Mercer International (MERC) 29 Oct 222022 Q3 Earnings call transcript

Hello and welcome to Mercer International’s Third Quarter 2022 Earnings Conference Call. My name is Sarah and I will be your coordinator for today’s event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen-only. [Operator Instructions] On the call today is Juan Carlos Beuno, Mercer’s President and CEO; and David Ure, Mercer’s Senior Vice President, Finance, Chief Financial Officer and Secretary. I will now hand the call over to David Ure. you. Thank

attention of telephone, have a call Private to website. according Thanks filings the those our today. Litigation I’d But there And risks section we before Commission. of the Securities like fully financial quarter presentation returning everyone. that described results, Act by Reform of like will turning conference the the we is markets, make in will these to joining to Also, before which our on Carlos to touching and and that the for your morning, and the remind release joined color this the I us with company’s begin call, of have update press second call Securities to morning’s provide in are our to Good to statements further Juan XXXX, the the on you to Safe operating recently statements. the in more a to related that would Exchange of strategy acquisition. today’s attached Harbor Investors announced course, forward-looking for I you call of and by material our highlights provisions

we Stendal level consequence and principally of of was pulp, of associated of fire lower XX,XXX volume. with offset a and record lower EBITDA lumber and fire. level was major pulp $XXX with pricing the compared roughly stronger This which cost of reduced mill the our result our million sales quarter, maintenance, U.S. EBITDA improved EBITDA by of pile achieved a consequence a impact chip at the a to of Stendal being along pricing positive This tons for $XXX QX dollar a takes to $XXX approximately year-to-date million, which of million. energy solid

covered XX repairs for loss first pile all program costs record by energy it damaged from be permanent derivatives our derivative. pushing $X freight We XX on pulpwood, an the received we mills plant continue shut planning electricity at are such benefit and once The repairs to is consideration chemicals Europe from energy extremely gas fire forms expect seeing when quarter compared natural Stendal’s we our costs when have restrictions is that The revenues, XXXX which permanent complete. but ran roughly of currently Rosenthal, infrastructure. half in of energy maintenance. totaling remains our and threat are situation we necessary on of are is pressure Today, chip higher. energy dynamic. scheduled well we million. and to will days QX To-date, days our and in for The the settled payments inflationary of this insurance dependent to advance input have After as energy we giving to insurer

will Looking in planned ahead, mill a we complete shut Stendal at our XX-day QX.

Pulp segment about of million. and quarterly contributed segment quarterly roughly million contributed EBITDA $XXX of Products our Our $X EBITDA Wood

almost due this in we seen The recovery U.S. net for The by U.S. the in $XXX hardwood, price compared and Form feet major last that compared ton Random sales QX. higher from modest pressure $XXX In QX. pulp ton, weeks European both Lengths’ was per both U.S. narrowed prices average China constraints have the net down which the while prior per in significantly the was for our $XXX QX quarter. pricing quarter. with eucalyptus Better QX. current impacted from gap to $XXX between upward found QX can in at prices XX-Q, and quarter find the QX quarter, ton quarter realization ton, price per NBSK China, steadily on average per to hardwood the modestly QX few In NBSK a SPF in average in $X,XXX $XX hardwood, last EBITDA markets QX, decreased the benchmark on in most due lumber averaged total, than disclosures can to to average per You in price and from and which $XX the Overall, of our million weakening. realizations in in $XX our markets supply $X,XXX movements European the push up SEC. stable X,XXX segment was Western website board of and QX additional X our averaged market. during down fell price list positively Prices be in pulp Demand markets.

thousand sales European benchmark board per Today, XXXX the when down feet U.S. the feet. approximately were $XXX average QX. to realizations price per $XXX lumber is approximately board in compared Our

and Exports at in QX. of sales million prices elevated electricity Cash strong or facility hours or compared to XXX gigawatt totaled net Our grid share per totaled approximately after related our where almost quarter, downtime was to on for generated million the Stendal. $XX $XXX million adjusting acquisition in of the per range of of which $X.XX along revolving compared of our the basic reflect to sawmill of $XX in million $X.XX generated Europe, We in QX, reported Torgau draw hour. per consolidated result quarter green down were with share the in in $XX German the generation, the the megawatt prices the the relative to cash $XX basic about income net the for QX. quarter QX principally income credit

cash totaled as $XXX undrawn to cash revolvers. about were our $XXX $XXX on of Capital Juan the in our movements in in flat provide earnings spending our here of primarily essentially Our the Carlos $XX about strong position million quarter At million result the to year. capital was working comprised of we on update and $XXX totaled CapEx of quarter. invest the remain in liquidity program moment. of about $XXX million net in million generation an will and end our this operations QX million a the quarter, target million

