NASDAQ:MERC Mercer International Q4 2023 Earnings Report $3.56 +0.06 (+1.71%) Closing price 04:00 PM EasternExtended Trading$3.56 0.00 (0.00%) As of 07:16 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Mercer International EPS ResultsActual EPS-$0.80Consensus EPS -$0.74Beat/MissMissed by -$0.06One Year Ago EPS$0.30Mercer International Revenue ResultsActual Revenue$470.50 millionExpected Revenue$508.46 millionBeat/MissMissed by -$37.96 millionYoY Revenue Growth-19.30%Mercer International Announcement DetailsQuarterQ4 2023Date2/16/2024TimeAfter Market ClosesConference Call DateFriday, February 16, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Mercer International Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 16, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good morning, and welcome to Mercer International's 4th Quarter 2023 Earnings Conference Call. On the call today is Juan Carlos Bueno, Mercer's President and Chief Executive Officer and Richard Short, Mercer's Chief Financial Officer and Secretary. I will now hand the call over to Richard. Speaker 100:00:20Thanks, Abigail. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the 4th 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 Investors section of our website. Speaker 100:00:47But before turning to our results, I would like to remind you that we will be making 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 the company's financial filings with the Securities and Exchange Commission. This quarter, our EBITDA was $21,000,000 compared to Q3's EBITDA of $38,000,000 Higher pulp sales realizations and lower fiber costs were more than offset by the sale of inventory in Q3 that had previously been impaired as well as increased major maintenance downtime in Q4. In the 2023 fiscal year, we had EBITDA of $17,000,000 compared to EBITDA of $537,000,000 in 2022 due to significantly weaker pulp and lumber markets, lower spot energy prices and higher fiber costs that impacted the entire industry. Our Pulp segment contributed quarterly EBITDA of $32,000,000 and our solid wood segment EBITDA was negative $6,000,000 You can find additional segment disclosures in our Form 10 ks, which can be found on our website and that of the SEC. In Q4, both our NBSK and NBHK sales realizations increased compared to Q3. Speaker 100:02:14We had higher prices in all our markets as customers were restocking, and in Europe, we are benefiting from a modest increase in paper demand. In China, the Q4 average MBSK net price was $7.48 per tonne, up $68 or 10 percent relative to Q3. European NBSK list price averaged $12.45 per tonne in the current quarter, an increase of $85 or 7% from Q3. In China, the Q4 average NBHK net price was $6.43 per tonne, up $113 or about 21% compared to the Q3 average price. The North American average Q4 list price was $10.83 per tonne, up $60 or 6% from Q3. Speaker 100:03:11As a consequence, the market price gap between NBSK and NBHK in China narrowed to about $105 per tonne in Q4 from $150 per tonne in Q3. We had increased scheduled maintenance downtime in Q3 when compared sorry, increased maintenance downtime in Q4 when compared to Q3. In Q4, we had 23 days of downtime, while in Q3, we had 13 days. The increased scheduled maintenance negatively impacted EBITDA by about $11,000,000 in Q4 when compared to Q3, which was partially offset by the impact of not having any production curtailments in Q4 relative to Q3. After adjusting for planned shut and Celgar's Q3 logistics related curtailment, pulp production was up approximately 11,000 tonnes from the 3rd quarter. Speaker 100:04:06Total pulp sales volumes in the 4th quarter were 491,000 tonnes, which was flat compared to the 3rd quarter. For our solid wood segment, modest lumber pricing improvements in the U. S. Market were more than offset by lower pricing in the European market. Despite the price increases in the U. Speaker 100:04:24S, overall lumber demand remained subdued due to high interest rates. The random lengths U. S. Benchmark for Western SPF 2 and Better was $4.22 per 1,000 board feet at the end of Q4 compared to $407 at the end of Q3. Today, that benchmark is around $4.28 We are expecting a modest increase in U. Speaker 100:04:50S. Lumber prices in the near term, driven by increased house building activity and low housing inventory levels. For the European market, we are expecting prices to remain flat as demand remains weak. Lumber production was 112,000,000 board feet in the quarter, up almost 20% from Q3 due to less scheduled annual maintenance work. Lumber sales volumes were also approximately 112,000,000 feet, which was essentially flat compared to the prior quarter. Speaker 100:05:21Electricity sales totaled 252 gigawatt hours in the quarter, which was about the same as Q3. Pricing in Q4 decreased to about $98 per megawatt hour from $113 in Q3 due to lower spot prices in both Germany and Canada. In Q4, our pulp and solid wood segments had lower fiber costs than Q3 as supply remained stable and the solid wood segment benefited from the availability of lower cost beetle damaged wood in Germany. We currently expect beetle damaged wood to be abundant into 2024, but strong demand for this fiber will likely keep prices from falling significantly. Our solid Our solid wood segment continues to ramp up its mass timber operations resulting in a modest positive EBITDA contribution in Q4. Speaker 100:06:13Revenues decreased to $15,000,000 in Q4 from $19,000,000 in Q3 due to the timing of projects. This business has grown its order book to almost $100,000,000 and we expect to fulfill this the majority of these orders over the course of the coming year. Into the Q4, we made this in the Q4, we made the strategic decision to pursue the sale of our sandalwood business, which resulted in the net assets for this business being valued at estimated fair market value and the recording of a non cash impairment of roughly $34,000,000 or $0.51 per share. Juan Carlos will have more to say on this shortly. We reported a consolidated net loss of $87,000,000 for the 4th quarter, dollars 1.31 per share compared to a net loss of $26,000,000 or $0.39 per share in Q3. Speaker 100:07:07For the full year, we are reporting a consolidated net loss of $242,000,000 or $3.65 per share compared to net income of $247,000,000 or $3.74 per basic share in 2022. We consumed about $30,000,000 of cash in Q4 compared to usage of about $70,000,000 after adjusting for the $200,000,000 senior note offering in Q3. The improved cash usage was driven by a smaller increase in working capital and reduced CapEx. The 4th quarter working capital increase was primarily the result of increased receivables due to higher pulp prices. In Q4, we invested about $26,000,000 of capital in our mills. Speaker 100:07:52Looking ahead, we currently expect capital spending to between $75,000,000 $100,000,000 in 2024. At the end of Q4, our liquidity position totaled $610,000,000 comprised of $314,000,000 of cash and about $296,000,000 of undrawn revolvers. Finally, as you would have noted from our press release, our Board has approved a quarterly dividend of $0.075 per share for shareholders of record on March 27, for which payment will be made on April 4, 2024. That ends my overview of the financial results. I will now turn the call over to Juan Carlos. Speaker 