MERC

Image source: The Motley Fool. Friday, Aug. 7, 2026 at 10 a.m. ET President and Chief Executive Officer - Juan Carlos Bueno Chief Financial Officer and Secretary - Richard Short Operator: Thank you. Good morning, and welcome to Mercer International's second quarter 2026 earnings conference call. On the call today is Juan Carlos Bueno, President and Chief Executive Officer of Mercer International, and Richard Short, CFO and Secretary. I will now hand the call over to Richard Short. Richard Short: Thanks, Howard. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the second quarter before turning the call to Juan Carlos to provide further color into the markets, our operations, and our strategic initiatives. Also, for those of you that have joined today's call by telephone, there is presentation material that we have attached to the investor section of our website. But before turning to our results, I would like to remind you that we will make forward-looking statements in this morning's conference call. According to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, I'd like to call your attention to the risks related to these statements, which are more fully described in our press release and in the company's filings with the Securities and Exchange Commission. In response to persistent economic uncertainty and challenging market conditions, we are currently working with advisors and are actively evaluating strategic alternatives to enhance our liquidity and strengthen our balance sheet. Juan Carlos will have more to say about these efforts shortly. We also added disclosure to our financial statements regarding our status as a going concern. This disclosure stems from the classification of our revolving credit facilities to current liabilities. Our Canadian revolving credit facility matures in January 2027, and we currently believe we will be able to renegotiate or replace this facility prior to its maturity. Separately, while we hold a waiver for our German revolving credit facilities leverage ratio through September 30, 2026, market conditions suggest we will likely miss that required ratio in the fourth quarter. As a result, we have also classified the borrowings under this facility as a current liability to comply with accounting standards. Our second quarter operating EBITDA was negative $21 million, down from a positive $8 million in the first quarter. This decrease was primarily due to higher fiber costs in Germany, which also led to a $29 million non-cash inventory impairment charge. In the second quarter, our pulp segment reported negative quarterly EBITDA of $13 million, and our solid wood segment reported negative quarterly EBITDA of $8 million. Additional segment disclosures are available in our Form 10-Q, which can be found on our website and that of the SEC. Softwood pulp markets continue to be impacted by the ongoing global economic headwinds through the second quarter. As a result, our softwood pulp realizations were down slightly to $682 per ton from $696 per ton in the first quarter. In the second quarter, the NBSK net price in China decreased to $658 per ton, a $27 decrease from the first quarter. However, this decrease was mostly offset by higher NBSK list prices in Europe and North America. In Europe, the average NBSK list price was $1,655 per ton, a $37 increase from the first quarter. And in North America, the average price was $1,577 per ton, a $14 increase. Hardwood markets in China and North America improved in the second quarter due to tight supply. As a result, our sales realizations improved to $607 per ton from $564 per ton in the first quarter. In the second quarter, the average price gap in China between softwood and hardwood pulp narrowed to approximately $56 per ton. The average net price for eucalyptus hardwood pulp in China in the second quarter was $602 per ton, modestly up from the first quarter. In North America, the average hardwood list price was $1,495 per ton, up $157 per ton from the first quarter. As mentioned previously, the second quarter included a $29 million non-cash inventory impairment, primarily driven by high fiber costs in Germany and low pulp prices. Of this amount, approximately $26 million was against inventory at our pulp mills, and the remainder was against the inventory at our Friesau sawmill and Torgau facility. Second quarter pulp production slightly decreased to about 456,000 tons from 466,000 tons in the first quarter. Our mills' production was stable in the second quarter; however, we strategically reduced production at our German pulp mills in Q2 because of economical fiber supply limitations. Pulp sales volumes in the second quarter decreased to about 450,000 tons from 471,000 tons in the first quarter. The decrease was due to the timing of sales. We did not have any planned maintenance downtime in the first or second quarter of 2026. In the third quarter, we have 40 days or about 42,000 tons scheduled. For our solid wood segment, lumber sales realizations increased in the second quarter due to improved prices in the U.S. In Europe, demand remained weak, but prices were stable due to reduced supply. The Random Lengths U.S. benchmark price for Western SPF #2 and better averaged $488 per thousand board feet in the second quarter, an increase of $25 from $463 per thousand board feet in the first quarter. Today, that benchmark price for Western SPF #2 and better is around $506 per thousand board feet, a $104 increase from the end of 2025. In the second quarter, lumber production increased by about 7% to 124 million board feet compared to the first quarter. This increase was driven by strong mill production and improved availability of sawlogs. While production was up, sales volumes decreased 11% from the first quarter to 100 million board feet, reflecting the timing of sales. Electricity sales for the second quarter totaled 206 gigawatt-hours, which is about 12 gigawatt-hours less than the first quarter due to lower production at our pulp mills. Pricing also decreased to about $117 per MWh from $127 in the first quarter due to lower spot prices in both Canada and Germany. Fiber costs for both our pulp and solid wood segments increased for the second quarter compared to the first quarter. This trend was driven by higher costs in Germany caused by low harvesting levels and, for our pulp mills, strong demand for sawmill residuals as an energy source. Looking ahead to the third quarter of 2026, we expect fiber costs for our German pulp mills to remain elevated. However, we anticipate costs will moderate for our sawmills as sawlog availability improves with increased downtime at high-cost operators. Meanwhile, our Canadian mills should see lower costs resulting from reduced fiber demand. Our mass timber operations within the solid wood segment had significantly higher revenues in the second quarter compared to the first quarter, reflecting our strong order book. Our current order book is expected to provide stable production for our facilities through 2026 and into 2027. We continue to make progress on our One Goal One Hundred program and are on track to achieve our target of improving our profitability by $100 million by the end of 2026, using 2024 as a baseline. In the second quarter, our aggregate liquidity decreased by $37 million to about $192 million, comprising $79 million of cash and $113 million of undrawn revolvers. This decrease was caused by our weak operating results. Excluding the impact of our $29 million non-cash inventory impairment, our working capital modestly decreased by $6 million. In the second quarter, we invested a total of $12 million of capital across our facilities, the majority of which was maintenance capital. We reported a consolidated net loss of $76 million for the second quarter, or $1.13 per share, which includes the non-cash inventory impairment of $29 million, or $0.43 per share. In the first quarter, we reported a net loss of $52 million, or $0.78 per share, which included a non-cash inventory impairment of $22 million, or $0.33 per share. That ends my overview of the financial results. I'll now turn the call over to Juan Carlos. Juan Bueno: Thanks, Rich. Our Q2 results were disappointing with both our pulp and solid wood segments reporting negative EBITDA. These results were driven by extremely high German fiber costs and a delayed recovery in pulp prices. Additionally, geopolitical conflicts in both Ukraine and the Middle East have exacerbated tariff-driven market volatility, resulting in high energy, production, and logistic costs. While these macroeconomic headwinds present ongoing challenges, we remain laser-focused on managing costs and executing on our strategic priorities. Obviously, in response to these ongoing weak operating results and market conditions, we took decisive steps. And this includes launching a restructuring plan for Torgau mill, extending Rosenthal's planned maintenance shut in the third quarter by 2 weeks, and slowing both Stendal and Rosenthal's daily production rates by about 10% in response to a shortage of economical fiber. At the same time, our One Goal One Hundred program, launched in Q2 of 2025, yielded about $30 million of concrete results for the full year of '25 with an additional $24 million achieved in the first half of '26. And we remain on track to reach our goal of $100 million of improvements by the end of the year. While achieving this milestone is significant, we are aggressively pursuing additional operational improvements across the business to help offset these other macroeconomic pressures. Finally, to address debt maturities, enhance liquidity, and strengthen our balance sheet, our special committee of independent directors is actively evaluating the development and implementation