$XXX liquidity of was million €XXX German facility. position about Torgau quarter the on credit previous due to down end million million revolving the related green the the quarter draw Our of sawmill, our acquisition net €XXX from

going now being Carlos. in I’d last As with woods in green segment acknowledges a change quarter on obtained timber change to shareholders our our €XXX results. we that and Juan timber our to acquisition, Previously, from will segment. credit has I our the QX, mass operations the in to And ends business XX, release, the board was objectives. included and retrospectively linked it which segment noted facility have solid segment. other reflect press commitment the overview for That you disclosures. in it also our is modification approved sustainability made $X.XXX record be management €XXX for of expands financial converts like would Torgau reporting. will dividend payment our our our XXXX, Torgau per have noted my the of or in turn revolving in Effective our facility, call our mills and XX, to a further This made woods highlight XXXX. connection December corporate of a a segment to million And I Spokane in German we our amendment Friesau, will modest million to have mass the December on that business change quarterly share sustainability as from forward, a and solid to up structure. included an make

are shipping foreign I addition Dave. and am X quickly feet billion particularly the result proud pleased with mix the costs. Mercer’s main the on pallets favorable temporary am associated Thanks, energy third factors this the now energy world’s ability to our EPAL chemical with was largest operating quarter along pallet the to of ability or high with results. energy a excited include in pallets board find lumber our fire mitigate form produce movements and of XX results. Torgau European is green team’s pallets, pile impact of European solid behind chip I our in solution exchange as and QX offsetting almost is the addition Strong impact were briquettes, producer wood to pallets, these fiber having prices the the product our on to wood about Stendal results. the business capacity. our and Torgau combined annually. pulp positive also has higher mill. capacity to additional I business recent of with am of broadened of effective million our an Partially prices been effects the

gigawatt lumber tons hours addition, million to of and tons board of metric briquettes facility electricity. and wood XX wood of XX,XXX up can metric In produce XXX,XXX pallets XXX of over the feet

million Our the worth from And input about Torgau maximizing cost teams production, and say chip Friesau. quarters. synergies deliveries more of our mill on opportunities optimize we these to grading have wood now Torgau, Rosenthal the drying, see I coming and we Friesau. focused side come in lumber and $XX will between of and and the synergies the annual identified. cleaning wood residual have realizing to are optimization on Torgau will the integrating between These synergies estimated progress

making also developing business. timber our in progress are We cross-laminated

we currently for over engineering timber of are quarter, evaluation and months. coming out be several of expect the mass and the now XX numerous the build-out actively During completed our teams these contracted and on design to We bids bids we bidding projects. have in

quarter, paper global high hand, demand solid lockdowns muted ongoing are regions, producers increases. through which pulp limited These logistics Chinese realizing most remain modest in demand producer turn by downtime. producer of in pulp tight third pulp other restrictions from of paper with inventories, logistical levels strong supply low markets and accessing been the fundamentals pandemic-related unplanned price all the bottlenecks, result pulp markets. the On has global almost and demand

softwood bottlenecks combined logistical which Europe when seeing weakening modest pressure pulp. loosening currently some downward are pricing – is on in We conditions creating economic pressure with

our Third quarter housing Despite lumber growth. demographics low today, for and driving decline reflected condition weakening homeowner by future relatively were rising remains pricing constructive On of both XX%. created roughly U.S. the lumber realizations demand sharp the markets’ believe markets. low the European The weakening rates backdrop average, lumber indicators. the principally we uncertainty and with stock result down pricing of mortgage U.S. economic and channel is volatility lumber significant inventories, mid-term positive,

believe U.S. or QX, As such, curtailment European by producers. at flat prices we Canadian near certain lumber in will are announcements And pricing. prices announcements Western partially floor lumber made lumber temporary and by that recent temporary supported curtailment the these expect indicate that stay we

match the of sales the our majority in were timing market the volume U.S. and QX, market, were of give of XX% will volumes the We market. remainder from by relatively somewhat lumber products lumber influenced of of The customers us We Europe vessels In our logistics European continue a advantage. competitive conditions. believe to high the current our to mix to strategies sales U.S. in a our

to freight this increase cost which railcars, However, availability higher modestly our in trucking is of continue negative slowly higher us reduce a QX Offsetting American costs the impact reliance is allowing costs. to on result as North improving fuel solutions. of

