NASDAQ:MERC Mercer International Q1 2024 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$0.10Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AMercer International Revenue ResultsActual Revenue$553.43 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AMercer International Announcement DetailsQuarterQ1 2024Date5/9/2024TimeN/AConference Call DateFriday, May 10, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Mercer International Q1 2024 Earnings Call TranscriptProvided by QuartrMay 10, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Good morning, and welcome to Mercer International's First Quarter 2024 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 100:00:18Thanks, Liz. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the Q1 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 are joining today's call by telephone, there is presentation material that we have attached to the Investors section of our website. Speaker 100:00:43But before turning to our results, I would like to remind you that we will be forward 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. This quarter, Speaker 200:01:08our EBITDA Speaker 100:01:08was $64,000,000 compared to Q4 EBITDA of $21,000,000 The improved results were driven by not having any major maintenance down time, improving pulp sales realizations and lower fiber and other production costs. Our pulp segment contributed quarterly EBITDA of $68,000,000 and our solid wood segment EBITDA was negative $1,000,000 You can find additional segment disclosures in our Form 10 Q, which can be found on our website and that of the SEC. In Q1, both our NBSK and NBSK sales realizations increased compared to Q4. Average list prices increased in Europe and North America due to stronger demand and global supply constraints. In China, prices were flat as demand slowed during the Chinese New Year and picked up near the end of the quarter. Speaker 100:02:01The European MBSK list price averaged $1400 per tonne in the current quarter, an increase of $155 or 12% from Q4. And the North American NBSK list price averaged $14.40 per tonne in the current quarter, increase of $128 or 10 percent from Q4. In China, the Q1 average MBHK net price was $6.62 per tonne, up $19 or about 3% compared to the Q4 average price, resulting in the market price gap between MBSK and MBHK in China narrowing to about $83 per tonne in Q1 from $105 per tonne in Q4. The North American NBHK average Q1 list price was $12.23 per tonne, up $140 or 13 percent from Q4. Total pulp sales volumes in the Q1 increased by 75,000 tons to 566,000 tonnes driven by the timing of sales and higher production due to lower scheduled maintenance downtime. Speaker 100:03:10We had no scheduled maintenance downtime in Q1 compared to 23 days of downtime in Q4, which positively impacted Q1 EBITDA by about $23,000,000 when compared to Q4. After adjusting for the Q4 planned shuts, pulp production was essentially flat from the Q4. For our solid wood segment, we had modest lumber pricing improvements in both Europe and the U. S. Market. Speaker 100:03:36Despite the price increases, overall lumber demand remained subdued as a result of uncertain economic conditions in Europe and high interest rates. The random lengths U. S. Benchmark for Western SPF number 2 and better was 4.6 $2 per 1,000 bore feet at the end of Q1 compared to $4.22 at the end of Q4. Today, that benchmark price for Western SPF number 2 and better is around $4.21 per 1,000 board feet, virtually unchanged from the beginning of 2024. Speaker 100:04:08For Q2, we are expecting generally flat lumber prices in the U. S. And European markets as demand remains weak. Lumber production was a near record 127,000,000 board feet in Q1, up 14% due to seasonal downtime in the 4th quarter. Lumber sales volumes were 121,000,000 board feet, up 8% from Q4. Speaker 100:04:32Electricity sales totaled 2 59 gigawatt hours in the quarter, which was about the same as Q4. Pricing in Q1 modestly decreased to about $94 per megawatt hour from $98 in Q4 due to lower spot prices in Germany. In Q1, our pulp segment had lower fiber costs in Q4 as supplied remained stable. On the other hand, our solid wood segment had higher sawlog costs due to strong demand in Germany. Production for our solid wood segment's mass timber operations wood segment's mass timber operations decreased in Q1 from Q4 due to minor customer driven delays for certain large scale projects. Speaker 100:05:09These projects are now underway and we are satisfied with the order book today. In the Q1, we made the strategic decision to dissolve the Cariboo Mill joint venture, which resulted in recording of a non cash loss of roughly $24,000,000 or $0.35 per share. We expect the transaction to only have a nominal impact on 2024 EBITDA. Juan Carlos will have more to say on this in a moment. We reported a consolidated net loss of $17,000,000 for the Q1 or 0 point $87,000,000 or $1.31 per share in Q4. Speaker 100:05:48We consumed about $40,000,000 of cash in Q1 compared to $30,000,000 in Q4. The large cash usage in Q1 was primarily due to higher receivables, which were up roughly $64,000,000 driven by higher sales realizations and sales volumes. We expect the majority of this working capital build to reverse in Q2. At the end of Q1, our liquidity position totaled $555,000,000 compared comprised of $274,000,000 of cash and about $281,000,000 of undrawn revolvers. Finally, our Board has approved a quarterly dividend of $0.075 per share shareholders of record on June 26, for which payment will be made on July 3, 2024. Speaker 100:06:34That ends my overview of the financial results. I'll now turn the call over to Juan Carlos. Speaker 200:06:41Thanks, Rich. Our Q1 operating results improved significantly relatively Q4. The improvement was primarily the result of higher pulp prices in combination with no major maintenance at any of our mills. And our results in Q1 also benefited from lower costs, including fiber and energy costs. Overall, all of our mills ran at near record production levels, while both our energy production and sales volumes were at record levels in Q1. Speaker 200:07:12As previously announced, we came to the decision to dissolve the Cariboo Mill joint venture after reviewing this asset and its future prospects against the strategic priorities and determined that dissolving the joint venture would allow us to focus our resources to areas more aligned with our long term strategic goals. I will also add that we were not expecting Caribou to have any meaningful impact on our 2024 earnings. In Q1, we invested roughly $18,500,000 in our operations. This CapEx spending was in line with our 2020 4 CapEx target of between $75,000,000 to $100,000,000 Those of you who follow the company closely will recognize that our 2024 CapEx target is well below our traditional spend. Our 2024 CapEx target is essentially a maintenance of business budget and is the result of our weak cash flow generation in 2023. Speaker 200:08:09I will speak about our markets in a moment, but we're optimistic about our cash flow generation in light of improved pulp pricing expectations for the remainder of the year. Consequently, we are comfortable restarting our Torgau lumber expansion project and the Spokane sorting line project. Both of them will provide significant added value and were originally contemplated as part of our investment strategy for each mill. We have also approved a handful of other small value adding projects. And as a result of these decisions, we now expect our CapEx to be between $95,000,000 to $120,000,000 in 2024. Speaker 200:08:46We will also continue to manage our working capital and costs closely. Despite our improved outlook for 2024, we believe the recovery for all our markets will be gradual. Overall, pulp markets have improved significantly in the quarter, with both the European and North American markets showing the most improvement and China lagging a little bit. We're seeing strong demand from European paper and tissue producers, and this demand is primarily the result of merchant destocking and logistical challenges around Chinese imports. To a lesser extent, we are seeing demand increases in North America as well. Speaker 200:09:23This strong demand is exacerbating the impact of the permanent closure of NBSK Mills in the last 2 years, while the impact of the finished transport strike and the significant unplanned downtime of 1 of Finland's largest mills are also adding to the supply challenges. Looking forward, we expect upward pulp price pressure through the Q2. In addition, pulp markets may face an even tighter supply situation should the Canadian railway unions take labor action as they are currently threatened to do. We're implementing mitigation strategies, but ultimately should this labor action be significant, it could negatively impact our ability to get our Canadian Mills products to market. Our mills run at near record levels in the quarter. Speaker 200:10:09When comparing our Q1 production to Q4, remember that Celgara took a 22 day major maintenance shut in Q4 of last year and Stendal took a one day maintenance shut, while in Q1 we didn't have any at all. Our remaining major maintenance downtime for 2024 is as follows. In Q2, Peace River already has taken their 16 day maintenance shuts in April. This shut was extended by 2 days due to final work. In addition, Stendal will take a long 17 day shut. Speaker 200:10:45Combined, this downtime equals to roughly a loss of about 61,000 tons of production. In Q3, Rosenthal will have a 14 day maintenance shut and Celga will take a short 4 day mini shut, which will amount to about 20,000 tons production loss in total during Q3. As a reminder, Celga has moved to an 18 month major maintenance schedule and will not have a major maintenance shut in 2024. Our solid wood segment results, although improved compared to Q4, are still not where we expect it to be. The U. Speaker 200:11:23S. And European lumber markets were up slightly. However, high interest rates continue to weigh on housing starts and construction in general. We see the potential for lumber pricing improvements in Q2, but generally expect pricing to stay flat with any improvement likely linked to improved economic data. We recognize there may be some short term pricing upside due to recently announced lumber production curtailments or the realization of a prolonged Canadian railway strike. Speaker 200:11:51That said, we continue to believe that low lumber 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 sustained positive pressure on the supply demand balance of this business in the term. We continue to optimize our mix of lumber products and customers to current market conditions. As such, in Q1, 43% of our lumber sales volume was sold in the U. S. Market, with the remainder sold in European and other markets. Speaker 200:12:29Shipping pallet market remains weak due to an overall weak European economy. Once the European economy begins to show signs of recovery, we expect pellet prices to return to normal levels, allowing our Torgau assets to deliver significant shareholder value. Heating pellet prices were down in Q1 due to expected seasonality in this market. In addition, the integration of the recently acquired mass timber assets continues to progress very well. We now have roughly 35% of North American mass timber production capacity, a broader range of product offerings and a much larger geographic footprint, which gives us competitive access to the entire North American market. Speaker 200:13:11We continue to see strong customer interest in our mass timber products, which has allowed us to build a significant order file. At the end of March, our order file totaled about $80,000,000 As I previously noticed, we are in the process of restarting strategic and high return CapEx projects at both Torgau and Spokane Mills. The Togo project is focused on the mill's woodyard and log in feed systems. Once completed in the late 2025, this project will allow the mill produce more high quality dimensional lumber. This project was originally envisioned as part of our investment strategy for this mill, and we are looking forward to completing this work while lumber prices are in cyclical lows. Speaker 200:13:53Similarly, the Spokane project is focused on the mill's wood infeed and sorting processes. Once this project is complete in mid-twenty 25, the mill will be able to source lower cost feed stock and processes into high quality lamb stock. Ultimately, this will significantly reduce the mill's fiber costs. In Q1, our overall pulp fiber costs decreased from Q4. In Germany, a steady supply of sawmill chips resulted in modest cost decreases. Speaker 200:14:23And in Canada, our ramp up of Peace River's wood room and our Selga Wood strategy also pushed our fiber costs down in Q1. Looking ahead, we expect further modest declines in prop wood costs at our mills in Q2, but we expect a slight increase to our sawlog costs due to strong demand. I am pleased with our new Lindigmin extraction pilot plant ramp up and the partnerships we have entered into to support the future commercialization of this product. As a reminder, this new lignin plant is a large step towards Mercer being able to develop a portfolio of novel offerings before going commercial with it. We're excited about the future prospect of this product as a sustainable alternative to fossil fuel based products, such as inodysis and advanced battery elements to name only a few. Speaker 200:15:13This 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 lignin, mass timber, green energy, lumber and pulp would 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. We remain committed to our 2,030 carbon reduction targets and believe our products are part of the climate change solution. In fact, we believe that in the fullness of time, demand for our low carbon products will dramatically increase as the world locks looks for solutions to reduce its carbon emissions. Speaker 200:16:07We 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, I am pleased that our pulp markets are recovering a little more quickly than expected, and the fact that this improvement is giving us the confidence to increase our planned 2024 capital spend, which will allow the benefits from these key high return projects to be realized even sooner. We also expect an improved result from our solid wood business in Q2. As a reminder, we have an unusually heavy schedule of major maintenance in Q2, which will be a drag on what we're expecting would otherwise be a strong financial quarter. We will remain focused on our cost saving initiatives, and we will also 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. Speaker 200:17:00Thanks for listening, And I will now return the call to the operator for questions. Thanks. Operator00:17:27Our first question comes from the line of Hamir Patel with CIBC. Speaker 300:17:34Hi, good morning. Juan Carlos, one of your peers recently announced the large reduction of its pulp capacity in British Columbia. Just given your presence in the province, how much more pulp capacity do you think needs to come out of the region? And can you speak to how comfortable you are with the long term capacity potential at Celgar? Speaker 200:18:00Thank you, Hamir. Yes, obviously, this is something that actually news that we were expecting from some time. It is well known that the fiber supply in the province has been pretty tight and getting tighter and tighter as time goes by. So it comes as no surprise that announcement came up yesterday. Now one of the things that we've decided to do, and I think that it puts us in a very favorable position in the case of Celgar in BC, is that we're taking full advantage of the mill very close to the U. Speaker 200:18:37S. Border. That has proven for us extremely beneficial. Our cost of fiber have been coming down as we've started implementing that strategy. And that is basically allowing us to source chips from the U. Speaker 200:18:54S. At costs that are competitive as logistics have been arranged accordingly. And we're seeing more and more inflow from the U. S. Into Celgar. Speaker 200:19:07We can easily think about Celgar going as much as between 30% to 50% of fiber sourced from the U. S. So again, that takes the pressure off the mill from this very complicated situation that BC is going through. Regardless, and I have to say that the Kootenay's, that region in particular has not been impacted as much as other regions in Northern BC on reductions and access to fiber. So that also has helped Celgar in a good way. Speaker 200:19:43We have a very good source for fiber in the mill, and we expect this to continue that way. Speaker 300:19:52Great. Yes, thanks for all that detail there Juan Carlos. And just last question I had was on the lumber side with respect to demand in Europe. Could you comment on what you're seeing there across the different end markets in terms of R and R, New Res, Industrial and maybe where if anything stands out as inflecting on the R and R side? Speaker 200:20:17Yes. The European market has been very weak over the past, I would say, over the past year. The situation in the European economy in general in Germany, which is probably the one that we focus ourselves a lot more, is still not in a recovery mode. It's still very, very dormant. The only thing that we have seen recently that has built a little bit of momentum, a possible momentum even in prices has been the resurgence of the UK and Ireland market. Speaker 200:20:53So we've been able to get back into that market after being out of it for almost a year. So Europe is still, I would say, very precarious and nothing that we expect any significant change. Most likely for the next couple of quarters. We'll see if there is some improvement in the economy indicators by the end of the year. And obviously, that would definitely push the construction industry in a better trajectory as it has been before or at least in a recovery mode. Speaker 200:21:28So yes, it's been very, very slow, Haneer, incredibly slow. We have the advantage that since our mill is very competitive from a cost production point of view, We're able to serve the U. S. Market very competitively, and obviously, we've taken advantage of that as much as we can. In the last year, we did exactly the same thing. Speaker 200:21:49Almost 50% of our sales went to the U. S. This year, it's been a bit lower than that, again, because U. K. And Ireland has shown good signs of recovery. Speaker 200:22:00But we always play that card. It gives us that confidence that if Europe is not giving us what we expect, then we can take advantage of the U. S. Market. Speaker 300:22:11Perfect. Yes, that makes a lot of sense. That's all I had. Speaker 400:22:15I'll turn it over. Thanks, Juan Carlos. Speaker 200:22:17Thanks. Operator00:22:21Our next question comes from the line of Sean Steuart with TD Cowen. Speaker 400:22:28Thank you. Good morning. A couple of questions. The discretionary projects at Torgau and Spokane, can you give us a sense of the return parameters you're looking at for that type of CapEx? I suppose once markets normalize a little bit, how do you think about the returns for those types of projects? Speaker 200:22:49Absolutely, Sean. We have 2 important projects, as I was mentioning. The first one and both of them were envisioned when we acquired the mills. So if we talk first about Torgau. Torgau, as we acquired it, it has 4 saw lines, but it's not optimized in any way. Speaker 200:23:10It's an old mill, very big in size, with a lot of capacity, but it's totally underutilized. And it was focused its production on pallet production to a large extent. And what we are doing right now with this investment is we're freeing up capacity so that we can produce lumber in addition to what we're producing in free sell. Out. And that additional capacity that would put Torghao as not only as a pallet mill, but both lumber and pallets, bringing a little bit down the volume of pallets, but really, really, really increasing the volume that we can get for lumber. Speaker 200:23:53So that's what we're planning for. The return on those projects is relatively short. We have those investments coming probably completed next year. So by the end of next year, we will already which we believe that lumber prices will be better by the end of next year than they are today. So when we said that we're doing all this investment, doing the cyclical low part of the or the low part of the cycle, we're preparing ourselves to be ready whenever the markets rebound. Speaker 200:24:26The return of those projects, both lumber or what we're doing in Spokane, when we do it, it's usually less than 3 year returns. So for us, those are high return projects in general terms. In the case of Spokane, it's the same it's a similar situation. The mill, even though it's a brand new mill when we acquired it, not because it's brand new means that it was designed ideally or in an optimal way. So there's a few things that we need to do, particularly on sorting lines. Speaker 200:24:59Later down the road, we'll do some improvements on the press capacity, and those things will drive cost down significantly for us. Again, same as in Torgo, those are 2 to 3 year payback projects when fully implemented. Speaker 400:25:19That's great detail. Thanks for that. Second question is on pulp markets. Curious on your assessment of current momentum sustainability into the second half of the year. How much of the recent surge do you attribute as a lot of it is temporary supply constraints, but on the demand side, how much do you think is customer restocking versus real pull from paper demand improvement? Speaker 200:25:49Absolutely, Sean. Yes, what you said is absolutely true. Supply constraint is a huge driver of the surge that we've seen in pulp prices. There's no doubt about it. And it's still increasing. Speaker 200:26:04We just heard the announcement yesterday of yet another closure, another 300,000 tons that goes out of the market. So the elements to keep the pressure upwards around prices is there, is sustained, no doubt. And we do believe that we will see further price improvements along the second half of the year. Now when it comes to demand, it has been a lot better, but not as we would like, let's put it that way. So yes, European demand has improved, North American demand has improved, Chinese demand not so much. Speaker 200:26:45We know that they're exporting quite a bit. So there's a balance on how much of that demand coming in from China goes elsewhere. But it is a fact that European especially European was so low, just I would say 6 months ago or 9 months ago, demand was incredibly low and we've seen a very big resurgence of demand. It's still I wouldn't say that it's strong enough as we like it, as we would prefer it to be, but it's obviously much, much healthier than it was before. So all in all, I think the prospects are positive. Speaker 200:27:29The logistic constraints that we see, the issues that we still see in the Middle East and the logistic constraints that, that causes, now there's a potential issue of railway strikes in Canada. Obviously, those things just add noise and probably put more pressure on prices than anything else upwards. So again, we're bullish, probably cautiously bullish on the price increases that we may see in the coming months. I don't think there is any sign of softwood giving way within these current market conditions. Speaker 400:28:10Thank you very much for that context. That's all I have. Operator00:28:24Our next question comes from the line of Harman Dott with RBC Capital Markets. Speaker 400:28:32Hi. This is Harmon on for Matt McKellar. I just had a quick question. You noted in the release that you'd begun work on certain large scale mass timber projects as of Q2. Are you able to provide a bit more detail more broadly on the kind of pickup we should expect in manufactured product sales or EBITDA in the next couple of quarters? Speaker 200:28:56Sure, Harmon. To give you a sense of magnitude, we have 2 very large projects and I wish I was at liberty to say the companies. I'm not allowed to say which companies they are, but we have 2 very large projects that are currently being produced at the mill. These projects will keep us busy for this quarter for sure. One of them is also going to be built up in the beginning of 2025. Speaker 200:29:31So we see the order book gaining good momentum and therefore we see very positive results as a result of this. Now one of those projects had a delay, a minor delay for them, but a minor delay for them means that instead of becoming a Q1 production project, it became a Q2 production project. And as we're ramping up, obviously, when we have a major project that moves from 1 quarter to another, that creates a hole that we cannot fill as we would like. So that's why our results in Q1 for mass timber were very short or almost at breakeven level. But in Q2, we expect mass timber to be much better in terms of profitability. Speaker 200:30:18Our sales for the year, we expect them to be almost twice as much as we had last year. So last year, our sales were around $60,000,000 We're estimating that for 2024, we should be around $100,000,000 to $120,000,000 give or take, with further sustained levels in 2025. One of the things that we're seeing in this market, which is not different from many things that we see in lumber spaces, With the interest rates being as still at a very high level, what we're seeing is that, yes, there's more demand for more interest in projects to be built on mass timber. So there's a lot of tailwind on interest from developers, architects on mass timber. Many more designs and many more quotations that we're putting out and projects that are being designed for mass timber than previously before. Speaker 200:31:16But what is happening is that there's a lot more that are being put on hold until the financing gets better for those developers. So what we expect is maybe in 2025, we won't see as much increase as we would otherwise have thought there would be until there's a start to see a reduction in interest. And then what we will see is all of this amount of projects that are being repressed, that are being put on hold, plus the ones that were being that were coming up as new, that's going to come in a big wave. So we do expect a very, very strong growth of this business, whether it's in late 2025 or 2020 6 depending on how interest rates behave. And obviously, we will take advantage of it. Speaker 200:32:08When we look at maturity from our business, we're looking at a business that should be north of 20 percent EBITDA when it comes to when we're at maturity level and running at least 2 shifts on our facilities. So that's the forecast that we have, and we're very, very eager to keep on investing in these assets, make sure that all three of them, the Canadian one and the ones that the 2 that we'll have in the U. S. Are very cost competitive. Speaker 400:32:43Got you. No, that's super helpful. And I think the rest of my questions were answered. So that was the main one. Thank you. Speaker 200:32:49Okay, Herman. Operator00:32:54That concludes today's question and answer session. I'd like to turn the call back to Juan Carlos Bueno for closing remarks. Speaker 200:33:01Thank you, Liz, and thanks to all of you for joining our call. 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 call in August. Bye for now.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallMercer International Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) 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.comREVEALED: Elon’s Secret Master Plan “AGENDA X”REVEALED: Elon's Secret Master Plan "AGENDA X" For almost 30 years, Elon worked on his master plan in secret. Now, leaked computer code confirms Elon is moments away from launching a revolutionary financial technology… And Silicon Valley insider Jeff Brown says it could hand early investors who missed Tesla, "the ultimate second chance" to get rich.May 6, 2025 | Brownstone Research (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 5 speakers on the call. Operator00:00:00Good morning, and welcome to Mercer International's First Quarter 2024 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 100:00:18Thanks, Liz. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the Q1 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 are joining today's call by telephone, there is presentation material that we have attached to the Investors section of our website. Speaker 100:00:43But before turning to our results, I would like to remind you that we will be forward 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. This quarter, Speaker 200:01:08our EBITDA Speaker 100:01:08was $64,000,000 compared to Q4 EBITDA of $21,000,000 The improved results were driven by not having any major maintenance down time, improving pulp sales realizations and lower fiber and other production costs. Our pulp segment contributed quarterly EBITDA of $68,000,000 and our solid wood segment EBITDA was negative $1,000,000 You can find additional segment disclosures in our Form 10 Q, which can be found on our website and that of the SEC. In Q1, both our NBSK and NBSK sales realizations increased compared to Q4. Average list prices increased in Europe and North America due to stronger demand and global supply constraints. In China, prices were flat as demand slowed during the Chinese New Year and picked up near the end of the quarter. Speaker 100:02:01The European MBSK list price averaged $1400 per tonne in the current quarter, an increase of $155 or 12% from Q4. And the North American NBSK list price averaged $14.40 per tonne in the current quarter, increase of $128 or 10 percent from Q4. In China, the Q1 average MBHK net price was $6.62 per tonne, up $19 or about 3% compared to the Q4 average price, resulting in the market price gap between MBSK and MBHK in China narrowing to about $83 per tonne in Q1 from $105 per tonne in Q4. The North American NBHK average Q1 list price was $12.23 per tonne, up $140 or 13 percent from Q4. Total pulp sales volumes in the Q1 increased by 75,000 tons to 566,000 tonnes driven by the timing of sales and higher production due to lower scheduled maintenance downtime. Speaker 100:03:10We had no scheduled maintenance downtime in Q1 compared to 23 days of downtime in Q4, which positively impacted Q1 EBITDA by about $23,000,000 when compared to Q4. After adjusting for the Q4 planned shuts, pulp production was essentially flat from the Q4. For our solid wood segment, we had modest lumber pricing improvements in both Europe and the U. S. Market. Speaker 100:03:36Despite the price increases, overall lumber demand remained subdued as a result of uncertain economic conditions in Europe and high interest rates. The random lengths U. S. Benchmark for Western SPF number 2 and better was 4.6 $2 per 1,000 bore feet at the end of Q1 compared to $4.22 at the end of Q4. Today, that benchmark price for Western SPF number 2 and better is around $4.21 per 1,000 board feet, virtually unchanged from the beginning of 2024. Speaker 100:04:08For Q2, we are expecting generally flat lumber prices in the U. S. And European markets as demand remains weak. Lumber production was a near record 127,000,000 board feet in Q1, up 14% due to seasonal downtime in the 4th quarter. Lumber sales volumes were 121,000,000 board feet, up 8% from Q4. Speaker 100:04:32Electricity sales totaled 2 59 gigawatt hours in the quarter, which was about the same as Q4. Pricing in Q1 modestly decreased to about $94 per megawatt hour from $98 in Q4 due to lower spot prices in Germany. In Q1, our pulp segment had lower fiber costs in Q4 as supplied remained stable. On the other hand, our solid wood segment had higher sawlog costs due to strong demand in Germany. Production for our solid wood segment's mass timber operations wood segment's mass timber operations decreased in Q1 from Q4 due to minor customer driven delays for certain large scale projects. Speaker 100:05:09These projects are now underway and we are satisfied with the order book today. In the Q1, we made the strategic decision to dissolve the Cariboo Mill joint venture, which resulted in recording of a non cash loss of roughly $24,000,000 or $0.35 per share. We expect the transaction to only have a nominal impact on 2024 EBITDA. Juan Carlos will have more to say on this in a moment. We reported a consolidated net loss of $17,000,000 for the Q1 or 0 point $87,000,000 or $1.31 per share in Q4. Speaker 100:05:48We consumed about $40,000,000 of cash in Q1 compared to $30,000,000 in Q4. The large cash usage in Q1 was primarily due to higher receivables, which were up roughly $64,000,000 driven by higher sales realizations and sales volumes. We expect the majority of this working capital build to reverse in Q2. At the end of Q1, our liquidity position totaled $555,000,000 compared comprised of $274,000,000 of cash and about $281,000,000 of undrawn revolvers. Finally, our Board has approved a quarterly dividend of $0.075 per share shareholders of record on June 26, for which payment will be made on July 3, 2024. Speaker 100:06:34That ends my overview of the financial results. I'll now turn the call over to Juan Carlos. Speaker 200:06:41Thanks, Rich. Our Q1 operating results improved significantly relatively Q4. The improvement was primarily the result of higher pulp prices in combination with no major maintenance at any of our mills. And our results in Q1 also benefited from lower costs, including fiber and energy costs. Overall, all of our mills ran at near record production levels, while both our energy production and sales volumes were at record levels in Q1. Speaker 200:07:12As previously announced, we came to the decision to dissolve the Cariboo Mill joint venture after reviewing this asset and its future prospects against the strategic priorities and determined that dissolving the joint venture would allow us to focus our resources to areas more aligned with our long term strategic goals. I will also add that we were not expecting Caribou to have any meaningful impact on our 2024 earnings. In Q1, we invested roughly $18,500,000 in our operations. This CapEx spending was in line with our 2020 4 CapEx target of between $75,000,000 to $100,000,000 Those of you who follow the company closely will recognize that our 2024 CapEx target is well below our traditional spend. Our 2024 CapEx target is essentially a maintenance of business budget and is the result of our weak cash flow generation in 2023. Speaker 200:08:09I will speak about our markets in a moment, but we're optimistic about our cash flow generation in light of improved pulp pricing expectations for the remainder of the year. Consequently, we are comfortable restarting our Torgau lumber expansion project and the Spokane sorting line project. Both of them will provide significant added value and were originally contemplated as part of our investment strategy for each mill. We have also approved a handful of other small value adding projects. And as a result of these decisions, we now expect our CapEx to be between $95,000,000 to $120,000,000 in 2024. Speaker 200:08:46We will also continue to manage our working capital and costs closely. Despite our improved outlook for 2024, we believe the recovery for all our markets will be gradual. Overall, pulp markets have improved significantly in the quarter, with both the European and North American markets showing the most improvement and China lagging a little bit. We're seeing strong demand from European paper and tissue producers, and this demand is primarily the result of merchant destocking and logistical challenges around Chinese imports. To a lesser extent, we are seeing demand increases in North America as well. Speaker 200:09:23This strong demand is exacerbating the impact of the permanent closure of NBSK Mills in the last 2 years, while the impact of the finished transport strike and the significant unplanned downtime of 1 of Finland's largest mills are also adding to the supply challenges. Looking forward, we expect upward pulp price pressure through the Q2. In addition, pulp markets may face an even tighter supply situation should the Canadian railway unions take labor action as they are currently threatened to do. We're implementing mitigation strategies, but ultimately should this labor action be significant, it could negatively impact our ability to get our Canadian Mills products to market. Our mills run at near record levels in the quarter. Speaker 200:10:09When comparing our Q1 production to Q4, remember that Celgara took a 22 day major maintenance shut in Q4 of last year and Stendal took a one day maintenance shut, while in Q1 we didn't have any at all. Our remaining major maintenance downtime for 2024 is as follows. In Q2, Peace River already has taken their 16 day maintenance shuts in April. This shut was extended by 2 days due to final work. In addition, Stendal will take a long 17 day shut. Speaker 200:10:45Combined, this downtime equals to roughly a loss of about 61,000 tons of production. In Q3, Rosenthal will have a 14 day maintenance shut and Celga will take a short 4 day mini shut, which will amount to about 20,000 tons production loss in total during Q3. As a reminder, Celga has moved to an 18 month major maintenance schedule and will not have a major maintenance shut in 2024. Our solid wood segment results, although improved compared to Q4, are still not where we expect it to be. The U. Speaker 200:11:23S. And European lumber markets were up slightly. However, high interest rates continue to weigh on housing starts and construction in general. We see the potential for lumber pricing improvements in Q2, but generally expect pricing to stay flat with any improvement likely linked to improved economic data. We recognize there may be some short term pricing upside due to recently announced lumber production curtailments or the realization of a prolonged Canadian railway strike. Speaker 200:11:51That said, we continue to believe that low lumber 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 sustained positive pressure on the supply demand balance of this business in the term. We continue to optimize our mix of lumber products and customers to current market conditions. As such, in Q1, 43% of our lumber sales volume was sold in the U. S. Market, with the remainder sold in European and other markets. Speaker 200:12:29Shipping pallet market remains weak due to an overall weak European economy. Once the European economy begins to show signs of recovery, we expect pellet prices to return to normal levels, allowing our Torgau assets to deliver significant shareholder value. Heating pellet prices were down in Q1 due to expected seasonality in this market. In addition, the integration of the recently acquired mass timber assets continues to progress very well. We now have roughly 35% of North American mass timber production capacity, a broader range of product offerings and a much larger geographic footprint, which gives us competitive access to the entire North American market. Speaker 200:13:11We continue to see strong customer interest in our mass timber products, which has allowed us to build a significant order file. At the end of March, our order file totaled about $80,000,000 As I previously noticed, we are in the process of restarting strategic and high return CapEx projects at both Torgau and Spokane Mills. The Togo project is focused on the mill's woodyard and log in feed systems. Once completed in the late 2025, this project will allow the mill produce more high quality dimensional lumber. This project was originally envisioned as part of our investment strategy for this mill, and we are looking forward to completing this work while lumber prices are in cyclical lows. Speaker 200:13:53Similarly, the Spokane project is focused on the mill's wood infeed and sorting processes. Once this project is complete in mid-twenty 25, the mill will be able to source lower cost feed stock and processes into high quality lamb stock. Ultimately, this will significantly reduce the mill's fiber costs. In Q1, our overall pulp fiber costs decreased from Q4. In Germany, a steady supply of sawmill chips resulted in modest cost decreases. Speaker 200:14:23And in Canada, our ramp up of Peace River's wood room and our Selga Wood strategy also pushed our fiber costs down in Q1. Looking ahead, we expect further modest declines in prop wood costs at our mills in Q2, but we expect a slight increase to our sawlog costs due to strong demand. I am pleased with our new Lindigmin extraction pilot plant ramp up and the partnerships we have entered into to support the future commercialization of this product. As a reminder, this new lignin plant is a large step towards Mercer being able to develop a portfolio of novel offerings before going commercial with it. We're excited about the future prospect of this product as a sustainable alternative to fossil fuel based products, such as inodysis and advanced battery elements to name only a few. Speaker 200:15:13This 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 lignin, mass timber, green energy, lumber and pulp would 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. We remain committed to our 2,030 carbon