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Mercer International Inc. Reports Fourth Quarter and Year End 2020 Results and Announces Quarterly Cash Dividend of $0.065
ソース: Nasdaq GlobeNewswire / 16 2 2021 15:30:00 America/Chicago
Selected Highlights
- Record quarterly and annual wood products segment results
- Fourth quarter Operating EBITDA* of $49.5 million and net loss of $13.0 million
- 2020 annual Operating EBITDA of $192.7 million and net loss of $17.2 million ($0.26 per diluted share)
NEW YORK, Feb. 16, 2021 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported fourth quarter 2020 Operating EBITDA increased to $49.5 million from negative $34.2 million in the fourth quarter of 2019 and $45.6 million in the third quarter of 2020.
In the fourth quarter of 2020, net loss was $13.0 million (or $0.20 per share) compared to a net loss of $72.7 million (or $1.11 per share) in the fourth quarter of 2019 and net income of $7.5 million (or $0.11 per share) in the third quarter of 2020.
In 2020, Operating EBITDA decreased by 8% to $192.7 million from $210.4 million in 2019 and the net loss was $17.2 million (or $0.26 per share) compared to $9.6 million (or $0.15 per share) in 2019.
Mr. David Gandossi, the Chief Executive Officer, stated: “All of our mills ran well in the fourth quarter. Our Rosenthal and Peace River mills successfully and safely completed a total of 16 days of annual maintenance downtime. Our recent capital investment in our Friesau sawmill continues to pay dividends in the form of record quarterly operating income of $12.9 million in the fourth quarter.
Our fourth quarter results are highlighted by improved pulp pricing and moderately lower fiber costs, as well as steady production. Fourth quarter average European NBSK list prices were up $40 per ADMT, and average net prices in China were up $65 per ADMT compared to the third quarter. Pulp market fundamentals continued to improve in the fourth quarter allowing us to achieve record sales volumes.
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*Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 6 of the financial tables included in this press release for a reconciliation of net income (loss) to Operating EBITDA.Our wood products segment had record operating results this quarter and benefited from strong demand and robust pricing in the U.S. market. In the current quarter approximately 56% of lumber revenues and 37% of our lumber sales volumes were to the U.S. which was our single largest market.
In the first quarter of 2021, our pulp mills have 20 days of planned annual maintenance downtime (approximately 27,600 ADMTs).
In January 2021, we issued $875 million of 5.125% senior notes due 2029 to refinance and repay all $250 million of our 6.5% senior notes due 2024 and all $550 million of our 7.375% senior notes due 2025. This transaction reduces our cost of capital and extends the maturity of our senior note debt to 2026 at the earliest. After giving effect to the transaction, going forward it will reduce our annual interest expense by approximately $12 million.
While I am pleased that COVID-19 vaccines are beginning to be administered globally, it will be some time before the pandemic is behind us. In late 2020, there was a second wave in reported infections in Europe, the United States and Canada, as well as the emergence of new variants of the virus. As such, we remain committed to maintaining measures and procedures to operate our business safely and efficiently and protect our people.
Looking ahead to 2021, we are encouraged by the improving fundamentals in pulp demand and markets and continued price increases implemented in 2021 to date. Along with continuing strong lumber markets and our ample liquidity position, we are positioned well to execute our strategic plan in 2021.”
Consolidated Financial Results
Q4 Q3 Q4 YTD YTD 2020 2020 2019 2020 2019 (in thousands, except per share amounts) Revenues $ 398,195 $ 333,151 $ 331,172 $ 1,423,140 $ 1,624,411 Operating income (loss) $ 15,616 $ 13,736 $ (66,106 ) $ 63,729 $ 84,003 Operating EBITDA $ 49,506 $ 45,620 $ (34,159 ) $ 192,650 $ 210,397 Net income (loss) $ (12,977 ) $ 7,545 $ (72,721 ) $ (17,235 ) $ (9,639 ) Net income (loss) per common share Basic and diluted $ (0.20 ) $ 0.11 $ (1.11 ) $ (0.26 ) $ (0.15 ) Consolidated – Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019
Total revenues for the three months ended December 31, 2020 increased by approximately 20% to $398.2 million from $331.2 million in the same quarter of 2019 primarily due to higher pulp and energy sales volumes and higher lumber sales realizations.Costs and expenses in the current quarter decreased by approximately 4% to $382.6 million from $397.3 million in the fourth quarter of 2019 primarily due to lower annual maintenance costs and per unit fiber costs partially offset by higher pulp sales volumes and the negative impact of a weaker dollar on our euro and Canadian dollar denominated costs and expenses. The fourth quarter of 2019 included the reversal of $13.7 million in accrued wastewater fees as a result of completing certain approved capital projects.
