existing common stock and listing of new securities.
• Highly cyclical nature of the business, raw material costs, and indebtedness levels.

Management Commentary and Tone

• CEO Juan Carlos Bueno described the recapitalization as a "decisive step forward" resulting from constructive negotiations with stakeholders.
• Management emphasized a focus on "business fundamentals," including cost reduction, operational efficiency, and cash flow preservation.
• The company secured $26.5 million in grants and repayable contributions for the Peace River mill to improve productivity.
• Management expressed optimism about concluding the Chapter 11 process by the end of 2026.
• The recapitalization is expected to eliminate approximately $96 million of annual cash interest and provide $400 million in new capital.

Other Key Points

• On November 2, 2026, the company entered into restructuring support agreements with holders of more than 87% of senior notes and a majority of common stock.
• The recapitalization involves exchanging approximately $1.1 billion of existing senior notes for equity and a fully-backstopped rights offering for $400 million in senior secured notes.
• Mercer International Inc. and Mercer International (Texas) LLC will commence voluntary Chapter 11 prepackaged cases in the U.S. Bankruptcy Court for the Southern District of Texas.
• The recapitalization will not impact the operations of subsidiaries, customers, suppliers, or employees.
• No dividends were declared in Q3 2026 or Q1-Q3 2026; a dividend of $0.150 per share was declared in Q3 2025.
• The company has approximately $143.5 million in aggregate liquidity as of September 30, 2026, including $72.5 million available under revolving credit facilities.