reduction targets and believe our products are part of the climate change solution. In fact, we believe that in the fullness of time, demand for our low carbon products will dramatically increase as the world locks looks for solutions to reduce its carbon emissions. Speaker 200:16:07We 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, I am pleased that our pulp markets are recovering a little more quickly than expected, and the fact that this improvement is giving us the confidence to increase our planned 2024 capital spend, which will allow the benefits from these key high return projects to be realized even sooner. We also expect an improved result from our solid wood business in Q2. As a reminder, we have an unusually heavy schedule of major maintenance in Q2, which will be a drag on what we're expecting would otherwise be a strong financial quarter. We will remain focused on our cost saving initiatives, and we will also 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. Speaker 200:17:00Thanks for listening, And I will now return the call to the operator for questions. Thanks. Operator00:17:27Our first question comes from the line of Hamir Patel with CIBC. Speaker 300:17:34Hi, good morning. Juan Carlos, one of your peers recently announced the large reduction of its pulp capacity in British Columbia. Just given your presence in the province, how much more pulp capacity do you think needs to come out of the region? And can you speak to how comfortable you are with the long term capacity potential at Celgar? Speaker 200:18:00Thank you, Hamir. Yes, obviously, this is something that actually news that we were expecting from some time. It is well known that the fiber supply in the province has been pretty tight and getting tighter and tighter as time goes by. So it comes as no surprise that announcement came up yesterday. Now one of the things that we've decided to do, and I think that it puts us in a very favorable position in the case of Celgar in BC, is that we're taking full advantage of the mill very close to the U. Speaker 200:18:37S. Border. That has proven for us extremely beneficial. Our cost of fiber have been coming down as we've started implementing that strategy. And that is basically allowing us to source chips from the U. Speaker 200:18:54S. At costs that are competitive as logistics have been arranged accordingly. And we're seeing more and more inflow from the U. S. Into Celgar. Speaker 200:19:07We can easily think about Celgar going as much as between 30% to 50% of fiber sourced from the U. S. So again, that takes the pressure off the mill from this very complicated situation that BC is going through. Regardless, and I have to say that the Kootenay's, that region in particular has not been impacted as much as other regions in Northern BC on reductions and access to fiber. So that also has helped Celgar in a good way. Speaker 200:19:43We have a very good source for fiber in the mill, and we expect this to continue that way. Speaker 300:19:52Great. Yes, thanks for all that detail there Juan Carlos. And just last question I had was on the lumber side with respect to demand in Europe. Could you comment on what you're seeing there across the different end markets in terms of R and R, New Res, Industrial and maybe where if anything stands out as inflecting on the R and R side? Speaker 200:20:17Yes. The European market has been very weak over the past, I would say, over the past year. The situation in the European economy in general in Germany, which is probably the one that we focus ourselves a lot more, is still not in a recovery mode. It's still very, very dormant. The only thing that we have seen recently that has built a little bit of momentum, a possible momentum even in prices has been the resurgence of the UK and Ireland market. Speaker 200:20:53So we've been able to get back into that market after being out of it for almost a year. So Europe is still, I would say, very precarious and nothing that we expect any significant change. Most likely for the next couple of quarters. We'll see if there is some improvement in the economy indicators by the end of the year. And obviously, that would definitely push the construction industry in a better trajectory as it has been before or at least in a recovery mode. Speaker 200:21:28So yes, it's been very, very slow, Haneer, incredibly slow. We have the advantage that since our mill is very competitive from a cost production point of view, We're able to serve the U. S. Market very competitively, and obviously, we've taken advantage of that as much as we can. In the last year, we did exactly the same thing. Speaker 200:21:49Almost 50% of our sales went to the U. S. This year, it's been a bit lower than that, again, because U. K. And Ireland has shown good signs of recovery. Speaker 200:22:00But we always play that card. It gives us that confidence that if Europe is not giving us what we expect, then we can take advantage of the U. S. Market. Speaker 300:22:11Perfect. Yes, that makes a lot of sense. That's all I had. Speaker 400:22:15I'll turn it over. Thanks, Juan Carlos. Speaker 200:22:17Thanks. Operator00:22:21Our next question comes from the line of Sean Steuart with TD Cowen. Speaker 400:22:28Thank you. Good morning. A couple of questions. The discretionary projects at Torgau and Spokane, can you give us a sense of the return parameters you're looking at for that type of CapEx? I suppose once markets normalize a little bit, how do you think about the returns for those types of projects? Speaker 200:22:49Absolutely, Sean. We have 2 important projects, as I was mentioning. The first one and both of them were envisioned when we acquired the mills. So if we talk first about Torgau. Torgau, as we acquired it, it has 4 saw lines, but it's not optimized in any way. Speaker 200:23:10It's an old mill, very big in size, with a lot of capacity, but it's totally underutilized. And it was focused its production on pallet production to a large extent. And what we are doing right now with this investment is we're freeing up capacity so that we can produce lumber in addition to what we're producing in free sell. Out. And that additional capacity that would put Torghao as not only as a pallet mill, but both lumber and pallets, bringing a little bit down the volume of pallets, but really, really, really increasing the volume that we can get for lumber. Speaker 200:23:53So that's what we're planning for. The return on those projects is relatively short. We have those investments coming probably completed next year. So by the end of next year, we will already which we believe that lumber prices will be better by the end of next year than they are today. So when we said that we're doing all this investment, doing the cyclical low part of the or the low part of the cycle, we're preparing ourselves to be ready whenever the markets rebound. Speaker 200:24:26The