Q4 2025 Mercer International Inc Earnings Call

February 13, 2026

Juan Carlos ueno president and chief executive officer of Mercer International, and Richard, Schwarz, CFO and secretary. I will now hand the call over to Richard short.

Thanks Shannon. Good morning, everyone.

Thanks for joining us today.

I will Begin by touching on the financial and operating highlights of the fourth quarter before, turning the call to 1 cardos to provide further color into the markets, our operations and our strategic initiatives.

Also for those of you that are joined today's call by telephone, there is presentation material that we have attached to the investor section of our website.

But before turning to our results, I would like to remind you that we will make forward-looking statements in this morning's conference call.

According to the safe harbor, provisions of the private Securities. Litigation Reform, Act of 1995.

I'd like to call your attention to the risks related to these statements, which are more fully described in our press release, and in the company's filings, with the Securities and Exchange Commission.

Our operating, evida for the fourth quarter was negative -20 million up 8 million when compared to the third quarter's results.

This change in performance, was largely due to stable production, across all our Mills and the benefits of our 1 goal 100 program.

However Market headwinds including pricing, weak demand and elevated fiber costs in both Germany and Canada continued to weigh in our overall results.

The current quarter's ebit da also includes a non-cash inventory. Impairment of 23 million.

In the fourth quarter, we recognize total non-cash, impairment charges, against our long, lived assets of 260 million or 3.22 cents per share.

204 million of this was against the assets of the Peace River Mill. A requirement under us, gaap, that reflects the ongoing weakness in the hardwood pulp Market,

We also recorded a 12 million 12, million impairment in our solid wood segment related to the sale of obsolete equipment.

Richard Short: dollars when compared to the third quarter's results. This change in performance was largely due to stable production across all our mills and the benefits of our One Goal One Hundred program. Over market headwinds, including pricing, weak demand, and elevated fiber costs in both Germany and Canada, continued to weigh on our overall results. The current quarter's EBITDA also includes a non-cash inventory impairment of $23 million. In the fourth quarter, we recognized total non-cash impairment charges against our long-lived assets of $260 million, or $3.22 per share. $204 million of this was against the assets of the Peace River Mill, a requirement under US GAAP that reflects the ongoing weakness in the hardwood pulp market. We also recorded a $12 million impairment in our solid wood segment related to the sale of obsolete equipment.

Speaker #1: When compared to the third quarter's results, this change in performance was largely due to stable production across all our mills and the benefits of our One-Goal 100 program.

Given the challenging hardwood, pulp market conditions, there are a number of strategic initiatives underway with the goal of returning, the Peace River Mill to profitability.

Speaker #1: However, market headwinds, including pricing, weak demand, and elevated fiber costs in both Germany and Canada, continue to weigh on our overall results. The current quarter's EBITDA also includes a non-cash inventory impairment of $23 million.

These include expanding softwood pulp production exploring government. Support for incremental energy generation and a carbon capture project.

Unfortunately us gaap does not allow for the for the inclusion of these initiatives in the impairment assessment.

1 Cardinals, to provide more detail on these initiatives shortly.

Speaker #1: In the fourth quarter, we recognized total non-cash impairment charges against our long-lived assets of 216 million dollars, or $3.22 per share. 204 million dollars of this was against the assets of the Peace River Mill, a requirement under U.S.

Richard Short: In the fourth quarter, we recognized total non-cash impairment charges against our long-lived assets of $260 million, or $3.22 per share. $204 million of this was against the assets of the Peace River Mill, a requirement under US GAAP that reflects the ongoing weakness in the hardwood pulp market. We also recorded a $12 million impairment in our solid wood segment related to the sale of obsolete equipment.

Our pulp and solid wood segments, both reported negative quarterly IBA 11 million in the fourth quarter.

Additional segment, disclosures are available in our form 10K, which can be found on our website and that of the SEC.

Speaker #1: GAAP that reflects the ongoing weakness in the hardwood pulp market. We also recorded a 12 million dollar impairment in our solid wood segment related to the sale of obsolete equipment.

In the fourth quarter, mbsk markets weaken due to the sustained uncertainty of the global economy.

Speaker #1: Given the challenging hardwood pulp market conditions, there are a number of strategic initiatives underway with the goal of returning the Peace River Mill to profitability.

Richard Short: Given the challenging hardwood pulp market conditions, there are a number of strategic initiatives underway with the goal of returning the Peace River Mill to profitability. These include expanding softwood pulp production, exploring government support for incremental energy generation, and a carbon capture project. Unfortunately, US GAAP does not allow for the inclusion of these initiatives in the impairment assessment. Juan Carlos Bueno will provide more detail on these initiatives shortly. Our pulp and solid wood segments both reported negative quarterly EBITDA of $11 million in the fourth quarter. Additional segment disclosures are available in our Form 10-K, which can be found on our website and that of the SEC. In the fourth quarter, NBSK markets weakened due to the sustained uncertainty of the global economy.

As a result, our softwood sales realizations decreased to 700 7 722 per ton down from 7208 per ton in the third quarter.

Speaker #1: These include expanding softwood pulp production, exploring government support for incremental energy generation, and a carbon capture project. Unfortunately, U.S. GAAP does not allow for the inclusion of these initiatives in the impairment assessment.

The mbsk net price. In China, saw a small decline to 671 per ton. A 19 decrease from the third quarter.

Richard Short: Juan Carlos Bueno will provide more detail on these initiatives shortly. Our pulp and solid wood segments both reported negative quarterly EBITDA of $11 million in the fourth quarter. Additional segment disclosures are available in our Form 10-K, which can be found on our website and that of the SEC. In the fourth quarter, NBSK markets weakened due to the sustained uncertainty of the global economy.

We observed a more significant drop in the North American mbsk list price, which the average 1,568 per ton in the fourth quarter, a reduction of about 132 from the third quarter.

Speaker #1: Juan Cartles will provide more detail on these initiatives shortly. Our pulp and solid wood segments both reported negative quarterly EBITDA of $11 million in the fourth quarter.

The European mbsk list. Price remains stable at an average of 1,498 per ton.

Speaker #1: Additional segment disclosures are available in our Form 10-K, which can be found on our website and that of the SEC. In the fourth quarter, MBSK markets weakened due to the sustained uncertainty of the global economy.

Hardwood markets in China, showed Improvement in the fourth quarter, largely due to Stronger, demand and increased domestic fiber costs.

Meanwhile, demand and pricing in North America. Remain steady.

Speaker #1: As a result, our softwood sales realizations decreased to $702 per ton, down from $728 per ton in the third quarter. The MBSK net price in China saw a small decline to $671 per ton, a $19 decrease from the third quarter.

Richard Short: As a result, our softwood sales realizations decreased to $702 per ton, down from $728 per ton in Q3. The NBSK net price in China saw a small decline to $671 per ton, a 19-dollar decrease from Q3. We observed a more significant drop in the North American NBSK list price, which averaged $1,568 per ton in Q4, a reduction of about 132 dollars from Q3. The European NBSK list price remains stable at an average of $1,498 per ton. Hardwood markets in China showed improvement in Q4, largely due to stronger demand and increased domestic fiber costs. Meanwhile, demand and pricing in North America remains steady.

Overall, our hardwood sales realizations were flat at 528 per ton.

The third quarter.

The average price Gap in China between softwood and hardwood pulp narrowed, by 56 dollars per ton. This quarter to approximately $130 per ton,

Speaker #1: We observed a more significant drop in the North American MBSK list price, which averaged 1,568 dollars per ton in the fourth quarter, a reduction of about 132 dollars from the third quarter.

The average net price for eucalyptus hardwood. In the fourth quarter was 540 per ton which is an increase of 37 from the third quarter.

In North America, the average list price was flat compared to the third quarter at 1,198 per ton.

Speaker #1: The European MBSK list price remained stable at an average of $1,498 per ton. Hardwood markets in China showed improvement in the fourth quarter, largely due to stronger demand and increased domestic fiber costs.

Richard Short: The European NBSK list price remains stable at an average of $1,498 per ton. Hardwood markets in China showed improvement in Q4, largely due to stronger demand and increased domestic fiber costs. Meanwhile, demand and pricing in North America remains steady.

As mentioned previously, the fourth quarter included, a 23 million non-cash inventory impairment, primarily driven by low pulp prices and high fiber costs of this amount approximately 15 million was attributed to softwood inventories and the remainder was against hardwood inventories.

Speaker #1: Meanwhile, demand and pricing in North America remained steady. Overall, our hardwood sales realizations were flat at 528 dollars per ton, compared to the third quarter.

Richard Short: Overall, our hardwood sales realizations were flat at $528 per ton compared to the third quarter. The average price gap in China between softwood and hardwood pulp narrowed by $56 per ton this quarter to approximately $130 per ton. The average net price for eucalyptus hardwood in the fourth quarter was $540 per ton, which is an increase of $37 from the third quarter. In North America, the average list price was flat compared to the third quarter at $1,198 per ton. As mentioned previously, the fourth quarter included a $23 million non-cash inventory impairment, primarily driven by low pulp prices and high fiber costs. Of this amount, approximately $15 million was attributed to softwood inventories and the remainder was against hardwood inventories.

Pulp sales volumes in the fourth quarter increased by 20,000 tons to 472,000. Tons.

Speaker #1: The average price gap in China between softwood and hardwood pulp narrowed by $56 per ton this quarter to approximately $130 per ton.

Pulp production remains relatively stable in the fourth quarter at 460,000 tons.

however, if we adjust for Planned, downtime our production volume, proved by about 20,000 tons,

Speaker #1: The average net price for eucalyptus hardwood in the fourth quarter was $540 per ton, which is an increase of $37 from the third quarter.

Speaker #1: In North America, the average list price was flat compared to the third quarter at $1,198 per ton. As mentioned previously, the fourth quarter included a $23 million non-cash inventory impairment, primarily driven by low pulp prices and high fiber costs.

21 days of planned maintenance at our sendall Mill in the fourth quarter which reduced production by 42,000. Tons. Compared to the third quarter. When we had a total of 20 days of planned, downtime at the cellar and Rosenthal Mills which reduced production by about 21,000 tons.

Richard Short: As mentioned previously, the fourth quarter included a $23 million non-cash inventory impairment, primarily driven by low pulp prices and high fiber costs. Of this amount, approximately $15 million was attributed to softwood inventories and the remainder was against hardwood inventories.

In the first half of 2026, we do not have any planned maintenance, downtime.

In Q3 Rosenthal will be down for 14 days and Peace. River will be down for about 10 days.

Speaker #1: Of this amount, approximately $15 million was attributed to softwood inventories, and the remainder was against hardwood inventories. Pulp sales volumes in the fourth quarter increased by 20,000 tons to 472,000 tons.

Richard Short: Pulp sales volumes in the fourth quarter increased by 20,000 tons to 472,000 tons. Pulp production remains relatively stable in the fourth quarter at 460,000 tons. However, if we adjust for planned downtime, our production volume improved by about 20,000 tons. We had a total of 21 days of planned maintenance at our Stendal mill in the fourth quarter, which reduced production by 42,000 tons compared to the third quarter, when we had a total of 20 days of planned downtime at the Celgar and Rosenthal mills, which reduced production by about 21,000 tons. In the first half of 2026, we do not have any planned maintenance downtime. In Q3, Rosenthal will be down for 14 days, and Peace River will be down for about 10 days. In Q4, Celgar will be down for 20 days.

In Q4 Cellar will be down for 20 days. Overall we expect to see almost 50 days less planned maintenance downtime compared to 2025.

Speaker #1: Pulp production remained relatively stable in the fourth quarter at 460,000 tons. However, if we adjust for planned downtime, our production volume improved by about 20,000 tons.

Our solid wood segment, lumber pricing sorry for our solid wood segment. Number pricing in the fourth quarter modestly, decreased compared to the third quarter in the US as weak demand was only partially offset by reduced Supply.

Speaker #1: We had a total of 21 days of planned maintenance at our Sendell Mill in the fourth quarter, which reduced production by 42,000 tons. In the third quarter, we had a total of 20 days of planned downtime at the Selgar and Rosenthal mills, which reduced production by about 21,000 tons.

In Europe pricing was stable in the fourth quarter compared to the third quarter.

The random links us Benchmark price for Western SPF number 2 and better averaged 422 dollars per thousand board feet in the fourth quarter.

A decrease from 477 per thousand board feet in the third quarter.

Richard Short: In the first half of 2026, we do not have any planned maintenance downtime. In Q3, Rosenthal will be down for 14 days, and Peace River will be down for about 10 days. In Q4, Celgar will be down for 20 days. Overall, we expect to see almost 50 days less planned maintenance downtime compared to 2025. Our solid wood segment, lumber pricing—Sorry, for our solid wood segment, lumber pricing in Q4 modestly decreased compared to Q3 in the US, as weak demand was only partially offset by reduced supply. In Europe, pricing was stable in Q4 compared to Q3.

Speaker #1: In the first half of 2026, we do not have any planned maintenance downtime. In Q3, Rosenthal will be down for 14 days, and Peace River will be down for about 10 days.

Today that Benchmark price for Western SPF number 2, and better is around 448 per thousand board feet. A 46 increase from the end of 2025.

Speaker #1: In Q4, Selgar will be down for 20 days. Overall, we expect to see almost 50 days less planned maintenance downtime compared to 2025. Our solid wood segment, lumber pricing—sorry—for our solid wood segment, lumber pricing in the fourth quarter modestly decreased compared to the third quarter in the U.S.

Richard Short: Overall, we expect to see almost 50 days less planned maintenance downtime compared to 2025. Our solid wood segment, lumber pricing—Sorry, for our solid wood segment, lumber pricing in Q4 modestly decreased compared to Q3 in the US, as weak demand was only partially offset by reduced supply. In Europe, pricing was stable in Q4 compared to Q3. The Random Lengths US benchmark price for Western SPF number 2 and better averaged $422 per thousand board feet in Q4, a decrease from $477 per thousand board feet in Q3. Today, that benchmark price for Western SPF number 2 and better is around $448 per thousand board feet, a $46 increase from the end of 2025.

In the fourth quarter, Lumber production decreased by about 6% to 109 million board feet from the third quarter.

This was primarily due to reduce saw log availability and reduce production during the holiday season.

Similarly, lumber sales, volume decrease to 103 million board feet. A drop of about 7% from the third quarter, which mirrored the lower production.

Speaker #1: As weak demand was only partially offset by reduced supply, in Europe, pricing was stable in the fourth quarter compared to the third quarter. The Random Lengths U.S.