of potential alternatives to improve our capital structure. We have also engaged advisors to support this process, and we're currently in discussions with holders of our 2028 and 2029 senior notes, and other stakeholders across our capital structure regarding potential financing and other liquidity-enhancing transactions. Our objective is to achieve a comprehensive solution that supports a long-term business plan. The international trade environment continues to evolve, and although not in the news lately, the uncertainty around CUSMA may introduce additional trade headwinds, as could any new tariffs imposed by the United States or any counter-tariffs applied by a trading partner of the United States. As it stands today, the only direct impact we are facing is a 10% tariff on our European lumber imports into the U.S. This positions us favorably against Canadian lumber exports to the U.S., which, despite recent decreases in anti-dumping and countervailing duties, are still in the process of being subject to a significantly higher average combined tariff and duty rate of about 35%. Although the direct tariff impacts have been modest, we continue to monitor events as indirect impacts reshape global commodity supply and demand dynamics. Moving to Torgau, this mill has been heavily impacted by the global economic uncertainty and heightened raw material and energy costs created by these macro events. In response, we have taken comprehensive measures to enhance operations, including increasing production of higher-value dimensional lumber for the U.S. market and adjusting our product portfolio to better meet market demand. We also have taken steps to align our production with current market conditions, including product portfolio rationalization, moving from a 4-shift to a 3-shift system, reducing 100 positions in our workforce during the month of July, and with 250 more to go between now and Q2 of 2027, a difficult but absolutely necessary step. Our German fiber costs have reached historically high levels driven by supply constraints and strong demand. These market dynamics are direct results of the war in Ukraine, which not only stopped the inflow of wood fiber from Russia into Europe, but caused energy costs to reach record levels. High energy prices coupled with a permissive legislation that allows wood burning for energy purposes and the German government subsidizing wood-burning home heating solutions result in a high demand for wood pellets, placing us in direct competition with the pellet producers for our pulp fiber. In contrast, we're seeing pulp fiber costs coming down in Canada due to reduced chip demand resulting from pulp mill curtailments. Similarly, we're also starting to see German sawlog prices coming down due to weak European lumber demand after increasing in the second quarter. Our main import from the U.S. into Canada is wood chips for our Celgar pulp mill, which accounted for approximately 60% of the mill's fiber consumption in the second quarter. And we feel this is a competitive advantage. Now, relative to the first quarter, pulp and sawmill fiber costs were up roughly 7% in Germany, and down about 4% in Canada for the reasons just mentioned. Overall, NBSK pulp markets weakened modestly in the second quarter. China net prices were down roughly 4% in the quarter as mill inventory levels remained high, while European list prices were up 2%, and in North America, list prices were stable. Today, the softwood-hardwood price differential is about $76 per ton. Hardwood prices in North America increased 12% in the second quarter, while prices in China were essentially flat. Looking ahead, we expect seasonality, excuse me, seasonally slow pulp demand, to weigh on pricing as the business works through the high mill inventory levels. In contrast, global NBHK supply constraints are expected to ease in Q3, putting additional pressure on pricing. However, for the latter part of the year and into 2027, we expect the NBSK market to tighten as a consequence of the heavy maintenance season in the Northern Hemisphere, coupled with the mill closures that have been announced, which will reduce the inventory levels and create positive price pressure. Trade uncertainty combined with inflationary pressures brought on by high energy prices are expected to continue to impact this business. And until the macroeconomic factors stabilize, the supply side will heavily influence the supply-demand dynamic. Our pulp production was stable in Q2 compared to Q1. In total, we produced 456,000 tons in Q2 compared to 466,000 tons in Q1. However, ongoing fiber constraints required us to strategically reduce production at our German pulp mills by approximately 26,000 tons in Q2. Our German mills will continue to operate at a reduced rate in the third quarter. As part of our objective to keep all of our pulp mills running reliably, we planned maintenance shutdowns during the second half of the year. So our remaining shut schedule is as follows. In Q3, Rosenthal will be shut down for 26 days, equivalent to 22,000 tons. And Peace River will take 10 days, or almost 14,000 tons. Stendal will only take a short 4-day shut that is a bit less than 7,000 tons. The extended shut in Rosenthal includes 12 days of market-related curtailment. Now, in Q4, Celgar will be down for 18 days, an equivalent of 23,000 tons. Our lumber production was up almost 7% relative to Q1. We're encouraged with the performance of the new advanced scanning technology installed at Torgau this quarter, as this technology allows us to maximize the value of our dimensional lumber and into the U.S. Our solid wood segment continues to face headwinds from a weak European economy and the dampening impact of high mortgage rates in the U.S. However, the reduced supply of Canadian lumber has created a supply-driven higher lumber prices in the U.S. market, a trend we believe will continue in the third quarter. The stagnation of the European economy continues to dampen pallet demand. This unfavorable business environment combined with high fiber costs drove the $8 million EBITDA loss of our solid wood segment in Q2. This segment's earnings were also held back this quarter by unplanned downtime at our Conway facility and mass timber project delays, and incremental fixed costs associated with our transition to 2 shifts at our Conway facility. Looking ahead, we expect the full implementation of a second shift will create meaningful operating efficiencies. Given the many economic forces affecting the U.S. construction activity, U.S. lumber pricing will likely continue to be volatile in the short term. We're expecting a modest demand increase through the summer building season in North America, which combined with reduced supply will create an improved pricing environment. Prices in Europe are expected to stay flat in Q3, and any meaningful long-term improvement in either the European or U.S. markets remains dependent on improved economic conditions and lower long-term interest rates. In Q2, 43% of our lumber volume was sold into the U.S. Looking forward, we believe the U.S. lumber market will be driven by favorable homeowner demographics, which combined with reduced North American lumber capacity will create supportive supply-demand dynamics in the midterm. European shipping pallet markets remain weak, with pricing staying generally flat due to the overhang of the European economy, particularly in Germany. We're expecting generally stable pricing in the second half of '26. Biofuel prices, on the other hand, were down 3% in Q2 relative to Q1. Seasonal demand softness typically drives a steeper decline in prices, but current market dynamics limited that this year. We expect modest downward pressure on biofuel prices in the third quarter. With regards to our mass timber business, revenues were up over 25% compared to Q1, and production was up by about 40%. We expect our production and sales to be flat in Q3 and increase meaningfully in Q4 due to the timing of projects. Today, our mass timber backlog of projects sits at about $151 million, and we continue to see a steady volume of incoming project inquiries, including large data center projects sponsored by hyperscalers, which make up roughly 70% of the backlog. We feel our large production capacity and geographic footprint positions us very well for these type of projects. And we remain bullish on this business as a growth engine for Mercer. Thinking about Mercer overall, the headwinds facing our industry have proven to be both longer and more severe than many had anticipated. The impact of the war in the Middle East not only exacerbates global economic challenges. Market weakness is expected to persist during the rest of the year. As a result, our priority is on maintaining solid liquidity. To do this, our strategy continues to focus on cost reductions beyond our One Goal One Hundred program, reduced capital expenditure, and other working capital measures along with a commitment to improve our capital structure in a way that supports our long-term business plan. As '26 progresses, we will remain focused on those elements of our business that we can control while executing on short-term strategic initiatives while working in tandem with our financial advisors to improve our capital structure. I also believe that the current market conditions validate our long-term strategy that focuses on transforming our pulp mills into bio-refineries with additional revenue streams that will balance our product mix and make Mercer much more resilient. Thanks for listening, and I will now turn the call back to the operator for questions. Thank you. Operator: [Operator Instructions] Our first question or comment comes from the line of Roger Spitz from Bank of America. Roger