200:08:32Thanks, Rich. Our Q4 results were positively impacted by improved pulp pricing, lower fiber costs and a modest contribution from our mass timber business. In addition, all our mills went very well this quarter. However, results were lower compared to Q3 due to the impact of non cash items in Q3 that didn't recur an incremental major maintenance compared to Q3. Overall, even though demand remains weak, we saw small improvements in most of our markets in Q4. Speaker 200:09:06The one notable exception was the European lumber market that took a step back after some positive momentum in Q3. Generally speaking, our market dynamics remain unchanged with lower producer inventories and weaker than normal demand. These challenging market conditions have led us to keep a tight handle on CapEx. We closed the year with capital expenditures of roughly $136,000,000 compared to an original target of $200,000,000 at the beginning of the year. Looking ahead to 2024, we're currently targeting between $75,000,000 $100,000,000 of CapEx as Rich mentioned before. Speaker 200:09:46This is essentially a maintenance of business budget. However, we will be monitoring our operating results and could green light additional high return projects should market continue to improve as the year progresses. We will also continue to manage our working capital and costs closely, While we're expecting 2024 to be a significant improvement over 'twenty three, we believe the recovery will be gradual. Overall, pulp markets remain weak, but we are seeing some upward pricing pressure in Europe at the moment as a result of a slight uptick in demand. While in China the lunar year holiday has as expected limited buying activity. Speaker 200:10:28Looking ahead to 2024, we believe that the roughly 1,000,000 tons of softwood production that has been either permanently or indefinitely shuttered will be put upward pressures on prices. However, we don't see prices moving significantly until demand noticeably improves. On the demand side, European paper producers have increased production on slightly higher paper demand, but have continued to run at lower than normal rates as the economy remains weak. Similarly, in China, the government is pushing and pursuing measured economic stimulus steps, but weak economic conditions continue. Looking forward, we expect pulp prices to continue to slowly increase globally as reduced supply chain supports modest price improvements. Speaker 200:11:18Our mills ran very well in the quarter. When comparing Q3 to Q4, remember that Celgar took a 26 day curtailment as a result of the British Columbia port strike in Q3 and Rosenthal took a 13 day major maintenance shot, while in Q4, Celgar took a major maintenance shot totaling 22 days and Stendal took one day for maintenance. Looking forward into 2024, we have no maintenance shut scheduled for Q1 and we're expecting a normal maintenance year with the exception of Celgar that has moved to an 18 month major maintenance schedule. In Q2 of 2024, Peace River will have a 16 day maintenance shut and Stenda will take a 14 day shut, which combined this downtime equals to roughly 56,000 tons. In Q3 of 2024, Rosenthal will take a 14 day maintenance shot and Celgar will take a short 4 day mini shot, which amounts combined to about 20,000 tons. Speaker 200:12:31Moving on to our solid wood segment, our 4th quarter reflected improved lumber and mass timber results. The U. S. Market was up slightly on average, while the European market was down compared to Q3. Although high interest rates continue to weigh on housing starts and construction in general, we are expecting U. Speaker 200:12:53S. Lumber pricing to improve slightly as we move into the spring building season. We're expecting the European lumber market to remain weak in the first half of 2024. We continue to believe that low lumber channel inventories, the large number of sawmill curtailments, relatively low housing stock, wood shortages created by recent Canadian forest fires and homeowner demographics are still very strong fundamentals for the construction industry and this will put positive pressure on the supply demand balance of this business in the midterm. We will continue to optimize our mix of lumber products and customers to current market conditions. Speaker 200:13:35In Q4, 39% of our lumber sales volumes was sold in the U. S. Market with the remainder sold in the European and other markets. The integration of Dorgau continues to progress well. Shipping pallets remain weak on the back of a weak European economy overall. Speaker 200:13:53Heating pallet prices were down in Q4 due to warm winter weather. Once the European economy begins to show signs of recovery, we expect pallet prices to return to normal levels, allowing this asset to deliver significant shareholder value. In addition, the integration of the recently acquired Mastamber assets continues to progress as planned. We now have roughly 35% of North American mass timber production capacity, a broader range of product offerings and a much larger geographic footprint that gives us competitive access to the entire North American market. We continue to see strong customer interest in our mass timber products, which has allowed us to build a significant order file. Speaker 200:14:38At the end of December, our order file totaled almost $100,000,000 In addition, our mass timber business contributed a modest positive EBITDA in Q4 as planned. We expect EBITDA for this business to grow in 2024 as we continue to ramp up. Moving on to costs of fiber. Overall, we experienced a decrease in pulpwood prices in Q4. In Germany, a steady supply of sawmill chips resulted in cost decreases, while work done at our Canadian mills entering the ramp up of Peace River's Wood Room and the renegotiation of contracts in Celgar pushed our fiber costs down in Q4. Speaker 200:15:23Looking ahead, we expect further modest declines in pulpwood and sawlog cost at our mills in early 2024. In Q4, as Rich mentioned before, we made the decision to sell our sandalwood business in Australia. Although we believe that in fullness of time this business will be a positive cash flow generator, it no longer fits our strategic direction. Our process is underway to sell this business and we hope to have more to say about this in the coming months. Our new lignin extraction plant, pilot plant continues its ramp up as planned. Speaker 200:16:00As a reminder, this new lignin pilot plant is a large step towards Mercer being able to begin commercializing lignin. We're excited about the future prospects of this product as a sustainable alternative to fossil fuel based products, such as in adhesives and advanced battery elements to name only a few. This aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy. As the world becomes more sensitive to reducing carbon emissions, we believe that products like knickman, mass timber, green energy, lumber and pulp will play increasingly important roles in displacing carbon intensive products, products like concrete and steel for construction or plastic for packaging. Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative to the wood products industry. Speaker 200:17:05Climate change solution. In fact, we believe that in the fullness of time, demand for low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions. We remain bullish on the long term value of pulp and are committed to better balance our company through faster growth in our lumber and mass timber businesses. In closing, we're happy to have 2023 behind us. Although we continue to predict a slow recovery in 2024, we do expect a much stronger financial result. Speaker 200:17:37We will remain focused on our cost reduction, CapEx and working capital initiatives, while we navigate this period of relatively low pulp and lumber prices. We will continue to work on rebalancing our assets in line with the execution of our strategic plan and we'll continue to manage our cash and liquidity prudently. Thanks for listening. And I will now turn the call back to the operator for questions. Thank you. Operator00:18:03Thank you. At this time, we'll conduct the question and answer session. Our first question comes from Hamir Patel with CIBC Capital Markets. Your line is open. Speaker 300:18:34Hi, good morning. One caller, could you comment on how you would see wood costs and fiber availability trending across your European fiber baskets on for both pulpwood and sawlogs in coming years just as the effects of the spruce beetle play out? Speaker 200:18:54Of course, Anil. Thank you. Good question, because this is obviously a very significant element of our cost structure And there's some important developments on that end. We know that calamity wood in Germany is obviously a very significant factor that we're already seeing some of the benefits of it in the later part of 2023. And we're seeing still some of those benefits in 2024. Speaker 200:19:20So we are expecting a continued decrease, slight decrease on the cost of fiber overall, both for pulp and lumber. It is important to say though that obviously this calamity wood, especially in Germany, it has created quite a significant amount of buzz and demand. So even though there's plenty of it, there's also an uptick in demand as people obviously prefer to go for this lower priced wood. So we don't expect necessarily prices to collapse. But yes, there is a positive trend for us with lower prices coming overall. Speaker 200:20:05So in that sense, I think it's positive what we see coming in the months to come. But I'm cautious as to how big that drop will be. Speaker 300:20:18Great. Thanks. That's helpful. And just wanted to ask about on the lumber side, what impact you would expect the Red Sea disruptions to have on European lumber exports and whether you think some of that more of that would get perhaps redirected to the U. S? Speaker 200:20:40In the case of the Red Sea, the impacts that we're seeing right now, Hamir, are more on the pulp side than on the lumber side. As in our lumber business, when we don't ship to the U. S, we're usually focusing on the European market to a large extent. So then the impact is much more limited. In the case of pulp, we do have a bit more of an impact, even though that impact has now translated in probably a small uptick in the actual logistic cost, but it's very relative still relatively small at this time. Speaker 200:21:20And obviously, added transit time, which if you put it in from a flip side, it means more tightened supply into China, which is not at all bad. It creates this sentiment of a little bit more tightens in the market if there's delays in shipments. So really the impact so far is very small. We hope it stays this way, obviously. Speaker 300:21:50Okay. Fair enough. Thanks for one Carlos. I'll turn it over. Operator00:21:55One moment for our next question. Our next question comes from Richard Stevens with Amundi USA. Your line is open. Speaker 400:22:07Hi, and thanks for taking my question. I had two questions, just one more housekeeping. I think you mentioned that the revolver availability was $296,000,000 My sense is that there are no covenant limitations on that availability. Is that correct? Speaker 100:22:27That's correct. Generally, there's a cap on the Canadian revolver, but we factored that into that number. Speaker 400:22:34Got it. Okay. And the next question I had was more from a historical perspective. Obviously, you're at the bottom of the cycle at the moment. Typically, how long do these cycles last? Speaker 400:22:47Have you seen in the past? I know there was a bit of a one, I want to say, going back to maybe 2018, 2019 and maybe some earlier in the decade there. But typically when you go through these cycles, you mentioned there's been over a 1,000,000 tons of capacity that's been shut in. And how long typically does the cycle last? How many quarters? Speaker 400:23:09Just to get a sense. Speaker 200:23:11Normally, when we look at cycles, these pop cycles, they can easily have 4 years, 3 years in duration and some cases a bit more than that. So it really we don't it's not a mathematical equation behind them obviously, but yes, there's a few years behind them. So that's why when we think about what the future holds for us, I think we're looking into a recovery, partial recovery in 2024, a much healthier 20252026. That's a little bit of what we have in our plans. And when we look at some of the analysts' projections, particularly for pulp, we see the same thing, everybody projecting almost in a very coherent way, pricing picking up in the next few years. Speaker 200:24:04So, yes. Speaker 400:24:06Got it. Okay, that's very helpful. That's all I had. Thank you. Operator00:24:10One moment for our next question. Our next question comes from Kasia Turoski Kopitak with TD Securities. Your line is open. Speaker 500:24:25Hey there, good morning everyone. A couple of questions. Maybe starting with pulp markets, it seems like pulp mill inventories are decently balanced at this point. Can you speak to where buyer inventories are talking about China and Europe? Speaker 200:24:41Yes. I think the situation on inventories is quite balanced, probably more to our favor in this time of the year. In terms of producer inventories, when you look at the recently revealed statistics that show 40 days on average for softwood, that's in good levels, relatively low levels and proper. When you think about customer inventory, we believe that the situation in China is a bit more uncertain. There might be more inventory there. Speaker 200:25:14And actually, as they came into the New Year celebration, obviously, they were stacking up with inventory prior to that. We saw very big swings of product in the last quarter of the year into China in preparation for the New Year. So obviously, there's a lot of expectations on what will happen demand wise once that New Year celebration is past us and how demand will pick up from that point onwards. What we do see is an important demand uptick in Europe. And this again is coming from a very, very low level. Speaker 200:25:52So when you think about our customers that are running their paper machines, they're running at better than they were running before, but again coming from very low levels. So it's far from being what the market traditionally is. And that's why we think there's a very significant upside. If the European economy comes back and paper comes back, that would be a very significant factor in what we would believe to be then a much stronger price recovery. Because again, as Yuval said, the tightness in supply is there. Speaker 200:26:30There's so many mills that have closed