Richard Short: The Random Lengths US benchmark price for Western SPF number 2 and better averaged $422 per thousand board feet in Q4, a decrease from $477 per thousand board feet in Q3. Today, that benchmark price for Western SPF number 2 and better is around $448 per thousand board feet, a $46 increase from the end of 2025.

Speaker #1: Benchmark price for Western SPF number two and better averaged $422 per thousand board feet in the fourth quarter, a decrease from $477 per thousand board feet in the third quarter.

Electricity sales in the fourth quarter, total, 202 gigawatt hours, and pricing was about $105 per megawatt hour, which is about the same as the third quarter.

Fiber costs for both our pulp and solid wood. Segments were relatively steady in the fourth quarter, compared to Q3.

Speaker #1: Today, that benchmark price for Western SPF number two and better is around $448 per thousand board feet—a $46 increase from the end of 2025.

In the first quarter of 2026, we are expecting fiber cost to increase in both Canada and Germany caused by Supply. Constraints resulting from reduced sawmilling activity.

Speaker #1: In the fourth quarter, lumber production decreased by about 6 percent to 109 million board feet from the third quarter. This was primarily due to reduced saw log availability and reduced production during the holiday season.

Richard Short: In Q4, lumber production decreased by about 6% to 109 million board feet from Q3. This was primarily due to reduced sawlog availability and reduced production during the holiday season. Similarly, lumber sales volumes decreased to 103 million board feet, a drop of about 7% from Q3, which mirrored the lower production. Electricity sales in Q4 totaled 202 GWh, and pricing was about $105 per MWh, which is about the same as Q3. Fiber costs for both our pulp and solid wood segments were relatively steady in Q4 compared to Q3. In Q1 2026, we are expecting fiber cost to increase in both Canada and Germany, caused by supply constraints resulting from reduced sawmilling activity.

In addition, Germany will also be impacted by seasonal demand for fiber from the biofuel industry.

Our Mass Timber operations, within the solid wood segment had modestly higher revenues in the fourth quarter, compared to the previous quarter.

Speaker #1: Similarly, lumber sales volumes decreased to 103 million board feet, a drop of about 7 percent from the third quarter, which mirrored the lower production.

In Q4 the elevated interest rates in the US continued to be a drag and overall Market momentum. However our Mass Timber business has developed a healthy order book.

Speaker #1: Electricity sales in the fourth quarter totaled 202 gigawatt-hours, and pricing was about $105 per megawatt-hour, which is about the same as the third quarter.

Richard Short: Electricity sales in Q4 totaled 202 GWh, and pricing was about $105 per MWh, which is about the same as Q3. Fiber costs for both our pulp and solid wood segments were relatively steady in Q4 compared to Q3. In Q1 2026, we are expecting fiber cost to increase in both Canada and Germany, caused by supply constraints resulting from reduced sawmilling activity.

Today the order book totals about 163 million, which Compares nicely to our order book of approximately 80 million dollars at the end of Q3.

We currently expect our 2026 Master Timber Revenue, to be about 120 million dollars.

Speaker #1: Fiber costs for both our pulp and solid wood segments were relatively steady in the fourth quarter compared to Q3. In the first quarter of 2026, we are expecting fiber costs to increase in both Canada and Germany, caused by supply constraints resulting from reduced sawmilling activity.

We continue to make progress on our 1 goal 100 program as a reminder. This initiative focuses on cost reduction and operational efficiencies with a Target to improve our profitability by 100 million by the end of 2026 using 2024 as a Baseline.

Speaker #1: In addition, Germany will also be impacted by seasonal demand for fiber from the biofuel industry. Our mass timber operations within the solid wood segment had modestly higher revenues in the fourth quarter compared to the previous quarter.

Richard Short: In addition, Germany will also be impacted by seasonal demand for fiber from the biofuel industry. Our mass timber operations within the solid wood segment had modestly higher revenues in Q4 compared to the previous quarter. In Q4, the elevated interest rates in the US continued to be a drag on overall market momentum. However, our mass timber business has developed a healthy order book. Today, the order book totals about $163 million, which compares nicely to our order book of approximately $80 million at the end of Q3. We currently expect our 2026 mass timber revenue to be about $120 million. We continue to make progress on our One Goal One Hundred program.

We realized approximately 30 million dollars in cost savings and reliability. Improvements in 2025.

Speaker #1: In Q4, the elevated interest rates in the U.S. continued to be a drag on overall market momentum. However, our mass timber business has developed a healthy order book.

In the fourth quarter, our aggregate liquidity improved by over 54 million to 430 million, comprised of about 187 million dollars of cash and 243 million of undrawn revolvers.

Richard Short: However, our mass timber business has developed a healthy order book. Today, the order book totals about $163 million, which compares nicely to our order book of approximately $80 million at the end of Q3. We currently expect our 2026 mass timber revenue to be about $120 million. We continue to make progress on our One Goal One Hundred program.

Speaker #1: Today, the order book totals about $163 million, which compares nicely to our order book of approximately $80 million at the end of Q3.

This improvement in our liquidity, was the direct result of our working Capital Management and cost reduction activities.

In the fourth quarter, we invested a total of 14 million of Maintenance Capital across our facilities.

Speaker #1: We currently expect our 2026 mass timber revenue to be about $120 million. We continue to make progress on our One Goal 100 program.

Speaker #1: As a reminder, this initiative focuses on cost reduction and operational efficiencies, with a target to improve our profitability by $100 million by the end of 2026, using 2024 as a baseline.

Richard Short: As a reminder, this initiative focuses on cost reduction and operational efficiencies, with a target to improve our profitability by $100 million by the end of 2026, using 2024 as a baseline. We realized approximately $30 million in cost savings and reliability improvements in 2025. In Q4, our aggregate liquidity improved by over $54 million to $430 million, comprised of about $187 million of cash and $243 million of undrawn revolvers. This improvement in our liquidity was the direct result of our working capital management and cost reduction activities. In Q4, we invested a total of $14 million of maintenance capital across our facilities.

We reported a Consolidated, net loss of 309 million for the fourth quarter or 4.61 cents per share, which includes the non-cash, long lived asset, and inventory impairments.

Which aggregate directly 200 and 39 million or 3507 cents per share.

Speaker #1: We realized approximately $30 million in cost savings and reliability improvements in 2025. In the fourth quarter, our aggregate liquidity improved by over $54 million to $430 million, comprised of about $187 million of cash and $243 million of undrawn revolvers.

In the third quarter, we reported a net loss of 81 million or a dollar and 2121 cents per share.

That ends my overview of the financial results. I'll now turn the call over to 1 Carlos

Thanks Rich.

Our operating results continue to be undermined by significant Market hwids.

Speaker #1: This improvement in our liquidity was the direct result of our working capital management and cost reduction activities. In the fourth quarter, we invested a total of $14 million of maintenance capital across our facilities.

Richard Short: This improvement in our liquidity was the direct result of our working capital management and cost reduction activities. In Q4, we invested a total of $14 million of maintenance capital across our facilities. We reported a consolidated net loss of $309 million for Q4, or $4.61 per share, which includes the non-cash, long-lived asset, and inventory impairments, which aggregate to roughly $239 million, or $3.57 per share. In Q3, we reported a net loss of $81 million, or $1.21 per share. That ends my overview of the financial results. I'll now turn the call over to Juan Carlos.

The ongoing down cycle conditions forces us to recognize, non-cash asset impairments, including a ride down of our Peace River Mills fixed assets.

And while these non-cash impairments, will understandably dominate headline results.

The fact is that, underlying operational performance improved quarter over quarter.

Speaker #1: We reported a consolidated net loss of 309 million dollars for the fourth quarter, or 4 dollars and 61 cents per share, which includes the non-cash long-lived asset and inventory impairments, which aggregate to roughly 239 million dollars, or 3 dollars and 57 cents per share.

Richard Short: We reported a consolidated net loss of $309 million for Q4, or $4.61 per share, which includes the non-cash, long-lived asset, and inventory impairments, which aggregate to roughly $239 million, or $3.57 per share. In Q3, we reported a net loss of $81 million, or $1.21 per share. That ends my overview of the financial results. I'll now turn the call over to Juan Carlos.

Million dollar improvement in our liquidity.

And we remain focused on improving the controllable drivers of performance.

Speaker #1: In the third quarter, we reported a net loss of 81 million dollars, or a dollar and 21 cents per share. That ends my overview of the financial results.

Speaker #1: I'll now turn the call over to Juan Carlos.

Speaker #2: Thanks, Rich. Our operating results continue to be undermined by significant market headwinds. The ongoing down-cycle conditions force us to recognize non-cash asset impairments, including a write-down of our Peace River mill's fixed assets.

Juan Carlos Bueno: Thanks, Rich. Our operating results continue to be undermined by significant market headwinds. The ongoing downcycle conditions force us to recognize non-cash asset impairments, including a write-down of our Peace River Mill's fixed assets. While these non-cash impairments will understandably dominate headline results, the fact is that underlying operational performance improved quarter-over-quarter. Cost reductions, efficiency improvements, and working capital reductions contributed to the $54 million improvement in our liquidity, and we remain focused on improving the controllable drivers of performance. This focus is highlighted through our One Goal One Hundred program. Launched in Q2, it has yielded about $30 million of concrete results for the full year, and we're on track to achieve our goal of $100 million in improvements by the end of 2026, when compared to our 2024 baseline.

This focus is highlighted through our 1 go 100 program launched in Q2. It has yielded about 30 million of concrete results for the full year and we're on track to achieve our goal of 100 million dollars in improvements by the end of 2026 when compared to our 2024 Baseline.

Speaker #2: And while these non-cash impairments will understandably dominate headline results, the fact is that underlying operational performance improved quarter over quarter. Cost reductions, efficiency improvements, and working capital reductions contributed to the $54 million improvement in our liquidity, and we remain focused on improving the controllable drivers of performance.

As Rich mentioned, the non-cash impairment of our Peace River Mill was the result of us being subject to us capitals. Unfortunately, these rules do not allow us to take into account 2, very important projects that our team has been working on for a couple of years already. Our Calvin capture project and the expansion of the male's fire energy output with support of the government projects that will be transformative for the mill.

Juan Carlos Bueno: Cost reductions, efficiency improvements, and working capital reductions contributed to the $54 million improvement in our liquidity, and we remain focused on improving the controllable drivers of performance. This focus is highlighted through our One Goal One Hundred program. Launched in Q2, it has yielded about $30 million of concrete results for the full year, and we're on track to achieve our goal of $100 million in improvements by the end of 2026, when compared to our 2024 baseline.

Speaker #2: This focus is highlighted through our One Goal 100 program. Launched in Q2, it has yielded about $30 million of concrete results for the full year, and we're on track to achieve our goal of $100 million in improvements by the end of 2026 when compared to our 2024 baseline.

Previously we had announced our plans to install a carbon capture demonstration unit at our Peace River Mill. In the fourth quarter as part of a joint development project with Fanta Technologies. I am pleased to report that the pilot plant is operating and the results so far are very encouraging both in terms of the efficiency as well as purity of the CO2 being captured.

The results of the 6-month testing period of this demonstration unit will be instrumental in our decision-making process for future phases of this project.

Speaker #2: As Rich mentioned, the non-cash impairment of our Peace River mill was the result of us being subject to U.S. GAAP rules. Unfortunately, these rules do not allow us to take into account two very important projects that our team has been working on for a couple of years already.

Juan Carlos Bueno: As Rich mentioned, the non-cash impairment of our Peace River Mill was the result of us being subject to US GAAP rules. Unfortunately, these rules do not allow us to take into account two very important projects that our team has been working on for a couple of years already: our carbon capture project and the expansion of the mill's bioenergy output with support of the government, projects that will be transformative for the mill. Previously, we had announced our plans to install a carbon capture demonstration unit at our Peace River Mill in Q4 as part of a joint development project with Fanta Technologies. I am pleased to report that the pilot plant is operating, and the results so far are very encouraging, both in terms of the efficiency as well as purity of the CO2 being captured.

This Venture is not only important for the Peace River Mill but will be 1 of the steps in our journey to transform our pulp Mills into biorefineries with multiple sustainable revenue streams.

Speaker #2: Our carbon capture project and the expansion of the mill's bioenergy output, which supported the government—projects that will be transformative for the mill. Previously, we had announced our plans to install a carbon capture demonstration unit at our Peace River mill in the fourth quarter, as part of a joint development project with Svante Technologies.

Now turning the overall business environment, the trade War, headwinds have created, an unprecedented level of Market uncertainty that persists even though current tires appear to be stable for now.

Juan Carlos Bueno: Previously, we had announced our plans to install a carbon capture demonstration unit at our Peace River Mill in Q4 as part of a joint development project with Fanta Technologies. I am pleased to report that the pilot plant is operating, and the results so far are very encouraging, both in terms of the efficiency as well as purity of the CO2 being captured.

We're expecting further tariff, uncertainty. As cusma is to be renegotiated in June this year.

The majority of the trade related impacts, we have faced are due to the indirect impacts of tariffs and trade uncertainty.

Speaker #2: I am pleased to report that the pilot plant is operating, and the results so far are very encouraging, both in terms of the efficiency as well as the purity of the CO2 being captured.

As it stands today. The only tariff barrier we're facing is a 10% tariff on our European Lumber Imports into the US.

Speaker #2: The results of the six-month testing period of this demonstration unit will be instrumental in our decision-making process for future phases of this project. This venture is not only important for the Peace River mill, but will be one of the steps in our journey to transform our pulp mills into biorefineries with multiple sustainable revenue streams.

Juan Carlos Bueno: The results of the six-month testing period of this demonstration unit will be instrumental in our decision-making process for future phases of this project. This venture is not only important for the Peace River Mill, but will be one of the steps in our journey to transform our pulp mills into biorefineries with multiple sustainable revenue streams. Now, turning to the overall business environment, the trade war headwinds have created an unprecedented level of market uncertainty that persists even though current tariffs appear to be stable for now. We're expecting further tariff uncertainty as CUSMA is to be renegotiated in June this year. The majority of the trade-related impacts we have faced are due to the indirect impacts of tariffs and trade uncertainty. As it stands today, the only tariff barrier we're facing is a 10% tariff on our European lumber imports into the US.

This does however compared favorably to Canadian Imports, which today face an average combined tariff and Duty rate of approximately 50% varying by company.

As a result, we have already seen Canadian, Lumber criteria, and announcements, and expect more to come.