Spitz: I just wanted to ask two questions. One is, from the sound of it, it sounds like the German mills are well below cash break-even. Can you give us a sense of how far that is so we can understand, you know, what it will take to get them back to break-even if they are in fact below cash break-even? Richard Short: Yes, Roger, this is Richard. So they are negative cash. Order of magnitude, I mean, overall the pulp segment was negative like $25 million, I believe. To get on top of the CapEx, it probably needs to be another 30 -- get it to $35 million or $40 million in total in terms of an improvement? Does that give you an order of magnitude? Roger Spitz: It does. Helpful. Also, can you give an update of your 2026 cash flow items? You gave that, I think, on the Q4 call, cash interest, CapEx, cash taxes, working capital, inflow, outflow, any guidance you can provide there? Richard Short: I think our Q3 expectation is to be pretty similar to Q2. Roger Spitz: You mean on the cash flow items for CapEx and interest and taxes, working capital? Richard Short: Yes. Operator: Our next question or comment comes from the line of [ Dhruv Rana ] from [indiscernible] Energy. Unknown Analyst: My question was regarding the maintenance cost. It shows around $67 million. You mentioned there was no maintenance done for the first six months. So is this, like, for the whole year that the maintenance cost has been mentioned? Richard Short: Yes, I think the way to think about that maintenance cost is that's kind of an OpEx, sort of an ongoing non-capital cost. What we were talking about is not having major maintenance shuts. We didn't take the mill down for an extended period of time to do what we call major maintenance. The number that you see in there is just day-to-day maintenance maybe to make the distinction. So in a major shut, we take all the machines down, we go in and inspect, you know, pipe thickness and replace motors and things like that where you need to take the whole mill down to do, whereas the rest of it you can isolate mill pieces and do maintenance, regular maintenance as we sort of think about it. Unknown Analyst: So we can expect in the next six months also there will be a maintenance cost similar or more amount related to maintenance? Richard Short: Yes, so we're going to have about 40 days of major maintenance downtime. So we're going to take 3 of the mills down this quarter and do all this maintenance. And I guess when you think about order of magnitude of incremental cost, think about $1.5 million per day of cost. That's kind of the order of magnitude. Unknown Analyst: Okay, my second question was related to energy. Since we use all the waste material for generating energy, how do we calculate the energy cost for our production? Is it related to the sale price of energy? Because it seems to be rising every year, so is it related to the selling price? Richard Short: Yes, so the major energy usage at our mills is natural gas, at least at the pulp mills. There's electricity used at the sawmills, but all of our mills, with the exception of our mass timber mills, are energy self-sufficient, so we produce our own electricity. So to answer your question, yes, we're paying market prices for natural gas. So as the price of that gas goes up due to the Middle East war, for example, we're paying those market prices. Operator: Our next question or comment comes from the line of Sean Steuart from TD Cowen. Sean Steuart: Just one question. The Torgau restructuring, I'm trying to understand the puts and takes with, I suppose, layoff costs near term, but I guess the bigger question is how concentrated are the wood product losses to that asset? And as the footprint changes, what is the expected uplift in contributions or, I guess, lower losses coming from that asset specifically? Juan Bueno: Absolutely, Sean. Yes, obviously we have some costs associated with severance as obviously a massive amount of people will be leaving the company or have already, some of that already left. We believe that the cost is around $3 million this year and $3 million next year. When you think about the whole process being implemented by the second quarter of next year, we would be -- already the mill would be headed towards profitability. It is right now, as you well indicated, a big factor behind the negative results of the wood product segment, but the turnaround that these actions that we're taking on restructuring for Torgau could be really significant, in excess of $20 million for the mill, and with potential to be even higher than that, much higher than that. So our goal at the end of the day is for the mill to be positive next year, profitability-wise. It would be, we believe, almost break-even in terms of cash flow, and for the following year being positive cash flow once you have a full year behind you of absolute implementation. Operator: [Operator Instructions] I am showing no additional questions in the queue at this time. I would like to turn the conference back over to Juan Carlos Bueno for any closing remarks. Juan Bueno: Okay, thank you, Howard. And thanks to all of you for joining our call. And obviously, Rich and I are available to talk more at any time, so don't hesitate to call either one of us. Otherwise, we look forward to speaking to you again on our next earnings calls in October. Bye for now. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Operating results were severely impacted by historically high fiber costs in Germany, driven by the war in Ukraine which halted Russian wood inflows and increased competition from subsidized wood-pellet energy producers. Management attributed the negative EBITDA to a combination of these fiber supply limitations and a delayed recovery in global pulp prices, necessitating a $29 million non-cash inventory impairment. The company is executing a significant restructuring at the Torgau mill, including a shift reduction and a workforce decrease of 350 positions by Q2 2027 to address market-driven losses. Strategic production curtailments were implemented at German pulp mills, including a 10% reduction in daily production rates at Stendal and Rosenthal due to a lack of economical fiber. The 'One Goal One Hundred' program remains a core strategic pillar, having achieved $54 million in cumulative profitability improvements toward its $100 million year-end 2026 target. Management is pivoting the long-term strategy toward transforming pulp mills into bio-refineries to create diversified revenue streams and enhance resilience against commodity volatility. A special committee of independent directors and financial advisors is actively evaluating strategic alternatives to enhance liquidity and address 2028 and 2029 senior note maturities. Management anticipates a 'going concern' disclosure due to the reclassification of revolving credit facilities as current liabilities, though they expect to renegotiate the Canadian facility before its 2027 maturity. Pulp markets are expected to tighten in late 2026 and into 2027 as heavy maintenance seasons and industry-wide mill closures reduce global inventory levels. The mass timber business is positioned as a primary growth engine, supported by a $151 million backlog with Large data center projects sponsored by hyperscalers make up roughly 70% of the mass timber backlog. Third-quarter guidance assumes continued elevated fiber costs in Germany, partially offset by moderating costs in Canada due to reduced regional demand. The German revolving credit facility is expected to miss its required leverage ratio in Q4 2026, leading to its classification as a current liability. Geopolitical conflicts in Ukraine and the Middle East are cited as primary drivers for sustained high energy, production, and logistics costs. A 10% tariff on European lumber imports into the U.S. remains a factor, though management views this as a relative advantage compared to the 35% average duties faced by Canadian exporters. Unplanned downtime at the Conway facility and mass timber project delays contributed to the solid wood segment's $8 million EBITDA loss in the second quarter. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed the German mills are currently cash-flow negative, estimating that an improvement of $35 million to $40 million is required to cover operating costs and maintenance capital. The company clarified that while no major maintenance occurred in H1, 40 days of major shut downtime are scheduled for Q3, with an estimated incremental cost of $1.5 million per day. Restructuring severance costs are estimated at $3 million for 2026 and $3 million for 2027. Management expects the Torgau mill to reach cash flow break-even by 2027, with total restructuring benefits potentially exceeding $20 million.

