Mercer cuts operating EBITDA loss to $2.9 million in third quarter
Key Facts
Mercer International said on November 5 that its operating loss before interest, taxes, depreciation and amortization, under its operating measure, narrowed to $2.9 million in the third quarter of 2026. The company recorded a loss of $28.1 million in the third quarter of 2025 and $21.0 million in the second quarter of 2026. Despite the clear improvement, the measure remained negative, and the company was still posting an operating loss. Mercer said the improvement was mainly due to government grants for its Peace River mill, cost-cutting initiatives and higher proceeds from energy and solid wood sales. It added that these factors partly offset higher fiber and freight costs and lower pulp proceeds.
The company posted a net loss of $59.2 million, or $0.88 per share, in the third quarter. That compares with a net loss of $80.8 million, or $1.21 per share, in the same period a year earlier, and $76.0 million, or $1.13 per share, in the second quarter of 2026. Mercer also recorded an accounting operating loss of $38.747 million, compared with an operating loss of $67.589 million in the third quarter of 2025. The figures show that losses narrowed at both the net and operating levels, while the company continued to report losses overall. Total revenue fell about 4% to $440.7 million from $458.1 million a year earlier, as pulp sales volumes and proceeds declined.
The pulp segment was the biggest source of revenue pressure, with revenue falling about 12% to $281.1 million from $318.6 million in the same period of 2025. Pulp sales volumes declined about 7% to 421,413 air-dried metric tonnes, from 452,840 tonnes. The company said pulp markets faced weak demand and a regional capacity surplus in China, keeping prices stable during the quarter. Capacity cuts and permanent closures at some pulp mills helped balance supply, but did not prevent declines in volumes and proceeds. By contrast, solid wood segment revenue rose 10% to $128.6 million from $117.2 million, and the segment's EBITDA loss improved to $7.0 million from $9.3 million a year earlier.
Planned annual maintenance at pulp mills affected operating results during the quarter. Mercer said its mills recorded 44 days of maintenance downtime, equivalent to about 48,900 air-dried metric tonnes, reducing operating EBITDA by about $34.1 million. The company expects a further planned 18-day outage at its Celgar mill in the fourth quarter of 2026. The maintenance impact came alongside market factors that weighed on pulp revenue, while government grants, cost cuts and improved proceeds from energy and wood supported EBITDA. Total liquidity was about $143.5 million as of September 30, including $71.0 million in cash and cash equivalents and about $72.5 million available under revolving credit facilities.
Mercer announced on November 2 a recapitalization agreement covering $1.275 billion of senior notes and providing $400 million of new capital through a fully backstopped rights offering of new secured notes. Among its terms, the transaction calls for exchanging about $1.1 billion of senior notes for equity and eliminating about $96 million in annual cash interest on those notes. The chief executive said the recapitalization would support debt reduction and strengthen liquidity. Holders of more than 87% of the outstanding principal of senior notes and holders of a majority of common shares signed agreements supporting the transaction. The plan includes a comprehensive restructuring through a prepackaged Chapter 11 plan, with current common shares to be canceled upon its effectiveness.
The company expects a slight increase in softwood pulp prices in its markets during the fourth quarter, citing continued global supply constraints, while it expects hardwood pulp prices to remain relatively stable. It also expects lumber prices to remain broadly stable, with weak demand offsetting supply constraints. In engineered wood, the order book and commitments stood at about $151 million at the end of the third quarter, tied to large data center infrastructure projects. Mercer expects the contracts to begin contributing to results as they ramp up in late 2026 and during 2027. The company scheduled a call to discuss third-quarter results for November 6, 2026, at 10:00 a.m. Eastern time.
MERC shares closed at $0.25 on November 4, 2026, and then at $0.2493 on November 5. Under the recapitalization announcement, the company expects confirmation of its restructuring plan within about 45 days of filing it and completion of the recapitalization by the end of 2026, subject to the satisfaction of conditions and receipt of necessary approvals. These dates mark the next stage in implementing the agreement, which aims to restructure debt and provide new capital. Operating performance remains tied to changes in pulp prices, demand and input costs, as well as the impact of the planned Celgar outage in the fourth quarter. The company said global supply constraints could support a slight increase in softwood pulp prices during that period.