Juan Carlos Bueno: Now, turning to the overall business environment, the trade war headwinds have created an unprecedented level of market uncertainty that persists even though current tariffs appear to be stable for now. We're expecting further tariff uncertainty as CUSMA is to be renegotiated in June this year. The majority of the trade-related impacts we have faced are due to the indirect impacts of tariffs and trade uncertainty. As it stands today, the only tariff barrier we're facing is a 10% tariff on our European lumber imports into the US.

Speaker #2: Now, turning to the overall business environment, the trade war headwinds have created an unprecedented level of market uncertainty that persists, even though current tariffs appear to be stable for now.

This is creating a reduced supply of residual chips for pot Mills and is putting pressure on fiber costs.

Speaker #2: We're expecting further tariff uncertainty as Kuzma is to be renegotiated in June this year. The majority of the trade-related impacts we have faced are due to the indirect impacts of tariffs and trade uncertainty.

We feel our Cellar Mill is well, positioned given its ability to access the US fiber market and our ability to harvest and process. Whole logs, nonetheless, we're experiencing some Fiber cost inflation as expected.

Speaker #2: As it stands today, the only tariff barrier we're facing is a 10% tariff on our European lumber imports into the U.S. This does, however, compare favorably to Canadian imports, which today face an average combined tariff and duty rate of approximately 50%, varying by company.

As mentioned our main import from the US into Canada, is wood chips for our Cellar, pulp Mill, which today, amounts to about 45, 45% of the 5 or something of the milk.

Juan Carlos Bueno: This does, however, compare favorably to Canadian imports, which today face an average combined tariff and duty rate of approximately 50%, varying by company. As a result, we have already seen Canadian lumber curtailment announcements and expect more to come. This is creating a reduced supply of residual chips for pulp mills and is putting pressure on fiber costs. We feel our Celgar mill is well positioned, given its ability to access the US fiber market and our ability to harvest and process whole logs. Nonetheless, we're experiencing some fiber cost inflation, as expected. As mentioned, our main import from the US into Canada is wood chips for our Celgar pulp mill, which today amounts to about 45% of the fiber consumption of the mill. We feel this is a competitive advantage for us, and we have the ability to grow this percentage going forward if required.

We feel this is a competitive Advantage for us and we have the ability to grow this percentage. Going forward. If required

Most importantly, there are no counter tariffs applied to this fiber.

Speaker #2: As a result, we have already seen Canadian lumber curtailment announcements, and expect more to come. This is creating a reduced supply of residual chips for pulp mills and is putting pressure on fiber costs.

Our ebda of negative -20 million reflects 21 days of planned maintenance, downtime at our Standalone Mill, low prices in most of our markets and high fiber costs.

Speaker #2: We feel our SailGuard mill is well positioned, given its ability to access the U.S. fiber market and our ability to harvest and process whole logs. Nonetheless, we're experiencing some fiber cost inflation, as expected.

Juan Carlos Bueno: We feel our Celgar mill is well positioned, given its ability to access the US fiber market and our ability to harvest and process whole logs. Nonetheless, we're experiencing some fiber cost inflation, as expected. As mentioned, our main import from the US into Canada is wood chips for our Celgar pulp mill, which today amounts to about 45% of the fiber consumption of the mill. We feel this is a competitive advantage for us, and we have the ability to grow this percentage going forward if required.

Overall nbsk pop markets weakened in the fourth quarter, including in North America, reflecting the indirect effects of the evolving tariff environment.

Specifically in North American fluff, pulp previously shipped to China, primarily for diaper applications is now subject to a 10% tariff. Consequently

Speaker #2: As mentioned, our main import from the U.S. into Canada is wood chips for our SailGuard pulp mill, which today amounts to about 45-50% of the fiber consumption of the mill.

Speaker #2: We feel this is a competitive advantage for us, and we have the ability to grow this percentage going forward if required. Most importantly, there are no counter-tariffs applied to this fiber.

Chinese manufacturers are pivoting to other products and displaced. North American fluff. Bulb is now being redirected into paper applications, adding supply pressure and Weighing on the North American Market.

Juan Carlos Bueno: Most importantly, there are no counter-tariffs applied to this fiber. Our EBITDA of -$20 million reflects 21 days of planned maintenance downtime at our Stendal mill, low prices in most of our markets, and high fiber costs. Overall, NBSK pulp markets weakened in Q4, including in North America, reflecting the indirect effects of the evolving tariff environment. Specifically, North American fluff pulp, previously shipped to China primarily for diaper applications, is now subject to a 10% tariff. Consequently, Chinese manufacturers are pivoting to other products, and displaced North American fluff pulp is now being redirected into paper applications, adding supply pressure and weighing on the North American market. Chinese NBSK prices were also under pressure as weak paper prices pushed certain producers to opportunistically substitute and run their machines more slowly. Meanwhile, European NBSK prices were relatively stable.

Chinese nbsk prices were also under pressure as weak. Paper prices push certain producers to opportunistically substitute and run their machines more slowly.

Speaker #2: Our EBITDA of negative $20 million reflects 21 days of planned maintenance downtime at our Stendhal mill, low prices in most of our markets, and high fiber costs.

Meanwhile, European nbsk prices were relatively stable.

Speaker #2: Overall, NBSK pulp markets weakened in the fourth quarter, including in North America, reflecting the indirect effects of the evolving tariff environment. Specifically, North American fluff pulp, previously shipped to China primarily for diaper applications, is now subject to a 10% tariff. Consequently, Chinese manufacturers are pivoting to other products, and displaced North American fluff pulp is now being redirected into paper applications.

Now, turning to hardwood prices in China increased in the fourth quarter driven by improving demand and higher domestic fiber costs. Meanwhile in North America, hardwood prices were flat

looking ahead. We expect to see some modest nbsk and nbh K price improvements in q1 in both Europe and China while North America's expected to be stable.

Juan Carlos Bueno: Consequently, Chinese manufacturers are pivoting to other products, and displaced North American fluff pulp is now being redirected into paper applications, adding supply pressure and weighing on the North American market. Chinese NBSK prices were also under pressure as weak paper prices pushed certain producers to opportunistically substitute and run their machines more slowly. Meanwhile, European NBSK prices were relatively stable.

However, trade uncertainty continues to be an overhang on this business and until trade restrictions are reduced. The supply, demand Dynamic will be influenced by the supply side.

Speaker #2: Adding supply pressure and weighing on the North American market. Chinese NBSK prices were also under pressure, as weak paper prices pushed certain producers to opportunistically substitute and run their machines more slowly.

Speaker #2: Meanwhile, European NBSK prices were relatively stable. Now, turning to hardwood, prices in China increased in the fourth quarter, driven by improving demand and higher domestic fiber costs.

this results, reflects an overall production Improvement, given that we lost roughly, 42,000 tons, due to scandals Q4, plant maintenance shot compared to only 21,000 tons of planned downtime in Q3

Juan Carlos Bueno: Now turning to hardwood, prices in China increased in Q4, driven by improving demand and higher domestic fiber costs. Meanwhile, in North America, hardwood prices were flat. Looking ahead, we expect to see some modest NBSK and NBHK price improvements in Q1 in both Europe and China, while North America is expected to be stable. However, trade uncertainty continues to be an overhang on this business, and until trade restrictions are reduced, the supply-demand dynamic will be heavily influenced by the supply side. In total, our pulp production was flat at 460,000 tons compared to Q3. This result reflects an overall production improvement, given that we lost roughly 42,000 tons due to Stendal's Q4 plant maintenance shut, compared to only 21,000 tons of planned downtime in Q3.

Speaker #2: Meanwhile, in North America, hardwood prices were flat. Looking ahead, we expect to see some modest NBSK and NBHK price improvements in Q1 in both Europe and China, while North America is expected to be stable.

Our lumber production was down about 6% relative to Q3 due to reduced production during the holiday season, and the availability of solos overall. We're pleased with our lumber production.

pulp fiber costs were essentially flat relatively to Q3

Speaker #2: However, trade uncertainty continues to be an overhang on this business, and until trade restrictions are reduced, the supply-demand dynamic will be heavily influenced by the supply side.

Juan Carlos Bueno: However, trade uncertainty continues to be an overhang on this business, and until trade restrictions are reduced, the supply-demand dynamic will be heavily influenced by the supply side. In total, our pulp production was flat at 460,000 tons compared to Q3. This result reflects an overall production improvement, given that we lost roughly 42,000 tons due to Stendal's Q4 plant maintenance shut, compared to only 21,000 tons of planned downtime in Q3.

In Canada our would cost didn't change, but in Germany The increased demand for pop logs and Sawmill residuals and lower supply of Saw logs, pushed fiber.

Prices up slightly for both our pulp and sawmills.

Speaker #2: In total, our pulp production was flat at 460,000 tons compared to Q3. This result reflects an overall production improvement given that we lost roughly 42,000 tons due to Stendhal's Q4 plant maintenance shut, compared to only 21,000 tons of planned downtime in Q3.

Looking ahead to q1. We expect fiber costs to increase meaningfully for both our pulp and smile businesses.

Our pulp business will be impacted by reduced smal residual. Availability on our German pop Mills will also face increased seasonal competition, for wood chips from biofield producers. And reduce sonal chip Supply.

Speaker #2: Our lumber production was down about 6% relative to Q3 due to reduced production during the holiday season and the availability of saw logs. Overall, we're pleased with our lumber production.

Juan Carlos Bueno: Our lumber production was down about 6% relative to Q3 due to reduced production during the holiday season and the availability of sawlogs. Overall, we're pleased with our lumber production. Pulp fiber costs were essentially flat relative to Q3. In Canada, our wood costs didn't change, but in Germany, the increased demand for pulp logs and sawmill residuals and lower supply of sawlogs pushed fiber prices up slightly for both our pulp and sawmills. Looking ahead to Q1, we expect fiber costs to increase meaningfully for both our pulp and sawmill businesses. Our pulp business will be impacted by reduced sawmill residual availability, and our German pulp mills will also face increased seasonal competition for wood chips from biofuel producers and reduced sawmill chip supply.

In Germany, we expect harvesting levels to improve as the lumber Market improves while in Canada. Lower fiber availability will keep price pressure on fiber, unless the demand side of the equation changes.

Speaker #2: Pulp fiber costs were essentially flat relative to Q3. In Canada, our wood costs didn't change, but in Germany, the increased demand for pulp logs and sawmill residuals, along with lower supply of saw logs, pushed fiber prices up slightly for both our pulp and sawmills.

If this is environment for a solid wood segment was consistent with Q3 it continues to be held back by a weak European economy and the impact of high mortgage rates.

With seasonal construction slowdown in Q4 creating modestly weaker pricing in the US, Lumber Market.

The stagnation of the European economy continues to dampen the demand for pallets.

Speaker #2: Looking ahead to Q1, we expect fiber costs to increase meaningfully for both our pulp and sawmill businesses. Our pulp business will be impacted by reduced sawmill residual availability, and our German pulp mills will also face increased seasonal competition for wood chips from biofuel producers and reduced sawmill chip supply.

Juan Carlos Bueno: Looking ahead to Q1, we expect fiber costs to increase meaningfully for both our pulp and sawmill businesses. Our pulp business will be impacted by reduced sawmill residual availability, and our German pulp mills will also face increased seasonal competition for wood chips from biofuel producers and reduced sawmill chip supply.

And the result of this very adverse business environment is the main reason behind the 11 million ebda loss of our solid wood segment in Q4.

Speaker #2: In Germany, we expect harvesting levels to improve as the lumber market improves. While in Canada, lower fiber availability will keep price pressure on fiber unless the demand side of the equation changes.

Juan Carlos Bueno: In Germany, we expect harvesting levels to improve as the lumber market improves, while in Canada, lower fiber availability will keep price pressure on fiber unless the demand side of the equation changes. The business environment for our solid wood segment was consistent with Q3. It continues to be held back by a weak European economy and the impact of high mortgage rates, with seasonal construction slowdown in Q4, creating modestly weaker pricing in the US lumber market. The stagnation of the European economy continues to dampen the demand for pallets, and the result of this very adverse business environment is the main reason behind the $11 million EBITDA loss of our solid wood segment in Q4. Given the many economic forces affecting US construction activity, US lumber pricing could be volatile in the short term, while demand is expected to remain weak in Q1.

Speaker #2: The business environment for the solid wood segment was consistent with Q3. It continues to be held back by a weak European economy and the impact of high mortgage rates.

Given the many economic forces of affecting us construction activity us, lumber pricing could be volatile in the short term while the man is expected to remain weak in q1. In contrast, we expect modest upward pricing, pressure in the European market primarily due to increase in SLO prices. Any meaningful long-term Improvement in either the European or us markets remains dependent on improved economic conditions and lower long-term interest rates.

Speaker #2: With seasonal construction slowdown in Q4 creating modestly weaker pricing in the U.S. lumber market, the stagnation of the European economy continues to dampen the demand for pallets, and the result of this very adverse business environment is the main reason behind the $11 million EBITDA loss of our solid wood segment in Q4.

Our flexible Samuel production capabilities, enable us to be competitive in all Lumber markets, we intend to continue to maintain a strong presence in Europe and the us while serving the quality sensitive Japanese Market.

Juan Carlos Bueno: The stagnation of the European economy continues to dampen the demand for pallets, and the result of this very adverse business environment is the main reason behind the $11 million EBITDA loss of our solid wood segment in Q4. Given the many economic forces affecting US construction activity, US lumber pricing could be volatile in the short term, while demand is expected to remain weak in Q1.

In Q4 41% of our, lumber volume was sold in the US.

Speaker #2: Given the many economic forces affecting U.S. construction activity, U.S. lumber pricing could be volatile in the short term. While demand is expected to remain weak in Q1, in contrast, we expect modest upward pricing pressure in the European market, primarily

Looking forward. We believe the US Lumber Market will be driven by favorable homeowners demographics. This combined with reduced North American, Lumber capacity will create a supportive Supply demand dynamic in the midterm.

Juan Carlos Bueno: In contrast, we expect modest upward pricing pressure in the European market, primarily due to increasing sawlog prices. Any meaningful long-term improvement in either the European or US markets remains dependent on improved economic conditions and lower long-term interest rates. Our flexible sawmill production capabilities enable us to be competitive in all lumber markets. We intend to continue to maintain a strong presence in Europe and the US while serving the quality-sensitive Japanese market. In Q4, 41% of our lumber volume was sold in the US. Looking forward, we believe the US lumber market will be driven by favorable homeowners demographics. This, combined with reduced North American lumber capacity, will create a supportive supply-demand dynamic in the mid-term.

