Mercer International’s Earnings Call: Progress Amid Pain

Mercer International ((MERC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Mercer International’s latest earnings call painted a mixed picture, pairing tangible operational progress with a starkly negative bottom line. Management highlighted improved liquidity, cost savings, and growth in newer businesses, yet the quarter was dominated by sizable non-cash impairments and a steep net loss, underscoring elevated near-term risk for investors.

Operating EBITDA Improvement Despite Remaining in the Red

Operating EBITDA in the fourth quarter came in at a negative $20 million, but that still marked an $8 million improvement versus the prior quarter. Management credited stable mill operations and early gains from the One Goal 100 cost-savings program for the sequential uptick.

Liquidity Position Strengthens to $430 Million

Mercer closed the quarter with aggregate liquidity of roughly $430 million, up more than $54 million from Q3. The buffer consists of about $187 million of cash on hand and $243 million of undrawn revolving credit facilities, giving the company flexibility as markets remain weak.

One Goal 100 Cost Program Gathers Early Traction

The One Goal 100 initiative, aimed at delivering $100 million in improvements by 2026 versus a 2024 baseline, made meaningful progress in 2025. Management reported about $30 million of realized cost savings and operational efficiencies, representing roughly 30% of the multi-year target.

Stable Pulp Production With Higher Sales Volumes

Pulp sales volumes rose to 472,000 tonnes in Q4, an increase of 20,000 tonnes or about 4.4% quarter over quarter. While reported pulp production was flat at around 460,000 tonnes, output improved by roughly 20,000 tonnes once planned downtime is factored out.

Mass Timber Backlog Doubles, Signaling Growth Ahead

The mass timber segment remained a bright spot, with the order book nearly doubling to about $163 million from roughly $80 million at the end of Q3. Quarterly revenues in the business grew about 6% and management is targeting approximately $120 million of mass timber revenue in 2026, more than double 2025 levels.

Carbon Capture Pilot Shows Encouraging Early Results

At the Peace River mill, Mercer’s carbon capture demonstration unit is now operating and producing promising early data. The first six months of the pilot have delivered encouraging indicators on capture efficiency and CO2 purity, which will guide subsequent phases of the program.

Stable European Pulp Pricing and Solid Power Sales

In an otherwise tough pricing environment, European NBSK list prices held steady at about $1,498 per tonne during the quarter. Electricity sales contributed an additional pillar of stability, with 202 gigawatt-hours sold at roughly $105 per megawatt-hour, broadly unchanged from Q3.

Heavy Non-Cash Impairments Hit Reported Results

Reported earnings were severely impacted by $216 million of non-cash long-lived asset impairments recorded in Q4. The bulk of this, roughly $204 million, related to the Peace River mill, with a further $12 million impairment in the solid wood segment, sharply depressing headline profitability.

Inventory Write-Down Reflects Weak Pulp Fundamentals

The company also booked a $23 million non-cash inventory impairment in the quarter, reflecting low pulp prices and high fiber costs. About $15 million of this charge related to softwood inventories, with the remainder tied to hardwood inventories, signaling ongoing margin pressure.

Net Loss Swells on Impairments and Soft Markets

Mercer reported a consolidated net loss of $309 million in Q4, or $4.61 per share, compared with a loss of $81 million, or $1.21 per share, in Q3. Management noted that impairments alone accounted for roughly $239 million, or about $3.57 per share, of the latest quarterly loss.

Negative Segment EBITDA Highlights Market Weakness

Both the pulp and solid wood segments posted negative EBITDA of $11 million each in the quarter, underscoring how weak the operating environment remains. Low selling prices, soft demand, and elevated fiber costs were all cited as key drivers of underperformance in these core businesses.

Pulp Price Pressure Intensifies, Especially in Softwood

Softwood NBSK realized prices slipped to $707 per tonne from $728 in Q3, a decline of about 2.9%. Regionally, the North American NBSK list price averaged $1,568 per tonne, down roughly $132 quarter on quarter, while China’s NBSK net price edged down $19 to $601 per tonne.

Lumber Prices and Volumes Decline Further

In the solid wood segment, the Random Lengths U.S. Western SPF benchmark fell to an average of $422 per thousand board feet in Q4, down $55 or 11.5% from Q3. Mercer’s lumber production dropped about 6% to 109 million board feet and sales volumes fell around 7% to 103 million board feet.

Higher Fiber Costs and Working Capital Needs Loom

Looking ahead, management warned of higher fiber costs in Canada and Germany in early 2026, driven by supply constraints and seasonal biofuel demand. The company also anticipates a net cash outflow for 2026 tied to working capital, interest, and capital spending, with working capital requirements currently pegged at roughly $100 million to $150 million.

Tariffs and Trade Policy Add Extra Headwinds

Trade frictions are compounding the industry’s problems, with a 10% tariff on European lumber imports into the U.S. and sharply higher Canadian lumber duties cited as key pressures. These measures have contributed to mill curtailments, reduced residual chip availability, and upward pressure on fiber costs across the system.

Guidance Focuses on Liquidity, Costs, and Targeted Growth

For 2026, Mercer plans to prioritize liquidity preservation and strict cost control while continuing to invest selectively in safety, maintenance, and environmental projects. CapEx is guided to $60 million to $80 million, cash interest to about $120 million, with negligible cash taxes, a still-strong $430 million liquidity base, reduced maintenance downtime, modest pulp price tailwinds, higher fiber costs, and continued execution on the One Goal 100 and mass timber growth plans.

Mercer’s earnings call presented a company in transition, leveraging cost savings, liquidity, and growth in mass timber and carbon capture to offset a very difficult pricing and cost environment. The heavy impairments and deep net loss highlight near-term risk, but management’s disciplined spending, efficiency targets, and expanding order book in newer segments remain key watch points for investors.