return of those projects, both lumber or what we're doing in Spokane, when we do it, it's usually less than 3 year returns. So for us, those are high return projects in general terms. In the case of Spokane, it's the same it's a similar situation. The mill, even though it's a brand new mill when we acquired it, not because it's brand new means that it was designed ideally or in an optimal way. So there's a few things that we need to do, particularly on sorting lines. Speaker 200:24:59Later down the road, we'll do some improvements on the press capacity, and those things will drive cost down significantly for us. Again, same as in Torgo, those are 2 to 3 year payback projects when fully implemented. Speaker 400:25:19That's great detail. Thanks for that. Second question is on pulp markets. Curious on your assessment of current momentum sustainability into the second half of the year. How much of the recent surge do you attribute as a lot of it is temporary supply constraints, but on the demand side, how much do you think is customer restocking versus real pull from paper demand improvement? Speaker 200:25:49Absolutely, Sean. Yes, what you said is absolutely true. Supply constraint is a huge driver of the surge that we've seen in pulp prices. There's no doubt about it. And it's still increasing. Speaker 200:26:04We just heard the announcement yesterday of yet another closure, another 300,000 tons that goes out of the market. So the elements to keep the pressure upwards around prices is there, is sustained, no doubt. And we do believe that we will see further price improvements along the second half of the year. Now when it comes to demand, it has been a lot better, but not as we would like, let's put it that way. So yes, European demand has improved, North American demand has improved, Chinese demand not so much. Speaker 200:26:45We know that they're exporting quite a bit. So there's a balance on how much of that demand coming in from China goes elsewhere. But it is a fact that European especially European was so low, just I would say 6 months ago or 9 months ago, demand was incredibly low and we've seen a very big resurgence of demand. It's still I wouldn't say that it's strong enough as we like it, as we would prefer it to be, but it's obviously much, much healthier than it was before. So all in all, I think the prospects are positive. Speaker 200:27:29The logistic constraints that we see, the issues that we still see in the Middle East and the logistic constraints that, that causes, now there's a potential issue of railway strikes in Canada. Obviously, those things just add noise and probably put more pressure on prices than anything else upwards. So again, we're bullish, probably cautiously bullish on the price increases that we may see in the coming months. I don't think there is any sign of softwood giving way within these current market conditions. Speaker 400:28:10Thank you very much for that context. That's all I have. Operator00:28:24Our next question comes from the line of Harman Dott with RBC Capital Markets. Speaker 400:28:32Hi. This is Harmon on for Matt McKellar. I just had a quick question. You noted in the release that you'd begun work on certain large scale mass timber projects as of Q2. Are you able to provide a bit more detail more broadly on the kind of pickup we should expect in manufactured product sales or EBITDA in the next couple of quarters? Speaker 200:28:56Sure, Harmon. To give you a sense of magnitude, we have 2 very large projects and I wish I was at liberty to say the companies. I'm not allowed to say which companies they are, but we have 2 very large projects that are currently being produced at the mill. These projects will keep us busy for this quarter for sure. One of them is also going to be built up in the beginning of 2025. Speaker 200:29:31So we see the order book gaining good momentum and therefore we see very positive results as a result of this. Now one of those projects had a delay, a minor delay for them, but a minor delay for them means that instead of becoming a Q1 production project, it became a Q2 production project. And as we're ramping up, obviously, when we have a major project that moves from 1 quarter to another, that creates a hole that we cannot fill as we would like. So that's why our results in Q1 for mass timber were very short or almost at breakeven level. But in Q2, we expect mass timber to be much better in terms of profitability. Speaker 200:30:18Our sales for the year, we expect them to be almost twice as much as we had last year. So last year, our sales were around $60,000,000 We're estimating that for 2024, we should be around $100,000,000 to $120,000,000 give or take, with further sustained levels in 2025. One of the things that we're seeing in this market, which is not different from many things that we see in lumber spaces, With the interest rates being as still at a very high level, what we're seeing is that, yes, there's more demand for more interest in projects to be built on mass timber. So there's a lot of tailwind on interest from developers, architects on mass timber. Many more designs and many more quotations that we're putting out and projects that are being designed for mass timber than previously before. Speaker 200:31:16But what is happening is that there's a lot more that are being put on hold until the financing gets better for those developers. So what we expect is maybe in 2025, we won't see as much increase as we would otherwise have thought there would be until there's a start to see a reduction in interest. And then what we will see is all of this amount of projects that are being repressed, that are being put on hold, plus the ones that were being that were coming up as new, that's going to come in a big wave. So we do expect a very, very strong growth of this business, whether it's in late 2025 or 2020 6 depending on how interest rates behave. And obviously, we will take advantage of it. Speaker 200:32:08When we look at maturity from our business, we're looking at a business that should be north of 20 percent EBITDA when it comes to when we're at maturity level and running at least 2 shifts on our facilities. So that's the forecast that we have, and we're very, very eager to keep on investing in these assets, make sure that all three of them, the Canadian one and the ones that the 2 that we'll have in the U. S. Are very cost competitive. Speaker 400:32:43Got you. No, that's super helpful. And I think the rest of my questions were answered. So that was the main one. Thank you. Speaker 200:32:49Okay, Herman. Operator00:32:54That concludes today's question and answer session. I'd like to turn the call back to Juan Carlos Bueno for closing remarks. Speaker 200:33:01Thank you, Liz, and thanks to all of you for joining our call. 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 call in August. Bye for now.Read morePowered by