Speaker #1: Due to increasing saw prices, any meaningful long-term improvement in either the European or US markets remains dependent on improved economic conditions and lower long-term interest rates. Our flexible sawmill production capabilities enable us to be competitive in all lumber markets.

European shipping pallets markets, remain weak with pricing staying generally flat due to the overhang of the European economy, particularly in Germany and we're expecting generally, stable pricing in the first half of 2026,

Biofuels were up almost 10% relative to Q3 due to seasonal demand and the prices may still increase slightly.

Speaker #1: We intend to continue to maintain a strong presence in Europe and the US while serving the quality sensitive Japanese market . In Q4 , 41% of our lumber volume was sold in the US Looking forward , we believe the US lumber market will be driven by favorable homeowners demographics .

Juan Carlos Bueno: We intend to continue to maintain a strong presence in Europe and the US while serving the quality-sensitive Japanese market. In Q4, 41% of our lumber volume was sold in the US. Looking forward, we believe the US lumber market will be driven by favorable homeowners demographics. This, combined with reduced North American lumber capacity, will create a supportive supply-demand dynamic in the mid-term.

With regards to our Mass Timber business revenues, were up roughly 6%, compared to Q3, we continue to see a steady volume of incoming project inquiries in terms of both number and total dollar value of projects. As a reminder, the projects we are bidding on and winning today. Are meant to be constructed, an average about 9 months from now or well into 2026.

Speaker #1: This , combined with reduced North American lumber capacity , will create a supportive supply demand dynamic in the mid-term European shipping pallets markets remain weak , with pricing staying generally flat due to the overhang of the European economy , particularly in Germany , and we're expecting generally stable pricing in the first half of 2026 .

Juan Carlos Bueno: European shipping pallets markets remain weak, with pricing staying generally flat due to the overhang of the European economy, particularly in Germany, and we're expecting generally stable pricing in the first half of 2026. Biofuels were up almost 10% relative to Q3 due to seasonal demand, and the prices may still increase slightly. With regards to our mass timber business, revenues were up roughly 6% compared to Q3. We continue to see a steady volume of incoming project inquiries in terms of both number and total dollar value of projects. As a reminder, the projects we are bidding on and winning today are meant to be constructed in average about nine months from now or well into 2026. We expect 2026 revenues to be more than double what we had in 2025 or above $120 million.

We expect 26 revenues to be more than double what we had in 2025 or above 120 million dollars. As a result, we will begin ramping our Conway facility to 2 shifts in early Q2 and expect to do the same at Spokane in late in the year.

Speaker #1: Biofuels were up almost 10% relative to Q3 due to seasonal demand, and the prices may still increase slightly. With our mass timber business, revenues were up roughly 6% compared to Q3.

Today, our mass number backlog of project sits at about 163 million. Practically twice of where we were at the end of Q3.

Juan Carlos Bueno: With regards to our mass timber business, revenues were up roughly 6% compared to Q3. We continue to see a steady volume of incoming project inquiries in terms of both number and total dollar value of projects. As a reminder, the projects we are bidding on and winning today are meant to be constructed in average about nine months from now or well into 2026. We expect 2026 revenues to be more than double what we had in 2025 or above $120 million.

It is clear that a large portion of the growing interest in Mass Timber is coming from Data Center, hyperscalers.

Speaker #1: We continue to see a steady volume of incoming project inquiries, in terms of both number and total dollar value of projects. As a reminder, the projects we are bidding on and winning today are meant to be constructed in, on average, about nine months from now or well into 2026.

The appeal to this group, is the speed of construction, which can be about a third shorter than traditional construction methods, as well as the carbon sequestration benefits, that only Mass Timber brings.

Speaker #1: We expect 26 revenues to be more than double what we had in 2025 or above $120 million . As a result , we will begin ramping our Conway facility to two shifts in early Q2 and expect to do the same at Spokane in late in the year Today , our mass timber backlog of projects sits at about $163 million , practically twice of where we were at the end of Q3 It is clear that a large portion of the growing interest in mass timber is coming from data center hyperscalers .

More importantly to Mercer is that our industry is leading North American capacity that are, excuse me to Mercy is that our industry-leading, North American capacity, leaves us. Well positioned to meet this growing demand.

As a result, we're confident in this business, being a growth engine for Mercer in the short term.

Juan Carlos Bueno: As a result, we will begin ramping our Conway facility to 2 shifts in early Q2 and expect to do the same at Spokane in late in the year. Today, our mass timber backlog of projects sits at about $163 million, practically twice of where we were at the end of Q3. It is clear that a large portion of the growing interest in mass timber is coming from data center hyperscalers. The appeal to this group is the speed of construction, which can be about 1/3 shorter than traditional construction methods, as well as the carbon sequestration benefits that only mass timber brings. More importantly, to Mercer is that our industry is leading North American capacity, that our, excuse me, to Mercer is that our industry-leading North American capacity leaves us well-positioned to meet this growing demand.

Product offerings, including the sign assist and installation services, and a large Geographic footprint, with manufacturing sites in the Northwest, as well as a Southeast giving us competitive access to the entire North American Market.

Speaker #1: The appeal to this group is the speed of construction, which can be about a third shorter than traditional construction methods, as well as the carbon sequestration benefits that only mass timber brings.

Juan Carlos Bueno: The appeal to this group is the speed of construction, which can be about 1/3 shorter than traditional construction methods, as well as the carbon sequestration benefits that only mass timber brings. More importantly, to Mercer is that our industry is leading North American capacity, that our, excuse me, to Mercer is that our industry-leading North American capacity leaves us well-positioned to meet this growing demand.

In closing Market, weakness is expected to persist in 2026 and as a result of our priority is on maintaining strong liquidity.

Speaker #1: More importantly , to Mercer is that our industry is leading North American capacity that , excuse me to Mercer , is that our industry leading North American capacity leaves us , well positioned to meet this growing demand As a result , we're confident in this business being a growth engine for Mercer in the short term .

To do this. Our strategy includes further cost reductions lower Capital expenditures and other working capital measures along with a commitment to rebalance. Our portfolio of assets that combined will improve our balance sheet above all, we are committed to putting financial management.

Juan Carlos Bueno: As a result, we're confident in this business being a growth engine for Mercer in the short term. We have roughly 30% of North American Cross-Laminated Timber production capacity, a broad range of product offerings, including design assist and installation services, and a large geographic footprint with manufacturing sites in the Northwest as well as the Southeast, giving us competitive access to the entire North American market. In closing, market weakness is expected to persist in 2026, and, as a result, our priority is on maintaining strong liquidity. To do this, our strategy includes further cost reductions, lower capital expenditures, and other working capital measures, along with a commitment to rebalance our portfolio of assets that combined will improve our balance sheet. Above all, we're committed to prudent financial management.

In light of the ongoing economic uncertainties on our focus on liquidity. Our plan capex spend is about 60 to 800 million in 2026.

And this capital budget is focused on maintenance environmental and safety projects.

Speaker #1: We have roughly 30% of North American cross-laminated timber production capacity , a broad range of product offerings , including design assist and installation services , and a large geographic footprint with manufacturing sites in the northwest , as well as the southeast , giving us competitive access to the entire North American market .

The headwinds facing our industry have proven to be both longer and more severe than many anticipated.

However, our experienced management team has navigated through previous commodity downturns and I'm confident that our short-term strategy will allow us to weather this storm.

Juan Carlos Bueno: In closing, market weakness is expected to persist in 2026, and, as a result, our priority is on maintaining strong liquidity. To do this, our strategy includes further cost reductions, lower capital expenditures, and other working capital measures, along with a commitment to rebalance our portfolio of assets that combined will improve our balance sheet. Above all, we're committed to prudent financial management.

Speaker #1: In closing, market weakness is expected to persist in 2026, and as a result, our priority is on maintaining strong liquidity.

Speaker #1: To do this , our strategy includes further cost reductions , lower capital expenditures and other working capital measures , along with a commitment to rebalance our portfolio of assets that combined will improve our balance sheet Above all , we're committed to putting financial management in light of the ongoing economic uncertainties and our focus on liquidity , our planned CapEx spend is about 60 to $80 million in 2026 , and this capital budget is focused on maintenance , environmental and safety projects The headwinds facing our industry have proven to be both longer and more severe than many anticipated However , our experienced management team has navigated through previous commodity downturns and am confident that our short term strategy will allow us to weather the storm .

I also believe that the current market conditions validate, our long-term strategy that focuses on Transforming Our potential and to buy refineries with additional revenue streams that can not only help balance our product mix but grant us, further resilience during Paul down Cycles.

Juan Carlos Bueno: In light of the ongoing economic uncertainties and our focus on liquidity, our planned CapEx spend is about $60 to 80 million in 2026, and this capital budget is focused on maintenance, environmental, and safety projects. The headwinds facing our industry have proven to be both longer and more severe than many anticipated. However, our experienced management team has navigated through previous commodity downturns, and I'm confident that our short-term strategy will allow us to weather this storm. I also believe that the current market conditions validate our long-term strategy that focuses on transforming our pulp mills into biorefineries, with additional revenue streams that can not only help balance our product mix, but grant us further resilience during pulp down cycles.

I work on a linjing project pilot plant in Rosenthal, is a great example, as is the carbon capture plant pilot plant in Peace River and the work that we're doing in sandal on sustainable aviation fuel.

As 2026 progresses, we will remain focused on those elements of our business that we can control while implementing our short-term strategy.

Thank you for listening. I and I will now turn the call back to the operator for questions. Thank you.

Question, please. Press star.

Juan Carlos Bueno: However, our experienced management team has navigated through previous commodity downturns, and I'm confident that our short-term strategy will allow us to weather this storm. I also believe that the current market conditions validate our long-term strategy that focuses on transforming our pulp mills into biorefineries, with additional revenue streams that can not only help balance our product mix, but grant us further resilience during pulp down cycles.

Speaker #1: I also believe that the current market conditions validate our long-term strategy that focuses on transforming our pulp mills into biorefineries with additional revenue streams that can not only help balance our product mix, but grant us further resilience during pulp down cycles.

To withdraw your question. Please press star 1 1, again please, stand by while we compile the Q&A roster.

Our first question comes from the line of Roger Spitz with Bank of America. Your line is now open

Speaker #1: Our work on our lignin project pilot plant in Rosenthal is a great example, as is the carbon capture pilot plant in Peace River.

Juan Carlos Bueno: Our work on our lignin project pilot plant in Rosenthal is a great example, as is the carbon capture pilot plant in Peace River, and the work that we're doing in Stendal on sustainable aviation fuel. As 2026 progresses, we will remain focused on those elements of our business that we can control while implementing our short-term strategy. Thank you for listening. I will now turn the call back to the operator for questions. Thank you.

Speaker #1: And the work that we're doing in Stendal on sustainable aviation fuel. As 2026 progresses, we will remain focused on those elements of our business that we can control while implementing our short-term strategy.

Um, yes. Thank you very much. Hopefully you can, uh, hear me, okay? Uh, the first question uh, rich is, can you say how much Headroom that you have under any of your uh, maintenance covenants as of December 31st?

um, yeah, so we've got

Speaker #1: Thank you for listening. I will now turn the call back to the operator for questions. Thank you.

Yeah, I don't, I don't have the number in front of me, but we're we're comfortable that we're well under the the, uh, the covenants at the end of the end of the quarter, but we will expect them to get tighter as the year progresses, given the the week Outlook.

Speaker #2: Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced.

Operator: Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Roger Spitz with Bank of America. Your line is now open.

Great. And then uh, secondly.

Um, I I don't know if you want to comment.

Speaker #2: To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Roger Spitz with Bank of America.

In addition to cap, 2026 capex, but cash interest, cash taxes and and any working capital view, inflow or outflow.

Speaker #2: Your line is now open

Roger Spitz: Yes, thank you very much. Hopefully, you can hear me okay. The first question, Rich, is: can you say how much headroom that you have under any of your maintenance covenants as of 31 December?

Speaker #3: Yes . Thank you very much . Hopefully you hear me . Okay The first question , Rich , is , can you say how much headroom that you have under any of your maintenance covenants as of December 31st ?

Uh, so we're expecting taxes to be negligible this year. Um, interest to be around 120.

And you heard wardles with the capex numbers, 60 to 80.

Um,

I'm sorry, I I spoke. I was thinking about working capital inflow or out to

Richard Short: Yeah, so we've got. Yeah, I don't have the number in front of me, but we're comfortable that we're well under the covenants at the end of the quarter, but we will expect them to get tighter as the year progresses, given the weak outlook.

Speaker #4: Yeah . So we've got yeah , I don't have the number in front of me , but we're we're comfortable that we're well under the , the the covenants at the end of the end of the quarter .

Oh um, it'll be a net outflow probably around 100 to 150 million at this point.

Speaker #4: But we will expect them to get tighter as the year progresses. Given the weak outlook,

It'll be an outflow of 100 100 150 million. What? What would be driving that?

Speaker #3: Great . And then secondly can , I don't know if you want to comment in addition to 2026 CapEx , but cash interest , cash taxes and any working capital view inflow or outflow

Roger Spitz: Great. And then, secondly, I don't know if you wanna comment in addition to 2026 CapEx, but cash interest, cash taxes, and any working capital view, inflow or outflow?

uh, we're going to have well, actually it's the work, the um, the interest, the capex, and probably a small net, uh, outflow in working capital,

Richard Short: So, we're expecting taxes to be negligible this year, interest to be around $120, and you heard Juan Carlos with the CapEx numbers, $60 to 80.

Speaker #4: So we're expecting taxes to be negligible this year . Interest would be 120 . And you heard Juan Carlos , with the CapEx numbers 60 to 80 .

Richard Short: So, we're expecting taxes to be negligible this year, interest to be around $120, and you heard Juan Carlos with the CapEx numbers, $60 to 80.

For the year. Oh, okay. I was just thinking working capital itself, uh, as opposed to, uh, there's some taxes and cat-backs, are you, including that? In in when you gave the 100 to 150,

Yeah.

Okay, so I got to admit that out. Okay, got it. Thank you very much.

Roger Spitz: I'm sorry, I, I must have misspoke. I was thinking about working capital inflow or outflow.

Speaker #3: I'm sorry, I must have misspoken. I was thinking about working capital inflow or outflow.

Roger Spitz: I'm sorry, I, I must have misspoke. I was thinking about working capital inflow or outflow.

Thank you. Our next question comes from the line of Sean Stewart with TD. Cowen, your line is now open,

Speaker #4: Oh, it'll be a net outflow, probably around $100 to $150 million at this point.

Richard Short: Oh, it'll be a net outflow, probably around $100 to 150 million at this point.