In the fourth quarter of 2020, Operating EBITDA increased to $49.5 million from negative $34.2 million in the same quarter of 2019 primarily due to lower annual maintenance costs, lower per unit fiber costs, higher pulp and energy sales volumes and higher lumber sales realizations.
Segment Results
Pulp: Record quarterly pulp sales volumes and lower annual maintenance and fiber costs
Three Months Ended December 31, 2020 2019 (in thousands) Pulp revenues $ 321,379 $ 275,517 Energy and chemical revenues $ 22,698 $ 15,273 Operating income (loss) $ 4,650 $ (66,574 ) Pulp segment operating income increased to $4.7 million in the fourth quarter of 2020 compared to an operating loss of $66.6 million in the same quarter of 2019 due to lower annual maintenance and per unit fiber costs and higher pulp and energy sales volumes.
In the fourth quarter of 2020, our pulp sales realizations were flat at $588 per ADMT from $581 per ADMT in the same quarter of the prior year. NBSK sales volumes increased by approximately 13% to a record 469,544 ADMTs in the current quarter from 416,569 ADMTs in the same quarter of 2019 primarily due to lower annual maintenance downtime. In the current quarter of 2020, our pulp mills had 16 days of annual maintenance downtime (approximately 21,500 ADMTs). In the comparative quarter of 2019, our pulp mills had 54 days of annual maintenance downtime (approximately 86,500 ADMTs). We estimate that such downtime in the fourth quarter of 2020 adversely impacted our operating income by approximately $14.7 million, comprised of approximately $9.4 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their results using International Financial Reporting Standards capitalize their direct costs of maintenance downtime.
In the fourth quarter of 2020, per unit fiber costs decreased by approximately 19% from the same quarter of 2019 due to lower per unit fiber costs for all of our mills. In Germany, per unit fiber costs benefited from the continuing availability of beetle damaged wood. In Canada, per unit fiber costs declined due to increased sawmill activity but remained at historically high levels due to strong demand in the mills’ fiber procurement areas.
Wood Products: Record operating income driven by strong demand
Three Months Ended December 31, 2020 2019 (in thousands) Lumber revenues $ 48,560 $ 35,071 Energy revenues $ 3,133 $ 2,646 Wood residual revenues $ 1,398 $ 1,871 Operating income $ 12,859 $ 5,274 In the fourth quarter of 2020, our wood products segment had record operating income of $12.9 million compared to $5.3 million in the same quarter of 2019 primarily due to higher realized sales prices.
Average lumber sales realizations increased by approximately 35% to $467 per Mfbm in the fourth quarter of 2020 compared to approximately $347 per Mfbm in the same quarter of 2019 primarily due to higher pricing in the U.S. market. U.S. lumber pricing increased due to strong demand in the fourth quarter of 2020 from the U.S. housing and renovation markets. European lumber pricing modestly increased in the quarter due to steady demand with limited supply.
Per unit fiber costs decreased by approximately 5% in the fourth quarter of 2020 from the same quarter of 2019 primarily as a result of the continuing availability of beetle damaged wood.
Consolidated – Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Total revenues in 2020 decreased by approximately 12% to $1,423.1 million from $1,624.4 million in 2019 primarily due to lower pulp sales realizations and pulp sales volumes partially offset by higher lumber sales realizations and lumber sales volumes.Costs and expenses in 2020 decreased by approximately 12% to $1,359.4 million from $1,540.4 million in 2019 primarily due to lower per unit fiber costs, maintenance costs and pulp sales volumes. 2019 costs and expenses included a reversal of $20.9 million in accrued wastewater fees at our German pulp mills.
In 2020, we had $5.9 million of other income primarily due to a $17.5 million gain on the sale of investments partially offset by a $13.8 million foreign exchange loss primarily on the translation of dollar denominated cash held at our mills as the dollar weakened at the end of 2020. In 2019, we had $6.1 million of other income primarily due to interest earned on cash.
In 2020, Operating EBITDA decreased by approximately 8% to $192.7 million from $210.4 million in 2019 as lower pulp sales realizations were only partially offset by lower per unit fiber costs, lower maintenance costs and higher lumber sales realizations.
Segment Results
Pulp
Year Ended December 31, 2020 2019 (in thousands) Pulp revenues $ 1,130,302 $ 1,370,742 Energy and chemical revenues $ 90,342 $ 86,381 Depreciation and amortization $ 115,945 $ 117,108 Operating income $ 37,952 $ 90,583 Wood Products
Year Ended December 31, 2020 2019 (in thousands) Lumber revenues $ 180,769 $ 142,243 Energy revenues $ 10,619 $ 9,721 Wood residual revenues $ 6,261 $ 7,973 Depreciation and amortization $ 12,212 $ 7,966 Operating income $ 34,704 $ 7,349 Liquidity
The following table is a summary of selected financial information as of the dates indicated:
December 31, 2020 2019 (in thousands) Cash and cash equivalents $ 361,098 $ 351,085 Working capital $ 663,056 $ 588,385 Total assets $ 2,129,126 $ 2,065,720 Long-term liabilities $ 1,316,303 $ 1,259,005 Total shareholders' equity $ 601,027 $ 550,403 As of December 31, 2020, we had cash and cash equivalents of approximately $361.1 million, approximately $266.8 million available under our revolving credit facilities, providing aggregate liquidity of about $627.9 million.
Current Market Environment
In January 2021, published NBSK list prices increased $50 per ADMT in Europe, and $30 per ADMT in North America and net prices increased $100 per ADMT in China. Although there is continued economic uncertainty as a result of the COVID-19 pandemic, based on the recent NBSK price increases and an improving supply demand balance, we are currently expecting stable pulp demand and modestly improving prices during the course of 2021.In our lumber segment, going into 2021 we currently expect continued strong lumber demand and prices in the U.S. market along with modestly improving sales realizations in the European market.
Quarterly Dividend
A quarterly dividend of $0.065 per share will be paid on April 7, 2021 to all shareholders of record on March 31, 2021. Future dividends will be subject to Board approval and may be adjusted as business and industry conditions warrant.Earnings Release Call
In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for February 17, 2021 at 10:00 AM (Eastern Standard Time). Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/4hyqmsx9 or through a link on the company's home page at https://www.mercerint.com. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.Mercer International Inc. is a global forest products company with operations in Germany and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber. To obtain further information on the company, please visit its web site at https://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Words such as "expects", "anticipates", "projects", "intends", "designed", "will", "believes", "estimates", "may", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
APPROVED BY:
Jimmy S.H. Lee
Executive Chairman
(604) 684-1099David M. Gandossi, FCPA, FCA
Chief Executive Officer
(604) 684-1099-FINANCIAL TABLES FOLLOW-
Summary Financial HighlightsQ4 Q3 Q4 YTD YTD 2020 2020 2019 2020 2019 (in thousands, except per share amounts) Pulp segment revenues $ 344,077 $ 274,916 $ 290,790 $ 1,220,644 $ 1,457,123 Wood products segment revenues 53,091 57,053 39,588 197,649 159,937 Corporate and other revenues 1,027 1,182 794 4,847 7,351 Total revenues $ 398,195 $ 333,151 $ 331,172 $ 1,423,140 $ 1,624,411 Pulp segment operating income (loss) $ 4,650 $ 3,753 $ (66,574 ) $ 37,952 $ 90,583 Wood products segment operating income 12,859 11,963 5,274 34,704 7,349 Corporate and other operating loss (1,893 ) (1,980 ) (4,806 ) (8,927 ) (13,929 ) Total operating income (loss) $ 15,616 $ 13,736 $ (66,106 ) $ 63,729 $ 84,003 Pulp segment depreciation and amortization $ 30,104 $ 28,251 $ 29,492 $ 115,945 $ 117,108 Wood products segment depreciation and amortization 3,585 3,446 2,029 12,212 7,966 Corporate and other depreciation and amortization 201 187 426 764 1,320 Total depreciation and amortization $ 33,890 $ 31,884 $ 31,947 $ 128,921 $ 126,394 Operating EBITDA $ 49,506 $ 45,620 $ (34,159 ) $ 192,650 $ 210,397 Income tax recovery (provision) $ (1,645 ) $ 1,775 $ 15,875 $ (6,096 ) $ (19,226 ) Net income (loss) $ (12,977 ) $ 7,545 $ (72,721 ) $ (17,235 ) $ (9,639 ) Net income (loss) per common share Basic and diluted $ (0.20 ) $ 0.11 $ (1.11 ) $ (0.26 ) $ (0.15 ) Common shares outstanding at period end 65,868 65,868 65,629 65,868 65,629