Selected Highlights Second quarter Operating EBITDA* of negative $21.0 million (net loss of $76.0 million), including a non-cash inventory impairment of $29.0 million, compared to negative $20.9 million (net loss of $86.1 million) in the same quarter of 2025 Implementing operational restructuring at the Torgau facility to align its capacity and operational profile to current market conditions, with the goal of ensuring an economically viable future for the facility Continued efforts to improve our balance sheet and optimize working capital. "One Goal One Hundred" program remains on track to achieve $100 million of cost savings and operational efficiencies by year end, with additional cost savings of $13.0 million in second quarter and a total of approximately $54.0 million to date since launch in April 2025 Engaged advisors and key stakeholders to pursue and evaluate a range of strategic alternatives to address debt maturities, enhance liquidity and strengthen our capital structure NEW YORK, Aug. 06, 2026 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported second quarter 2026 Operating EBITDA of negative $21.0 million, a decrease from negative $20.9 million in the same quarter of 2025 and positive $7.8 million in the first quarter of 2026. In the second quarter of 2026, net loss was $76.0 million ($1.13 per share) compared to $86.1 million ($1.29 per share) in the same quarter of 2025 and $52.0 million ($0.78 per share) in the first quarter of 2026. Mr. Juan Carlos Bueno, Chief Executive Officer, stated: "Our pulp sales realizations remained steady this quarter, as continued economic uncertainty delayed market recovery. Our second quarter results were also weighed down by rising European fiber costs, driven by regional supply shortages and intense competition for sawmill residuals from energy producers. As a result, we recognized a non-cash impairment of $29.0 million primarily against pulp and fiber inventory. In response to ongoing economic uncertainty and weak market conditions, we have been actively evaluating strategic alternatives and are proactively taking steps to enhance our liquidity and strengthen our balance sheet. As previously announced, our existing special committee of independent directors continues to oversee, review, and evaluate the development and implementation of potential alternatives to improve our capital structure. To assist in these matters, we have engaged advisors to review strategic alternatives and broader financing initiatives. As part of this process, we have entered into discussions with holders of our 2028 and 2029 senior notes, as well as other stakeholders across our capital structure, regarding potential financing and other liquidity-enhancing transactions. These discussions remain ongoing and we continue to evaluate a range of alternatives with the objective of achieving a comprehensive solution that supports our long-term business plan. No agreement has been reached with any stakeholder group, and there can be no assurance the discussions referenced above will result in any particular transaction or that any transaction, if pursued, will be completed. We continue to pursue our "One Goal One Hundred" program and remain confident that we will achieve our targeted $100 million in cost savings and operational efficiencies by year end. With $13.0 million in cost savings realized this quarter, we have achieved a total of approximately $54.0 million since its launch in April 2025. The program is part of our broader initiatives to improve our balance sheet and preserve cash, including efforts to reduce capital expenditures and optimize working capital. Like many industry participants, Mercer Torgau has been impacted by global economic uncertainty and heightened raw material and energy costs. To address these dynamics, the facility has taken various comprehensive measures to enhance operations, including the installation of new scanning technology to increase production of higher-value, on-grade dimensional lumber and expand exports to the U.S. It also recently announced additional strategic actions designed to align its capacity and operational profile with market conditions. These include a reduction in its workforce and adjustments to its product portfolio. An initial reduction of approximately 100 contractor positions was completed in July 2026, and Mercer Torgau expects an overall workforce reduction of approximately 350 positions as the initiative is completed in stages through the second quarter of 2027. Looking ahead, ongoing geopolitical conflicts, including in the Middle East and Ukraine, are expected to exert inflationary pressures on fiber, freight and other production costs for our pulp and solid wood segments. While direct tariff impacts have been immaterial to date, we continue to monitor events as indirect impacts reshape global supply dynamics. On the supply-side, we are starting to see responses to prevailing market conditions, supporting our current expectation of more balanced markets toward the end of 2026. Per unit fiber costs for our pulp and solid wood segments increased in the second quarter of 2026 compared to the first quarter of 2026, driven by supply constraints and strong demand in Germany. For the third quarter of 2026, per unit fiber costs are expected to remain elevated at our German mills with a slight increase at our pulp mills. This increase is driven by continued strong demand for wood as an energy source as a result of ongoing geopolitical conflicts. We expect to see a modest decrease in per unit fiber costs at our sawmills and Canadian pulp mills as regional curtailments improve their fiber supply. We had relatively stable pulp production in the second quarter of 2026 compared to the first quarter. However, we strategically reduced production at our German mills by approximately 26,000 tonnes due to fiber constraints and expect these reductions to continue into the third quarter. We had no annual planned maintenance downtime in the second quarter of 2026 and expect a total of 40 days of annual planned maintenance downtime at our pulp mills in the third quarter of 2026. In the second quarter of 2026, overall pulp prices were relatively steady compared to the first quarter of 2026 as weak demand was balanced by scheduled maintenance and curtailments. Looking ahead to the third quarter, we expect softwood pulp prices across all our markets to be slightly lower as the positive impacts of recent supply reductions are offset by lower seasonal demand. We expect hardwood pulp pricing to modestly decrease in the third quarter as global supply constraints ease. In the second quarter of 2026, our lumber sales realizations increased compared to the first quarter of 2026 driven by low customer inventory levels and sawmill curtailments in the U.S. While supply also contracted in Europe, continued weak demand limited the positive impact on lumber pricing in the market. Overall demand is expected to remain weak in the third quarter of 2026 due to high U.S. interest rates and continued European economic headwinds. We are, however, seeing an upward trend in North American lumber prices driven by lower customer inventory levels and capacity curtailments. As conditions improve, we expect a strong recovery, with pent-up demand and supply constraints driving further price increases. The order book and commitments for our mass timber business are robust, at approximately $151 million at the end of the second quarter, anchored by large-scale data center infrastructure projects. We expect these contracts to begin contributing to our results as they commence in late 2026 and into 2027." Mr. Bueno concluded: "As economic headwinds and geopolitical volatility persist, our immediate priorities are managing costs, maintaining our liquidity, and optimizing our capital structure. The proactive steps we are taking have the goal of strengthening our balance sheet and positioning us to capitalize as market conditions improve. " ______________*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 loss to Operating EBITDA. Consolidated Financial Results Consolidated – Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 Total revenues for the second quarter of 2026 remained relatively steady at $460.3 million compared to $453.5 million in the same period of 2025, as higher sales realizations for our solid wood products and higher pulp sales volumes were mostly offset by lower pulp sales realizations. Costs and expenses in the second quarter of 2026 were generally flat at $519.3 million compared to $511.9 million in the same period of 2025. In the second quarter of 2026, higher per unit fiber costs were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the second quarter of 2026, costs and expenses included a non-cash impairment of $29.0 million primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. In the same period of 2025, costs and expenses included a non-cash impairment of $11.0 million against hardwood inventory at our Peace River mill. In the second quarter of 2026, Operating EBITDA was negative $21.0 million compared to negative $20.9 million in the same period of 2025. In the second quarter of 2026, higher per unit fiber costs and lower pulp sales realizations were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the second quarter of 2026, Operating EBITDA included a non-cash inventory impairment of $29.0 million compared to $11.0 million in the same period of 2025. Segment Results Pulp ______________(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. In the second quarter of 2026, Segment Operating EBITDA for our pulp segment was negative $12.7 million compared to negative $10.3 million in the same period of 2025. This primarily resulted from lower pulp sales realizations and higher per unit fiber costs. These adverse effects were partially offset by the impact of lower planned maintenance downtime, the benefits of our cost reduction initiatives, and the positive foreign exchange impact from a stronger dollar. In the second quarter of 2026, Segment Operating EBITDA also included a non-cash inventory impairment of $26.0 million compared to $11.0 million in the same period of 2025. Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the second quarter of 2026 modestly decreased to $325.1 million from $332.3 million in the same period of 2025 due to lower pulp revenues. Pulp revenues in the second quarter of 2026 modestly decreased to $303.3 million from $313.7 million in the same period of 2025 as a result of lower sales realizations, partially offset by higher sales volume. In the second quarter of 2026, the third-party industry quoted average list price for NBSK pulp in Europe increased from the same period of 2025 primarily due to supply constraints. In the second quarter of 2026, the third-party industry quoted average list price in North America and net price in China for NBSK pulp both decreased compared to the same period of 2025. The decrease was primarily due to weak demand driven by the current economic climate and, in China, an oversupplied paper market. Our average NBSK pulp sales realizations in the second quarter of 2026 decreased by approximately 10% to $682 per ADMT from $758 per ADMT in the same period of 2025. This decrease was primarily due to lower pricing in North America and China, while higher list prices in Europe were offset by increased customer discounts. In the second quarter of 2026, the third-party industry quoted average list price in North America and net price in China for NBHK pulp both increased from the same period of 2025, primarily due to global supply constraints. In the second quarter of 2026, average NBHK pulp sales realizations increased by approximately 6% to $607 per ADMT from $575 per ADMT in the same period of 2025, driven by higher prices in all our markets. Total pulp sales volumes in the second quarter of 2026 increased by approximately 6% to 450,329 ADMTs from 426,731 ADMTs in the same period of 2025 driven by the timing of sales. Energy and chemical revenues in the second quarter of 2026 increased by approximately 17% to $21.7 million from $18.6 million in the same period of 2025. This increase was primarily due to higher sales realizations, partially offset by lower sales volumes. In the second quarter of 2026, cost and expenses modestly decreased to $362.9 million from $368.7 million in the same period of 2025. This decrease was primarily due to lower planned maintenance downtime, our cost reduction initiatives and the positive foreign exchange impact from a stronger dollar. These decreases were partially offset by higher per unit fiber costs and higher pulp sales volumes. In the second quarter of 2026, costs and expenses included a non-cash inventory impairment of $26.0 million compared to $11.0 million in the same period of 2025. Total pulp production in the second quarter of 2026 was relatively flat at 455,769 ADMTs compared to 457,117 ADMTs in the same period of 2025. Our German pulp mills reduced production during the quarter in response to high fiber prices, but this was offset by there being no planned maintenance downtime in the second quarter of 2026 compared to 23 days (approximately 33,200 ADMTs) at our pulp mills in the same period of 2025. Pulp production at our German mills is expected to remain at reduced levels in the third quarter of 2026 due to ongoing high fiber costs. Overall average per unit fiber costs in the second quarter of 2026 increased by approximately 14% compared to the same period of 2025 primarily due to higher costs in Germany. These higher costs were driven by reduced supply, and strong demand for wood as an energy source as a result of ongoing geopolitical conflicts. For the third quarter of 2026, per unit fiber costs for our German pulp mills are expected to slightly increase due to continued strong demand. For our Canadian pulp mills, per unit fiber costs are expected to modestly decrease as supply improves. Solid Wood ______________(1) Manufactured products primarily include cross-laminated timber ("CLT") and glue-laminated timber ("glulam").(2) Biofuels include pellets and briquettes.(3) 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. In the second quarter of 2026, Segment Operating EBITDA for the solid wood segment was negative $8.2 million compared to negative $4.9 million in the same period of 2025. This decrease primarily resulted from higher per unit fiber costs partially offset by higher sales realizations for all our products. Solid wood segment revenues in the second quarter of 2026 increased by approximately 14% to $134.2 million from $117.3 million in the same period of 2025 as a result of higher revenue from all product categories except for lumber. In the second quarter of 2026, lumber revenues decreased by approximately 15% to $56.6 million from $66.3 million in the same period of 2025 as a result of lower sales volumes. Average lumber sales realizations in the second quarter of 2026 modestly increased to $565 per Mfbm from $550 per Mfbm in the same period of 2025. This increase was primarily due to lower customer inventory levels in the U.S. The U.S. market accounted for approximately 49% of our lumber revenues and approximately 43% of our lumber sales volumes in the second quarter of 2026. The balance of our lumber sales were mainly to Europe. Lumber sales volumes in the second quarter of 2026 decreased by approximately 17% to 100.3 MMfbm from 120.6 MMfbm in the same period of 2025 driven by the timing of sales. In the second quarter of 2026, manufactured products revenues were $25.8 million compared to $12.4 million in the same period of 2025. This increase was primarily driven by higher sales volumes and realizations. Manufactured products sales realizations increased by approximately 67% to $2,206 per cubic meter in the second quarter of 2026 from $1,318 per cubic meter in the same period of 2025 driven by a shift in mass timber construction activity toward higher-value projects. Lumber production in the second quarter of 2026 was relatively stable at 123.8 MMfbm compared to 120.2 MMfbm in the same period of 2025. Fiber costs were approximately 85% of our lumber cash production costs in the second quarter of 2026. In the second quarter of 2026, per unit fiber costs for lumber production increased by approximately 28% compared to the same period of 2025 due to reduced supply and strong demand. For the third quarter of 2026, we currently expect per unit fiber costs to modestly decrease as sawlog availability improves. Consolidated – Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Total revenues for the first half of 2026 were relatively flat at $949.6 million compared to $960.5 million in the same period of 2025. Costs and expenses in the first half of 2026 modestly increased to $1,041.4 million from $1,012.2 million in the same period of 2025. This increase was primarily due to higher per unit fiber costs and negative foreign exchange impact from a weaker dollar on our euro and Canadian dollar-denominated costs and expenses. These adverse impacts were partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, costs and expenses included inventory impairment charges of $51.0 million primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. In the same period of 2025, costs and expenses included inventory impairment charges of $11.0 million against hardwood inventory at our Peace River mill. In the first half of 2026, Operating EBITDA decreased to negative $13.1 million from positive $26.2 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations and higher per unit fiber costs, partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, Operating EBITDA also included inventory impairment charges of $51.0 million compared to $11.0 million in the same period of 2025. Liquidity As of June 30, 2026, we had cash and cash equivalents of $78.8 million. After taking into account the previously announced €70 million reduction in borrowing capacity under our German revolving credit facility, we had approximately $112.9 million available under our revolving credit facilities, bringing aggregate liquidity to approximately $191.7 million as of June 30, 2026. Please refer to our Quarterly Report on Form 10-Q for the period ended June 30, 2026, for further information regarding our liquidity as of June 30, 2026. The following table is a summary of selected financial information as of the dates indicated: 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 August 7, 2026 at 10:00 AM ET. Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/smtqn5ma 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 website and download and install any necessary audio software. Mercer International Inc. is a global forest products company with operations in Germany, USA and Canada with consolidated annual production capacity of 2.1 million tonnes of pulp, 1,023 million board feet of lumber, 210 thousand cubic meters of CLT, 45 thousand cubic meters of glulam, 17 million pallets and 230 thousand tonnes of biofuels. To obtain further information on the company, please visit its website 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", "are optimistic that", "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, ability to refinance or obtain any necessary financing on acceptable terms in the future, 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:William D. McCartneyChairman(604) 684-1099 Juan Carlos BuenoChief Executive Officer (604) 684-1099 -FINANCIAL TABLES FOLLOW- Summary Financial Highlights ______________(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 not a measure of financial performance under 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 loss to Operating EBITDA. Summary Operating Highlights ______________(1) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates.(2) Sales realizations after customer discounts, rebates and other selling concessions.(3) Manufactured products primarily include CLT and glulam.(4) Biofuels include pellets and briquettes.(5) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period. MERCER INTERNATIONAL INC.COMPUTATION OF OPERATING EBITDA(Unaudited)(In thousands) Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and long-lived 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 long-lived asset impairment charges are not actual cash costs, 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, management believes 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, income taxes 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. Operating EBITDA is an internal measure and therefore may not be comparable to other companies. 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. The following table sets forth a reconciliation of net loss to Operating EBITDA for the periods indicated:

