Mercer International Inc.: Form 10-Q for the period ended Jun 30, 2025
Filed with the SEC on Jul 31, 2025 and accepted by EDGAR at Jul 31, 2025, 16:48 ET.
Management's discussion and analysis
As filed, 67,521 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of June 30, 2025, unless otherwise stated; (iv) our reporting currency is dollars and references to “€” mean euros and “C$” mean Canadian dollars; (v) “ADMTs” mean air-dried metric tonnes; (vi) “CLT” mean cross-laminated timber; (vii) “glulam” mean glue-laminated timber; (viii) “m3” mean cubic meters; (ix) “NBSK” mean northern bleached softwood kraft; (x) “NBHK” mean northern bleached hardwood kraft; (xi) “MW” mean megawatts and “MWh” mean megawatt hours; (xii) “Mfbm” mean thousand board feet of lumber and “MMfbm” mean million board feet of lumber; and (xiii) our lumber metrics are converted from m3 to Mfbm using a conversion ratio of 1.6 m3 of lumber equaling one Mfbm, which is the ratio commonly used in the industry.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figure.
The following discussion and analysis of our results of operations and financial condition for the three and six months ended June 30, 2025 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission, referred to as the “SEC”.
Results of Operations
General
We have two reportable operating segments:
- Pulp – consists of the manufacture, sale and distribution of pulp, electricity and chemicals at our pulp mills.
- Solid Wood – consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals at our sawmills and other facilities in Germany and our mass timber facilities in North America.
Each segment offers primarily different products and requires different manufacturing processes, technology and sales and marketing.
Current Market Environment
In the second quarter of 2025, our NBSK pulp sales realizations remained strong in both North America and Europe compared to the first quarter of 2025 driven by steady demand and supply constraints. In China, both our NBSK and NBHK pulp sales realizations decreased in the second quarter of 2025 compared to the first quarter of 2025 as a result of weak demand driven by global trade policy uncertainty. In North America, NBHK pulp sales realizations modestly increased in the second quarter of 2025 compared to the first quarter of 2025 due to stable demand.
In the second quarter of 2025, our lumber sales realizations increased in both the U.S. and Europe compared to the first quarter of 2025 due to stable demand and reduced supply.
As of June 30, 2025, the third-party industry quoted NBSK pulp list prices in Europe and North America were approximately $1,510 per ADMT and $1,790 per ADMT, respectively, and the third-party industry quoted NBSK pulp net price in China was approximately $690 per ADMT. Prices for China are net of discounts, allowances and rebates.
We currently expect NBSK pulp prices to decrease in all our key markets in the third quarter of 2025 driven by slower demand as a result of seasonality and a weakened economic environment caused by global trade policy uncertainty. For NBHK pulp prices, we currently expect relatively steady prices in the third quarter of 2025.
In the third quarter of 2025, we currently expect lumber prices to modestly increase in Europe primarily driven by strong demand and higher fiber costs. In the U.S., we currently expect higher prices in the third quarter of 2025 as a result of lower supply and the impact from duties imposed on Canadian producers. In the third quarter of 2025, we currently expect pallet prices to remain flat due to continued weak economic conditions in Europe and mass timber prices to remain relatively steady.
Per unit fiber costs for the pulp segment increased in the second quarter of 2025 compared to the first quarter of 2025 primarily as a result of strong demand and steady supply. For the third quarter of 2025, we currently expect per unit fiber costs to be lower for our German pulp mills due to reduced demand and relatively stable for our Canadian pulp mills.
Per unit fiber costs for the solid wood segment increased in the second quarter of 2025 compared to the first quarter of 2025 as a result of strong demand in Germany. For the third quarter of 2025, we currently expect modestly higher per unit fiber costs for our solid wood segment due to a temporary reduction in regional logging in Germany and continued strong demand.
Demand and pricing for our products may be further impacted by ongoing developments in international trade policies, including tariffs proposed or imposed by the United States on goods originating from Canada, the European Union and other countries, and related countermeasures. As these developments are ongoing and subject to change, it is difficult to predict such impact at this time. However, in the second quarter of 2025, uncertainties surrounding these developments have impacted demand for pulp in China. See Item 1A. Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2024 for further information.
Summary Financial Highlights
(in thousands, other than per share amounts)
| Statement of Operations Data Revenues from external customers | Three Months Ended June 30, 2025 | 2024 | Six Months Ended June 30, 2025 | 2024 |
|---|---|---|---|---|
| Pulp segment | $332,308 | $367,371 | $713,388 | $799,775 |
| Solid wood segment | 117,268 | 130,238 | 239,988 | 249,261 |
| Corporate and other | 3,948 | 1,775 | 7,122 | 3,778 |
| Total revenues | $453,524 | $499,384 | $960,498 | $1,052,814 |
| Pulp Segment Operating EBITDA(1) | $(10,262) | $31,674 | $39,610 | $100,139 |
| Solid wood Segment Operating EBITDA(1) | (4,861) | 3,124 | (5,153) | 2,229 |
| Corporate and other | (5,758) | (4,359) | (8,250) | (8,328) |
| Operating EBITDA(2) | $(20,881) | $30,439 | $26,207 | $94,040 |
| Net loss | $(86,071) | $(67,586) | $(108,410) | $(84,289) |
| Net loss per common share | ||||
| Basic | $(1.29) | $(1.01) | $(1.62) | $(1.26) |
| Diluted | $(1.29) | $(1.01) | $(1.62) | $(1.26) |
| Common shares outstanding at period end | 66,983 | 66,871 | 66,983 | 66,871 |
(1) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information.
(2) Operating EBITDA is a non-GAAP measure. See “Non-GAAP Financial Measures” for its description, limitation and why we consider it to be a useful measure. The following table provides a reconciliation of net loss to operating loss and Operating EBITDA for the periods indicated:
(in thousands)
| Three Months Ended June 30, 2025 | 2024 | Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|---|---|
| Net loss | $(86,071) | $(67,586) | $(108,410) | $(84,289) |
| Income tax provision (recovery) | (1,864) | 1,263 | (1,132) | (5,102) |
| Interest expense | 28,411 | 26,843 | 56,566 | 54,402 |
| Other expenses (income) | 1,120 | (4,299) | 1,305 | (9,238) |
| Operating loss | (58,404) | (43,779) | (51,671) | (44,227) |
| Add: Depreciation and amortization | 37,523 | 39,941 | 77,878 | 80,345 |
| Add: Loss on disposal of investment in joint venture | — | — | — | 23,645 |
| Add: Goodwill impairment | — | 34,277 | — | 34,277 |
| Operating EBITDA | $(20,881) | $30,439 | $26,207 | $94,040 |
FORM 10-Q
Selected Production, Sales and Other Data
| Pulp Segment Pulp production ('000 ADMTs) | Three Months Ended June 30, 2025 | 2024 | Six Months Ended June 30, 2025 | 2024 |
|---|---|---|---|---|
| NBSK | 403.2 | 357.8 | 773.6 | 811.0 |
| NBHK | 53.9 | 63.9 | 142.4 | 149.6 |
| Annual maintenance downtime ('000 ADMTs) | 33.2 | 64.9 | 62.9 | 64.9 |
| Annual maintenance downtime (days) | 23 | 37 | 45 | 37 |
| Pulp sales ('000 ADMTs) | ||||
| NBSK | 361.4 | 377.6 | 749.5 | 865.8 |
| NBHK | 65.3 | 55.7 | 155.1 | 133.2 |
| Average NBSK pulp prices ($/ADMT)(1) | ||||
| Europe | 1,553 | 1,602 | 1,552 | 1,501 |
| China | 734 | 811 | 764 | 778 |
| North America | 1,820 | 1,697 | 1,787 | 1,568 |
| Average NBHK pulp prices ($/ADMT)(1) | ||||
| China | 533 | 735 | 556 | 698 |
| North America | 1,310 | 1,437 | 1,289 | 1,330 |
| Average pulp sales realizations ($/ADMT)(2) | ||||
| NBSK | 758 | 811 | 771 | 766 |
| NBHK | 575 | 701 | 572 | 660 |
| Energy production ('000 MWh)(3) | 511.1 | 493.9 | 1,038.1 | 1,070.4 |
| Energy sales ('000 MWh)(3) | 183.1 | 185.0 | 381.8 | 405.5 |
| Average energy sales realizations ($/MWh)(3) | 83 | 84 | 96 | 86 |
| Solid Wood Segment | ||||
| Lumber | ||||
| Production (MMfbm) | 120.2 | 111.4 | 248.2 | 238.4 |
| Sales (MMfbm) | 120.6 | 116.6 | 251.5 | 238.0 |
| Average sales realizations ($/Mfbm) | 550 | 463 | 524 | 461 |
| Energy | ||||
| Production and sales ('000 MWh) | 32.7 | 33.7 | 68.8 | 72.4 |
| Average sales realizations ($/MWh) | 130 | 128 | 132 | 126 |
| Manufactured products(4) | ||||
| Production ('000 m3) | 7.8 | 11.1 | 14.9 | 18.4 |
| Sales ('000 m3) | 8.1 | 11.2 | 14.0 | 15.2 |
| Average sales realizations ($/m3) | 1,318 | 2,942 | 1,955 | 3,128 |
| Pallets | ||||
| Production ('000 units) | 2,132.9 | 2,547.8 | 4,229.3 | 5,604.1 |
| Sales ('000 units) | 2,248.0 | 2,570.4 | 4,376.8 | 5,486.7 |
| Average sales realizations ($/unit) | 12 | 10 | 11 | 10 |
| Biofuels(5) | ||||
| Production ('000 tonnes) | 25.2 | 41.0 | 69.7 | 78.9 |
| Sales ('000 tonnes) | 19.6 | 40.4 | 59.9 | 88.6 |
| Average sales realizations ($/tonne) | 260 | 202 | 239 | 219 |
| Average Spot Currency Exchange Rates | ||||
| $ / €(6) | 1.1342 | 1.0766 | 1.0943 | 1.0810 |
| $ / C$(6) | 0.7225 | 0.7310 | 0.7099 | 0.7362 |
(1) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates.
(2) Sales realizations after customer discounts, rebates and other selling concessions.
(3) Does not include our 50% joint venture interest in the Cariboo Pulp & Paper Company mill (“CPP”), which was accounted for using the equity method. In the first quarter of 2024, we disposed of this interest.
(4) Manufactured products primarily include CLT and glulam.
(5) Biofuels include pellets and briquettes.
(6) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.
Consolidated – Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Total revenues for the second quarter of 2025 decreased by approximately 9% to $453.5 million from $499.4 million in the same quarter of 2024 primarily due to lower sales realizations and volumes from our pulp and manufactured products partially offset by higher lumber sales realizations.
Costs and expenses in the second quarter of 2025 decreased by approximately 6% to $511.9 million from $543.2 million in the same quarter of 2024 driven by fewer days of planned annual maintenance downtime in the second quarter of 2025 at our pulp mills. This decrease was partially offset by foreign exchange losses, higher per unit fiber costs and an $11.0 million non-cash impairment recognized against hardwood inventory at our Peace River mill. The foreign exchange losses resulted from the impact of a weaker dollar on the revaluation of dollar denominated accounts receivables held at our operations, and on our euro denominated costs and expenses compared to the same quarter of 2024. In the second quarter of 2024, costs and expenses included a non-cash goodwill impairment of $34.3 million related to the Torgau facility, which was recognized as a result of ongoing weakness in lumber, pallet and biofuels markets in Europe stemming from high interest rates and other economic conditions.
In the second quarter of 2025, cost of sales depreciation and amortization was relatively flat at $37.5 million compared to $39.9 million in the same quarter of 2024.
Selling, general and administrative expenses were relatively steady at $30.4 million in the second quarter of 2025 compared to $29.8 million in the same quarter of 2024.
In the second quarter of 2025, we had a negative foreign exchange impact of approximately $21.1 million on operating loss compared to the same quarter of 2024. This negative impact was primarily due to foreign exchange losses on the revaluation of dollar denominated accounts receivables held at our operations, as the dollar weakened relative to the euro and Canadian dollar at the end of the second quarter of 2025, and the negative effect of a weaker dollar on our euro denominated costs and expenses compared to the same quarter of 2024.
In the second quarter of 2025, our operating loss was $58.4 million compared to $43.8 million in the same quarter of 2024 primarily due to lower pulp and manufactured products sales realizations, negative foreign exchange impacts from a weaker dollar, higher per unit fiber costs and the non-cash impairment recognized against hardwood inventory. These adverse impacts were partially offset by fewer days of planned annual maintenance downtime in the second quarter of 2025 at our pulp mills and higher lumber sales realizations. In the second quarter of 2024, our operating loss included a non-cash goodwill impairment of $34.3 million related to the Torgau facility.
Interest expense was relatively flat at $28.4 million in the second quarter of 2025 compared to $26.8 million in the same quarter of 2024.
In the second quarter of 2025, other expenses were $1.1 million compared to other income of $4.3 million in the same quarter of 2024. Other expenses in the second quarter of 2025 primarily consisted of foreign exchange losses on the revaluation of dollar denominated cash held at our operations as the dollar weakened against the euro at the end of the second quarter of 2025 mostly offset by interest earned on cash. In the second quarter of 2024, other income primarily consisted of interest earned on cash and foreign exchange gains on the revaluation of dollar denominated cash held at our operations as the dollar strengthened at the end of the second quarter of 2024.
In the second quarter of 2025, we had an income tax recovery of $1.9 million, or an effective tax rate of 2%. In the same quarter of 2024, we had an income tax provision of $1.3 million on a loss before income taxes. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate as we do not recognize tax recoveries for certain entities which we do not expect to realize a tax benefit. In the second quarter of 2024, the effective tax rate was also impacted by the non-deductibility of the non-cash goodwill impairment.
In the second quarter of 2025, our net loss was $86.1 million, or $1.29 per share, compared to $67.6 million, or $1.01 per share, in the same quarter of 2024. The net loss in the second quarter of 2024 included the non-cash goodwill impairment of $34.3 million, or $0.51 per share.
In the second quarter of 2025, Operating EBITDA decreased to negative $20.9 million from positive $30.4 million in the same quarter of 2024 primarily as a result of lower pulp and manufactured products sales realizations, negative foreign exchange impacts from a weaker dollar, higher per unit fiber costs and the non-cash impairment recognized on hardwood inventory. These decreases were partially offset by fewer days of planned annual maintenance downtime at our pulp mills and higher lumber sales realizations.
Pulp Segment – Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Selected Financial Information
(in thousands)
| Three Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Pulp revenues | $313,705 | $346,808 |
| Energy and chemical revenues | $18,603 | $20,563 |
| Segment Operating EBITDA(1) | $(10,262) | $31,674 |
(1) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information.
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the second quarter of 2025 decreased by approximately 10% to $332.3 million from $367.4 million in the same quarter of 2024 driven by lower pulp revenues.
Pulp revenues in the second quarter of 2025 decreased by approximately 10% to $313.7 million from $346.8 million in the same quarter of 2024 as a result of lower sales realizations and volumes.
Energy and chemical revenues in the second quarter of 2025 decreased by approximately 10% to $18.6 million from $20.6 million in the same quarter of 2024 primarily due to lower chemical sales realizations.
Total pulp production in the second quarter of 2025 increased by approximately 8% to 457,117 ADMTs compared with 421,692 ADMTs in the same quarter of 2024 primarily as a result of fewer days of planned annual maintenance downtime in the second quarter of 2025. In the second quarter of 2025, our pulp mills had 29 days of downtime (approximately 40,900 ADMTs) which included 23 days of planned annual maintenance and six additional days due to slower than expected start-up. In the same quarter of 2024, our pulp mills had 44 days of downtime (approximately 77,600 ADMTs) which included 37 days of planned annual maintenance and seven additional days due to slower than expected start-up.
We estimate that planned annual maintenance downtime in the second quarter of 2025 adversely impacted our Segment Operating EBITDA by approximately $26.4 million, comprised of approximately $19.4 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their financial results using International Financial Reporting Standards, referred to as “IFRS”, capitalize their direct costs of maintenance downtime.
In the third quarter of 2025, we currently expect a total of 18 days of planned annual maintenance downtime (approximately 19,600 ADMTs) at our pulp mills.
Total pulp sales volumes in the second quarter of 2025 were relatively flat at 426,731 ADMTs compared to 433,320 ADMTs in the same quarter of 2024.
In the second quarter of 2025, the third-party industry quoted average list price for NBSK pulp in Europe was relatively flat compared to the same quarter of 2024. In the second quarter of 2025, the third-party industry quoted average list price for NBSK pulp in North America increased from the same quarter of 2024 due to stronger demand and supply constraints. In the second quarter of 2025, the third-party industry quoted average net price for NBSK pulp in China decreased from the same quarter of 2024 as a result of weaker demand driven by the current economic climate and global trade policy uncertainty. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,553 per ADMT and $1,820 per ADMT, respectively, in the second quarter of 2025 compared to approximately $1,602 per ADMT and $1,697 per ADMT, respectively, in the same quarter of 2024. Third-party industry quoted average net prices for NBSK pulp in China were approximately $734 per ADMT in the second quarter of 2025 compared to approximately $811 per ADMT in the same quarter of 2024. Prices quoted for
China are net of discounts, allowances and rebates whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
In the second quarter of 2025, the third-party industry quoted average list price for NBHK pulp in North America decreased from the same quarter of 2024 due to weaker demand. In the second quarter of 2025, the third-party industry quoted average net price for NBHK pulp in China decreased from the same quarter of 2024 driven by weak demand due to the current economic climate and global trade policy uncertainty. Third-party industry quoted average list prices for NBHK pulp in North America were approximately $1,310 per ADMT in the second quarter of 2025 compared to approximately $1,437 per ADMT in the same quarter of 2024. Third-party industry quoted average net prices for NBHK pulp in China were approximately $533 per ADMT in the second quarter of 2025 compared to approximately $735 per ADMT in the same quarter of 2024.
Our average NBSK pulp sales realizations in the second quarter of 2025 decreased by approximately 7% to $758 per ADMT from $811 per ADMT in the same quarter of 2024 primarily due to lower net prices in China partially offset by higher prices in North America. In the second quarter of 2025, average NBHK pulp sales realizations decreased by approximately 18% to $575 per ADMT from $701 per ADMT in the same quarter of 2024 as a result of lower prices in China and North America.
In the second quarter of 2025, we had a negative foreign exchange impact of approximately $17.7 million on Segment Operating EBITDA compared to the same quarter of 2024. This negative impact was primarily due to foreign exchange losses on the revaluation of dollar denominated accounts receivables held at our operations, as the dollar weakened relative to the euro and Canadian dollar at the end of June 2025, and the negative impact of a weaker dollar on our euro denominated costs and expenses compared to the same quarter of 2024.
In the second quarter of 2025, we recorded a non-cash impairment of $11.0 million against hardwood inventory at our Peace River mill as a result of low hardwood pulp prices.
Costs and expenses in the second quarter of 2025 were relatively flat at $368.7 million compared to $364.0 million in the same quarter of 2024 as the negative foreign exchange impacts from a weaker dollar, the non-cash impairment recognized on hardwood inventory and higher per unit fiber costs were mostly offset by lower maintenance costs due to fewer days of planned annual maintenance downtime in the second quarter of 2025.
Overall average per unit fiber costs in the second quarter of 2025 increased by approximately 11% compared to the same quarter of 2024 primarily as a result of higher per unit fiber costs at our German mills due to reduced supply. Per unit fiber costs at our Canadian mills were relatively flat in the second quarter of 2025 compared to the same quarter of 2024. For the third quarter of 2025, we currently expect per unit fiber costs to be lower for our German pulp mills due to reduced demand and relatively stable for our Canadian pulp mills.
Transportation costs for our pulp segment in the second quarter of 2025 were relatively flat at $32.9 million compared to $33.7 million in the same quarter of 2024.
In the second quarter of 2025, Segment Operating EBITDA for our pulp segment decreased to negative $10.3 million from positive $31.7 million in the same quarter of 2024 as a result of lower pulp sales realizations, negative foreign exchange impacts from a weaker dollar, the non-cash impairment recognized on hardwood inventory and higher per unit fiber costs. These decreases were partially offset by lower maintenance costs due to fewer days of planned annual maintenance downtime in the second quarter of 2025.
Solid Wood Segment – Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Selected Financial Information
(in thousands)
| Three Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Lumber revenues | $66,332 | $53,910 |
| Energy revenues | $4,242 | $4,301 |
| Manufactured products revenues(1) | $12,418 | $35,381 |
| Pallet revenues | $26,586 | $26,741 |
| Biofuels revenues(2) | $5,095 | $8,155 |
| Wood residuals revenues | $2,595 | $1,750 |
| Segment Operating EBITDA(3) | $(4,861) | $3,124 |
(1) Manufactured products primarily include CLT and glulam.
(2) Biofuels include pellets and briquettes.
(3) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information.
Solid wood segment revenues in the second quarter of 2025 decreased by approximately 10% to $117.3 million from $130.2 million in the same quarter of 2024 primarily due to lower manufactured products revenues partially offset by higher lumber revenues.
In the second quarter of 2025, lumber revenues increased by approximately 23% to $66.3 million from $53.9 million in the same quarter of 2024 primarily as a result of higher sales realizations.
Energy, biofuels and wood residuals revenues in the second quarter of 2025 decreased by approximately 16% to $11.9 million from $14.2 million in the same quarter of 2024 primarily due to lower biofuels sales volumes.
In the second quarter of 2025, manufactured products revenues decreased by approximately 65% to $12.4 million from $35.4 million in the same quarter of 2024 driven by lower sales realizations and volumes as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Pallet revenues in the second quarter of 2025 were flat at $26.6 million compared to $26.7 million in the same quarter of 2024 due to continued weak economic conditions in Europe.
Lumber production in the second quarter of 2025 increased by approximately 8% to 120.2 MMfbm from 111.4 MMfbm in the same quarter of 2024 driven by the timing of planned maintenance downtime and higher production at our Torgau facility.
Lumber sales volumes in the second quarter of 2025 modestly increased by approximately 3% to 120.6 MMfbm from 116.6 MMfbm in the same quarter of 2024 as a result of higher production.
Average lumber sales realizations in the second quarter of 2025 increased by approximately 19% to $550 per Mfbm from $463 per Mfbm in the same quarter of 2024 due to lower supply and improved demand in both the U.S. and European markets. The U.S. market accounted for approximately 45% of our lumber revenues and approximately 40% of our lumber sales volumes in the second quarter of 2025. The majority of the balance of our lumber sales were to Europe.
Manufactured products sales realizations decreased to $1,318 per m3 in the second quarter of 2025 from $2,942 per m3 in the same quarter of 2024 as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Fiber costs were approximately 80% of our lumber cash production costs in the second quarter of 2025. In the second quarter of 2025, per unit fiber costs for lumber production increased by approximately 25% compared to the same quarter of 2024 due to strong demand. For the third quarter of 2025, we currently expect modestly higher per unit fiber costs due to a temporary reduction in regional logging in Germany and continued strong demand.
Transportation costs for our solid wood segment in the second quarter of 2025 decreased by approximately 8% to $13.4 million from $14.5 million in the same quarter of 2024 primarily as a result of lower freight rates.
In the second quarter of 2025, Segment Operating EBITDA for the solid wood segment decreased to negative $4.9 million from positive $3.1 million in the same quarter of 2024 primarily due to lower manufactured products sales realizations and higher per unit fiber costs partially offset by higher lumber sales realizations.
Consolidated – Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Total revenues for the first half of 2025 decreased by approximately 9% to $960.5 million from $1,052.8 million in the same period of 2024 driven by lower sales volumes and realizations from our pulp and manufactured products partially offset by higher lumber sales realizations.
Costs and expenses in the first half of 2025 decreased by approximately 8% to $1,012.2 million from $1,097.0 million in the same period of 2024 primarily as a result of lower pulp sales volumes. This decrease was partially offset by higher per unit fiber costs, foreign exchange losses and the non-cash impairment recognized against hardwood inventory at our Peace River mill in 2025. The foreign exchange losses resulted from the impact of a weaker dollar on the revaluation of dollar denominated accounts receivables held at our operations. In the first half of 2024, costs and expenses included a non-cash goodwill impairment of $34.3 million related to the Torgau facility, which was recognized as a result of ongoing weakness in lumber, pallet and biofuels markets in Europe stemming from high interest rates and other economic conditions, and a non-cash loss of $23.6 million in connection with the dissolution of the CPP joint venture.
In the first half of 2025, cost of sales depreciation and amortization was relatively steady at $77.7 million compared to $80.2 million in the same period of 2024.
Selling, general and administrative expenses were flat at $60.1 million in the first half of 2025 compared to $61.5 million in the same period of 2024.
In the first half of 2025, we had a negative foreign exchange impact of approximately $12.0 million on operating loss compared to the same period of 2024 primarily due to foreign exchange losses on the revaluation of dollar denominated accounts receivables held at our operations as the dollar weakened relative to the euro and Canadian dollar at the end of June 2025.
In the first half of 2025, our operating loss was $51.7 million compared to $44.2 million in the same period of 2024 as a result of higher per unit fiber costs, lower pulp and manufactured products sales realizations, negative foreign exchange impacts from a weaker dollar and the non-cash impairment recognized against hardwood inventory partially offset by higher lumber sales realizations. In the first half of 2024, our operating loss included a non-cash goodwill impairment of $34.3 million related to the Torgau facility and a non-cash loss of $23.6 million recognized in connection with the dissolution of the CPP joint venture.
Interest expense in the first half of 2025 was relatively flat at $56.6 million compared to $54.4 million in the same period of 2024.
In the first half of 2025, other expenses were $1.3 million compared to other income of $9.2 million in the same period of 2024. Other expenses in the first half of 2025 primarily consisted of foreign exchange losses on the revaluation of dollar denominated cash held at our operations as the dollar weakened against the euro at the end of June 2025 mostly offset by interest earned on cash. In the first half of 2024, other income primarily consisted of interest earned on cash and foreign exchange gains on the revaluation of dollar denominated cash held at our operations as the dollar strengthened at the end of June 2024.
During the first half of 2025, we had an income tax recovery of $1.1 million, or an effective tax rate of 1%, and in the same period of 2024, we had an income tax recovery of $5.1 million, or an effective tax rate of 6%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate as we do not recognize tax recoveries for certain entities which we do not expect to realize a tax benefit. In the first half of 2024, the effective tax rate was also impacted by the non-deductibility of the non-cash goodwill impairment.
In the first half of 2025, our net loss was $108.4 million, or $1.62 per share, compared to $84.3 million, or $1.26 per share in the same period of 2024. The net loss in the first half of 2024 included the non-cash goodwill impairment of $34.3 million, or $0.51 per share, and the non-cash loss of $23.6 million, or $0.35 per share, recognized in connection with the dissolution of the CPP joint venture.
In the first half of 2025, Operating EBITDA decreased to $26.2 million from $94.0 million in the same period of 2024 primarily due to higher per unit fiber costs, lower pulp and manufactured products sales realizations, negative foreign exchange impacts from a weaker dollar and the non-cash impairment recognized on hardwood inventory partially offset by higher lumber sales realizations.
Pulp Segment – Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Selected Financial Information
(in thousands)
| Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Pulp revenues | $670,669 | $755,103 |
| Energy and chemical revenues | $42,719 | $44,672 |
| Segment Operating EBITDA(1) | $39,610 | $100,139 |
(1) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information.
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the first half of 2025 decreased by approximately 11% to $713.4 million from $799.8 million in the same period of 2024 driven by lower pulp revenues.
Pulp revenues in the first half of 2025 decreased by approximately 11% to $670.7 million from $755.1 million in the same period of 2024 as a result of lower sales volumes and realizations.
Energy and chemical revenues in the first half of 2025 modestly decreased to $42.7 million from $44.7 million in the same period of 2024 driven by lower chemical sales realizations.
Total pulp production in the first half of 2025 decreased by approximately 5% to 916,026 ADMTs from 960,599 ADMTs in the same period of 2024 primarily due to the dissolution of the CPP joint venture in March 2024. In the first half of 2025, our pulp mills had 51 days of downtime (approximately 70,600 ADMTs) which included 45 days of planned annual maintenance and six additional days due to slower than expected start-up. In the first half of 2024, our pulp mills had 44 days of downtime (approximately 77,600 ADMTs) which included 37 days of planned annual maintenance and seven additional days due to slower than expected start-up.
We estimate that planned annual maintenance downtime in the first half of 2025 adversely impacted our Segment Operating EBITDA by approximately $55.9 million, comprised of approximately $40.6 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their financial results using International Financial Reporting Standards, referred to as “IFRS”, capitalize their direct costs of maintenance downtime.
Total pulp sales volumes in the first half of 2025 decreased by approximately 9% to 904,610 ADMTs from 998,984 ADMTs in the same period of 2024 driven by lower production and the timing of sales.
In the first half of 2025, third-party industry quoted average list prices for NBSK pulp in Europe and North America increased from the same period of 2024 primarily due to stable demand and supply constraints. In the first half of 2025, the third-party industry quoted average net price for NBSK pulp in China modestly decreased from the same period of 2024 as a result of weaker demand driven by the current economic climate and global trade policy uncertainty. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,552 per ADMT and $1,787 per ADMT, respectively, in the first half of 2025 compared to approximately $1,501 per ADMT and $1,568 per ADMT, respectively, in the same period of 2024. Third-party industry quoted average net prices for NBSK pulp in China were approximately $764 per ADMT in the first half of 2025 compared to approximately $778 per ADMT in the same period of 2024. Prices quoted for China are net of discounts, allowances and rebates whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
In the first half of 2025, the third-party industry quoted average list price for NBHK pulp was relatively stable in North America compared to the same period of 2024. In the first half of 2025, the third-party industry quoted average net price for NBHK pulp in China decreased from the same period of 2024 due to weaker demand driven by the current economic climate and global trade policy uncertainty and the market absorbing increased hardwood capacity, which came online in 2024. Third-party industry quoted average list prices for NBHK pulp in North America were approximately $1,289 per ADMT in the first half of 2025 compared to approximately $1,330 per ADMT in the same period of 2024. Third-party industry quoted average net prices for NBHK pulp in China were approximately $556 per ADMT in the first half of 2025 compared to approximately $698 per ADMT in the same period of 2024.
Our average NBSK pulp sales realizations in the first half of 2025 were relatively flat at $771 per ADMT from $766 per ADMT in the same period of 2024 as higher prices in North America and Europe were offset by lower prices in China. In the first half of 2025, average NBHK pulp sales realizations decreased by approximately 13% to $572 per ADMT from $660 per ADMT in the same period of 2024 driven by lower prices in China.
In the first half of 2025, we had a negative foreign exchange impact of approximately $10.9 million on Segment Operating EBITDA compared to the same period of 2024 as a result of foreign exchange losses on the revaluation of dollar denominated accounts receivables held at our operations as the dollar weakened relative to the euro and Canadian dollar at the end of June 2025.
In the first half of 2025, we recorded a non-cash impairment of $11.0 million against hardwood inventory at our Peace River mill primarily due to low hardwood pulp prices.
Costs and expenses in the first half of 2025 decreased by approximately 7% to $729.6 million from $780.5 million in the same period of 2024 driven by lower pulp sales volumes. This decrease was partially offset by higher per unit fiber costs, the non-cash impairment recognized against hardwood inventory and negative foreign exchange impacts from a weaker dollar. In the first half of 2024, costs and expenses included a non-cash loss of $23.6 million recognized in connection with the dissolution of the CPP joint venture.
Overall average per unit fiber costs increased by approximately 5% in the first half of 2025 compared to the same period of 2024 primarily as a result of higher per unit fiber costs at our German mills due to reduced supply. Per unit fiber costs at our Canadian mills were relatively steady in the first half of 2025 compared to the same period of 2024.
Transportation costs for our pulp segment in the first half of 2025 decreased by approximately 12% to $68.3 million from $77.4 million in the same period of 2024 driven by lower pulp sales volumes partially offset by higher freight rates.
In the first half of 2025, Segment Operating EBITDA for the pulp segment decreased to $39.6 million from $100.1 million in the same period of 2024 primarily due to lower pulp sales realizations, higher per unit fiber costs, the non-cash impairment recognized against hardwood inventory and negative foreign exchange impacts from a weaker dollar.
Solid Wood Segment – Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Selected Financial Information
(in thousands)
| Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Lumber revenues | $131,718 | $109,792 |
| Energy revenues | $9,108 | $9,139 |
| Manufactured products revenues(1) | $31,242 | $52,094 |
| Pallet revenues | $49,763 | $54,761 |
| Biofuels revenues(2) | $14,319 | $19,409 |
| Wood residuals revenues | $3,838 | $4,066 |
| Segment Operating EBITDA(3) | $(5,153) | $2,229 |
(1) Manufactured products primarily include CLT and glulam.
(2) Biofuels include pellets and briquettes.
(3) Segment Operating EBITDA is a measure of segment profit or loss presented in our financial statements under GAAP. Refer to the segment information note in our consolidated financial statements for more information.
Solid wood segment revenues in the first half of 2025 modestly decreased to $240.0 million from $249.3 million in the same period of 2024 as higher lumber revenues were more than offset by lower revenues from our other products.
Lumber revenues in the first half of 2025 increased by approximately 20% to $131.7 million from $109.8 million in the same period of 2024 primarily due to higher sales realizations and volumes.
Energy, biofuels and wood residuals revenues in the first half of 2025 decreased by approximately 16% to $27.3 million from $32.6 million in the same period of 2024 primarily as a result of lower biofuels sales volumes.
In the first half of 2025, manufactured products revenues decreased by approximately 40% to $31.2 million from $52.1 million in the same period of 2024 due to lower sales realizations and volumes as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Pallet revenues in the first half of 2025 decreased by approximately 9% to $49.8 million from $54.8 million in the same period of 2024 as a result of lower sales volumes as weak economic conditions in Europe continue to negatively impact demand.
Lumber production in the first half of 2025 modestly increased to 248.2 MMfbm compared to 238.4 MMfbm in the same period of 2024 due to the timing of planned maintenance downtime and higher production at our Torgau facility.
Lumber sales volumes in the first half of 2025 increased by approximately 6% to 251.5 MMfbm from 238.0 MMfbm in the same period of 2024 driven by higher production.
Average lumber sales realizations in the first half of 2025 increased by approximately 14% to $524 per Mfbm from $461 per Mfbm in the same period of 2024 as a result of lower supply and improved demand in both the U.S. and European markets. The U.S. market accounted for approximately 46% of our lumber revenues and approximately 39% of our lumber sales volumes in the first half of 2025. The majority of the balance of our lumber sales were to Europe.
Manufactured products sales realizations decreased to $1,955 per m3 in the first half of 2025 from $3,128 per m3 in the same period of 2024 as the ongoing elevated interest rate environment in the U.S. negatively impacted demand.
Fiber costs were approximately 80% of our lumber cash production costs in the first half of 2025. In the first half of 2025, per unit fiber costs for lumber production increased by approximately 18% compared to the same period of 2024 due to strong demand.
Transportation costs for our solid wood segment in the first half of 2025 were relatively flat at $26.7 million compared to $27.9 million in the same period of 2024.
In the first half of 2025, Segment Operating EBITDA for the solid wood segment decreased to negative $5.2 million from positive $2.2 million in the same period of 2024 as a result of higher per unit fiber costs and lower manufactured products sales realizations partially offset by higher lumber sales realizations.
Liquidity and Capital Resources
Summary of Cash Flows
(in thousands)
| Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Net cash from (used in) operating activities | $(7,515) | $32,991 |
| Net cash used in investing activities | (42,633) | (37,638) |
| Net cash from (used in) financing activities | 15,978 | (46,459) |
| Effect of exchange rate changes on cash and cash equivalents | (4,256) | 287 |
| Net decrease in cash and cash equivalents | $(38,426) | $(50,819) |
We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for production costs, such as fiber, chemicals and energy costs, and other material operating costs for maintenance, freight and labor. Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and sales and the payment of payables and expenses.
On August 1, 2025, we announced that our board of directors had suspended our quarterly dividend. In making this determination, the change was considered prudent from a capital allocation standpoint in light of ongoing market and global trade environment uncertainties. The declaration, timing and amount of any future dividends will be subject to the discretion and approval of our board of directors based upon consideration of, among other things, our financial condition, capital allocation strategy, liquidity requirements, earnings and market conditions.
Cash Flows from (used in) Operating Activities. In the six months ended June 30, 2025, cash used in operating activities was $7.5 million compared to cash provided from operating activities of $33.0 million in the same period of 2024. A decrease in accounts receivable provided cash of $14.8 million in the six months ended June 30, 2025 and an increase in accounts receivable used cash of $41.8 million in the same period of 2024. Adjusting for inventory impairments of $11.0 million, an increase in inventories used cash of $24.1 million in the six months ended June 30, 2025 and a decrease in inventories provided cash of $4.6 million in the same period of 2024. An increase in accounts payable and accrued expenses provided cash of $16.4 million in the six months ended June 30, 2025 and $18.1 million in the same period of 2024. An increase in prepaid expenses and other used cash of $8.8 million in the six months ended June 30, 2025 and a decrease in prepaid expenses and other provided cash of $5.5 million in the same period of 2024.
Cash Flows from (used in) Investing Activities. In the six months ended June 30, 2025, investing activities used cash of $42.6 million. In the six months ended June 30, 2025, we incurred $44.4 million of capital expenditures primarily related to completion of the wood room project at our Celgar mill, log yard upgrades at our Torgau facility and Friesau mill, sorting line upgrades and other strategic projects at our mass timber facilities, and maintenance projects across our operating segments. In the six months ended June 30, 2025, we received $3.1 million in government grants for capital projects at our mass timber facilities.
In the six months ended June 30, 2024, investing activities used cash of $37.6 million. In the six months ended June 30, 2024, we incurred $36.3 million of capital expenditures primarily related to log yard upgrades and other strategic projects at our Torgau facility, optimization projects at our Mercer Spokane facility, and maintenance projects across our operating segments.
Cash Flows from (used in) Financing Activities. In the six months ended June 30, 2025, financing activities provided cash of $16.0 million. In the six months ended June 30, 2025, we borrowed approximately $25.4 million under our revolving credit facilities and we paid dividends of $5.0 million.
In the six months ended June 30, 2024, financing activities used cash of $46.5 million. In the six months ended June 30, 2024, we repaid approximately $35.8 million under our revolving credit facilities and we paid dividends of $5.0 million.
Balance Sheet Data
The following table is a summary of selected financial information as of the dates indicated:
(in thousands)
| June 30, 2025 | December 31, 2024 | |
|---|---|---|
| Cash and cash equivalents | $146,499 | $184,925 |
| Working capital | $635,485 | $653,466 |
| Total assets | $2,378,376 | $2,262,932 |
| Long-term liabilities | $1,629,767 | $1,576,619 |
| Total shareholders’ equity | $446,491 | $429,775 |
Sources and Uses of Funds
Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand. Our principal uses of funds consist of operating expenditures, capital expenditures and interest payments on our senior notes.
