Mercer International (NASDAQ:MERC) reported a fourth-quarter 2025 operating EBITDA loss of $20 million, an $8 million improvement from the prior quarter, as management pointed to stable production across its mills and early benefits from its “One Goal One Hundred” cost and efficiency program. The company said results were still pressured by pulp pricing, weak demand, and elevated fiber costs in both Germany and Canada.
Fourth-quarter results included large non-cash impairments
Chief Financial Officer Richard Short said operating EBITDA for the quarter included a $23 million non-cash inventory impairment tied primarily to low pulp prices and high fiber costs, with about $15 million related to softwood inventories and the remainder to hardwood inventories.
Mercer posted a consolidated net loss of $309 million, or $4.61 per share, compared with a net loss of $81 million, or $1.21 per share, in the third quarter. Short said the quarter’s long-lived asset and inventory impairments aggregated to roughly $239 million, or $3.57 per share.
Pulp markets: softwood weaker, hardwood mixed by region
Short said NBSK (softwood) markets weakened due to “sustained uncertainty” in the global economy. Mercer’s softwood sales realizations declined to $702 per ton from $728 per ton in the third quarter. In China, the NBSK net price slipped to $671 per ton, down $19, while the North American NBSK list price averaged $1,568 per ton, down about $132. The European NBSK list price was stable at an average of $1,498 per ton.
Hardwood markets in China improved in the quarter on stronger demand and increased domestic fiber costs, while North American demand and pricing were described as steady. Mercer’s overall hardwood sales realizations were flat at $528 per ton versus the prior quarter. Short said the average net price for eucalyptus hardwood was $540 per ton, up $37, and the North American hardwood list price averaged $1,198 per ton, flat quarter-over-quarter.
Chief Executive Officer Juan Carlos Bueno added that trade-war uncertainty was weighing on demand and pricing, even though “current tariffs appear to be stable for now,” and said Mercer expects more uncertainty as CUSMA is renegotiated in June. He described most tariff impacts as indirect, noting the company’s only direct tariff barrier was a 10% tariff on European lumber imports into the U.S., which he said compared favorably with Canadian imports facing an average combined tariff and duty rate of roughly 50% (varying by company). Bueno linked Canadian curtailments to reduced chip supply and upward pressure on fiber costs.
Bueno also discussed how displaced North American fluff pulp flows were adding pressure in the North American market, saying fluff pulp previously shipped to China is now subject to a 10% tariff, leading to product shifts and additional supply into paper applications.
Operations: maintenance downtime, volumes, and fiber cost outlook
Pulp sales volumes rose by 20,000 tons to 472,000 tons, while pulp production was 460,000 tons. Short said the quarter included 21 days of planned maintenance at the Stendal mill, reducing production by 42,000 tons compared with the third quarter, which had 20 days of planned downtime at Celgar and Rosenthal that reduced production by about 21,000 tons.
Looking ahead, Short said Mercer expects no planned maintenance downtime in the first half of 2026. He outlined downtime later in the year: Rosenthal down 14 days and Peace River down about 10 days in the third quarter, and Celgar down 20 days in the fourth quarter. Overall, he said Mercer expects nearly 50 fewer days of planned maintenance downtime compared with 2025.
Fiber costs were described as relatively steady in the fourth quarter versus the third quarter, but both executives said costs are expected to rise in the first quarter of 2026 in Canada and Germany due to supply constraints from reduced sawmilling activity. Bueno added that Germany would also see seasonal competition for fiber from biofuel producers and referenced German energy policy as a factor pushing up prices for residuals used in pellet and biofuel production.
Solid wood and mass timber: weak near-term markets, growing backlog
Mercer’s pulp and solid wood segments each posted negative EBITDA of $11 million in the quarter. Short said U.S. lumber pricing decreased modestly as weak demand was only partially offset by reduced supply, while European pricing was stable quarter-over-quarter. The Random Lengths U.S. benchmark for Western SPF No. 2 and better averaged $422 per 1,000 board feet in the fourth quarter, down from $477 in the third quarter; Short said the benchmark was around $448 per 1,000 board feet at the time of the call.
Lumber production fell about 6% to 109 million board feet, driven by reduced sawlog availability and holiday-season effects, while lumber sales volumes declined about 7% to 103 million board feet. Bueno said 41% of lumber volume was sold into the U.S. in the fourth quarter.
In mass timber, management highlighted improving demand indicators. Short said Mercer’s mass timber operations had modestly higher revenues in the fourth quarter and that the business had developed a “healthy order book” totaling about $163 million, up from roughly $80 million at the end of the third quarter. He said the company currently expects 2026 mass timber revenue of about $120 million.
During Q&A, Bueno said the mass timber business was neutral cash flow in 2025 despite low sales, and he expects positive profitability and cash contribution in 2026 with revenue above $120 million. He indicated profitability remains in the single digits during the ramp, with potential for double-digit profitability once both Conway and Spokane are running two shifts. He said the company plans to ramp Conway to two shifts in early Q2 and Spokane later in the year, and noted that data center hyperscalers are driving a meaningful portion of mass timber demand due to faster construction timelines and carbon benefits.
Liquidity, cost program, and 2026 priorities
Short said Mercer’s aggregate liquidity improved by more than $54 million to $430 million, consisting of about $187 million of cash and $243 million of undrawn revolvers, attributing the improvement to working capital management and cost reduction efforts. Mercer invested $14 million of maintenance capital in the quarter.
Management reiterated progress on its One Goal One Hundred initiative, which targets $100 million of profitability improvement by the end of 2026 using 2024 as a baseline. Short and Bueno said the program generated about $30 million of cost savings and reliability improvements in 2025.
Bueno said market weakness is expected to persist in 2026, making liquidity preservation the company’s priority through additional cost reductions, lower capital expenditures, and working capital measures, as well as actions to “rebalance” the asset portfolio to improve the balance sheet. He said planned 2026 CapEx is expected to be about $60 million to $80 million, focused on maintenance, environmental, and safety projects.
In Q&A, Short said cash taxes are expected to be negligible and cash interest around $120 million. He later clarified that Mercer expects only a modest working capital cash outflow in 2026 after initially misunderstanding a question. Management also said it is in discussions with lenders regarding extensions to its revolving credit facilities, describing talks as going well and expecting to conclude before the end of the second quarter, while noting the facilities are likely to become more expensive and may be modestly reduced in size.
On Peace River, Bueno said the company is pursuing initiatives aimed at returning the mill to profitability, including shifting the fiber mix from hardwood toward softwood and pursuing government-supported bioenergy expansion and a longer-dated carbon capture opportunity. He said Peace River had been 80% hardwood and 20% softwood, was roughly 70/30 at the time of the call, and is expected to reach 50/50 by year-end. Bueno also said Mercer’s carbon capture pilot with Svante Technologies is operating and producing “encouraging” early results, with a six-month testing period expected to inform next steps.
About Mercer International (NASDAQ:MERC)
Mercer International Inc is a publicly traded pulp producer headquartered in Vancouver, British Columbia. Listed on the NASDAQ under the symbol MERC, the company specializes in the manufacture of Northern Bleached Softwood Kraft (NBSK) pulp and dissolving pulp for use in tissue, specialty paper and textile applications.
Mercer’s core business activities include the operation of integrated pulp mills in North America and Europe. Its production portfolio encompasses NBSK pulp, renowned for its strength and versatility, and dissolving pulp, which serves as a key raw material in the manufacture of viscose, cellulose acetate and other specialty products.
The company’s facilities are located in British Columbia and the U.S.