Interested in Mercer International Inc.? Here are five stocks we like better. Mercer reported Q1 operating EBITDA of about $8 million but a consolidated net loss of $52 million (including a $22 million non‑cash inventory impairment); aggregate liquidity fell to about $229 million and the company obtained a waiver after missing the leverage covenant on its German revolver. The pulp segment generated roughly $7 million of quarterly EBITDA while solid wood was about $6 million negative, with rising fiber costs and weak pulp/lumber markets the main near‑term headwinds even as management expects fiber costs to stabilize in Q2. Mercer has realized about $41 million of savings under its One Goal One Hundred program (targeting $100 million by end‑2026) and is ramping its mass timber business—revenues rose >60% sequentially with a backlog of roughly $171 million—while pursuing a strategic review and maintaining 2026 CapEx guidance of $60–80 million. Mercer Near Rock Bottom: Is This High-Yield Play Set to Soar? Mercer International (NASDAQ:MERC) reported first-quarter 2026 operating EBITDA of about $8 million, an improvement of $28 million from the fourth quarter, as reduced planned maintenance downtime and savings tied to the company’s One Goal One Hundred program helped offset weak pulp and lumber markets and higher fiber costs, particularly in Germany and Canada. Chief Financial Officer Richard Short said the quarter also included a $22 million non-cash inventory impairment charge, driven primarily by low pulp prices and high fiber costs. Mercer posted a consolidated net loss of $52 million, or $0.78 per share, including the impairment of $0.33 per share. In the prior quarter, the company reported a net loss of $309 million, or $4.61 per share, which included roughly $239 million of non-cash, long-lived asset and inventory impairments. → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% Short said Mercer did not meet the leverage ratio covenant under its German revolving credit facility at the end of the first quarter due to “the high costs and weak markets for our products.” The company obtained a waiver from lenders covering the current quarter and the subsequent two quarters and expects to return to compliance by the fourth quarter based on its forecast assumptions. Short added that the outstanding balance on the German revolving credit facility remains classified as non-current as of March 31, 2026. Aggregate liquidity fell by $201 million to about $229 million, consisting of $85 million in cash and $144 million of undrawn revolvers. He attributed the decline primarily to a temporary EUR 70 million reduction in the availability of the German revolver tied to the waiver, as well as higher working capital from seasonal fiber inventory, scheduled senior note interest payments, and higher receivables related to sales timing. Management expects a “modest reduction” in working capital in the second quarter. → Light Speed Returns: Corning Cashes In on NVIDIA Growth During the quarter, Mercer launched a consent solicitation with bondholders “to provide flexibility with regards to the types of financing transactions the company may be able to engage in,” and it received approval from more than 80% of bondholders. Short said the company did not have a specific amendment or transaction in mind and had not engaged any bondholder or ad hoc groups. Mercer’s pulp segment generated quarterly EBITDA of $7 million, while the solid wood segment posted negative quarterly EBITDA of approximately $6 million, according to Short. → Years in the Making, AMD’s Upside Movement Has Just Begun In pulp, softwood sales realizations dipped slightly to $696 per ton from $702 per ton in the fourth quarter. Short said the European NBSK list price averaged $1,618 per ton, up $120 from the fourth quarter, though the benefit was “offset by a higher discount rate.” In China, the NBSK net price increased to $685 per ton, up $14, while North American NBSK list prices averaged $1,563 per ton, flat sequentially. Hardwood markets improved in China and North America, Short said, supported by stronger demand and higher domestic fiber costs in China. Mercer’s hardwood sales realizations rose to $564 per ton from $528 per ton. The average net price for eucalyptus hardwood pulp in China was $595 per ton, up $55, and the North American average list price was $1,338 per ton, up $140. The quarter’s $22 million inventory impairment was “primarily driven by low pulp prices and high fiber costs,” with approximately $17 million attributed to softwood inventories and the remainder to hardwood inventories. Pulp sales volumes were flat sequentially at about 471,000 tons and production was about 466,000 tons. Short noted the company reduced production at its German mills due to fiber supply limitations, and Chief Executive Officer Juan Carlos Bueno later said Mercer “strategically curtailed roughly 20,000 tonnes at our German mills due to fiber constraints.” There were no planned maintenance days in the first quarter, compared with 21 days at the Stendal mill in the fourth quarter, and Mercer also does not expect planned maintenance downtime in the second quarter. In solid wood, Short said lumber sales realizations were flat in both the U.S. and Europe as weak demand was offset by reduced supply. The Random Lengths U.S. benchmark price for Western SPF No. 2 and better averaged $463 per thousand board feet in the first quarter, up $41 from the fourth quarter, and was around $483 per thousand board feet at the time of the call. Lumber production rose about 7% to 160 million board feet, while lumber sales volumes increased 9% to 112 million board feet. Electricity sales totaled 217 GWh, up about 16 GWh from the fourth quarter due to the Stendal shutdown in the prior period, with pricing increasing to about $127 per MWh from $105 due to higher German spot prices. Management repeatedly highlighted fiber costs as a major challenge. Short said fiber costs increased in both segments due primarily to higher costs in Germany tied to supply constraints and demand, including seasonal demand from the biofuel industry. For the second quarter, he expects stable fiber costs in Germany and Canada, with improved availability offsetting continued strong demand. Bueno described European fiber supply as “frustrating,” saying some mills had to slow due to “insufficient or too expensive fiber supply.” He said Mercer expects fiber costs to stabilize in the second quarter, helped by “modestly improved availability of fiber in Germany, along with increased chip volumes from U.S. sources for our Celgar mill.” Bueno also pointed to late-quarter increases in energy-related costs, including fuel surcharges and inflationary impacts on chemicals. While the effect was minimal in the first quarter, he expects the increases to be more meaningful in the second quarter, estimating $5 to $10 per ton of pulp in freight costs and about $5 per ton for chemicals. On trade, Bueno said the only direct tariff the company is facing is a 10% tariff on European lumber imports into the U.S. He contrasted that with Canadian exports to the U.S., which he said would face an average combined tariff and duty rate of about 35%, contributing to curtailment announcements in Canada and pressuring fiber costs due to reduced residual chip supply. He said Mercer’s Celgar mill is “well-positioned” given access to U.S. fiber and the ability to harvest and process whole logs, while noting some inflation in fiber costs with “some relief” beginning in the second quarter. He added that Mercer’s imports of wood chips from the U.S. represent about 45% of Celgar’s fiber consumption, which he called a competitive advantage. Short said Mercer has realized approximately $41 million in cost savings and reliability improvements under One Goal One Hundred and remains on track to achieve $100 million in improvements by the end of 2026 using 2024 as a baseline. Bueno said the program produced about $30 million of results in 2025 and another $11 million in the first quarter of 2026. In mass timber, Short said revenues were “significantly higher” sequentially due to a growing order book, and he expects the order book to provide stable production through 2026 and into 2027. Bueno said mass timber revenues were up more than 60% versus the fourth quarter and production rose over 20% as the company begins ramping to a second shift, though both were below expectations due to roughly a week of unplanned downtime at the Spokane facility following a mechanical failure. He said the quarter also reflected ramp-up costs tied to hiring and training, and he expects production and sales to increase “significantly” in the second quarter. Bueno said Mercer’s mass timber backlog stands at about $171 million, with large data center projects sponsored by hyperscalers representing roughly 60% of the backlog. He added that, structurally, the business benefits from down payments when contracts are signed, creating a more favorable cash cycle than Mercer’s other businesses. Looking forward, Bueno said Mercer is evaluating strategic alternatives and financing options to improve liquidity and position the company for a market recovery, with the board appointing a special committee to oversee management’s efforts. In response to analyst questions, he said it was “too premature” to categorize assets as core or non-core and reiterated that asset sales are difficult in current conditions because valuations are “very impacted” by the market environment. On capital spending, Bueno said the company plans 2026 CapEx of about $60 million to $80 million focused on maintenance, environmental, and safety projects, reflecting a priority on liquidity amid continued market weakness expected through 2026. He also reiterated Mercer’s longer-term strategy of transforming pulp mills into biorefineries to add revenue streams and increase resilience during pulp down cycles. Mercer International Inc is a publicly traded pulp producer headquartered in Vancouver, British Columbia. Listed on the NASDAQ under the symbol MERC, the company specializes in the manufacture of Northern Bleached Softwood Kraft (NBSK) pulp and dissolving pulp for use in tissue, specialty paper and textile applications. Mercer's core business activities include the operation of integrated pulp mills in North America and Europe. Its production portfolio encompasses NBSK pulp, renowned for its strength and versatility, and dissolving pulp, which serves as a key raw material in the manufacture of viscose, cellulose acetate and other specialty products. The company's facilities are located in British Columbia and the U.S. The article "Mercer International Q1 Earnings Call Highlights" was originally published by MarketBeat. 