Summary Operating HighlightsQ4 Q3 Q4 YTD YTD 2020 2020 2019 2020 2019 Pulp Segment Pulp production ('000 ADMTs) NBSK 436.9 400.2 381.3 1,716.1 1,736.4 NBHK 87.4 79.8 60.9 335.0 304.2 Annual maintenance downtime ('000 ADMTs) 21.5 15.0 86.5 50.1 108.1 Annual maintenance downtime (days) 16 10 54 43 82 Pulp sales ('000 ADMTs) NBSK 469.5 369.9 416.6 1,700.4 1,773.2 NBHK 93.6 100.1 65.3 329.0 325.7 Average NBSK pulp prices ($/ADMT)(1) Europe 880 840 822 851 946 China 637 572 563 588 612 North America 1,138 1,133 1,115 1,139 1,239 Average NBHK pulp prices ($/ADMT)(1) China 480 443 455 462 558 North America 868 868 893 881 1,036 Average pulp sales realizations ($/ADMT)(2) NBSK 588 562 581 572 663 NBHK 454 424 476 452 567 Energy production ('000 MWh)(3) 568.1 529.2 432.9 2,238.6 2,141.2 Energy sales ('000 MWh)(3) 225.3 215.5 154.5 894.5 822.8 Average energy sales realizations ($/MWh)(3) 96 96 88 93 91 Wood Products Segment Lumber production (MMfbm) 111.4 96.8 106.7 438.0 414.7 Lumber sales (MMfbm) 104.0 118.5 101.1 449.2 408.8 Average lumber sales realizations ($/Mfbm) 467 453 347 402 348 Energy production and sales ('000 MWh) 25.7 17.8 23.1 89.0 83.5 Average energy sales realizations ($/MWh) 122 125 114 119 116 Average Spot Currency Exchange Rates $ / €(4) 1.1925 1.1698 1.1075 1.1410 1.1194 $ / C$(4) 0.7675 0.7508 0.7578 0.7457 0.7537 ______________
(1) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates. Effective January 2020, the RISI pricing report does not provide list prices for China.
(2) Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates.
(3) Does not include our 50% joint venture interest in the Cariboo mill, which is accounted for using the equity method.
(4) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)Three Months Ended
December 31,For the Year Ended
December 31,2020 2019 2020 2019 Revenues $ 398,195 $ 331,172 $ 1,423,140 $ 1,624,411 Costs and expenses Cost of sales, excluding depreciation and amortization 331,173 346,020 1,163,727 1,340,380 Cost of sales depreciation and amortization 33,865 31,693 128,817 125,801 Selling, general and administrative expenses 17,541 19,565 66,867 74,227 Operating income (loss) 15,616 (66,106 ) 63,729 84,003 Other income (expenses) Interest expense (20,690 ) (20,647 ) (80,746 ) (75,750 ) Loss on settlement of debt — (4,750 ) — (4,750 ) Other income (expenses) (6,258 ) 2,907 5,878 6,084 Total other expenses, net (26,948 ) (22,490 ) (74,868 ) (74,416 ) Income (loss) before income taxes (11,332 ) (88,596 ) (11,139 ) 9,587 Income tax recovery (provision) (1,645 ) 15,875 (6,096 ) (19,226 ) Net loss $ (12,977 ) $ (72,721 ) $ (17,235 ) $ (9,639 ) Net loss per common share Basic and diluted $ (0.20 ) $ (1.11 ) $ (0.26 ) $ (0.15 ) Dividends declared per common share $ 0.0650 $ 0.1375 $ 0.3325 $ 0.5375
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)December 31, 2020 2019 ASSETS Current assets Cash and cash equivalents $ 361,098 $ 351,085 Accounts receivable, net 227,055 208,740 Inventories 271,696 272,599 Prepaid expenses and other 15,003 12,273 Total current assets 874,852 844,697 Property, plant and equipment, net 1,109,740 1,074,242 Investment in joint ventures 46,429 53,122 Amortizable intangible assets, net 51,571 53,371 Operating lease right-of-use assets 13,251 13,004 Other long-term assets 31,928 26,038 Deferred income tax 1,355 1,246 Total assets $ 2,129,126 $ 2,065,720 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and other $ 210,994 $ 255,544 Pension and other post-retirement benefit obligations 802 768 Total current liabilities 211,796 256,312 Debt 1,145,294 1,087,932 Pension and other post-retirement benefit obligations 31,810 25,489 Finance lease liabilities 41,329 31,103 Operating lease liabilities 9,933 10,520 Other long-term liabilities 10,909 14,114 Deferred income tax 77,028 89,847 Total liabilities 1,528,099 1,515,317 Shareholders’ equity Common shares $1 par value; 200,000,000 authorized; 65,868,000 issued and outstanding (2019 – 65,629,000) 65,800 65,598 Additional paid-in capital 345,696 344,994 Retained earnings 217,106 256,371 Accumulated other comprehensive loss (27,575 ) (116,560 ) Total shareholders’ equity 601,027 550,403 Total liabilities and shareholders’ equity $ 2,129,126 $ 2,065,720