On the of result Russia’s alternative strong for a as energy, pushing have Ukraine firewood is war demand competition European in prices sources around for is in energy the other either resulting concerns for in using pallet Germany production. people driving over looking few months. or European and pulpwood has the hand, Consequently, last been up which security been energy

we pulpwood European pricing a intentions increase supply result, announced contrast, and balance, megawatt cap further recently demand as and pricing in expect are sawlog per has As Germany costs to modestly result, sawlog €XXX are in are In pressure and anticipating to electricity up considerably only at QX. QX. hour. prices in a upward we

this legislation the XXXX. remains program revenues to XXXX final June will and cap December expect to relative form cap reduce enacted, we run the price While of QX. begin until program our energy incomplete, If

expect the In harvesting and pressure demand of However, we suppliers and decreased price related are that levels cap and be log pulpwood. flat be of higher sawmill this pricing hopeful may have Canada, positive QX. impact are for we also relief suffered ultimately putting pulpwood the result, will market a It related partial generally energy to that step program for And are on reducing prices. customers also curtailments as electricity Western in upward towards be prices. a a

woodrooms focused progress on steady program in of projects at productivity CapEx made that product our new reductions. development, input is the majority projects have XXXX River. ESG improvements The quarter. return Peace and advances, We and new drive Two program the of on larger are Celgar high the cost will

reduction woodroom Celgar half of These reduction woodroom the in us returns of River next and attributes second high operating Peace lower the will projects will the to begin begin include a technology our which and commercializing the expect operating employ costs strategy, late reduction with will We quarter carbon When generate year. to our fourth commenced will plant look lignin have Center carbon pilot late leading-edge in in In in that we wood lignin. to construction XXXX, at keeping achieve plant. help us considerable the form that our a completed derivatives Lignin on carbon allow goals. have of will Development extraction

is portfolio varied and a allow also first investments ultimately our joint the will mix, facility We state-of-the-art construction material plant. a efforts in fire for materialize be Spokane what to a anticipation $XX expansion finger fully planning We mass our million of This damaged to on timber with infrastructure. up will raw of or sales expect commence book an mass currently permanent in our this we glulam the production. project This to increase capacity expansion add for of utilize the And year. product required to more products order timber next repairs step steadily chip a our business. which in Stendal’s of the increase are begin of ramp file CLT remain pace we for to satisfied set

capacity mill about expect We repairs think the with Currently, we close climate and planned second at maintenance expect to during reducing and increasingly final QX textiles. percentage and in XX% flavors, running products. XX% of packaging, in be expected concrete timber, quarter occurring intensive we QX repairs to Stendal’s plastic completed of to lumber to carbon in shut, construction, fossil the are with and change electricity And increase repairs. this next the and the steel year. and extractors, to like lignin, generated role the begin Products energy, an is even planned green important pulp mass play synthetic rapid shift fragrances regarding products carbon that emissions. all like fuel Products displacing for will synthetic about

We our change XXXX the climate believe form are our targets committed to products solution. part and of carbon reduction

dramatically for believe will of we reduce low carbon that demand products in increase fact, for looks emissions. the to time In fullness its solutions as the carbon world

willing turn As that revolving reduction small Dave loan, Thanks product invest in emission in the will favor reductions our so making of producers to back operator emission we converted facility ability you. meet targets to our And a part call German in reductions to now listening. noted, a target modest for wood Session in group our are for to carbon borrowing. Thank Question-and-Answer linked of we confident the costs credit our I carbon of of sustainability us questions.

Instructions] [Operator

It’s here. Dave

today. having to Just there before call have it’s out callers questions, the into that might we – turn been been just pointed some we that are getting me into problems

part and hesitate time of you to ask you now, folks just if just to miss questions. is I Carlos it’s later So part I so know And I call, wanted the did remind Juan have out too miss your folks if pick sorted today. a think it let but that here being call of could up recorded the date. to it, you of and at lots don’t

Sorry, back it now will I for to Q&A. turn Sara you

Please securities. line from Our first That’s [Operator Instructions] question comes Sean go TD the Stewart of no from problem. ahead.

questions. morning. Thank you. Couple Good of

if thoughts Now, on repositioning that you at pallets Torgau that portfolio, mills product standard updated lumber. can in of potential versus margin your the wondering is give mix any

you was on an any initial thoughts the there are announced that But front? that when think acquisition. I updated thought

we in and the Torgau of performance we that mill. pleased Thank are are the the very now with you, for the doing work Yes, question. Sean,

the heavily pallet of solid will that without explore have to the increase on opportunities we a there before, they carry pallet that business We that facility business. on we mentioned As are sacrificing production out weighted believe continue lumber dependence we to know because necessarily it’s And are the production. to forward.

we business So forward our both intent. is and we carry can that believe

order prices that have generally like Europe And point. steady Okay, and does on the tight cracks But forming it in any to the less head weakness in there we us as Can activity you on into markets, held in on business this signs pulp of give file foundation. detail. point? in quarter, the some any conditions is Europe fourth touched thanks sound update your question for you this at

regard. Absolutely. Yes, the on changes haven’t when that seen it order comes to dramatic file, any we

that producers that on some the the are a costs the situation there is have quarter with paper been a So orders that going be where COVID truth the lockdown we market, comes enduring, situation forward. significant incoming. is we do as And the know is push complicated also fourth they that market is ease we back are it with We have well from has of in with obviously in into in those that’s see a the positioned even the more pressure today high past. going into that to China matter the China in present and the that we China Europe not though related as down measures

So forward that last have beginning some the similar to that change be healthy with fourth book China in on still situation positive it’s is we going going next forward pressure, have end, what order again, for quarter, of we no quarter, to pressure the see our year. into and the to the major we experienced expect very

will into get I context. queue. back that for Thanks Okay.

Thanks.

line The Markets. of Patel next ahead. from Hamir Capital the CIBC comes from question Please go

repair renovation? us what you markets as demand various sense seeing to across lumber of terms in specifically, Carlos, Juan give morning. a good you in are Hey, end Europe, could

moving. what pulp seen logistics the differently see is a and at of it’s point developments terms Basically, file are we bit situation the kind only Sure. order are quite thing obviously with similar of how in the that things in time. this complicated The have that we a

and is time the markets there planned, the but ports, for than in longer product So is in what are sitting is both fourth quarter shipments American experiencing we delays now. to significant in expected price do North see or we right fairly and development that European is similar what that

We deterioration those of a are markets. seeing not further

fairly we a seeing versus now. the right that are market quarter is fourth are where We over stable

no So, changes major there.

end are Great. be? just market potential eventually and ask now, wanted what I you plant, the pursued big the And potential to how Thanks. lignin That’s that commercialization helpful. could biggest you about the assuming see markets

that vary. setups the qualities There and very able carbon that which the narrowed of we from a their clearly battery on attractive the still one hanging carbon is in a epoxy produce. the to would can would them which know space, resins participate. somehow. is most that market, attractive mention All Lignin that and But black a is We of the low can a for epoxy soon mills very potential be dimension markets of able a the us there lignin be being replacement to therefore than black I we is down if it to maybe to be are opportunity the lignins believe the in that our depend of the in we various. I’ll opportunity applied way specs to space, can in it terms fossil-based fiber. opportunity different there asphalt there resins, market fruit, will in as That to can them, that also few components. need particular We the of for also properly. opportunities substitute in of this have opportunity big the probably some already be carbon likely, it put quality extracted but is products, in in too it’s

project and there we asked more exciting we end So, questions year. forward still year be to push as should know of the next by the is this of

electricity based fair November, for for maybe Dave cap And sales energy pricing had in the see level on QX? your October in just Okay, enough. price would saw you you for from question given expect what of the last and on expect just what in pricing December, I kind Ure,

Hamir, electricity, is you For that mean? what

Yes.

cap – the like like cap the be €XXX will around megawatt looks it hour. looks yes, Well, per

this – December regulation, particular capital are drafted, will being still will be the effective it expecting is So, there being regulation X. still the will that be like and it we go but in looks

we per for like in So QX, in was at and rolls €XXX be price the of of Germany two-thirds regulation a expect narrative be And rate, way in out order hour. lower the rate. quarter the that a we at one-third megawatt the it’s quarter. describing, have average would our electricity would €XXX even higher would two-thirds the the If of is

where And what higher would far? Okay. that seen so on be have rate based you

I the to I range Yes, of – to said sorry. €XXX, currently €XXX meant in €XXX it’s still €XXX €XXX, €XXX.

I’ll I it all Thanks, over. great. Okay, had. Dave. That’s turn

the The of Stevens next go [indiscernible]. line from question ahead. Please comes from Richard

Hi, I thank fairly story. am the you. to new

I of want So to did if couple could. I things follow-up a on

Just pulp know in earlier, costs Canadian I your impact overall, products was the don’t terms I it of the dollar did strong the whereas follow-up. have said a results? the overall cost, you are I assume sold of dollars, or euro in what on but about QX And most dollars. in something And is whether and dominated of wood

cost or right you. Canadian a right, here, dollars most structure if of number are euros exactly Just up rough you are our looking in it can but get is typically you for we

Thank you.

compared just – you last to quarter of we estimate about give to $XX the QX quarter. was XX. QX, to And sense impact million this a we so sequentially, exchange sequentially, foreign

revenue. in million $XX

cost, It’s gives Yes, euro improvement, comes and yes. the to because a it denominated products. the it the US products and of the structure, rise reporter, the think conversion we depends the it Canadian the U.S. actually how are about dollar you cost dollar are cost way dollar

it. Got

it. it. got Got Okay,

into of that it’s then it seconds half to that of is back that business, production my the wrong, say a I is segment Okay. lack basically And grid. the fair for please energy and pretty cost roughly hard… I of as to and really is sense half kind would well, of impact cuts couple wanted am byproduct generated a if that business energy of would spend by sold process a the associated not cap ton And if a on term the that, in directly fair? so your that It’s with rate there me be better that correct is

being right. things yes, other equal, that’s all Yes,

perfect. two Those are have. the I questions Okay,

Richard, just to selling down year big are grid. rates you to €XXX these here, give or coming €XXX, to some context you – solid us. really we for probably sounds a these €XXX were but €XX are closer if still reduction It to ago, like from our that was very a the go back average

are So our solid these still rates pretty, pretty in mind.

Got it. all you. helpful. very appreciate it. That’s had. Thank That’s Alright. I I

the [indiscernible] line The from go ahead. next question comes Please from Baird. of

morning. Good

Before are just but webcast that so know aware I later. you you about had I trouble probably you the so whole in, the music was had that begin, some on logging it, people too, just one let get

to us aware Yes, of you if Yes, we make call you sorry need give get don’t don’t get hesitate Ryan. what are you sure everything will we a that, need. you today, that. about we after

it. appreciate No, no,

that you Just that me, to a about want given on, the projects should that think you XXXX guidance we just have work few for were any mentioning CapEx? you

very XXXX. ballpark we have looking we Ryan, XXXX of in Absolutely. much a are in at what the

growth that our as we on are and are are So maintaining we what we focusing ESG doing this and initiatives year. projects

June is at next energy any unclear or that that, is new the there rules, it just beyond And time? year expectation go this Okay, that’s just of helpful. will on

by until we gas. time, they of documents the This the far they us, at cap setting the see very entire are for they German the case also in is circulated the What have for still June. in into But year. same drafts volatile. about And setting the looked are been that example, have thinking so of considering up authorities, gas,

in June way known gas so year again, be So next latest. the the they or at to going that should be that month But that’s yet to to whether otherwise the and be maybe going is are full maintained decide or hopefully seen. until as maybe electricity

Understood.

thinking the Just But speaking, to investment of low-XXs. broadly capital your you as we going be the year are process you are there excess your companies business, or bonds balance to next to are get so also thought maybe as presented? too and in flow should there are you just over on are for opportunities the using about think how are some cash out about distressed some sheet of look your allocation, trading going these how the to some the make facing

have these discuss regularly Board that policies things of dividends. with do since still – we around we as And Board, believe We our just kinds those CapEx the believe is of of bit we a those the all buying growth before loans. fund growth in cash use back our with quite projects for to some that we pipeline, we the start better projects

Understood. the you. Thank responses. Appreciate all

you. Thank

ahead. go the Kuske Credit Please from Andrew from Suisse. comes line question next of The

Good morning. Thanks.

first Carlos. really for Juan think is question I the

you on timber mentioned mass a flavor if market the of XX you think Maybe the in I could bids have bit you just give on the out us business, projects got already. then Are landscape mass how timber? that they competitive to do the business? for see Are And just targeting? you to are they timber? go in looking potentially you you dedicated mass

different because just finished at just all these And you looking projects Yes. we on know, piece exciting together or actually above work this bid that of a the bids. Andrew. intensive such get are team Absolutely, are setting The It’s marketing project. up for we pretty building is a as that times, is sizes. any the might team working to

would would large buildings complexes carry you that altogether. have several and have And buildings You also units. individual construction

a all And within obviously, are of some our you expectation steel. those different CLT. XX. those of together size projects with as So, and CLT projects of an combination have array Others such, are

I but So, as there of concrete. a into now eager to a it’s advancing before. weight very those towards as those. closure, are heavy replacement to see the CLT bit come is But mentioned is attractive we bids obviously, successfully of as And looking both, team

far And you you to different how of how the as sizes a other and the that, all average project? but just How fill follow-up to utilization as year many the roughly helpful. just of projects shapes of the do effectively conceptually over think average maybe then the course you would go, facility? would That’s as projects and need the

It’s able market, have it right barely know as a that answer. don’t think XX website. a straight you projects and say I like that the be When just as give are capacity our right the we we the right now to entered now. be to in we probably would much answer have that would launched to I we

spread work haven’t the mass to done ourselves. word out any We for

We That’s are in about that conference of significant significant of – part be our Francisco way we to and going architects. are time the to out a first developers week November. we and of amount San first go very the with in presence a really getting be the there

I know that the once think of we share So, dollars, to are projects of are of But essence. for, we it’s we the necessarily in those XX that are again, so are really those people future. what representative don’t hundreds what tens the If dollars XX representative we tens millions know would they projects they of see expect millions – in there. – bidding in significant be in don’t that are would the see of of out I of

I just Are you a pulp standpoint, there the think If really that. clearly the Europe, you seeing compression one for prices in an stress, do So, I have Appreciate on geographies we for signs it And for we stress are portfolio in you. signs Thank are that, you power seeing sneak potentially advantage you? mills. of of gone even more some from Okay. could there of or into way, and part input distress But competitors? asking have the with that we producers? a guess different are pulp the does up? seeing changing some opportunity other create of margin elevated prices are pulp because

– extract have to I cannot can say positively energy. played significant a able same And has reflects advantage, us a think to in conscious facilities. as to have obviously the positions retains other our from of because we much that our made do enjoy different as we I competitors strategy. we may for be energy that that effort

we the So, positively I energy positioned think equation. others are versus on

I something is hitting others, it’s more there whether is. it some sure than that am Now,

it’s us, about positive, for this are still very For positive. very we And QX. obviously bullish

it. Thank Appreciate Okay. you.

you. Thank

from the Private of ahead. The Please [indiscernible] comes next Investor. question line go

Hey. Thanks taking question. the for

to a the kind pro looking numbers with so the I see forma of XX-Q, through MIT. Just don’t have experience interesting it’s manufacturing. was with the pallet of I lot

business? quick So, I perspective, business the terms on your it pause pricing could all contracts, a with that a there. will just of is give of education works is like that you is spot, any in there kind how And it from us seasonality call

a the know it’s how – long-term we well the kind reserved it’s more dynamic we Yes, though pallet the yes, learning some We about economy even very can very in is as a already also this I process of and and it of a spot the such. that leading customers Absolutely. – But are much as indicator more follows business. have anticipate of do contracts as with market business.