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Selected Highlights First quarter Operating EBITDA* of $7.8 million (net loss of $52.0 million), including a non-cash inventory impairment of $22.0 million, compared to $47.1 million (net loss of $22.3 million) in the same quarter of 2025 Secured an extended waiver for the German revolving credit facility to address covenant compliance and to provide flexibility to pursue and implement steps to enhance liquidity and financial condition to position for an eventual market recovery On track for our $100 million "One Goal One Hundred" goal, attaining $11.0 million of cost savings in the first quarter, and a total of approximately $41.0 million since launch in April 2025; one of various initiatives to improve our balance sheet Mass timber momentum continues to build, backed by an order book and commitments of $171 million that support a multi-year production plan NEW YORK, May 07, 2026 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported first quarter 2026 Operating EBITDA of $7.8 million, a decrease from $47.1 million in the same quarter of 2025 and an increase from negative $20.1 million in the fourth quarter of 2025. In the first quarter of 2026, net loss was $52.0 million ($0.78 per share) compared to $22.3 million ($0.33 per share) in the same quarter of 2025 and $308.7 million ($4.61 per share) in the fourth quarter of 2025. Mr. Juan Carlos Bueno, Chief Executive Officer, stated: "Our pulp sales realizations showed resilience this quarter as softwood pulp markets held steady, while hardwood pulp performance trended upward on favorable demand-supply dynamics. However, elevated fiber costs across our supply chain and a slower-than-anticipated recovery in prices continued to weigh on our results. As a result, we recognized a non-cash impairment of $22 million against pulp and fiber inventory. We are starting to see supply responses to prevailing market conditions and currently expect a more balanced market in the later half of 2026. The current conflicts in the Middle East and their impacts on energy supply are creating significant inflationary pressures and further economic uncertainty. We believe these conditions may negatively impact demand for our products and increase certain operating costs, such as chemicals and freight. Conversely, high oil prices are raising interest in bio-substitution, as expensive oil-based synthetics drive increased demand for lower-cost, wood-pulp-derived alternatives. While the potential impacts and duration of these conditions are currently unknown, we continue to monitor and assess these events. We continue to pursue our "One Goal One Hundred" program and remain confident that we will achieve our targeted $100 million in cost savings and operational efficiencies by year end. With $11 million in profitability actions realized this quarter, our cumulative total has reached approximately $41 million since its launch in April 2025. The program is part of our broader initiatives to improve our balance sheet and preserve cash, including efforts to reduce capital expenditures and optimize working capital. In the first quarter of 2026, European softwood pulp prices increased compared to the fourth quarter of 2025 due to supply constraints, although these gains were offset by higher discounts. In China, softwood pulp pricing remained under pressure from an oversupplied paper sector and ongoing economic uncertainties, while excess inventory tempered the North American market. Conversely, hardwood pulp prices increased globally due to stronger demand and tightening inventory levels. Looking ahead to the second quarter, we expect softwood pulp prices to increase modestly across all markets, with hardwood pricing remaining relatively steady. Our lumber sales realizations in both the U.S. and Europe were relatively stable in the first quarter of 2026. For the second quarter, we currently expect lumber prices to remain stable in Europe and modestly increase in the U.S. due to low supply. Per unit fiber costs for our pulp and solid wood segments increased in the first quarter of 2026 compared to the fourth quarter of 2025 driven by supply constraints and strong demand. We currently expect per unit fiber costs to stabilize in the second quarter of 2026 as improved availability is offset by strong demand. In the first quarter of 2026, we had relatively stable production but fiber constraints in Europe required us to strategically reduce production at our German mills by approximately 20,000 tonnes. There was no annual planned maintenance downtime in the first quarter of 2026 and none is currently scheduled for the second quarter. Overall, our solid wood segment remains pressured by high U.S. interest rates and European economic headwinds. As conditions improve, we expect a strong recovery, with pent-up demand and supply constraints eventually driving higher pricing. Current geopolitical conflicts may delay any economic recovery. With the installation of new scanning technology currently underway at Torgau that is expected to be operational in the second quarter, we are well positioned to increase our production of on-grade dimensional lumber. This allows us to scale our exports to the U.S. market, enabling us to shift more of our existing production into higher-value dimensional products. Within this segment, our mass timber order book and commitments grew to approximately $171 million this quarter. This portfolio is increasingly weighted toward large-scale projects related to data center infrastructure, representing approximately 60% of our existing project pipeline. We expect these contracts to begin contributing to our results as they commence in late 2026 and into 2027. As a result of ongoing economic uncertainty and softness in the markets for our products, we did not meet the requisite leverage ratio required under our German revolving credit facility at the end of the first quarter. As announced, to address this, we secured a waiver of the applicable covenant from the lenders under the facility. Based on management's current forecasts and assumptions, including with respect to pricing and demand for our products, we currently expect to achieve compliance with the leverage ratio by the fourth quarter of 2026. Accordingly, amounts outstanding under our German revolving credit facility remain classified as "non-current liabilities" at the end of the first quarter. The waiver gives us additional flexibility to pursue and implement measures and solutions with the goal of enhancing our liquidity and financial condition in the current economic environment, including to address maturing indebtedness, and to assist our positioning for an eventual market recovery. To this end, we are also evaluating strategic alternatives and financing options to address our liquidity needs and goals. Our board of directors has appointed a special committee of independent directors to oversee, review and evaluate the development and implementation of potential liquidity management strategies and other transactions to improve our capital structure." Mr. Bueno concluded: "In the first quarter of 2026, economic headwinds continued and were accompanied by geopolitical volatility. In these difficult conditions, the steps being taken to address liquidity, combined with our ongoing focus on production discipline and the "One Goal One Hundred" program, are intended to position us to capture market upside when conditions improve towards the second half of the year." ______________ *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 loss to Operating EBITDA. Consolidated Financial Results Consolidated – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 Total revenues for the first quarter of 2026 decreased by approximately 3% to $489.3 million from $507.0 million in the same period of 2025. This decrease was primarily due to lower pulp sales realizations partially offset by modestly higher sales realizations from our other products. Costs and expenses in the first quarter of 2026 increased by approximately 4% to $522.2 million from $500.2 million in the same period of 2025. This increase was primarily due to the negative foreign exchange impact from a weaker dollar on our euro and Canadian dollar denominated costs and expenses and higher per unit fiber costs partially offset by lower maintenance costs. In the first quarter of 2026, costs and expenses included a non-cash inventory impairment of $22.0 million against pulp and fiber inventory due to low pulp prices and high fiber costs. In the first quarter of 2026, Operating EBITDA decreased to $7.8 million, which includes the $22.0 million non-cash inventory impairment, from $47.1 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations, higher per unit fiber costs, and the negative foreign exchange impact from a weaker dollar partially offset by lower maintenance costs. Segment Results Pulp ______________ (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. In the first quarter of 2026, Segment Operating EBITDA for the pulp segment decreased to $6.9 million from $49.9 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations, higher per unit fiber costs, and the negative foreign exchange impact from a weaker dollar partially offset by lower maintenance costs. In the first quarter of 2026, Segment Operating EBITDA also included a non-cash inventory impairment of $22.0 million. Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the first quarter of 2026 decreased by approximately 9% to $345.0 million from $381.1 million in the same period of 2025 driven by lower pulp revenues. Pulp revenues in the first quarter of 2026 decreased by approximately 11% to $319.2 million from $357.0 million in the same period of 2025 primarily as a result of lower sales realizations. In the first quarter of 2026, the third-party industry quoted average list price for NBSK pulp in Europe modestly increased compared to the same period of 2025 primarily due to supply constraints. In the first quarter of 2026, the third-party industry quoted average list price for NBSK pulp in North America and the third-party industry quoted average net price for NBSK pulp in China decreased compared to the same period of 2025. The decrease was primarily due to weak demand driven by the current economic climate and, in China, an oversupplied paper market. Our average NBSK pulp sales realizations in the first quarter of 2026 decreased by approximately 11% to $696 per ADMT from $783 per ADMT in the same period of 2025 due to lower prices in North America and China. In the first quarter of 2026, the third-party industry quoted average list price for NBHK pulp in North America and the third-party industry quoted average net price for NBHK pulp in China modestly increased from the same period of 2025 primarily due to global supply constraints. In the first quarter of 2026, average NBHK pulp sales realizations remained flat at $564 per ADMT compared to $570 per ADMT in the same period of 2025. Pulp sales volumes in the first quarter of 2026 were relatively steady at 470,700 ADMTs compared to 477,879 ADMTs in the same period of 2025. Energy and chemical revenues in the first quarter of 2026 were relatively flat at $25.8 million compared to $24.1 million in the same period of 2025. Costs and expenses in the first quarter of 2026 remained stable at $366.9 million compared to $360.9 million in the same period of 2025 as higher per unit fiber costs and the negative foreign exchange impact from a weaker dollar on our euro and Canadian dollar denominated costs and expenses were partially offset by lower maintenance costs. In the first quarter of 2026, costs and expenses included a non-cash inventory impairment charge of $22.0 million against inventory as a result of low pulp prices and high fiber costs. Total pulp production in the first quarter of 2026 was relatively flat at 465,717 ADMTs compared to 458,909 ADMTs in the same period of 2025. There was no planned maintenance downtime in the first quarter of 2026, compared to 22 days (approximately 29,700 ADMTs) at our Celgar mill in the same period of 2025. This benefit was mostly offset by the impact of reduced production at our German mills due to fiber supply constraints in Europe. Overall average per unit fiber costs in the first quarter of 2026 increased by approximately 22% compared to the same period of 2025 primarily as a result of reduced supply in Germany and Canada. For the second quarter of 2026, we currently expect per unit fiber costs to stabilize as improved availability is offset by strong demand. Solid Wood ______________ (1) Manufactured products primarily include cross-laminated timber ("CLT") and glue-laminated timber ("glulam"). (2) Biofuels include pellets and briquettes. (3) 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. In the first quarter of 2026, Segment Operating EBITDA for the solid wood segment was negative $5.6 million compared to negative $0.3 million in the same period of 2025. This primarily resulted from higher per unit fiber costs partially offset by modestly higher sales realizations for most of our products. Solid wood segment revenues in the first quarter of 2026 increased by approximately 7% to $131.7 million from $122.7 million in the same period of 2025 as a result of higher revenue from all product categories except for lumber. Lumber revenues in the first quarter of 2026 decreased by approximately 8% to $60.1 million from $65.4 million in the same period of 2025 primarily due to lower sales volumes. Average lumber sales realizations in the first quarter of 2026 increased by approximately 7% to $536 per Mfbm from $499 per Mfbm in the same period of 2025 primarily as a result of lower supply and higher fiber costs in the European market. This increase was partially offset by lower average sales realization in the U.S. market due to weak demand. The U.S. market accounted for approximately 46% of our lumber revenues and approximately 42% of our lumber sales volumes in the first quarter of 2026. The balance of our lumber sales was mainly to Europe. Lumber sales volumes in the first quarter of 2026 decreased by approximately 14% to 112.1 MMfbm from 130.9 MMfbm in the same period of 2025 as a result of lower production. In the first quarter of 2026, manufactured products revenues increased by approximately 12% to $21.0 million from $18.8 million in the same period of 2025 primarily due to higher sales volumes partially offset by lower sales realizations. Manufactured products sales realizations decreased by approximately 36% to $1,801 per cubic meter in the first quarter of 2026 from $2,832 per cubic meter in the same period of 2025 as construction activity was weighted toward modest-scale projects amid an elevated interest rate environment in the U.S. Lumber production in the first quarter of 2026 decreased by approximately 9% to 115.9 MMfbm from 128.0 MMfbm in the same period of 2025 due to fiber supply constraints. Fiber costs were approximately 85% of our lumber cash production costs in the first quarter of 2026. In the first quarter of 2026, per unit fiber costs for lumber production increased by approximately 36% compared to the same period of 2025 due to reduced supply and strong demand. For the second quarter of 2026, we currently expect per unit fiber costs to be flat as the positive impact of improved supply will be offset by strong demand. Liquidity As of March 31, 2026, we had cash and cash equivalents of $84.5 million. After taking into account the Waiver and the €70 million reduction in borrowing capacity thereunder, we had approximately $144.5 million available under our revolving credit facilities, bringing aggregate liquidity to about $229.0 million as of March 31, 2026. Please refer to our Quarterly Report on Form 10-Q for the period ended March 31, 2026, for further information regarding the Waiver and liquidity as of March 31, 2026. The following table is a summary of selected financial information as of the dates indicated: 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 May 8, 2026 at 10:00 AM ET. Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/ha9u4g4a 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 website and download and install any necessary audio software. Mercer International Inc. is a global forest products company with operations in Germany, USA and Canada with consolidated annual production capacity of 2.1 million tonnes of pulp, 1,023 million board feet of lumber, 210 thousand cubic meters of CLT, 45 thousand cubic meters of glulam, 17 million pallets and 230 thousand tonnes of biofuels. To obtain further information on the company, please visit its website 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", "are optimistic that", "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, ability to refinance or obtain any necessary financing on acceptable terms in the future, 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: William D. McCartney Chairman (604) 684-1099 Juan Carlos Bueno Chief Executive Officer (604) 684-1099 -FINANCIAL TABLES FOLLOW- Summary Financial Highlights ______________ (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 not a measure of financial performance under 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 loss to Operating EBITDA. Summary Operating Highlights ______________ (1) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates. (2) Sales realizations after customer discounts, rebates and other selling concessions. (3) Manufactured products primarily include CLT and glulam. (4) Biofuels include pellets and briquettes. (5) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and long-lived 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 long-lived asset impairment charges are not actual cash costs, 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, management believes 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, income taxes 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. Operating EBITDA is an internal measure and therefore may not be comparable to other companies. 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. The following table sets forth a reconciliation of net loss to Operating EBITDA for the periods indicated: