Mercer International Reports Wider Q2 Loss, Restructures Torgau Operations and Advances Balance Sheet Initiatives

Mercer International Inc. reported a second-quarter 2026 Operating EBITDA loss of $21.0 million and a net loss of $76.0 million, as elevated fiber costs in Europe, weak pulp market conditions and a $29.0 million non-cash inventory impairment weighed on earnings. The company also announced further restructuring measures at its Mercer Torgau facility in Germany and said it is pursuing strategic alternatives to strengthen its capital structure and liquidity.

Second-quarter Operating EBITDA was largely unchanged from a loss of $20.9 million in the same period of 2025 but declined from positive $7.8 million in the first quarter of 2026. Net loss improved from $86.1 million in the prior-year quarter but widened from $52.0 million in the preceding quarter. Revenue remained relatively stable at $460.3 million, compared with $453.5 million a year earlier, as stronger solid wood pricing and higher pulp sales volumes were mostly offset by weaker pulp prices.

Chief Executive Officer Juan Carlos Bueno said continued economic uncertainty delayed recovery in pulp markets, while higher European fiber costs driven by supply shortages and competition for wood residuals increased production costs and resulted in the inventory impairment. The company said it continues to evaluate strategic alternatives to improve liquidity and strengthen its balance sheet, including discussions with holders of its 2028 and 2029 senior notes and other stakeholders. Mercer emphasized that no agreement has been reached and there is no assurance any transaction will be completed.

Mercer said its "One Goal One Hundred" cost reduction program remains on track to deliver $100 million in savings and operational efficiencies by the end of 2026. The initiative generated $13 million in savings during the second quarter, bringing cumulative savings to approximately $54 million since its launch in April 2025. The company said the program complements efforts to reduce capital expenditures, optimize working capital and preserve cash.

The company is also implementing an operational restructuring at its Mercer Torgau facility to better align production capacity with current market conditions. Measures include workforce reductions, product portfolio adjustments and operational improvements, including new scanning technology to increase production of higher-value dimensional lumber and expand exports to the U.S. Approximately 100 contractor positions were eliminated in July 2026, with a total workforce reduction of around 350 positions expected to be completed in stages through the second quarter of 2027.

Mercer said geopolitical conflicts, including those in the Middle East and Ukraine, continue to create inflationary pressure on fiber, freight and production costs. Fiber costs at its German mills are expected to remain elevated in the third quarter, while Canadian operations could benefit from improving fiber supply. The company also expects softwood and hardwood pulp prices to soften modestly in the third quarter, although it anticipates more balanced market conditions toward the end of 2026 as supply reductions take effect.

In its pulp segment, second-quarter Operating EBITDA was a loss of $12.7 million, compared with a loss of $10.3 million a year earlier, reflecting lower pulp sales realizations and higher fiber costs despite reduced maintenance downtime and cost-saving initiatives. Pulp segment revenue declined modestly to $325.1 million, while pulp sales volumes increased about 6% to 450,329 ADMTs. The company also reported a $26 million non-cash inventory impairment within the pulp segment.

Mercer's solid wood segment posted an Operating EBITDA loss of $8.2 million, compared with a loss of $4.9 million in the prior-year period, primarily due to higher fiber costs. Segment revenue increased approximately 14% to $134.2 million, supported by growth in manufactured products, pallets, biofuels and energy, although lumber revenue declined because of lower sales volumes. Manufactured products revenue more than doubled to $25.8 million, driven by higher volumes and pricing for cross-laminated timber (CLT) and glue-laminated timber (glulam). The company said its mass timber order book stood at approximately $151 million at the end of the quarter, supported by large-scale data center infrastructure projects expected to contribute to results from late 2026 into 2027.

For the first six months of 2026, Mercer reported revenue of $949.6 million, compared with $960.5 million in the same period of 2025, while Operating EBITDA declined to a loss of $13.1 million from positive $26.2 million a year earlier. As of June 30, 2026, the company had $78.8 million in cash and cash equivalents and aggregate liquidity of approximately $191.7 million, including available revolving credit facilities.