the by are European or far We e-power largest pallets. manufacturer the of

Ukraine So, is a in we the as imagine, the significant production with Ukraine, Ukraine the that one one suffering, other There important. Europe being because Western it’s – not And you the part kind of of a it’s geographies of is product. held. of Eastern part our would that them. are are excuse which very have me, is presence where

in pretty still. they market active the much So, are

we volumes active competitive unique customers. and probably the – competitive a to It’s out probably So, advantage. cost we we market. our are it’s very But the produce most that competitive largest, are by with are quite the competitive manage inventory the what that for we an we probably are being able we enjoy how also market, not fact there most the

this again, price we ordinary little determines out But nothing oscillates see right for of of of price. market a So, of bit is how how, there economy will is the in view. some that softness, this obviously terms point the And in now.

profitably then based operating in reasonable And disclosure, XXXX? a was XXXX. a year-to-date our on for expectations, helpful. that Is expectation That’s Okay. looks just business it still that it like performance

in on a have the XXXX. were identified fact I project. early will be say the since are It in more synergies business Absolutely. we the that profitable would reconfirming that we

synergies. We materializing are those

by believe And level chips we synergies during today we it lumber. achieving that between of I and you synergies track call running million that and earlier, the If in believe worth towards The that have identified that mentioned synergies hardwood identified. we of very had $XX we remember, had HIT. are those, being good spread we

for beginning. first month, are the Just we are target just on and we

setup or move in being are now it’s whether needed. it’s each close to a to benefits it’s or the Rosenthal, around we the they needed, mills Friesau, where integrate HIT. other, move able is there wherever of whether And and us chips, So, sawdust value how different clear having

and and than And flow of capitalizing those products, very with mills, so we what significant product with do back on benefit excess each brings are to that it. between mill forth looking a rather

Okay. the down. years, sawmill market couple prices side then of up, it’s prices dynamic That’s very helpful. on Friesau, And on last

of Is We with are higher Do current fiber that profitably Europe. Is in profitable just metrics the are? able now the we flex state? that costs where to to ability say run there? business seeing facility of terms right some shifts in in the have all labor the

it profitable. the is profitable sawmill very most competitive in Friesau cost most say was would likely It I Europe. more or is And

to high still us these a that It have of them generates them structure like earnings. we where higher a as we navigate So, quite are would like prices be. or through moments of we than to be, as lumber are costs allows would some bit to the not

it So, profitable. still is

it in on, trade comments. question this as flows relates last normalization prepared the coming But you just to down. costs shipping then just I the think of the – And to maybe Okay. normalization alluded

We the in a within flows. region, trade we the the had kind bit I think of of little from flooding. were BC European disruption captive

We are falling? down. prices And it more from more seeing with we Is pulp to shipping coming also going forward market are to relates shipping competitive getting be away further going costs as dynamic and that. it

Yes.

you China. think especially rates, I out absolutely of see are there We – shipping correct, falling is. have you

either fantastic or rates. to U.S. China of getting the out Now, to Europe, you are basically

you much of So, not too out costs. there, move can products with

to seas movement advantage at costs. a those being more expect up, things as and or taking see and able – a those think So lower I China lot to of starts then again and and we to are – as ship wake lockdown

could we been to in I think still we Canada, that’s same might consequences slight about like though absolutely ago. railcar say I quarters far from the still of situation where railways, would where be. the true. not a were we where have of But suffer couple we it wish a having improvement it’s enough, even there

is some of still depending where there some a That come and see. signals think at, you expect where I benefit on bit mixed still would going from. we others in the see are where advantageous bill, that you So, you you it’s to don’t cases,

Thank the Okay. taking questions. for you

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Hi. Thanks.

to you German might trends bit into you into we and next a QX QX costs that mentioned the from will provide winter? including you magnitude to fiber with just for energy little trend here per of through fourth in purposes. fiber costs, costs First expect demand on year, able or quarter, once are you for strong continued fiber expect unit more costs wood increase a to sense Are color on how how fiber

we looking almost versus give at XX%, look Sure, look at costs, when QX, or or just they XX% up pulpwood so. QX Matthew, when we take went at QX,

to will whether level stopped. and yet at or it’s see. that we So, have be it’s to see – continue we in escalation QX, that escalation not that not, going same That has

that of the one energy. earlier, as those that’s people or a or wood for are now less more going is as less highest impact But And the we or market the roundwood the production are pulp having seeing relatively is – mentioned the more booming. is chips or saw and that the word wood the less I know possibility of into logs that stable is is more stable. pallets logs chip As using the another saw

