Slides
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Mercer International Inc. Transforming biomass into bioproducts for a more sustainable world Q2 2025 Earnings Call August 1, 2025 Juan Carlos Bueno – President & CEO Richard Short – CFO, Executive VP & Secretary
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Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial conditions, market expectations and business development activities, as well as capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of Mercer. For more information regarding these risks and uncertainties, review Mercer’s filings with the United States Securities and Exchange Commission. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. 2
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Financial Results Overview 3 EBITDA (US$ millions) Q1 2025 Q2 2025 Change (+/-) Pulp Segment(1) $50 ($10) ($60) Solid Wood Segment(1) ($0) ($5) ($5) Corporate & Other ($3) ($6) ($3) Operating EBITDA(2) $47 ($21) ($68) Key DriversEBITDA Decreased Quarter-Over-Quarter Note: Due to rounding, numbers presented in this presentation may not add up precisely to totals and percentages may not precisely reflect the absolute figure 1) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information. 2) Operating EBITDA is a non-GAAP measure. For a reconciliation of Net Loss to Operating EBITDA, refer to slide 24. • EBITDA decreased quarter-over-quarter due to: • Negative FX impact from a weaker U.S. dollar primarily on EUR and CAD denominated expenses; • Lower pulp prices in China led to a $11 million non-cash hardwood inventory impairment; and • Higher fibre costs for both Pulp and Solid Wood segments.
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Pulp Prices 4 Region Q1 2025 Q2 2025 NBSK List Price (US$ / tonne) Domestic $1,753 $1,820 China (net) $793 $734 Europe $1,550 $1,553 NBHK List Price (US$ / tonne) Domestic $1,268 $1,310 China (net)(1) $578 $533 NBSK / NBHK Price Gap (US$ / tonne) China $215 $201 - $200 $400 $600 $800 $1,000 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Q2 2025 NBHK NBSK Pulp Segment Realized Pulp Price (US$ / tonne) NBSK Realized Prices Decreased in Q2 Pricing Overview 1) Bleached eucalyptus kraft
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Production Volume (000s tonnes) Key Performance Indicators 5 Major Maintenance Downtime (Days) 22 23 6 Q1 2025 Q2 2025 Planned Start-up Pulp Segment Sales Volume (000s tonnes) 478 427 Q1 2025 Q2 2025 1) Adjusted production adds back lost tonnes from planned downtime 459 457489 490 Q1 2025 Q2 2025 Production (Actual) Production (Adjusted)(1) Q3 2025: • 14 days (Rosenthal) • 4 days (Celgar)
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Lumber Overview Lumber Operations (mmfbm) Benchmark Lumber Price 128 120 131 121 Q1 2025 Q2 2025 Production Sales Solid Wood Segment - $300 $600 $900 $1,200 $1,500 2021 2022 2023 2024 2025 Random Lengths WSPF 2&btr 2x4 (US$ / mfbm) 6
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Electricity and Mass Timber Mass Timber Revenue (US$mm)Electricity $112 $90 Q1 2025 Q2 2025 Price ($ / MWh) $17 $11 Q1 2025 Q2 2025 Lower Q2 mass timber revenues due to prevailing high-interest rate environment, which is impacting project timelines and market momentum 7 235 216 Q1 2025 Q2 2025 Sales Volume (GWh)
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Financial Position 8 Summary One Goal, One Hundred US$mm unless otherwise stated Measure Q1 2025 Q2 2025 Change (+/-) Net Loss ($22) ($86) ($64) Loss per Share ($0.33 / share) ($1.29 / share) ($0.96 / share) Cash flows Cash flow used in operating activities ($3) ($5) ($2) Capital expenditures ($20) ($24) ($4) Liquidity Position $471 $438 ($33) Cash $182 $146 ($36) Undrawn Revolvers $289 $292 $3 Dividend 7.5¢ / share - / share (7.5 ¢ / share) • Goal to improve profitability by $100 million by the end of 2026, using 2024 as a baseline • $5 million in cost savings realized to date; $25 million anticipated for 2025 • On track to meet goal Key Points • $32 million increase in cash consumption primarily driven by lower EBITDA; offset by working capital decrease • Working capital, excluding non- cash items, decreased by $21 million due in part to working capital reductions from One Goal, One Hundred
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Strategic Focus: One Goal, One Hundred 9 $100 million • On track to meet goals through 2025 and 2026 through savings programs and unlocking significant reliability improvements • Targeting $100 million in EBITDA improvements by the end of 2026 compared to 2024 • Targeting ~$20 million reduction in working capital and ~$20 million reduction in capital expenditures by the end of 2025 • $5 million in savings achieved in Q2 with additional $20 million identified for 2025.
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Trade Uncertainty • Pulp and mass timber imports from Canada are currently not subject to tariffs • Lumber from Germany also do not have tariffs applied but under a Section 232 review • Wood chips imported from the U.S. poses potential counter-tariff risk if trade tensions escalate • Uncertain business environment directly affects regular trade flows of our commodities and forces delays in construction projects • Weaker U.S. dollar has an immediate effect on our cost basis and our receivable balances 10 Tariff Exposure and Impacts Quarterly Dividend Temporarily Suspended in Q2 Amidst economic uncertainty, the dividend will be suspended to focus on debt reduction and navigating market uncertainty A competitive dividend remains a commitment once market conditions improve
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Macroeconomic Headwinds 11 Heavy maintenance quarter, including 6 days of slow start-up for Celgar Impact of market uncertainty, including weakening U.S. dollar and pulp pricing Unclear global trade landscape ($21MM) EBITDA In face of global trade uncertainties, continue to maintain open dialogue with our customers, government officials and industry associations. Prepared to take swift action redirecting products to other geographies if necessary, and adjusting operations accordingly
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Pulp Markets NBSK • Softwood pricing expected to remain weak through summer months • Steady demand for softwood in mid-term, combined with reduced supply, will create upward pressure on pricing in Q4 2025, into 2026 Hardwood-softwood substitution opportunities are largely exhausted, with limited future flexibility despite price disparities NBHK 12 • Hardwood pricing weakened in China due to weak paper demand and increased domestic pulp supply • Pricing in North America resilient due to steady demand
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Expected incremental lumber production at Torgau will provide ~65 million board feet of annual lumber capacity 6% decrease in lumber production compared to Q1 due to planned maintenance at Friesau Lumber Production 13 128 120 Q1 2025 Q2 2025 Quarterly Lumber Production (mmfbm) (6%)
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Fiber Costs 14 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Q2 '24 Q3 '24 Q4 '24 Q1 '25 Q2 '25 Pulp (US$ / ADMT) Lumber (US$ / m3) Fiber Costs Increased for Pulp and Lumber Per Unit Fiber Costs Looking ahead, fiber costs are expected to modestly decrease for the pulp segment with a ~10% increase for the solid wood segment in Q3 2025 Overall pulp fibre costs were up slightly relative to Q1. In Germany, increased demand for sawlogs inflated fibre costs. In Canada, costs increased due to higher logistics costs.
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Solid Wood Segment • Despite challenging European economic backdrop and impact of high interest rates on the construction industry, U.S. lumber market saw some modest price improvements • Negative $5 million EBITDA in Q2 for solid wood segment primarily due to sustained weak demand for pallets • Anticipate the beginning of improved economic growth in Germany and broader Europe, which should drive better pallet pricing. A modest $1/pallet increase projected to move pallet business into a positive cash flow position. 15
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Lumber Markets • Expect U.S. lumber pricing to be volatile in the short term due to economic forces affecting the construction industry • In contrast, European lumber prices trending upwards, driven by increasing saw log prices • Long-term price improvement in both markets reliant on economic recovery, spurred by interest rate reductions in late 2025 We continue optimizing our mix of lumber products and customers to current market conditions Low Lumber Inventories Sawmill Curtailments & AAC Reduction Low Housing Stock Shortages from Canadian wildfires Constructive Homeowner Demographics Mid-Term Drivers of Positive Supply-Demand Dynamics 16
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Pallets & Pellets 17 • Shipping pallet market remains weak due to overhang of European economy (especially Germany) • Once signs of economic recovery show, pallet prices expected to return to normal level • Heating pellet prices up in Q2, driven from higher German fiber costs which created supply concerns • Expect demand and prices to be slightly lower in Q3 Pallet Pellet
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Mass Timber 18 • Steady growth in incoming project inquiries for the mass timber business, with potential sales volumes exceeding $400 million and over 100 projects per quarter • Order book is growing, with projects being bid on and won today scheduled for construction nine months from now, well into 2026 • Revenue will pick up momentum in Q4, leading to a plan to ramp one facility to two shifts early next year ~30% of North American CLT capacity Broad range of product offerings Large geographic footprint Competitive across entire North American Market