Thanks, good morning. Um, hoping you can give us some updates on potential assets, recycling opportunities.

Speaker #3: It'll be an outflow of $100, $150 million. What would be driving that?

Roger Spitz: It'll be an outflow of $100 to 150 million? What-

Roger Spitz: It'll be an outflow of $100-150 million? What-

Richard Short: Yep.

Roger Spitz: What would be driving that?

Speaker #4: We're going to have ? Well , obviously it's the the the interest , the CapEx and probably a small net outflow in working capital For the year

Richard Short: Well, obviously, it's the work, the interest, the CapEx, and probably a small net outflow on working capital... for the year.

uh, as a measure to um I guess expedite potential deleveraging in the balance sheet and you know, with some

Richard Short: Well, obviously, it's the work, the interest, the CapEx, and probably a small net outflow on working capital... for the year.

Flexibility on available liquidity here. And any thoughts on?

Asset closure potential and and maybe costs that would be Associated if you're taking potential pulp lines down.

Speaker #3: Oh , okay . I was just thinking , working capital itself as opposed to some taxes and CapEx . Are you including that in when you gave the 100 to 150 ?

Roger Spitz: Oh, okay. I was just thinking working capital itself, as opposed to-

on, in terms of acid,

Richard Short: Ah.

Roger Spitz: recent taxes and CapEx. Are you including that in when you gave the $100 to 150?

Speaker #4: Yeah

Richard Short: Yep.

Speaker #3: Okay, so I gotta net that out. Okay, got it. Thank you very much.

Roger Spitz: Okay, so I got to net that out. Okay. Got it. Thank you very much.

Speaker #2: Thank you. Our next question comes from the line of Sean Stewart with TD Cowen. Your line is now open.

Operator: Thank you. Our next question comes from the line of Sean Stewart with TD Cowen. Your line is now open.

Speaker #5: Thanks . Good morning Hoping you can give us some updated thoughts on . Potential asset recycling opportunities . As a measure to , I guess , expedite potential deleveraging of the balance sheet .

Juan Carlos Bueno: Thanks. Good morning. Hoping you can give us some updated thoughts on potential asset recycling opportunities, as a measure to, I guess, expedite potential deleveraging of the balance sheet. And, you know, with some flexibility on available liquidity here, and any thoughts on asset closure potential and maybe costs that would be associated if you're taking potential pulp lines down? Yes, Sean. On in terms of asset sales or restructuring, this is a subject that we have been analyzing and working on for quite some time now. Obviously, we are very conscious that on the very tough conditions that we're working on right now, the possibility of claiming reasonable value for any particular asset in this cycle is not the right time.

Sean Steuart: Thanks. Good morning. Hoping you can give us some updated thoughts on potential asset recycling opportunities, as a measure to, I guess, expedite potential deleveraging of the balance sheet. And, you know, with some flexibility on available liquidity here, and any thoughts on asset closure potential and maybe costs that would be associated if you're taking potential pulp lines down?

Uh, fails or or restructuring? Um, this is a subject that we have been uh, analyzing and working on for for quite some time now. Uh, obviously we we are very conscious that on the very tough uh, conditions that we're working on right now, uh, the possibility of of claiming reasonable value for any particular asset. Uh in this cycle is is is not the right time. Uh, but we are obviously uh looking into that as as we focus on on our core assets.

Speaker #5: And you know, with some flexibility on available liquidity here. Any thoughts on asset closure potential, and maybe costs that would be associated if you're taking potential pulp lines down?

And, uh, and see our way through, uh, this trough. But that is in the set that center of our debt reduction, uh, plans, without a doubt.

Okay, thanks for that detail.

Speaker #1: Yes , Sean , on in terms of asset sales or restructuring , this is a subject that we have been analyzing and working on for for quite some time now .

Juan Carlos Bueno: Yes, Sean. On in terms of asset sales or restructuring, this is a subject that we have been analyzing and working on for quite some time now. Obviously, we are very conscious that on the very tough conditions that we're working on right now, the possibility of claiming reasonable value for any particular asset in this cycle is not the right time. But we are obviously looking into that as we focus on our core assets... and see our way through this trough. But that is in the set, at the center of our debt reduction plans, without a doubt.

And with respect to the um the buildings of the order file for for Mass Timber which that's encouraging. Can you give us a sense of expected margins associated with that uplift in sales?

Speaker #1: Obviously , we we are very conscious that on the very trough conditions that we're working on right now , the possibility of of claiming reasonable value for any particular asset in this cycle is , is not the right time , but we are obviously looking into that as as we focus on on our core assets and , and see our way through this trough .

Yeah. What, what I can say in in that sense is, uh, when you look at at 2025, which was relatively low as, as we were basically, uh, working with with small projects all around,

Juan Carlos Bueno: But we are obviously looking into that as we focus on our core assets... and see our way through this trough. But that is in the set, at the center of our debt reduction plans, without a doubt.

Uh, that year, even though it was a low sales result, uh, it was a, a neutral cash flow. So the business was able, uh, not to be a drag despite the fact that it was still low on sales. Now, for this year, obviously, we expect that to change, uh, with sales, as we said, north of 120 million.

Speaker #1: But that is in the center of our debt reduction plans—without a doubt.

uh, and uh, positive profitability, uh, and obviously uh, with the contribution to cash,

Speaker #5: Okay . Thanks for that detail And with respect to the the buildup of the order file for for mass timber , that's encouraging .

Sean Steuart: Okay, thanks for that detail. With respect to the build-up of the order file for Mass Timber, which that's encouraging, can you give us a sense of expected margins associated with that uplift in sales?

So we're still in the single digits as we as this business, has the potential to grow up significantly with the acid base that we have.

Speaker #5: Can you give us a sense of the expected margins associated with that uplift in sales?

Speaker #1: Yeah . What I can say in that sense is when you look at 2025 , which was relatively low as we were . Basically working with with small projects all around that year , even though it was a low sales result , it was a neutral cash flow .

Juan Carlos Bueno: Yeah. What, what I can say in, in that sense is, when you look at, at 2025, which was, relatively low as, as we were basically, working with, with small projects all around. That year, even though it was a low sales result, it was a, a neutral cash flow. So the business was able, not to be a drag, despite the fact that it was still low on sales. Now, for this year, obviously, we expect that to change, with sales, as we said, north of $120 million, and, positive profitability, and obviously, with a contribution to cash. So we're still in the single digits as we- as this business has the potential to grow up significantly with the asset base that we have.

Considering that that this 120 million that we're talking about is is with Conway, ramping up to 2, ships only around April or so. In the second quarter and spoken, only ramping up to the 2 ships, maybe by the end of the year. So, so for the majority of the year, we would be running, let's say, on average, on average, uh, a shift and a half.

Speaker #1: So the business was able not to be a drag , despite the fact that it was still low on sales . Now , for this year , obviously we expect that to change with sales .

Juan Carlos Bueno: Now, for this year, obviously, we expect that to change, with sales, as we said, north of $120 million, and, positive profitability, and obviously, with a contribution to cash. So we're still in the single digits as we- as this business has the potential to grow up significantly with the asset base that we have.

Speaker #1: As we said, north of $120 million and positive profitability, obviously with the contribution to cash. So we're still in the single digits, as well as this business has the potential to grow up significantly with the asset base that we have.

Um so again still single digits under that. But once we are running in 2 ships on both facilities, um obviously would be looking at a double digit profitability for that business and we're very encouraged by the growth that we're that we're looking at, uh, not just withstanding. The fact that we have 163 million dollars in the order book that we mentioned earlier.

Speaker #1: Considering that that this 120 million that we're talking about is , is with Conway ramping up to two shifts only around April or so in the second quarter and Spokane only ramping up to the two shifts , maybe by the end of the year .

Juan Carlos Bueno: Considering that this $120 million that we're talking about is with Conway ramping up to two shifts only around April or so, in Q2, and Spokane only ramping up to the two shifts, maybe by the end of the year. So for the majority of the year, we would be running, let's say, on average, a shift and a half. So again, still single digits under that, but once we are running in two shifts on both facilities, obviously, we'd be looking at a double-digit profitability for that business. And we're very encouraged by the growth that we're looking at.

A a part of that is obviously going to happen in in 2026, uh, but we already have quite a quite an important piece of business for 2027 in that order book. So again, it's filling up very nicely and and we're very confident of the growth that we will have in in this business.

Okay, that's great detail. Thanks for the, uh, for the context. That's all I have.

Speaker #1: So, for the majority of the year, we would be running, let's say on average, on an average shift and a half.

Speaker #1: So again , still single digits under that . But once we are running in two shifts on both facilities , obviously we'll be looking at double digit profitability for that business .

Thank you as a reminder to ask a question at this time. Please press star 1 1 on your touchtone telephone. Our next question comes from the line of Edward Bruckner Brooker with barklay. Your line is now open.

Hey thanks for taking the question. This morning, my first 1 uh is on Peace. River. Is there any uh thought to

Speaker #1: And we're very encouraged by the growth that we're that we're looking at , not just withstanding the fact that we have $163 million in the order book that we mentioned earlier , a part of that is obviously going to happen in 2026 .

Juan Carlos Bueno: Not just withstanding the fact that we have $163 million in the order book that we mentioned earlier, a part of that is obviously gonna happen in 2026, but we already have quite an important piece of business for 2027 in that order book. So again, it's filling up very nicely, and we're very confident of the growth that we will have in this business.

Uh potentially closing uh the mill. And if so, you know, what is the timing of doing something like that and are there any, you know, approvals from the government or hurdles that you have to go through uh too close to something like that?

Speaker #1: But we already have quite a quite an important piece of business for 2027 , in that order book . So again , it's filling up very nicely .

Speaker #1: And we're very confident of the growth that we will have in this business.

Speaker #5: Okay . That's great detail . Thanks for the for the context . That's all I have

Sean Steuart: Okay, that's great detail. Thanks for the, for the context. That's all I have.

Speaker #2: Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Edward Bruckner.

Operator: Thank you. As a reminder, to ask a question at this time, please press star one one on your touch-tone telephone. Our next question comes from the line of Edward Brucker with Barclays. Your line is now open.

Well, on on Peace River, what we're working on is um, our transition from less hardwood to from to more softwood. Uh, that is the center and foremost because we believe that we can extract much more value from the mail if we produce soft wood over hardwood. And we're well underway in that road. Uh, remember this was a male that was 80/20 to hardwood, uh, right now it's 7030. And by the end of this year, we expect

Speaker #2: Bruckner with Barclays, your line is now open.

Speaker #6: Hey, thanks for taking the question this morning. My first one is on Peace River. Is there any thought to potentially closing the mill?

Edward Brucker: Hey, thanks for taking the question this morning. My first one is on Peace River. Is there any thought to potentially closing the mill? And if so, you know, what is the timing of doing something like that? And are there any, you know, approvals from the government or hurdles that you have to go through to close something like that?

Speaker #6: And if so, what is the timing of doing something like that? And are there any approvals from the government or hurdles that you have to go through to close like that?

Expected to be 50/50. Um, and and it makes a big difference because we make money on soft food. We don't make money on hardwood, um, obviously depending on on the price of hardwood, uh, beyond that. When you look into the work that we're doing, or that we have been doing, we mentioned these energy projects, uh, those would be very important contributors, to the bottom line of Peace River. Um, there's government support for those.

Speaker #1: Well , on peace River , what we're working on is our transition from less hardwood to , from to more softwood . That is central and foremost because we believe that we can extract much more value from the mill if we produce softwood over hardwood and we're well underway in that road Remember , this was a mill that was 80 over 20 to hardwood .

Juan Carlos Bueno: Well, on Peace River, what we're working on is our transition from less hardwood to more softwood. That is the center and foremost, and because we believe that we can extract much more value from the mill if we produce softwood over hardwood. And we're well underway in that road. Remember, this was a mill that was 80/20 to hardwood. Right now, it's 70/30, and by the end of this year, we expect it to be 50/50. And it makes a big difference because we make money on softwood, we don't make money on hardwood, obviously, depending on the price of hardwood.

Speaker #1: Right now it's 70 over 30. And by the end of this year, we expect it to be 50 over 50. And it makes a big difference because we make money on softwood.

Of the mail. So we do have uh, a way through for this mail and are working actively with the government uh to support these projects to support the male uh so that we can keep it uh and and make this Vision uh a reality.

Juan Carlos Bueno: And it makes a big difference because we make money on softwood, we don't make money on hardwood, obviously, depending on the price of hardwood. Beyond that, when you look into the work that we're doing or that we have been doing, we mentioned these energy projects, those would be very important contributors to the bottom line of Peace River.

Speaker #1: We don't make money on hardwood . Obviously , depending on on the price of hardwood beyond that , when you look into the work that we're doing or that we have been doing , we mentioned these energy projects .

Juan Carlos Bueno: Beyond that, when you look into the work that we're doing or that we have been doing, we mentioned these energy projects, those would be very important contributors to the bottom line of Peace River. There's government support for those, and also the carbon capture, which is further down the line, that's probably 2 years ahead of us or 3 years ahead of us, and that would be another important contribution to the profitability of the mill. So we do have a way through for this mill and are working actively with the government to support these projects, to support the mill, so that we can keep it and make this vision a reality.

Speaker #1: Those would be very important contributors to the bottom line of Peace River. There's government support for those, and also the carbon capture, which is further down the line.

Juan Carlos Bueno: There's government support for those, and also the carbon capture, which is further down the line, that's probably 2 years ahead of us or 3 years ahead of us, and that would be another important contribution to the profitability of the mill. So we do have a way through for this mill and are working actively with the government to support these projects, to support the mill, so that we can keep it and make this vision a reality.

Got it. And then, um, you know, my second question just given the, uh, you know, the, the difficult, uh, Market environment, as well as, um, you know, potential cash burn for 2026. You know, any, any, uh, new thoughts on productivity, uh, with the maturity wall coming up in, uh, 2027 and then also, I guess in 2028 as well.

Speaker #1: That's probably two years ahead of us, or three years ahead of us. And that would be another important contribution to the profitability of the mill.

Speaker #1: So, we do have a way through for this mill, and are working actively with the government to support these projects, to support the mill.

Sorry, Edward the uh, how how are we thinking about the 28th and 29th? Is that your question? Uh well, yeah. And and the revolver, uh, maturity ahead of that, right. Okay, so the revolvers were were talking to the, the banks, the, the banking groups for both, um,

Speaker #1: So that we can keep it and make this vision a reality.