down, so much capacity, almost 1,000,000 tons of capacity of software that has been shut, that there's not a whole lot of supply out there to cope with an incremental an incremental demand. So it won't take a whole lot to for this thing to actually move into a much stronger price schedule for us. But again, we need Europe to wake up strongly and China to come back after the New Year in a better situation. Speaker 500:27:06Okay. Thanks for that. And how much what are your freight costs right now for delivering lumber from Europe to the Eastern seaboard per 1,000? Speaker 100:27:20That's a good question, Kasia. It's probably around $100 a 1,000 board feet. Speaker 500:27:26$100 Okay. And Richard, that includes the land over land transportation as well? Speaker 100:27:33Yes, that would be all in. Speaker 500:27:35Okay, great. One last question, just switching gears to the mass timber markets, You indicated you're expecting this to trend favorably going forward over the next year. Any numbers you can put around that? Maybe a cadence for how you expect the revenue to grow from here and then any potential EBITDA contributions that you would expect? Speaker 200:27:58Yes. On mass timber, we're as I've said and Richard as well, we're very excited about how this business is progressing. The order book is a great indicator of it. If you think about where our order book was in Q3, we had $54,000,000 of projects locked in that we would then start executing from that point onwards. In Q4, we not only executed part of those $56,000,000 projects, but we closed with 100,000,000 dollars or almost $100,000,000 of projects in the order book. Speaker 200:28:35That gives us a very strong confidence to believe that if we close this year with about $60 plus 1,000,000 in sales, next year it would be at least twice that amount. And when we look at our capacity with the sites that we have, we know that by building up gradually and continuing to ramp up those mills in a way that we can add more shifts later down as time progresses. This is a business that just with our setup could provide us sales of at least $500,000,000 a few years down the road. So the assets that we have provide us for that growth trend for us to work on. Margin wise, this is meant to be obviously, this is not a commodity business. Speaker 200:29:24This is more of a specialties business. And we look at EBITDA margins around 20% percent, 25% in the long run. So that's what we expect of this business going forward. Speaker 500:29:39Okay. And just a quick follow-up. So your order book right now is $100,000,000 and appreciating it takes a while to actually lock in the order. What is the size of the sales that you're going after right now that you haven't locked in yet that you're pursuing? What potential order book size would that be? Speaker 200:29:56No. What we want to do is, for example, for this year, we're very confident that as quarters progress, our order book will continue to increase. We keep on executing on projects, so that reduces the order book and at the same time we lock in future projects and that makes it continuously to grow. When I am talking that we have $100,000,000 or close to $100,000,000 in order book, not all of that is isn't into 2024. So some of those projects are already looking into 2025. Speaker 200:30:25So you have locked in projects that will already go beyond the 1 year. So that's the way this thing works. You have quite a bit of lead time in some cases and it's all tied up to the individual schedules of these projects. So we will continue to grow. We will bring more projects into 2024 that will allow us, as I said, to double our revenue this year versus 2023 and for sure keep on the pace that this industry is showing overall. Speaker 200:31:00When you look at the mass timber industry in North America, It's growing at more than 20% a year, as a matter of fact. So this is a very significant growth engine for us. And obviously, we intend to ride that wave and do investments in our facilities to make sure they're even more and more cost competitive, so we can take full advantage of those opportunities ahead of us. Speaker 500:31:31Okay, awesome. Thanks everyone. That's all I had. Have a great weekend. Speaker 200:31:35Thanks. Operator00:31:50Our next question comes from Sam McGovern with UBS. Your line is open. Speaker 600:32:00Hi, guys. Good morning. With regard to the sale of the Sandalwood business, any plans in terms of what you're doing with the cash that comes in? Is it just reinvest in the business, increase liquidity? Or is there anything else that you're planning to do with that? Speaker 200:32:17Simon, as it comes to that, obviously, we have some interesting growth projects that we're given all the unrest that we went through in 2023, a lot of projects that we kind of put on hold and we're very eager to bring them back in. So that is obviously part of the equation. As we see the year progresses and we see what we believe to be an improvement overall in how the market prices behave. Obviously, this will be something that we will keep be keeping an eye on so that we can bring some of our more of these CapEx projects to fruition. The Sandalwood sale process will obviously add to that picture. Speaker 200:33:04So we see ourselves looking into what other potential projects we can put forward that can have a good and a quick return for our company. And we have quite a bit lined up. There's so many things that we want to do in Tor Gao to increase our lumber production there with a very quick payback and obviously mass timber to increase the competitiveness over there. So yes, there's plenty of things that we can work on if we have hold additional cash in hand. Speaker 600:33:39Awesome. Thank you very much. I'll pass it on. Operator00:33:43Thank you. That concludes the question and answer session. At this time, I would like to turn the call back to Juan Carlos for closing remarks. Speaker 200:33:52Okay. Thank you, Abigail. And thanks to all of you for joining our call. Rich and I are available to talk more at any time. So please don't hesitate to call any one of us. Speaker 200:34:02Otherwise, we look forward to speaking to you again on our next earnings call in May. Bye for now. Operator00:34:09Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallMercer International Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Mercer International Earnings HeadlinesMercer finalises SECOR Asset Management purchaseMay 5 at 12:05 PM | finance.yahoo.comRaymond James Has Bearish Estimate for MERC FY2025 EarningsMay 5 at 2:37 AM | americanbankingnews.comAltucher: Turn $900 into $108,000 in just 12 months?We are entering the final Trump Bump of our lives. But the biggest returns will not be in the stock market.May 6, 2025 | Paradigm Press (Ad)Mercer International First Quarter 2025 Earnings: EPS Beats ExpectationsMay 3 at 8:13 PM | finance.yahoo.comEquities Analysts Offer Predictions for MERC Q1 EarningsMay 3 at 1:09 AM | americanbankingnews.comMercer International outlines cost-saving measures and strategic adjustments for 2025May 2, 2025 | msn.comSee More Mercer International Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Mercer International? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Mercer International and other key companies, straight to your email. Email Address About Mercer InternationalMercer International (NASDAQ:MERC), together with its subsidiaries, manufactures and sells northern bleached softwood kraft (NBSK) and northern bleached hardwood kraft (NBHK) pulp worldwide. The company operates through two segments, Pulp and Solid Wood. It manufactures, sells, and distributes pulp, electricity, and chemicals through pulp mills. The company also manufactures, distributes, and sells lumber, cross-laminated timber, finger joint lumber, glue-laminated timber, wood pallets, electricity, biofuels, and wood residuals. In addition, it generates and sells green energy produced from biomass cogeneration power plant to third party. Further, it produces and sells NBSK pulp manufactured from softwood; green energy using carbon-neutral biofuels, such as black liquor and wood waste; tall oil from black liquor for use as a chemical additive and green energy source; bio extractives and biomaterials, including lignin, turpentine, cellulose filaments, and sandalwood oil; and biofuels; as well as provides transportation and logistics services. The company sells its pulp to pulp markets, integrated paper and paperboard manufacturers; and lumber products to distributors, construction firms, secondary manufacturers, retail yards, and home centers. Mercer International Inc. was founded in 1968 and is headquartered in Vancouver, Canada.View Mercer International ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Palantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2 Upcoming Earnings ARM (5/7/2025)AppLovin (5/7/2025)Fortinet (5/7/2025)MercadoLibre (5/7/2025)Cencora (5/7/2025)Carvana (5/7/2025)Walt Disney (5/7/2025)Emerson Electric (5/7/2025)Johnson Controls International (5/7/2025)Lloyds Banking Group (5/7/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Good morning, and welcome to Mercer International's 4th Quarter 2023 Earnings Conference Call. On the call today is Juan Carlos Bueno, Mercer's President and Chief Executive Officer and Richard Short, Mercer's Chief Financial Officer and Secretary. I will now hand the call over to Richard. Speaker 100:00:20Thanks, Abigail. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the 4th 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 Investors section of our website. Speaker 100:00:47But before turning to our results, I would like to remind you that we will be making 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 the company's financial filings with the Securities and Exchange Commission. This quarter, our EBITDA was $21,000,000 compared to Q3's EBITDA of $38,000,000 Higher pulp sales realizations and lower fiber costs were more than offset by the sale of inventory in Q3 that had previously been impaired as well as increased major maintenance downtime in Q4. In the 2023 fiscal year, we had EBITDA of $17,000,000 compared to EBITDA of $537,000,000 in 2022 due to significantly weaker pulp and lumber markets, lower spot energy prices and higher fiber costs that impacted the entire industry. Our Pulp segment contributed quarterly EBITDA of $32,000,000 and our solid wood segment EBITDA was negative $6,000,000 You can find additional segment disclosures in our Form 10 ks, which can be found on our website and that of the SEC. In Q4, both our NBSK and NBHK sales realizations increased compared to Q3. Speaker 100:02:14We had higher prices in all our markets as customers were restocking, and in Europe, we are benefiting from a modest increase in paper demand. In China, the Q4 average MBSK net price was $7.48 per tonne, up $68 or 10 percent relative to Q3. European NBSK list price averaged $12.45 per tonne in the current quarter, an increase of $85 or 7% from Q3. In China, the Q4 average NBHK net price was $6.43 per tonne, up $113 or about 21% compared to the Q3 average price. The North American average Q4 list price was $10.83 per tonne, up $60 or 6% from Q3. Speaker 100:03:11As a consequence, the market price gap between NBSK and NBHK in China narrowed to about $105 per tonne in Q4 from $150 per tonne in Q3. We had increased scheduled maintenance downtime in Q3 when compared sorry, increased maintenance downtime in Q4 when compared to Q3. In Q4, we had 23 days of downtime, while in Q3, we had 13 days. The increased scheduled maintenance negatively impacted EBITDA by about $11,000,000 in Q4 when compared to Q3, which was partially offset by the impact of not having any production curtailments in Q4 relative to Q3. After adjusting for planned shut and Celgar's Q3 logistics related curtailment, pulp production was up approximately 11,000 tonnes from the 3rd quarter. Speaker 100:04:06Total pulp sales volumes in the 4th quarter were 491,000 tonnes, which was flat compared to the 3rd quarter. For our solid wood segment, modest lumber pricing improvements in the U. S. Market were more than offset by lower pricing in the European market. Despite the price increases in the U. Speaker 100:04:24S, overall lumber demand remained subdued due to high interest rates. The random lengths U. S. Benchmark for Western SPF 2 and Better was $4.22 per 1,000 board feet at the end of Q4 compared to $407 at the end of Q3. Today, that benchmark is around $4.28 We are expecting a modest increase in U. Speaker 100:04:50S. Lumber prices in the near term, driven by increased house building activity and low housing inventory levels. For the European market, we are expecting prices to remain flat as demand remains weak. Lumber production was 112,000,000 board feet in the quarter, up almost 20% from Q3 due to less scheduled annual maintenance work. Lumber sales volumes were also approximately 112,000,000 feet, which was essentially flat compared to the prior quarter. Speaker 100:05:21Electricity sales totaled 252 gigawatt hours in the quarter, which was about the same as Q3. Pricing in Q4 decreased to about $98 per megawatt hour from $113 in Q3 due to lower spot prices in both Germany and Canada. In Q4, our pulp and solid wood segments had lower fiber costs than Q3 as supply remained stable and the solid wood segment benefited from the availability of lower cost beetle damaged wood in Germany. We currently expect beetle damaged wood to be abundant into 2024, but strong demand for this fiber will likely keep prices from falling significantly. Our solid Our solid wood segment continues to ramp up its mass timber operations resulting in a modest positive EBITDA contribution in Q4. Speaker 100:06:13Revenues decreased to $15,000,000 in Q4 from $19,000,000 in Q3 due to the timing of projects. This business has grown its order book to almost $100,000,000 and we expect to fulfill this the majority of these orders over the course of the coming year. Into the Q4, we made this in the Q4, we made the strategic decision to pursue the sale of our sandalwood business, which resulted in the net assets for this business being valued at estimated fair market value and the recording of a non cash impairment of roughly $34,000,000 or $0.51 per share. Juan Carlos will have more to say on this shortly. We reported a consolidated net loss of $87,000,000 for the 4th quarter, dollars 1.31 per share compared to a net loss of $26,000,000 or $0.39 per share in Q3. Speaker 100:07:07For the full year, we are reporting a consolidated net loss of $242,000,000 or $3.65 per share compared to net income of $247,000,000 or $3.74 