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Pulp Operations 2025 Major Maintenance Shut Q1: Celgar (22 days) Q2: Peace River (20 days) Stendal (3 days) Q3: Rosenthal (14 days) Celgar (4 days) Q4: Stendal (18 days) 19 Total downtime of 81 days vs. 57 days in 2024 as Celgar did not take a major shut in 2024
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Capital Allocation 20 • Project will increase sawn timber production capacity by 100,000 m3 annually and increase dimensional lumber production for the U.S. market by ~240,000 m3 annually • Part of original investment strategy to increase the mill’s value-added product mix and maximize potential synergies • Recently completed wood room upgrade expected to provide incremental fiber flexibility, reduced costs, and increased yield Strategic and high-return capital projects at Torgau and Celgar mills are underway / recently completed • Total Q2 capex of ~$24 million • Expected 2025 capex of ~$100 million (reduction of $20 million from previous targets) • Continued prioritization of maintenance of business, environmental, and safety capex Capital Expenditure Summary
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Bioproducts for a More Sustainable World 21 Carbon Capture Plant • Currently in FEL-2 stage of assessing the installation of a carbon capture plant. • Exciting opportunity to enter the voluntary carbon credit market We believe products like lignin, mass timber, green energy, lumber, and pulp will play increasingly important roles in displacing carbon-intensive products
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2025 Outlook 22 Aggressive Cost- Reduction Programs Strong Mill Reliability + Operational Rationalization Prudent Capital Management Mercer remains committed to increasing shareholder value by reducing leverage through • Amidst a challenging global trade environment, focused on building resilience • Businesses have strong fundamentals and when combined with debt reduction strategy, will create significant shareholder value • Committed to strengthening our businesses through the "One Goal, One Hundred" program and improving mill reliability
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Mercer International Inc. P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada V6C 1G8 Contact Information www.mercerint.com
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24 Consolidated (US$ millions) Q1 2025 Q2 2025 Net loss ($22.3) ($86.1) Income tax provision (recovery) 0.7 ($1.9) Interest expense 28.2 28.4 Other expense 0.2 1.1 Operating income (loss) 6.7 (58.4) Add: Depreciation and amortization 40.2 37.4 Operating EBITDA 47.0 (21.0) Note: See next slide for additional disclosures Reconciling Net Loss to Operating EBITDA
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Reconciling Net Loss to Operating EBITDA 25 Note: For other reconciliations of Net Loss to Operating EBITDA in periods not shown, please refer to that period’s respective Form 10-Q or 10-K, which can be found on our website (www.mercerint.com) Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and long-lived asset impairment charges. We use Operating EBITDA as a benchmark measurement of our own operating results and as a benchmark relative to our competitors. We consider it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and long-lived asset impairment charges are not actual cash costs, and depreciation expense varies widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of our operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance. Operating EBITDA does not reflect the impact of a number of items that affect our net loss, including financing costs, incometaxes, and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net loss or operating income (loss) as a measure of performance, or as an alternative to net cash from (used in) operating activities as a measure of liquidity. Operating EBITDA is an internal measure and therefore may not be comparable to other companies. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Operating EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt; (iv) the impact of realized or marked to market changes in our derivative positions, which can be substantial; and (v) the impact of impairment charges against our investments or assets. Because of these limitations, Operating EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure ofliquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP financial statements. Operating EBITDA is a non-GAAP financial measure at the consolidated level and is considered different from Operating EBITDA at the segment level, referred to as “Segment Operating EBITDA”, which is our single measure of segment profit or loss presented in our financial statements under GAAP. For more information on Segment Operating EBITDA, refer to the segment information note within our consolidated financial statements.