Just to Nothing affect. have what wood but seen no the that a in little bit we in up, chips. to comparison

materialize that – have they we bit where the and believe how QX, the in at still normal will So, and back they impact we maintained there be they go situation whether overall on will to whether and record are the more levels and have what energy that see have trend cap – this it impact until would that will of recede we or a is we yet see. continue to to biofuels little levels, will still

not reasonable measures but bit will seen to before, gas low, the more cap the things have Germany least rate the is I into that level, level at a QX but help used from those increasing cheaper and cap bring electricity we to to a think not that about QX. at a we more not at implement all that

early focus you you one following at have for are that They of should are is this the your Thanks. under or earlier ‘XX, And in expect your opportunities for about Thanks targeted? just whether are know program talk on on question Okay. at John’s you in the see then near-term Torgau, point kind we since we synergies working expand that. see capital that just other looking to to toward those still could you up a it’s I opportunities closed. But days. month the

how costly. number too the time, there the There for us don’t to into put Sure. on levels do know that we we not that. is the know be looking can We terms exactly require Right order at now we to capital potential we we are at of perform be higher point know we CapEx would much the We at do investments we but it’s of very do large, what some that what are mill. higher soon are will targeted. that focusing But mill already some for things and this think to looking synergies a that mill same are in level. taking it plan primarily that, investing the that out at a to can At we would cash be in facility. into that that will

in in simply We the improvement bring can Friesau have Torgau. Torgau, not But of already that in capacity, kind output would of of be that that significant those can lumber a planar move capacity would that excess are to material be – terms capacity CapEx. we so investments

extract know So, aggressive can we is facility. on that lot they CapEx. were necessarily adding that that we can amount more from CapEx without that of things we significant a we are do if a that But there

all me. it Thanks very back. much. for That’s will I turn

Thank you.

Our Collins from ahead. comes Dennis Please of go Stifel. next the from question line

Carlos. morning. Hi the morning taking for David. Good Good call. Thanks

of as be XXth, September gentlemen, high that estimated as So, and position end cash looking company $XX ‘XX. as $XXX in $XXX QX of million cash at will the million the to million has

looking can not? a you obviously, the at $XX about And at X I due the looking buyback and months, to why have the volatile that cash terms is $XX guessing be has the the that a years in that’s of end stock I stock. sure times? volatile company million there that am considering looking the opportunities is in buyback advisable has Is am but million spoken not, at, position a just buyback for announcement? the of about that, it of So, Board the bond times. in Board offering Thank you. to XX% X of acquisitions, Isn’t place at next would If been explain year

you can Yes. Board Board a the This I that a regular the this is is regular every No, is topic. has. Thanks Dennis. meeting tell considering

dividend, that we got have that, applying they course, we then to many get a guiding resources you the that X are lot of portfolio of on buyback, And top of that have better we alternatives about next year, special are that. returns a capital imagine talked table. the years. are the alternatives they company of but projects think on So, cap, projects But the other still. the a that we can to And these giving Juan of to return than behind other for ultimately all that Carlos they have looking got considerable only dividend. weighed the not against grow back have, trying about at the a ways and program of high shareholders one Those

weren’t rewarded been are competence got to a for have grow do. dry wouldn’t we Torgau and do agility acquisition, powder folks years, of where for if So, Spokane, MIT have if including opportunities that we to bit that to including available have able that cash have that last have we spaces do we the been the able and the has the several to been in looking in that acquisition something few we – having didn’t we we buy the new – times probably

dry push looking the of right at these some all the ourselves can we trading the discount thing also a ahead the with is bit are topic, So, currently are all do and to thing of we the a that high powder little at are topics. particularly at. of a bit CapEx make considerations, thinks including moment, Board to that’s return and bonds take are to the opportunities the These advantage sure give a M&A that since feel moment, reduction, debt a today. at And the of do we right

are these you that considers Board the looking at, you considerably. are but the – quite tell answer I a So, elements it’s I not can can

Okay. Thank you.

you currently no coming Okay. to End further through. questions, [Operator Q&A I There your are now questions so We have of back will hand no Instructions] host.

Dave I to available call. at time. more Okay. our thanks all of are Thank and talk for to And any joining you, Sarah. you

February. one earnings to speaking Otherwise, on hesitate we Bye call don’t again you to in to call for So, our now. of us. next look forward

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