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)For the Year Ended December 31, 2020 2019 2018 Cash flows from (used in) operating activities Net income (loss) $ (17,235 ) $ (9,639 ) $ 128,589 Adjustments to reconcile net income (loss) to cash flows from operating activities Depreciation and amortization 128,921 126,394 96,729 Deferred income tax provision (recovery) (15,249 ) (7,873 ) 16,596 Inventory impairment 25,998 9,200 — Loss on settlement of debt — 4,750 21,515 Defined benefit pension plans and other post-retirement benefit plan expense 3,053 3,449 1,868 Stock compensation expense 928 3,036 3,940 Gain on sale of investments (17,540 ) — — Foreign exchange transaction losses 13,272 7,116 746 Other 543 5,834 2,419 Defined benefit pension plans and other post-retirement benefit plan contributions (4,164 ) (4,467 ) (1,133 ) Changes in working capital Accounts receivable (6,269 ) 41,369 (10,370 ) Inventories (11,430 ) 24,683 (58,082 ) Accounts payable and accrued expenses (53,744 ) 45,256 37,959 Other (5,519 ) (4,825 ) (4,108 ) Net cash from (used in) operating activities 41,565 244,283 236,668 Cash flows from (used in) investing activities Purchase of property, plant and equipment (78,518 ) (132,034 ) (87,012 ) Purchase of amortizable intangible assets (647 ) (623 ) (600 ) Acquisitions — (6,380 ) (380,312 ) Purchase of investments (9,370 ) — — Proceeds from sale of investments 26,910 — — Other 1,798 (321 ) 445 Net cash from (used in) investing activities (59,827 ) (139,358 ) (467,479 ) Cash flows from (used in) financing activities Redemption of senior notes — (103,875 ) (317,439 ) Proceeds from issuance of senior notes — 205,500 350,000 Proceeds from (repayment of) revolving credit facilities, net 52,651 (58,404 ) 36,560 Dividend payments (21,892 ) (35,279 ) (40,724 ) Repurchase of common shares (162 ) (754 ) — Payment of debt issuance costs — (4,213 ) (10,074 ) Proceeds from government grants 362 6,467 — Other (4,642 ) (3,344 ) (3,462 ) Net cash from (used in) financing activities 26,317 6,098 14,861 Effect of exchange rate changes on cash and cash equivalents 1,958 (429 ) (4,297 ) Net increase (decrease) in cash and cash equivalents 10,013 110,594 (220,247 ) Cash and cash equivalents, beginning of year 351,085 240,491 460,738 Cash and cash equivalents, end of year $ 361,098 $ 351,085 $ 240,491 MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands)Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers 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 income (loss), including financing costs 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 income (loss) or operating income (loss) as a measure of performance, nor as an alternative to net cash from (used in) operating activities as a measure of liquidity. The following tables set forth the net income (loss) to Operating EBITDA:
Q4 Q3 Q4 YTD YTD 2020 2020 2019 2020 2019 Net income (loss) $ (12,977 ) $ 7,545 $ (72,721 ) $ (17,235 ) $ (9,639 ) Income tax provision (recovery) 1,645 (1,775 ) (15,875 ) 6,096 19,226 Interest expense 20,690 19,864 20,647 80,746 75,750 Loss on settlement of debt — — 4,750 — 4,750 Other (income) expenses 6,258 (11,898 ) (2,907 ) (5,878 ) (6,084 ) Operating income (loss) 15,616 13,736 (66,106 ) 63,729 84,003 Add: Depreciation and amortization 33,890 31,884 31,947 128,921 126,394 Operating EBITDA $ 49,506 $ 45,620 $ (34,159 ) $ 192,650 $ 210,397 