The following table sets out our total capital expenditures and interest expense for the periods indicated:
(in thousands)
| Six Months Ended June 30, 2025 | 2024 | |
|---|---|---|
| Capital expenditures | $44,413 | $36,344 |
| Cash paid for interest expense(1) | $53,415 | $51,529 |
| Interest expense(2) | $56,566 | $54,402 |
(1) Amounts differ from interest expense, which includes non-cash items. See supplemental disclosure of cash flow information in our Interim Consolidated Statements of Cash Flows included in this report.
(2) Interest on our senior notes due 2028 is paid semi-annually in April and October of each year. Interest on our senior notes due 2029 is paid semi-annually in February and August of each year. Prior to their redemption in October 2024, interest on our senior notes due 2026 was paid semi-annually in January and July of each year.
As of June 30, 2025, we had cash and cash equivalents of $146.5 million, approximately $291.6 million available under our revolving credit facilities and aggregate liquidity of about $438.1 million.
We have reduced our planned capital expenditures for fiscal 2025 and currently expect them to be between $90.0 million to $100.0 million.
We currently consider the majority of undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no U.S. income tax has been provided on such earnings. However, if we were required to repatriate funds to the U.S., we believe that we currently could repatriate the majority thereof without incurring any material amount of taxes as a result of our shareholder advances and U.S. tax reform. However, it is currently not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S. Substantially all of our undistributed earnings are held by our foreign subsidiaries outside of the U.S.
Based upon the current level of operations and our current expectations for future periods in light of the current economic environment, and in particular, current and expected pulp and lumber pricing and foreign exchange rates, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facilities, will be adequate to finance the capital requirements for our business.
In the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, capital resources will be required. Depending on the size of a transaction, the capital resources that will be required can be substantial. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets or the issuance of securities.
Debt Covenants
Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements. See our annual report on Form 10-K for the fiscal year ended December 31, 2024.
As of June 30, 2025, we were in full compliance with all of the covenants of our indebtedness.
Contractual Obligations and Commitments
There were no material changes outside the ordinary course to any of our material contractual obligations during the six months ended June 30, 2025.
Foreign Currency
As a majority of our assets, liabilities and expenditures are held or denominated in euros or Canadian dollars, our consolidated financial results are subject to foreign currency exchange rate fluctuations.
We translate foreign denominated assets and liabilities into dollars at the rate of exchange on the balance sheet date. Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recorded in other comprehensive income (loss) and do not affect our net earnings.
As a result of a weaker dollar versus the euro and Canadian dollar as of June 30, 2025, during the six months ended June 30, 2025, we recorded a non-cash increase of $133.6 million in the carrying value of our net assets denominated in euros and Canadian dollars, consisting primarily of our property, plant and equipment. This non-cash increase does not affect our net loss, Operating EBITDA or cash but is reflected in our other comprehensive income (loss) and as an increase to our total equity. As a result, our accumulated other comprehensive loss decreased to $97.7 million.
Based upon the exchange rate as of June 30, 2025, the dollar was approximately 5% weaker against the Canadian dollar and 13% weaker against the euro since December 31, 2024. See “Quantitative and Qualitative Disclosures about Market Risk”.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect both the amount and the timing of the recording of assets, liabilities, revenues, and expenses in the consolidated financial statements and accompanying note disclosures. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increases, these judgments become even more subjective and complex.
Our significant accounting policies are disclosed in Note 1 to our audited annual financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2024. While all of the significant accounting policies are important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment. On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, future cash flows associated with impairment testing for goodwill and long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, revenues under long-term contracts, inventory impairment, assets and liabilities classified as held for sale and the fair value of disposal groups, legal liabilities and contingencies. Actual results could differ materially from these estimates and changes in these estimates are recorded when known.
For information about our significant and critical accounting policies, see our annual report on Form 10-K for the fiscal year ended December 31, 2024.
Cautionary Statement Regarding Forward-Looking Information
The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Generally, forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, or words of similar meaning, or future or conditional verbs, such as “will”, “should”, “could”, or “may”, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties and other factors, many of which are beyond our control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the following:
Risks Related to our Business
- Our business is highly cyclical in nature;
- cyclical fluctuations in the price and supply of our raw materials, particularly fiber, could adversely affect our business;
- inflation or a sustained increase in our key production and other costs would lead to higher manufacturing costs which could reduce our margins;
- our business, financial condition and results of operations could be adversely affected by disruptions in the global and European economies caused by geopolitical conflicts, including Russia's invasion of Ukraine and conflicts in the Middle East;
- the impacts of changes in international trade policies, including tariffs or other trade barriers by the United States, or other nations, may adversely impact our business, financial condition and results of operations;
- we face intense competition in the forest products industry;
- our business is subject to risks associated with climate change and social and government responses thereto;
- fluctuations in prices and demand for lumber and mass timber products could adversely affect our business;
- our solid wood segment lumber products are vulnerable to declines in demand due to competing technologies or materials;
- we may experience material disruptions to our production;
- acquisitions may result in additional risks and uncertainties in our business;
- our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for such capital requirements;
- trends in non-print media and changes in consumer habits regarding the use of paper have and are expected to continue to adversely affect the demand for market pulp;
- we are subject to risks related to our employees;
- we are dependent on key personnel;
- if our long-lived assets become impaired, we may be required to record non-cash impairment charges that could have a material impact on our results of operations;
- our insurance coverage may not be adequate;
- we rely on third parties for transportation services;
- if we are unable to offer products certified to globally recognized forestry management and chain of custody standards or meet customers’ product or project specifications, it could adversely affect our ability to compete;
- failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business;
- evolving sustainability reporting and environmental, social and governance preferences of customers, investors and other stakeholders may impact our business;
Risks Related to our Debt
- our level of indebtedness could negatively impact our financial condition, results of operations and liquidity;
- changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities;
- we are exposed to interest rate fluctuations;
Risks Related to Macroeconomic Conditions
- a weakening of the global economy, including capital and credit markets, could adversely affect our business and financial results and have a material adverse effect on our liquidity and capital resources;
- political uncertainty, an increase in trade protectionism or geopolitical conflict could have a material adverse effect on global macroeconomic activities and trade and adversely affect our business, results of operations and financial condition;
- we are exposed to currency exchange rate fluctuations;
- globally, various central banks raised interest rates in 2022 and 2023 in response to high inflation rates, leading to a relatively high-interest rate environment, which could dampen macroeconomic conditions and business activity and reduce demand for our products;
- health epidemics or pandemics could adversely affect our business and financial results;
- we may incur losses as a result of unforeseen or catastrophic events, including terrorist attacks or natural disasters;
Legal and Regulatory Risks
- we are subject to extensive environmental regulation and we could incur substantial costs as a result of compliance with, violations of or liabilities under applicable environmental laws and regulations;
- we sell surplus green energy in Germany and are subject to changing energy legislation in response to high prices and energy shortages;
- our international sales and operations are subject to applicable laws relating to trade, export controls, foreign
corrupt practices and competition laws, the violation of which could adversely affect our operations;
- product liability claims could adversely affect our operating results;
Risks Related to Ownership of our Shares
- the price of our common stock may be volatile; and
- a small number of our shareholders could significantly influence our business.