Speaker #6: Got it . And then , you know , my second question , just given the , you know , the difficult market environment as well as , you know , potential cash burn for 2026 , you know , any , any new thoughts on productivity with the maturity wall coming up in 2027 .

Edward Brucker: Got it. And then, you know, my second question, just given the difficult market environment as well as, you know, potential cash burn for 2026, you know, any new thoughts on productivity with the maturity wall coming up in 2027, and then also, I guess, in 2028 as well?

Way, um, the the 2020 8th and 29th. We've, we've got some Runway there. So, we're we're happy with that given where we are in the cycle, um, and we've been talking, with, with our investors. So I think we're, we're, we're comfortable with where we are with those.

And and maybe if I could just to Pivot a little bit, I just wanted to clarify that our expectations around working capital uh for this year, I think I misunderstood Roger's question.

Expect a modest cash outflow from working capital in 2026.

Got it. Thank you.

Speaker #6: And then also, I guess in 2028 as well.

Speaker #4: Sorry. How are we thinking about the 28 and 29? Is that your question?

Richard Short: Sorry, Edward, how are we thinking about the 2028s and 2029s? Is that your question?

Thank you. Our next question comes from the line of coal hathorne with Jeffrey's your line is now open.

Edward Brucker: Well, yeah, and the revolver maturity ahead of that.

Speaker #6: Well, yeah. In the revolver, maturity ahead of that.

Edward Brucker: Well, yeah, and the revolver maturity ahead of that.

Good morning. Thanks for taking my question. Um, I just like to to follow up on.

Speaker #4: Right . Okay . So the revolvers were were talking to the banks , the banking groups for both currently underway . The 2028 and 29 , we've got some runway there .

Richard Short: Right. Okay. So the revolvers, we're talking to the banks, the banking groups for both. That's currently underway. The 2028s and 2029s, we've got some runway there, so we're happy with that given where we are in the cycle. And we've been talking with our investors, so I think we're comfortable with where we are with those. And maybe if I could, just to pivot a little bit, I just wanted to clarify that our expectations around working capital for this year, I think I misunderstood Roger's question. Expect a modest cash outflow from working capital in 2026.

Speaker #4: So we're we're happy with that given where we are in the cycle . And we've been talking with with our investors . So I think we're we're comfortable with where we are with those .

The the market dynamics from here, and if we stick to, to, softwood pulp to begin with, um, we've started to see some Supply disruptions with, you know, Indonesia.

Speaker #4: And maybe if I could just to pivot a little bit , I just wanted to clarify that our expectations around working capital for this year , I think I misunderstood Roger's question .

Speaker #4: Expect a modest cash outflow from working capital in 2026.

Reducing harvesting permits, which might impact the hardwood pulp market. We've seen hardwood, pulp narrow, the Gap 2 softwood, quite nicely. I know. Inventory levels are still high, but we've also got in Europe, sea out with the price hike. I'm just wondering, you know, how do you see the outlook for the market is there? More scope for Upward pressure now that the Gap to hardwood has narrowed

Speaker #6: Got it . Thank you

Edward Brucker: Got it. Thank you.

Speaker #2: Thank you. Our next question comes from the line of Cole Hawthorne with Jefferies. Your line is now open.

Operator: Thank you. Our next question comes from the line of Cole Hathorn with Jefferies. Your line is now open.

Speaker #7: Good morning . Thanks for taking my question I'd just like to to follow up on the the market dynamics from here . And if we stick to to softwood pulp to begin with , we've started to see some supply disruptions with , you know , Indonesia reducing harvesting permits , which might impact the hardwood pulp market .

Cole Hathorn: ... Good morning. Thanks for taking my question. I'd just like to follow up on the market dynamics from here. And if we stick to softwood pulp to begin with, we've started to see some supply disruptions with, you know, Indonesia reducing harvesting permits, which might impact the hardwood pulp market. We've seen hardwood pulp narrow the gap to softwood quite nicely. I know inventory levels are still high, but we've also got in Europe, SCA, out with a price hike. I'm just wondering, you know, how do you see the outlook for the market? Is there more scope for upward pressure now that the gap to hardwood has narrowed?

Cole Hathorn: Good morning. Thanks for taking my question. I'd just like to follow up on the market dynamics from here. And if we stick to softwood pulp to begin with, we've started to see some supply disruptions with, you know, Indonesia reducing harvesting permits, which might impact the hardwood pulp market.

Speaker #7: We've seen hardwood pulp narrow the gap to softwood quite nicely. I know inventory levels are still high, but we've also got, in Europe, SCA out with a price hike.

Cole Hathorn: We've seen hardwood pulp narrow the gap to softwood quite nicely. I know inventory levels are still high, but we've also got in Europe, SCA, out with a price hike. I'm just wondering, you know, how do you see the outlook for the market? Is there more scope for upward pressure now that the gap to hardwood has narrowed?

Cole. I I think you're absolutely right. Uh, these latest developments in Indonesia are very significant. Uh, the the impact or the known impact of April, Rio taking 150,000 tons out of the market, uh, as downtime is important, uh, the uncertainty, whether apoi, uh, 1.4 million, male startup might be delayed. Um, it's also important because that could take away 650,000, tons of hardwood in 2026. Uh, so, yes, there's, there's all this impact of of raising cheap prices in Vietnam and China and, and, and, and that is happening as we speak. Uh, as you will point out,

Speaker #7: I'm just wondering, you know, how do you see the outlook for the market? Is there more scope for upward pressure now that the gap to hardwood has narrowed?

Speaker #1: Cole , I think you're absolutely right . These latest developments in Indonesia are very significant . The the impact or the known impact of April Rio taking 150,000 tons out of the market as downtime is important .

Juan Carlos Bueno: Cole, I think you're absolutely right. These latest developments in Indonesia are very significant. The impact or the known impact of April Riau taking 150,000 tons out of the market as downtime is important. The uncertainty whether AP Oki 1.4 million mill startup might be delayed is also important because that could take away 650,000 tons of hardwood in 2026. So yes, there's all this impact of raising chip prices in Vietnam and China, and that is happening as we speak, as you well point out.

Speaker #1: The uncertainty whether AP oaky 1.4 million mill startup might be delayed . It's also important because that could take away 650,000 tons of hardwood in 2026 , so yes , there's there's all this impact of raising chip prices in Vietnam and China and , and that is .

And given that as you said the the now the Delta at which reported that the Delta between hardwood and softwood was 130 at the end of the quarter. Well it's now 100. So with hardwood pushing up, uh, we do believe that there's a a pretty like likelihood that we will see uh improved prices beyond what we have in our forecast uh and or at least much quicker than what we anticipated. We understand that we're now getting into the Chinese New Year. Uh, we understand that that means, uh, everything slows down a bit.

Speaker #1: Happening as we speak As you will point out and given that , as you said , the now the delta which reported that the delta between hardwood and softwood was 130 at the end of the quarter , well , it's now 100 .

Juan Carlos Bueno: And given that, as you said, now the delta, which reported that the delta between hardwood and softwood was 130 at the end of the quarter, well, it's now 100. So with hardwood pushing up, we do believe that there's a pretty likelihood that we will see improved prices beyond what we have in our forecast, or at least much quicker than what we anticipated. We understand that we're now getting into the Chinese New Year. We understand that that means everything slows down a bit, and we have to wait until after New Year's to see what the effect is.

Uh, and we have to wait until uh, after New Year's uh to see what the, uh, what the effect is. Uh, but I think if, if anything else, those very very recent developments. Uh, we tend to indicate uh a potential upward pressure on prices for both hardwood and and inherently then for softwood uh piggybacking on it. So uh so yeah it's it's rather positive

Speaker #1: So, with hardwood pushing up, we do believe that there's a pretty likely likelihood that we will see improved prices beyond what we have in our forecasts, or at least much quicker than what we anticipated.

Let's hope we see that reflect in the future's in the next couple weeks. Um shifting on to the the lumber side and

Particularly I'm I'm thinking about Europe, you know, you called out, you know, higher or lower costs and also pulpwood cost. Well, I suppose with chip cost for for the pulp Mills, um, it's always less clear, how would cost

Speaker #1: We understand that we're now getting into the Chinese New Year . We understand that that means everything slows down a bit , and we have to wait until after New Year's to see what the what the effect is .

Juan Carlos Bueno: We understand that we're now getting into the Chinese New Year. We understand that that means everything slows down a bit, and we have to wait until after New Year's to see what the effect is. But I think if, if anything else, those very, very recent developments will tend to indicate a potential upward pressure on prices for both hardwood and, and inherently then for softwood, piggybacking on it. So, so yeah, it's, it's rather positive.

Juan Carlos Bueno: But I think if, if anything else, those very, very recent developments will tend to indicate a potential upward pressure on prices for both hardwood and, and inherently then for softwood, piggybacking on it. So, so yeah, it's, it's rather positive.

Speaker #1: But I think, if anything else, those very, very recent developments would tend to indicate a potential upward pressure on prices for both hardwood and, inherently then, for softwood piggybacking on it.

Um, and and wood chips, and pulpwood. And do you see any kind of turn in this market or is this

Speaker #1: So, so yeah, it's rather positive.

Speaker #7: Let's hope we see that reflected in the futures in the next couple of weeks. Shifting on to the lumber side, and particularly I'm thinking about Europe.

Cole Hathorn: Let's hope we see that reflect in the futures in the next couple weeks. Shifting on to the lumber side, and particularly, I'm thinking about Europe. Now, you called out, you know, higher saw log costs and also pulpwood costs, well, I suppose wood chip costs for the pulp mills. It's always less clear how wood cost dynamics develop. I'd just like a little bit more color, you know, what are you seeing into Q1? You know, is this just lack of harvesting that's driving up saw logs and wood chips and pulpwood? And do you see any kind of turn in this market, or is this a kind of a structural, we should be higher for longer?

Speaker #7: You called out, you know, higher saw costs and also pulpwood costs. Well, I suppose wood chip costs for the pulp mills.

Speaker #7: It's always less clear . How would cost dynamics develop ? I'd just like a little bit more color , you know . What are you seeing in Q1 .

Is this a kind of a structural? We should be higher for for longer? And the reason I asked that is you've obviously got the Nordic saw log and, um, Pulpit prices coming down. So, I'm just wondering how the central eastern European wood. Basket is performing. Yeah, yeah. Well, that that's a very interesting dynamic as as we're living in right now. Um, let me start with, uh, 1 of the elements that that have a big impact on all of this, and that's the German energy policy. Uh, they they incentivize the the burn of of wood for energy purposes, uh, for pellet production and those kind of things. Uh,

Cole Hathorn: You know, is this just lack of harvesting that's driving up saw logs and wood chips and pulpwood? And do you see any kind of turn in this market, or is this a kind of a structural, we should be higher for longer? The reason I ask that is you've obviously got the Nordic saw log and pulpwood prices coming down, so I'm just wondering how the central Eastern European wood basket is performing.

Speaker #7: You know , is this just lack of harvesting that's driving up saw logs and and and wood chips and pulpwood and you see any kind of turn in this market or is this , is this a kind of a structural .

Speaker #7: We should be higher for longer. And the reason I ask that is you've obviously got the Nordic sawlog and pulpwood prices coming down.

Cole Hathorn: The reason I ask that is you've obviously got the Nordic saw log and pulpwood prices coming down, so I'm just wondering how the central Eastern European wood basket is performing.

Speaker #7: So, I'm just wondering how the Central Eastern European wood basket is performing.

Speaker #1: Yeah , yeah , that's a very interesting dynamic as we're living it right now . Let me start with one of the elements that that have a big impact on all of this .

Juan Carlos Bueno: Yeah. Yeah, Cole, that's a very interesting dynamic as we're living it right now. Let me start with one of the elements that have a big impact on all of this, and that's the German energy policy. They incentivize the burning of wood for energy purposes, for pellet production and those kinds of things. And what that creates is obviously a huge market for pellets, biofuels. Because the winter has been as hard as it has been, the prices of pellets have increased dramatically, and therefore, they're able to pay any price for residuals, whether it's wood chips or sawdust. They're on the lookout for anything they can buy.

Speaker #1: And that's the German energy policy . They they incentivize the burn of of wood for energy purposes . For pellet production and those kind of things .

And and what that creates is obviously a a huge market for pellets biofuels. Uh, because the winter has been as hard as it has been the prices of pellets have increased dramatically and therefore they're able to pay any price for residuals. Whether it's wood chips or sawdust, uh, they're in the in the lookout for anything they can buy, uh, that has an impact on us. Because when we buy wood chips for pop Mills, where we're now competing with these, uh absurd pellet prices and and values that they can pay that are obviously much higher than what we normally pay. So that is 1 of the elements that is impacting right now. Uh our our wood chip cost.

Speaker #1: And what that creates is, obviously, a huge market for pellets and biofuels, because the winter has been as hard as it has been.

Speaker #1: The prices of pellets have increased dramatically . And therefore they're able to pay any price for residuals , whether it's wood chips or sawdust , there in the in the lookout for anything they can buy that has an impact on us .

Juan Carlos Bueno: That has an impact on us because when we buy wood chips for our pulp mills, well, we're now competing with these absurd pellet prices and values that they can pay that are obviously much higher than what we normally pay. So that is one of the elements that is impacting right now our wood chip costs in Germany. Now, when it comes to the pulp logs or the other residuals that we buy from other sawmills, that is dependent on the harvesting in Germany. And the level of calamity that Germany was expecting last year did not happen. So the harvest that was planned did not happen. And the result of that was a significant shortfall in terms of availability of sawlogs totally in the market. So there you have it.

Speaker #1: Because when we buy wood chips for our pulp mills, we're now competing with these absurd pellet prices and values that they can pay, that are obviously much higher than what we normally pay.

Speaker #1: So that is one of the elements that is impacting right now . Our wood chip costs in Germany . Now , when it comes to the pulp logs or the other residuals that we buy from other sawmills , that is dependent on the harvesting in Germany and the level of calamity that Germany was expecting last year did not happen .

In Germany. Now, when it comes to the pop logs uh or the other residuals that we buy, um, from other Sawmills that is dependent on the harvesting in Germany and the level of Calamity that Germany was expecting, uh, last year, did not happen. So the Harvest that was planned did not happen. Uh, and the result of that was a, a significant shortfall in terms of availability of, of, of solids, totally in the market. So, so there you have it. We have less output from Sawmills. Many of them running at slower speeds or cutting shifts. Uh, we suffered the consequences of it and freeze out. We had to slow down production at times during the quarter, because there was simply not enough wood to go by. Again, as a result of this much, much lower harvesting levels, uh, and that creating a pinch. Uh, so that are the, the 2

Juan Carlos Bueno: And the level of calamity that Germany was expecting last year did not happen. So the harvest that was planned did not happen. And the result of that was a significant shortfall in terms of availability of sawlogs totally in the market. So there you have it. We have less output from sawmills, many of them running at slower speeds or cutting shifts.