per basic share in 2022. We consumed about $30,000,000 of cash in Q4 compared to usage of about $70,000,000 after adjusting for the $200,000,000 senior note offering in Q3. The improved cash usage was driven by a smaller increase in working capital and reduced CapEx. The 4th quarter working capital increase was primarily the result of increased receivables due to higher pulp prices. In Q4, we invested about $26,000,000 of capital in our mills. Speaker 100:07:52Looking ahead, we currently expect capital spending to between $75,000,000 $100,000,000 in 2024. At the end of Q4, our liquidity position totaled $610,000,000 comprised of $314,000,000 of cash and about $296,000,000 of undrawn revolvers. Finally, as you would have noted from our press release, our Board has approved a quarterly dividend of $0.075 per share for shareholders of record on March 27, for which payment will be made on April 4, 2024. That ends my overview of the financial results. I will now turn the call over to Juan Carlos. Speaker 200:08:32Thanks, Rich. Our Q4 results were positively impacted by improved pulp pricing, lower fiber costs and a modest contribution from our mass timber business. In addition, all our mills went very well this quarter. However, results were lower compared to Q3 due to the impact of non cash items in Q3 that didn't recur an incremental major maintenance compared to Q3. Overall, even though demand remains weak, we saw small improvements in most of our markets in Q4. Speaker 200:09:06The one notable exception was the European lumber market that took a step back after some positive momentum in Q3. Generally speaking, our market dynamics remain unchanged with lower producer inventories and weaker than normal demand. These challenging market conditions have led us to keep a tight handle on CapEx. We closed the year with capital expenditures of roughly $136,000,000 compared to an original target of $200,000,000 at the beginning of the year. Looking ahead to 2024, we're currently targeting between $75,000,000 $100,000,000 of CapEx as Rich mentioned before. Speaker 200:09:46This is essentially a maintenance of business budget. However, we will be monitoring our operating results and could green light additional high return projects should market continue to improve as the year progresses. We will also continue to manage our working capital and costs closely, While we're expecting 2024 to be a significant improvement over 'twenty three, we believe the recovery will be gradual. Overall, pulp markets remain weak, but we are seeing some upward pricing pressure in Europe at the moment as a result of a slight uptick in demand. While in China the lunar year holiday has as expected limited buying activity. Speaker 200:10:28Looking ahead to 2024, we believe that the roughly 1,000,000 tons of softwood production that has been either permanently or indefinitely shuttered will be put upward pressures on prices. However, we don't see prices moving significantly until demand noticeably improves. On the demand side, European paper producers have increased production on slightly higher paper demand, but have continued to run at lower than normal rates as the economy remains weak. Similarly, in China, the government is pushing and pursuing measured economic stimulus steps, but weak economic conditions continue. Looking forward, we expect pulp prices to continue to slowly increase globally as reduced supply chain supports modest price improvements. Speaker 200:11:18Our mills ran very well in the quarter. When comparing Q3 to Q4, remember that Celgar took a 26 day curtailment as a result of the British Columbia port strike in Q3 and Rosenthal took a 13 day major maintenance shot, while in Q4, Celgar took a major maintenance shot totaling 22 days and Stendal took one day for maintenance. Looking forward into 2024, we have no maintenance shut scheduled for Q1 and we're expecting a normal maintenance year with the exception of Celgar that has moved to an 18 month major maintenance schedule. In Q2 of 2024, Peace River will have a 16 day maintenance shut and Stenda will take a 14 day shut, which combined this downtime equals to roughly 56,000 tons. In Q3 of 2024, Rosenthal will take a 14 day maintenance shot and Celgar will take a short 4 day mini shot, which amounts combined to about 20,000 tons. Speaker 200:12:31Moving on to our solid wood segment, our 4th quarter reflected improved lumber and mass timber results. The U. S. Market was up slightly on average, while the European market was down compared to Q3. Although high interest rates continue to weigh on housing starts and construction in general, we are expecting U. Speaker 200:12:53S. Lumber pricing to improve slightly as we move into the spring building season. We're expecting the European lumber market to remain weak in the first half of 2024. We continue to believe that low lumber channel inventories, the large number of sawmill curtailments, relatively low housing stock, wood shortages created by recent Canadian forest fires and homeowner demographics are still very strong fundamentals for the construction industry and this will put positive pressure on the supply demand balance of this business in the midterm. We will continue to optimize our mix of lumber products and customers to current market conditions. Speaker 200:13:35In Q4, 39% of our lumber sales volumes was sold in the U. S. Market with the remainder sold in the European and other markets. The integration of Dorgau continues to progress well. Shipping pallets remain weak on the back of a weak European economy overall. Speaker 200:13:53Heating pallet prices were down in Q4 due to warm winter weather. Once the European economy begins to show signs of recovery, we expect pallet prices to return to normal levels, allowing this asset to deliver significant shareholder value. In addition, the integration of the recently acquired Mastamber assets continues to progress as planned. We now have roughly 35% of North American mass timber production capacity, a broader range of product offerings and a much larger geographic footprint that gives us competitive access to the entire North American market. We continue to see strong customer interest in our mass timber products, which has allowed us to build a significant order file. Speaker 200:14:38At the end of December, our order file totaled almost $100,000,000 In addition, our mass timber business contributed a modest positive EBITDA in Q4 as planned. We expect EBITDA for this business to grow in 2024 as we continue to ramp up. Moving on to costs of fiber. Overall, we experienced a decrease in pulpwood prices in Q4. In Germany, a steady supply of sawmill chips resulted in cost decreases, while work done at our Canadian mills entering the ramp up of Peace River's Wood Room and the renegotiation of contracts in Celgar pushed our fiber costs down in Q4. Speaker 200:15:23Looking ahead, we expect further modest declines in pulpwood and sawlog cost at our mills in early 2024. In Q4, as Rich mentioned before, we made the decision to sell our sandalwood business in Australia. Although we believe that in fullness of time this business will be a positive cash flow generator, it no longer fits our strategic direction. Our process is underway to sell this business and we hope to have more to say about this in the coming months. Our new lignin extraction plant, pilot plant continues its ramp up as planned. Speaker 200:16:00As a reminder, this new lignin pilot plant is a large step towards Mercer being able to begin commercializing lignin. We're excited about the future prospects of this product as a sustainable alternative to fossil fuel based products, such as in adhesives and advanced battery elements to name only a few. This aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy. As the world becomes more sensitive to reducing carbon emissions, we believe that products like knickman, mass timber, green energy, lumber and pulp will play increasingly important roles in displacing carbon intensive products, products like concrete and steel for construction or plastic for packaging. Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative to the wood products industry. Speaker 200:17:05Climate change solution. In fact, we believe that in the fullness of time, demand for low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions. We remain bullish on the long term value of pulp and are committed to better balance our company through faster growth in our lumber and mass timber businesses. In closing, we're happy to have 2023 behind us. Although we continue to predict a slow recovery in 2024, we do expect a much stronger financial result. Speaker 200:17:37We will remain focused on our cost reduction, CapEx and working capital initiatives, while we navigate this period of relatively low pulp and lumber prices. We will continue to work on rebalancing our assets in line with the execution of our strategic plan and we'll continue to manage our cash and liquidity prudently. Thanks for listening. And I will now turn the call back to the operator for questions. Thank you. Operator00:18:03Thank you. At this time, we'll conduct the question and answer session. Our first question comes from Hamir Patel with CIBC Capital Markets. Your line is open. Speaker 300:18:34Hi, good morning. One caller, could you comment on how you would see wood costs and fiber availability trending across your European fiber baskets on for both pulpwood and sawlogs in coming years just as the effects of the spruce beetle play out? Speaker 200:18:54Of course, Anil. Thank you. Good question, because this is obviously a very significant element of our cost structure And there's some important developments on that end. We know that calamity wood in Germany is obviously a very significant factor that we're already seeing some of the benefits of it in the later part of 2023. And we're seeing still some of those benefits in 2024. Speaker 200:19:20So we are expecting a continued decrease, slight decrease on the cost of fiber overall, both for pulp and lumber. It is important to say though that obviously this calamity wood, especially in Germany, it has created quite a significant amount of buzz and demand. So even though there's plenty of it, there's also an uptick in demand as people obviously prefer to go for this lower priced wood. So we don't expect necessarily prices to collapse. But yes, there is a positive trend for us with lower prices coming overall. Speaker 200:20:05So in that sense, I think it's positive what we see coming in the months to come. But I'm cautious as to how big that drop will be. Speaker 300:20:18Great. Thanks. That's helpful. And just wanted to ask about on the lumber side, what impact you would expect the Red Sea disruptions to have on European lumber exports and whether you think some of that more of that would get perhaps redirected to the U. S? Speaker 200:20:40In the case of the Red Sea, the impacts that we're seeing right now, Hamir, are more on the pulp side than on the lumber side. As in our lumber business, when we don't ship to the U. S, we're usually focusing on the European market to a large extent. So then the impact is much more limited. In the case of pulp, we do have a bit more of an impact, even though that impact has now translated in probably a small uptick in the actual logistic cost, but it's very relative still relatively small at this time. Speaker 200:21:20And obviously, added transit time, which if you put it in from a flip side, it means more tightened supply into China, which is not at all bad. It creates this sentiment of a little bit more tightens in the market if there's delays in shipments. So really the impact so far is very small. We hope it stays this way, obviously. Speaker 300:21:50Okay. Fair enough. Thanks for one Carlos. I'll turn it over. Operator00:21:55One moment for our next question. Our next question comes from Richard Stevens with Amundi USA. Your line is open. Speaker 400:22:07Hi, and thanks for taking my question. I had two questions, just one more housekeeping. I think you mentioned that the revolver availability was $296,000,000 My sense is that there are no covenant limitations on that availability. Is that correct? Speaker 100:22:27That's correct. Generally, there's a cap on the Canadian revolver, but we factored that into that number. Speaker 400:22:34Got it. Okay. And the next question I had was more from a historical perspective. Obviously, you're at the bottom of the cycle at the moment. Typically, how long do these cycles last? Speaker 400:22:47Have you seen in the past? I know there was a bit of a one, I want to say, going back to maybe 2018, 2019 and maybe some earlier in the decade there. But typically when you go through these cycles, you mentioned there's been over a 1,000,000 tons of capacity that's been shut in. And how long typically does the cycle last? How many quarters? Speaker 400:23:09Just to get a sense. Speaker 200:23:11Normally, when we look at cycles, these pop cycles, they can easily have 4 years, 3 years in duration and some cases a bit more than that. So it really we don't it's not a mathematical equation behind them obviously, but yes, there's a few years behind them. So that's why when we think about what the future holds for us, I think we're looking into a recovery, partial recovery in 2024, a much healthier 20252026. That's a little bit of what we have in our plans. And when we look at some of the analysts' projections, particularly for pulp, we see the same thing, everybody projecting almost in a very coherent way, pricing picking up in the next few years. Speaker 200:24:04So, yes. Speaker 400:24:06Got it. Okay, that's very helpful. That's all I had. Thank you. Operator00:24:10One moment for our next question. Our next question comes from Kasia Turoski Kopitak with TD Securities. Your line is open. Speaker 500:24:25Hey there, good morning everyone. A couple of questions. Maybe starting with pulp markets, it seems like pulp mill inventories are decently balanced at this point. Can you speak to where buyer inventories are talking about China and Europe? Speaker 200:24:41Yes. I think the situation on inventories is quite balanced, probably more to our favor in this time of the year. In terms of producer inventories, when you look at the recently revealed statistics that show 40 days on average for softwood, that's in good levels, relatively low levels and proper. When you think about customer inventory, we believe that the situation in China is a bit more uncertain. There might be more inventory there. Speaker 200:25:14And actually, as they came into the New Year celebration, obviously, they were stacking up with inventory prior to that. We saw very big swings of product in the last quarter of the year into China in preparation for the New Year. So obviously, there's a lot of expectations on what will happen demand wise once that New Year celebration is past us and how demand will pick up from that point onwards. What we do see is an important demand uptick in Europe. And this again is coming from a very, very low level. Speaker 200:25:52So when you think about our customers that are running their paper machines, they're running at better than they were running before, but again coming from very low levels. So it's far from being what the market traditionally is. And that's why we think there's a very significant upside. If the European economy comes back and paper comes back, that would be a very significant factor in what we would believe to be then a much stronger price recovery. Because again, as Yuval said, the tightness in supply is there. Speaker 200:26:30There's so many mills that have closed down, so much capacity, almost 1,000,000 tons of capacity of software that has been shut, that there's not a whole lot of supply out there to cope with an incremental an incremental demand. So it won't take a whole lot to for this thing to actually move into a much stronger price schedule for us. But again, we need Europe to wake up strongly and China to come back after the New Year in a better situation. Speaker 500:27:06Okay. Thanks for that. And how much what are your freight costs right now for delivering lumber from Europe to the Eastern seaboard per 1,000? Speaker 100:27:20That's a good question, Kasia. It's probably around $100 a 1,000 board feet. Speaker 500:27:26$100 Okay. And Richard, that includes the land over land transportation as well? Speaker 100:27:33Yes, that would be all in. Speaker 500:27:35Okay, great. One last question, just switching gears to the mass timber markets, You indicated you're expecting this to trend favorably going forward over the next year. Any numbers you can put around that? Maybe a cadence for how you expect the revenue to grow from here and then any potential EBITDA contributions that you would expect? Speaker 200:27:58Yes. On mass timber, we're as I've said and Richard as well, we're very excited about how this business is progressing. The order book is a great indicator of it. If you think about where our order book was in Q3, we had $54,000,000 of projects locked in that we would then start executing from that point onwards. In Q4, we not only executed part of those $56,000,000 projects, but we closed with 100,000,000 dollars or almost $100,000,000 of projects in the order book. Speaker 200:28:35That gives us a very strong confidence to believe that if we close this year with about $60 plus 1,000,000 in sales, next year it would be at least twice that amount. And when we look at our capacity with the sites that we have, we know that by building up gradually and continuing to ramp up those mills in a way that we can add more shifts later down as time progresses. This is a business that just with our setup could provide us sales of at least $500,000,000 a few years down the road. So the assets that we have provide us for that growth trend for us to work on. Margin wise, this is meant to be obviously, this is not a commodity business. Speaker 200:29:24This is more of a specialties business. And we look at EBITDA margins around 20% percent, 25% in the long run. So that's what we expect of this business going forward. Speaker 500:29:39Okay. And just a quick follow-up. So your order book right now is $100,000,000 and appreciating it takes a while to actually lock in the order. What is the size of the sales that you're going after right now that you haven't locked in yet that you're pursuing? What potential order book size would that be? Speaker 200:29:56No. What we want to do is, for example, for this year, we're very confident that as quarters progress, our order book will continue to increase. We keep on executing on projects, so that reduces the order book and at the same time we lock in future projects and that makes it continuously to grow. When I am talking that we have $100,000,000 or close to $100,000,000 in order book, not all of that is isn't into 2024. So some of those projects are already looking into 2025. Speaker 200:30:25So you have locked in projects that will already go beyond the 1 year. So that's the way this thing works. You have quite a bit of lead time in some cases and it's all tied up to the individual schedules of these projects. So we will continue to grow. We will bring more projects into 2024 that will allow us, as I said, to double our revenue this year versus 2023 and for sure keep on the pace that this industry is showing overall. Speaker 200:31:00When you look at the mass timber industry in North America, It's growing at more than 20% a year, as a matter of fact. So this is a very significant growth engine for us. And obviously, we intend to ride that wave and do investments in our facilities to make sure they're even more and more cost competitive, so we can take full advantage of those opportunities ahead of us. Speaker 500:31:31Okay, awesome. Thanks everyone. That's all I had. Have a great weekend. Speaker 200:31:35Thanks. Operator00:31:50Our next question comes from Sam McGovern with UBS. Your line is open. Speaker 600:32:00Hi, guys. Good morning. With regard to the sale of the Sandalwood business, any plans in terms of what you're doing with the cash that comes in? Is it just reinvest in the business, increase liquidity? Or is there anything else that you're planning to do with that? Speaker 200:32:17Simon, as it comes to that, obviously, we have some interesting growth projects that we're given all the unrest that we went through in 2023, a lot of projects that we kind of put on hold and we're very eager to bring them back in. So that is obviously part of the equation. As we see the year progresses and we see what we believe to be an improvement overall in how the market prices behave. Obviously, this will be something that we will keep be keeping an eye on so that we can bring some of our more of these CapEx projects to fruition. The Sandalwood sale process will obviously add to that picture. Speaker 200:33:04So we see ourselves looking into what other potential projects we can put forward that can have a good and a quick return for our company. And we have quite a bit lined up. There's so many things that we want to do in Tor Gao to increase our lumber production there with a very quick payback and obviously mass timber to increase the competitiveness over there. So yes, there's plenty of things that we can work on if we have hold additional cash in hand. Speaker 600:33:39Awesome. Thank you very much. I'll pass it on. Operator00:33:43Thank you. That concludes the question and answer session. At this time, I would like to turn the call back to Juan Carlos for closing remarks. Speaker 200:33:52Okay. Thank you, Abigail. And thanks to all of you for joining our call. Rich and I are available to talk more at any time. So please don't hesitate to call any one of us. Speaker 200:34:02Otherwise, we look forward to speaking to you again on our next earnings call in May. Bye for now. Operator00:34:09Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read morePowered by