Given these uncertainties, you should not place undue reliance on our forward-looking statements. The foregoing review of important factors is not exhaustive or necessarily in order of importance and should be read in conjunction with the risks and assumptions including those set forth under “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024 and in the other reports and documents we have filed with or furnished to the SEC. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
Cyclical Nature of Business
Revenues
The pulp and lumber businesses are highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can materially affect prices. Pulp and lumber markets are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macroeconomic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is primarily determined by supply relative to demand.
Industry capacity can fluctuate as changing industry conditions can influence producers to idle production capacity or permanently close mills. In addition, to avoid substantial cash costs in idling or closing a mill, some producers will choose to operate at a loss, sometimes even a cash loss, which can prolong weak pricing environments due to oversupply. Oversupply of our products can also result from producers introducing new capacity in response to favorable pricing trends. Certain integrated pulp and paper producers have the ability to discontinue paper production by idling their paper machines and selling their pulp production on the market, if market conditions, prices and trends warrant such actions.
Demand for each of pulp and lumber has historically been determined primarily by general global macroeconomic conditions and has been closely tied to overall business activity. Pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
The third-party industry quoted average European list prices for NBSK pulp between 2016 and 2025 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,635 per ADMT in 2024. In the same period, third-party industry quoted average North American list prices for NBHK pulp have fluctuated between a low of $820 per ADMT in 2016 to a high of $1,620 per ADMT in 2022.
As a key construction material, the pricing and demand for lumber is also significantly influenced by the number of housing starts, especially in the U.S. In the U.S., third-party industry quoted monthly average western spruce/pine/fir (WSPF) 2 x 4 #2&Btr prices between 2016 and 2025 have fluctuated between a low of $259 per Mfbm in 2016 to a high of $1,604 per Mfbm in 2021. Similarly, the demand for CLT and glulam is primarily driven by the wood construction market and increased government policies focused on a low-carbon economy.
Our mills and operations voluntarily subject themselves to third-party certifications in compliance with internationally recognized, sustainable management standards because end use paper and lumber customers have shown an increased interest in understanding the origin of products they purchase. Demand for our products could be adversely affected if we, or our suppliers, are unable to achieve compliance, or are perceived by the public as failing to comply, with these standards or if our customers require compliance with alternate standards for which our operations are not certified.
A pulp producer's actual sales price realizations are net of customer discounts, rebates and other selling concessions. Accordingly, prices for pulp and lumber are driven by many factors outside our control, and we have little influence over the timing and extent of price changes, which are often volatile. Because market conditions beyond our control determine the prices for pulp and lumber, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our mills. Therefore, our profitability depends on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.
Costs
Our production costs are influenced by the availability and cost of raw materials, energy and labor, and our plant efficiencies and productivity. Our main raw material is fiber in the form of wood chips, pulp logs, sawlogs and lumber. Wood chip, pulp log and sawlog costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both highly cyclical. Higher fiber prices could affect producer profit margins if they are unable to pass along price increases to pulp and lumber customers or purchasers of surplus energy.
Currency
We have manufacturing operations in Germany, Canada and the U.S. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars. However, the majority of our sales are in products quoted in dollars. Our results of operations and financial condition are reported in dollars. As a result, our costs generally benefit from a strengthening dollar but are adversely affected by a decrease in the value of the dollar relative to the euro and to the Canadian dollar. Such declines in the dollar relative to the euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Market risk
As filed, 612 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We are exposed to market risks from changes in interest rates and foreign currency exchange rates, particularly the exchange rates between the dollar and the euro and Canadian dollar. Changes in these rates may affect our results of operations and financial condition and, consequently, our fair value. We seek to manage these risks through internal risk management policies as well as the periodic use of derivatives.
For additional information, please refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our annual report on Form 10-K for the fiscal year ended December 31, 2024.
Controls and procedures
As filed, 1,819 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”), as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.
It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness and there can be no assurance that any design will succeed in achieving its stated goals.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Risk factors
As filed, 166 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes to the factors disclosed in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-06-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-04-01 to 2025-06-30 | $453.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months2025-01-01 to 2025-06-30 | $960.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months2025-04-01 to 2025-06-30 | $30.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months2025-01-01 to 2025-06-30 | $60.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2025-04-01 to 2025-06-30 | −$58.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months2025-01-01 to 2025-06-30 | −$51.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2025-04-01 to 2025-06-30 | −$1.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months2025-01-01 to 2025-06-30 | −$1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-04-01 to 2025-06-30 | −$86.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months2025-01-01 to 2025-06-30 | −$108.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-04-01 to 2025-06-30 | −$1.29 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months2025-01-01 to 2025-06-30 | −$1.62 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-04-01 to 2025-06-30 | −$1.29 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months2025-01-01 to 2025-06-30 | −$1.62 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-04-01 to 2025-06-30 | 66,914,282 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months2025-01-01 to 2025-06-30 | 66,903,741 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months2025-04-01 to 2025-06-30 | −$4.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months2025-01-01 to 2025-06-30 | −$7.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months2025-04-01 to 2025-06-30 | $24.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 6 months2025-01-01 to 2025-06-30 | $44.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months2025-04-01 to 2025-06-30 | $5.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months2025-01-01 to 2025-06-30 | $5.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | At period end2025-06-30 | $146.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2025-06-30 | $937.6m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-06-30 | $2.38bn | us-gaap:Assets |
| Current liabilities | At period end2025-06-30 | $302.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-06-30 | $1.93bn | us-gaap:Liabilities |
| Long-term debt | At period end2025-06-30 | $1.53bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | At period end2025-06-30 | $446.5m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0000950170-25-100958. Last ingested by Listed: Nov 3, 2026, 06:04 ET. Listed shows no prices and gives no investment advice.