Speaker #1: So the harvest that was planned did not happen. And the result of that was a significant shortfall in terms of availability of sawlogs, totally in the market.

2, main issues, um, behind, uh, the fiber Dynamic that we see in Germany, uh, it's been different in Scandinavia. There's been a, a big storm over there. A big, uh, need to, uh, uh, pick up, uh, what was left over of that storm. So a bigger inflow of fiber.

Speaker #1: So so there you have it . We have less output from sawmills . Many of them running at slower speeds or cutting shifts .

Juan Carlos Bueno: We have less output from sawmills, many of them running at slower speeds or cutting shifts. We suffered the consequences of it. In Friesau, we had to slow down production at times during the quarter because there was simply not enough wood to go by, again, as a result of this much, much lower harvesting levels, and that creating a pinch. So that are the two main issues behind the fiber dynamic that we see in Germany. It's been different in Scandinavia. There's been a big storm over there, a big need to pick up what was left over of that storm, so a bigger inflow of fiber.

Juan Carlos Bueno: We suffered the consequences of it. In Friesau, we had to slow down production at times during the quarter because there was simply not enough wood to go by, again, as a result of this much, much lower harvesting levels, and that creating a pinch. So that are the two main issues behind the fiber dynamic that we see in Germany. It's been different in Scandinavia. There's been a big storm over there, a big need to pick up what was left over of that storm, so a bigger inflow of fiber.

Speaker #1: We suffered consequences of it, and so we had to slow down production at times during the quarter because there was simply not enough wood to go by.

Speaker #1: Again . As a result of this much , much lower harvesting levels . And that creating a pinch . So that are the two main issues behind the fiber dynamic that we see in Germany .

Speaker #1: It's been different in Scandinavia; there's been a big storm over there. There's a significant need to pick up what was left over from that storm.

Speaker #1: So a bigger inflow of fiber . Now the fact that Scandinavia will have now lower prices would at least allow for a little bit less pressure from Scandinavia , as they were obviously looking at Germany or , or surrounding countries for supply before .

Now the fact that Scandinavia will have now lower prices would at least allow for a little bit less pressure from Scandinavia as they were, obviously looking at Germany or or surrounding countries for Supply before. Now, they have plenty to work with what what they have over there. So that eases a little bit of the of the pressure that we will get, uh, in our home turf. Uh, but overall, it's still a very, uh, tough business environment. That's why we're expecting Fiber prices to increase, uh, until we see, uh, proper Harvest levels. Uh, come back and after we go get through the seasonal, uh, aspect of biopellets biofuels. Obviously, we're in the middle of winter. Uh, once that winter passes, the demand for pellets recedes, uh, and and obviously prices will naturally come down. It's that's a normal cycle for pellets.

Juan Carlos Bueno: Now, the fact that Scandinavia will have now lower prices would at least allow for a little bit less pressure from Scandinavia, as they were obviously looking at Germany or surrounding countries for supply before. Now they have plenty to work with what they have over there, so that eases a little bit of the pressure that we will get in our home turf. But overall, it's still a very tough business environment. That's why we're expecting fiber prices to increase until we see proper harvest levels come back. And after we get through the seasonal aspect of bio pellets, biofuels. Obviously, we're in the middle of winter. Once that winter passes, the demand for pellets recedes, and obviously prices will naturally come down. That's a normal cycle for pellets.

So, uh, that's a little bit of of the pressure points.

Speaker #1: Now they have plenty to work with . What they have over there so that eases a little bit of of the pressure that we will get in our home turf .

That's helpful. And and maybe if I just um, run forward with that, you know, hopefully uh the the cost to your pulp Mills come down in the summer periods as as the pellet demands declines and hope hopefully harvesting volumes increase for for the soil logs.

But I suppose the the other Dynamic is, you know, price of your products.

Juan Carlos Bueno: But overall, it's still a very tough business environment. That's why we're expecting fiber prices to increase until we see proper harvest levels come back. And after we get through the seasonal aspect of bio pellets, biofuels. Obviously, we're in the middle of winter. Once that winter passes, the demand for pellets recedes, and obviously prices will naturally come down. That's a normal cycle for pellets. So, that's a little bit of the pressure points.

Speaker #1: But overall, it's still a very tough business environment. That's why we're expecting fiber prices to increase until we see proper harvest levels come back.

potentially we get pole prices higher which would be supportive, but on the the lumber side, you know, we have

Speaker #1: And after we get through the seasonal aspect of pellets biofuels, obviously we're in the middle of winter. Once that winter passes, the demand for pellets recedes, and obviously prices will naturally come down.

Speaker #1: That's a normal cycle for pellets. So that's a little bit of the pressure points.

Juan Carlos Bueno: So, that's a little bit of the pressure points.

Some green Shooters I suppose with like ifo commentary in Germany. Um, you know, there is off a very low based construction industry is looking a little bit better, is there anything to to call out there? Um, you know, are you seeing any lead indicators on the chemical side or, you know, the auto side or anything on the construction? That's giving a little bit more confidence. Maybe into the second quarter, um, into the summer period as well.

Speaker #7: That's helpful . And maybe if I just run forward with that , you know , hopefully the the cost to your pulp mills come down in the summer periods as , as the pellet demands declined and hopefully harvesting volumes increase for , for the sawlogs .

Cole Hathorn: That's helpful. And, and maybe if I just run forward with that, you know, hopefully the cost to your pulp mills come down in the summer periods as the pellet demands declines, and hopefully harvesting volumes increase for the sawlogs. But I suppose the other dynamic is, you know, price of your products. Potentially, we get pulp prices higher, which would be supportive, but on the lumber side, you know, we have some green shoots, I suppose, with like IFO commentary in Germany. You know, there is off a very low base construction industries looking a little bit better. Is there anything to call out there?

Matter of Defense.

Speaker #7: But I suppose the the other dynamic is , you know , price of your products potentially we get pulp prices higher , which would be supportive .

Speaker #7: on the lumber side , you know , we have some green shoots , I suppose , with like ifo commentary in Germany , you know , there is off a very low base construction industries .

Cole Hathorn: You know, there is off a very low base construction industries looking a little bit better. Is there anything to call out there? You know, are you seeing any lead indicators on the chemical side or, you know, the auto side or anything on the construction that's giving a little bit more confidence, maybe into the Q2, into the summer period as well?

Speaker #7: Looking a little bit better . Is there anything to to call out there , you know , are you seeing any lead indicators on the chemical side or , you know , the auto side or anything on the construction that's giving a little bit more confidence , maybe into the second quarter , into the summer period as well ?

Uh, with very significant increases versus what they had budgeted in previous years, that is something that will move the German economy as a whole. Uh, that is something that we believe will have some some impact. However, that impact is not going to be, um, all of a sudden that that's a, a relatively, um, slower pace of growth that we will see coming but but an important 1 for our country that has been stagnant and and stuck in a recession for for already 3 years.

Cole Hathorn: You know, are you seeing any lead indicators on the chemical side or, you know, the auto side or anything on the construction that's giving a little bit more confidence, maybe into the Q2, into the summer period as well?

So uh which again is is very uncommon for Germany. So we do see that there's a little bit of of

Speaker #1: That's a very good question , Colin . Probably one of the things that that we that everybody speaks about is in the case of Germany .

Juan Carlos Bueno: That's a very good question, Colin, and probably one of the things that we've that everybody speaks about is, in the case of Germany, the investment that the company has has decided to make in matter of defense, with very significant increases versus what they had budgeted in previous years. That is something that will move the German economy as a whole. That is something that we believe will have some impact. However, that impact is not gonna be all of a sudden. That's a relatively slower pace of growth that we will see coming, but an important one for a country that has been stagnant and stuck in a recession for already three years. So, which again, is very uncommon for Germany.

Speaker #1: The investment that the company has decided to make is in a matter of defense, with very significant increases versus what they had budgeted in previous years.

Speaker #1: That is something that will move the German economy as a whole. That is something that we believe will have some impact.

Juan Carlos Bueno: That is something that we believe will have some impact. However, that impact is not gonna be all of a sudden. That's a relatively slower pace of growth that we will see coming, but an important one for a country that has been stagnant and stuck in a recession for already three years. So, which again, is very uncommon for Germany.

Speaker #1: However, that impact is not going to be all of a sudden; that's a relatively slower pace of growth that we will see coming.

Speaker #1: But but an important one for a country that has been stagnant and stuck in a recession for for already three years . So which again , is very uncommon for Germany .

Hope in that regard, that there's a little bit of improvement coming, uh, but it's not something that would happen overnight. Uh, we just see a gradual improvement over there whether it's in construction activity. Uh, obviously, we, we keep an eye very much on the UK that some markets that we serve quite a bit that has been very good for us and and where we dedicate a lot of resources and energy. Uh, our prices, in UK tend to be higher than what they they, they are in Germany. So that's a market, we privilege. Uh, just as the market in Japan. We do as much business in Japan as we can. That's obviously the margins of where they are, are even better. Uh, and we're able to deliver the high quality products that they need. Uh, the US remains to be the, the, the valve, uh, when prices are are high and and they are trending higher, uh, we, we can pivot to the US, uh, and we

Speaker #1: So we do see that there's a little bit of , of hope in that regard , that there's a little bit of improvement coming , but it's not something that would happen overnight .

Juan Carlos Bueno: So we do see that there's a little bit of hope in that regard, that there's a little bit of improvement coming, but it's not something that would happen overnight. We just see a gradual improvement over there, whether it's in construction activity. Obviously, we keep an eye very much on the UK. That's a market that we serve quite a bit. That has been very good for us and where we dedicate a lot of resources and energy. Our prices in UK tend to be higher than what they are in Germany, so that's a market we privilege, just as the market in Japan.

Speaker #1: We just see a gradual improvement over there, whether it's in construction activity. Obviously, we keep an eye very much on the UK.

Speaker #1: That's a market that we serve quite a bit. That has been very good for us, and where we dedicate a lot of resources and energy.

Speaker #1: Our prices in the UK tend to be higher than what they are in Germany, so that's a market we privilege. Just as the market in Japan, we do as much business in Japan as we can.

We we've done that many times before. Um, I think in in in times that we sell more volumes to the us, we're we're close to 60% 55 or more of volume into the us. We right now at 41%, uh, but the prices over there are increasing and despite this 10% tariff that we have, as we mentioned before we believe we're pretty competitive, uh, into that market. So, uh, so I think there's there's some positive momentum on prices overall in number for the year. That's that's what we would tend to expect.

Thank you. Okay, thank you.

Juan Carlos Bueno: We do as much business in Japan as we can, as obviously the margins over there are even better, and we're able to deliver the high quality product that they need. The US remains to be the valve when prices are high and they are trending higher, we can pivot to the US, and we've done that many times before. I think in times that we sell more volumes to the US, we're close to 60%, 55 or more of volume into the US. We're right now at 41%, but the prices over there are increasing. And despite this 10% tariff that we have, as we've mentioned before, we believe we're pretty competitive into that market.

Speaker #1: As obviously the margins over there are even better, and we're able to deliver the high-quality product that they need. The US remains to be the valve.

Thank you. Our next question comes from the line of Dominic gesture with aperture. Your line is now open.

Speaker #1: When prices are high and they are trending higher , we we can pivot to the US and we we we've done that many times before .

Hi there. Thanks for taking my question. Could you please comment on the extension of your 2, AF? How those discussions going with lendo? And when you expecting those to be concluded,

Speaker #1: I think in times that we sell more volumes to the US, we're close to 60%, 55 or more of volume into the US.

we, we know these are going to be more expensive. Um, they I think the banks have their, their things that they want to change in, in the

Speaker #1: We're right now at 41% . But the prices over there are increasing . And despite this , 10% tariff that we have , as we mentioned before , we believe we're pretty competitive into that market .

Juan Carlos Bueno: We're right now at 41%, but the prices over there are increasing. And despite this 10% tariff that we have, as we've mentioned before, we believe we're pretty competitive into that market. So, I think there's some positive momentum on prices overall in lumber for the year. That's what we would tend to expect.

In the indentures. But I I would say, overall the the conversations are going well.

Thank you, that's helpful. And do you have any indication of when you're hoping to get this laptop timing wise?

Speaker #1: So, I think there's some positive momentum on prices overall in lumber for the year. That's what we would tend to expect.

Uh,

Juan Carlos Bueno: So, I think there's some positive momentum on prices overall in lumber for the year. That's what we would tend to expect.

yeah, that's a good question but before the end of Q2, for sure,

Speaker #7: Thank you. I'll get back in the queue.

Cole Hathorn: Thank you. I'll get back in the queue.

Speaker #2: Thank you. Our next question comes from the line of Dominik Gerster with Aperture. Your line is now open.

Operator: Thank you. Our next question comes from the line of Dominic Gerster with Aperture. Your line is now open.

And then 1 final question. Mark anything on size? You can comment? Will there be uh the same size as the current facilities? Any additional color would be helpful.

Speaker #8: Hi there. Thanks for taking my question. Could you please comment on the extension of your two RFPs? How are those discussions going with lenders, and when do you expect those to be concluded?

Dominic Gerster: Hi there. Thanks for taking my question. Could you please comment on the extension of your two RCFs, how those discussions are going with lenders, and when you're expecting those to be concluded?

Yeah, I think that's 1 thing we're talking about this. So I think there is a a bit of a push to reduce overall capacity slightly but uh, not not to a level that we're uncomfortable with, but obviously more liquidity for us is better.

Speaker #8: So

Speaker #4: Well , we we know these are going to expensive . The I think the banks have their their things that they want to change in the in the indentures .

Richard Short: Well, we know these are gonna be more expensive. I think the banks have their things that they wanna change in the indentures, but I would say overall, the conversations are going well.

Understood, thank you.

Thank you.

Our next question is a follow-up from coal hatthorn with Jeff. Your line is open.

Speaker #4: But I would say overall, the conversations are going well.

Thanks for taking the follow-up. Um,

Speaker #8: Thank you . That's helpful . And do you have any indication of when you're hoping to set this wrap up timing wise ?

Dominic Gerster: Thank you. That's helpful. And do you have any indication of when you're hoping to get this wrapped up, timing-wise?

I, I just wanted to ask around, um, you know, the point you made around pellets and the energy can consumption, um,

Richard Short: Yeah, that's a good question. But before the end of Q2, for sure.

Speaker #4: Yeah, that's a good question. Before the end of Q2, for sure.

Richard Short: Yeah, that's a good question. But before the end of Q2, for sure.

Dominic Gerster: Understood. And then one final question. Anything on size you can comment? Will there be the same size as the current facilities? Any additional color would be helpful.

Speaker #8: And then one final question. Anything on size you can comment? Will these be the same size as the current facilities? Any additional color would be helpful.

Speaker #8: Yeah .

Speaker #4: Yeah , I think that's one thing we're talking about . So I think there is a bit of a push to reduce overall capacity slightly , but not not to a level that we're uncomfortable with .

Richard Short: Yeah, I think that's one thing we're talking about this, so I think there is a bit of a push to reduce overall capacity slightly, but not to a level that we're uncomfortable with, but obviously, more liquidity for us is better.

We are seeing Industries Lobby um, more and more um, to prevent, you know, Imports and trade barriers. And you know, when there's a dislocation and it does seem like, you know, the priority of you should first be for wood. So on Wood Products, you know, then kind of the downstream pulp Industries before you get into energy, you know, is there any lobbying ongoing by

Speaker #4: But obviously, more liquidity for us is better.

Speaker #8: Understood . Thank you .

Dominic Gerster: Understood. Thank you.

Speaker #2: Thank you. Our next question is a follow-up from Cole Hathorn with Jefferies. Your line is now open.

Operator: Thank you. Our next question is a follow-up from Cole Hathorn with Jefferies. Your line is now open.

The Pulp and Paper industry to to prioritize that to keep your raw materials a little bit lower rather than they get it pushed out by energy. It's the first 1. And secondly, you know, there's been a lot of debate now around lower CO2 costs, um, in Europe, and the CO2 prices come down, um,

Speaker #7: Thanks for taking the follow up . I'm just wanting to ask around . You know , the point you made around pellets and the energy consumption we're seeing industry's lobby more and more to prevent , you know , imports and trade barriers .

Cole Hathorn: Thanks for taking the follow-up. I just wanted to ask around, you know, the point you made around pellets and the energy consumption. We're seeing industries lobby more and more to prevent, you know, imports and trade barriers. And, you know, when there's a dislocation, and it does seem like, you know, the priority of use should first be for wood, sawn wood products, you know, then kind of the downstream pulp industries before you get into energy. You know, is there any lobbying ongoing by the pulp and paper industry to prioritize that, to keep your raw materials a little bit lower rather than they get pushed out by energy? That's the first one. And secondly, you know, there's been a lot of debate now around lower CO2 costs in Europe, and the CO2 prices come down.

does that position you a little bit more favorably or or is it not really um, an item of consideration?

Speaker #7: And , you know , when there's a dislocation and it does seem like , you know , the priority of use should first be for wood , sawn wood products .

Cool, very important questions, uh, and the answers of the first 1 is absolutely. Yes. Um, what we, we are absolutely contrary to the policy of the German government of of promoting the use of wood for for bio fuel purposes straight off.

Speaker #7: You know , then kind of the downstream pulp industries , before you get into energy , you know , is there any lobbying ongoing by the pulp and paper industry to , to prioritize that , to keep your raw materials a little bit lower ?

Cole Hathorn: You know, is there any lobbying ongoing by the pulp and paper industry to prioritize that, to keep your raw materials a little bit lower rather than they get pushed out by energy? That's the first one. And secondly, you know, there's been a lot of debate now around lower CO2 costs in Europe, and the CO2 prices come down. Does that position you a little bit more favorably, or is it not really an item of consideration?

Speaker #7: Rather than getting pushed out by energy ? It's the first one . And secondly , you know , there's been a lot of debate now around lower CO2 costs in Europe .

Doesn't make any, uh, sense in, in our minds. Uh, we we privilege very much the fact that we need to extract the highest value of of, uh, of the harvests that we make. And it should only be based on residuals uh, that the pellet industry should operate on. And there's been a lot of lobbying effort on that end. Um, unfortunately there's a lot of forces that that that are not necessarily aligned

Speaker #7: And the CO2 prices come down. Does that position you a little bit more favorably, or is it not really an item of consideration?

Cole Hathorn: Does that position you a little bit more favorably, or is it not really an item of consideration?

Uh, there are other interests uh from other parties that that are contrary to ours. Uh but we stand by our

Speaker #1: Well , very important questions . And the answer to the first one is absolutely yes . What we are absolutely contrary to the policy of the German government of , of promoting the use of wood for , for biofuel purposes , off .

Juan Carlos Bueno: Cole, very important questions. And the answer to the first one is absolutely yes. What we are absolutely contrary to the policy of the German government of promoting the use of wood for biofuel purposes straight off. It doesn't make any sense in our minds. We privilege very much the fact that we need to extract the highest value of the harvests that we make, and it should only be based on residuals that the pellet industry should operate on. And there's been a lot of lobbying effort on that end. Unfortunately, there's a lot of forces that are not necessarily aligned. There are other interests from other parties that are contrary to ours.

By our belief that from an pure environmental perspective and and value capture perspective. The right thing to do is what we're promoting and what we're, uh, advocating for.

uh in terms of the CO2, as you say, yes uh that's another part of the equation that we

Speaker #1: It doesn't make any sense in our minds . We privilege very much the fact that we need to extract the highest value of , of of the harvests that we make , and it should only be based on residuals that the pellet industry should operate on .

Speaker #1: And there's been a lot of lobbying effort on that end. Unfortunately, there are a lot of forces that are not necessarily aligned.

Juan Carlos Bueno: And there's been a lot of lobbying effort on that end. Unfortunately, there's a lot of forces that are not necessarily aligned. There are other interests from other parties that are contrary to ours. But we stand by our, by our belief that from a pure environmental perspective and, and value capture perspective, the right thing to do is what we're promoting and what we're, advocating for.

Speaker #1: There are other interests from other parties that that are contrary to ours . But we stand by our by our belief that from a pure environmental perspective and value capture perspective , the right thing to do is what we're promoting and what we're advocating for terms of the CO2 , as you say .

Uh, emphasize. And that we have a line of communication with government on a regular basis, uh, to make sure that the fact that we have biogenic carbon, uh, in our operations that we have electricity that we generate uh, by biomass sources. Um, it's all taken into consideration when looking at at all these, uh, CO2 emissions and credits and whatnot. Uh, and we are actively uh, advocating for the proper allocation of those credits. Uh and the maintenance of those credits over time, uh, rather than our red

Production of them. Uh,

Juan Carlos Bueno: But we stand by our, by our belief that from a pure environmental perspective and, and value capture perspective, the right thing to do is what we're promoting and what we're, advocating for. In terms of the CO2, as you say, yes, that's another, part of the equation that we, emphasize, and that we have a, a line of communication with government on a regular basis, to make sure that the fact that we have biogenic carbon, in our operations, that we have electricity that we generate, by biomass sources, it's all taken into consideration when looking at, at all these, CO2 emissions and credits and whatnot.

Precisely on the back of of the type of business that we run. Uh, that is very much in line with what the government is pushing for, in terms of environment, uh, protection

Juan Carlos Bueno: In terms of the CO2, as you say, yes, that's another, part of the equation that we, emphasize, and that we have a, a line of communication with government on a regular basis, to make sure that the fact that we have biogenic carbon, in our operations, that we have electricity that we generate, by biomass sources, it's all taken into consideration when looking at, at all these, CO2 emissions and credits and whatnot.

Speaker #1: Yes , that's another part of the equation that we emphasize and that we have a line of communication with government on a regular basis to make sure that the fact that we have biogenic carbon in our operations , that we have electricity , that we generate by biomass sources , it's all taken into consideration when looking at at all these CO2 emissions and credits and whatnot .

and then I I have a a question from a investor here that we're asking to to everyone that has uh, saw and with business in Europe, you know, that they weren't able to give me a

Speaker #1: And we are actively advocating for the proper allocation of those credits, and the maintenance of those credits over time rather than a reduction of them, precisely on the back of the type of business that we run, that is very much in line with what the government is pushing for in terms of environment protection.

Juan Carlos Bueno: We are actively advocating for the proper allocation of those credits, and the maintenance of those credits over time, rather than a reduction of them, precisely on the back of the type of business that we run. That is very much in line with what the government is pushing for in terms of environment protection.

A, a perfect answer. And um, I hope you can just kind of add some color to it. It might be too far out. But you know what? We're seeing at the moment is we're seeing, you know, steel prices move up higher because of cbam plus, we're seeing, you know, import tariffs on steel driving ultimately steel prices higher. We're ALS seeing cement prices higher historically, they always used to be this good correlation between sa and wood, Lumber steel and cement because you're all

involved in the construction material space.

Speaker #7: And then I have a question from an investor here that we're asking to everyone that has Thornwood business in Europe. You know, they weren't able to give me a perfect answer.

Cole Hathorn: And then I have a question from an investor here that we're asking to everyone that has a sawn wood business in Europe. You know, they weren't able to give me a perfect answer, and I hope you can just kind of add some color to it. It might be too far out, but you know, what we're seeing at the moment is we're seeing, you know, steel prices move up higher because of CBAM, plus we're seeing, you know, import tariffs on steel driving, ultimately, steel prices higher. We're also seeing cement prices higher. Historically, there always used to be this good correlation between sawn wood, lumber, steel, and cement, because they're all involved in the construction material space.

Do you see longer term any form of kind of pricing umbrella that might shift the industry to use more wood? Considering it is only you know 5% of building materials outside of the nordics in Europe. You know is is there something that you are tangibly seeing now or something that you see in the future or is this just a too long? Dated positive to um to be relative in your in your term thinking?

Speaker #7: And I hope you can just kind of add some color to it . It might be too far out , but you know what we're seeing at the moment is we're seeing , you know , steel prices move up higher because of cbam .

Speaker #7: Plus , we're seeing , you know , import tariffs on steel driving ultimately steel prices higher . We're also seeing cement prices higher .

Cole Hathorn: We're also seeing cement prices higher. Historically, there always used to be this good correlation between sawn wood, lumber, steel, and cement, because they're all involved in the construction material space. Do you see longer term any form of kind of pricing umbrella that might shift the industry to use more wood, considering it is only, you know, 5% of building materials outside of the Nordics in Europe? You know, is there something that you are tangibly seeing now or something that you see in the future, or is this just a too long dated positive to to be relative in your- in your near-term thinking?

Speaker #7: Historically, there always used to be this good correlation between sawn wood, lumber, steel, and cement because they’re all involved in the construction material space.

Speaker #7: Do you see, longer term, any form of pricing umbrella that might shift the industry to use more wood, considering it is only 5% of building materials outside of the Nordics in Europe?

Cole Hathorn: Do you see longer term any form of kind of pricing umbrella that might shift the industry to use more wood, considering it is only, you know, 5% of building materials outside of the Nordics in Europe? You know, is there something that you are tangibly seeing now or something that you see in the future, or is this just a too long dated positive to to be relative in your- in your near-term thinking?

Speaker #7: You know , is there something that you are tangibly seeing now or something that you see in the future ? Or is this just a too long dated , positive to to be relative in your in your near thinking ?

I, I think all that, uh, the evolution of the use of wood, for construction substituting, uh, steel and concrete, it is something that we will see coming that is already happening. It just happens to be a very small fraction of the pie, uh, obviously steel and concrete is, is the bread and butter of the construction industry and has been for decades, uh, and and changing that ship, uh, takes time. But when you look at at Europe in particular, uh, let's talk about Mass timber in Europe where we do, not participate. But that's a business that grows double digit per year. Uh, it's growing, I think it at 11% per year. Uh, now uh, so there is an important growth on that element, uh, and that again, is substituting concrete and steel. Uh, when you look at that same growth in North America, we're talking about 22 24%. Uh,

Speaker #1: I think all that—the evolution of the use of wood for construction, substituting steel and concrete—is something that we will see coming, and that is already happening.

Juan Carlos Bueno: I think, Cole, that the evolution of the use of wood for construction, substituting steel and concrete, is, is something that we will see coming. That is already happening. It just happens to be a very small fraction of the pie. Obviously, steel and concrete is, is the bread and butter of the construction industry and has been for decades. And changing that ship takes time. But when you look at Europe in particular, let's talk about mass timber in Europe, where we do not participate, but that's a business that grows double digit per year. It's growing, I think, at 11% per year now. So there is an important growth on that element. And that, again, is substituting concrete and steel.

Speaker #1: It happens to be a very small fraction of the pie. Obviously, steel and concrete is the bread and butter of the construction industry and has been for decades.

Speaker #1: And changing that ship takes time . But when you look at Europe in particular , let's talk about mass timber in Europe , where we do not participate , but that's a business that grows double digit per year .

Juan Carlos Bueno: And changing that ship takes time. But when you look at Europe in particular, let's talk about mass timber in Europe, where we do not participate, but that's a business that grows double digit per year. It's growing, I think, at 11% per year now. So there is an important growth on that element. And that, again, is substituting concrete and steel.

Per year. So. And and that's why we we we live so much in the in the future of our Mass Timber business in North America because there's a tremendous push for it. And there's all the reasons, uh, whether it's in construction cost environmental, uh, just the speed of construction, the amount of Labor that you need. Uh, the thing about North America right now, with all the oil go environment that we're facing deportations and whatnot, labor for construction is a, a very significant issue.

Speaker #1: It's growing . I think , at 11% per year . Now . So there is an important growth on that element . And that , again is substituting concrete and steel .

Speaker #1: When you look at that same growth in North America , we're talking about 2,224% per year . So and that's why we we believe so much in the in the future of our mass timber business in North America .

Juan Carlos Bueno: When you look at that same growth in North America, we're talking about 22-24% per year. So, and that's why we leave so much in the future of our mass timber business in North America, because there's a tremendous push for it, and there's all the reasons, whether it's in construction cost, environmental, just the speed of construction, the amount of labor that you need. Think about North America right now with all the political environment that we're facing, deportations and whatnot, labor for construction is a very significant issue, and we offer a solution for that problem. The amount of labor that is needed for mass timber construction is absolutely a fraction of what normal construction projects with concrete and steel would demand. So there is an alternative, there is a solution.

Speaker #1: Because there's a tremendous push for it. And there's all the reasons, whether it's in construction costs, environmental, just speed of construction, the amount of labor that you need.

Speaker #1: Think about North America right now—with all the political environment that we're facing, deportations and whatnot, labor for construction is a very significant issue.

Juan Carlos Bueno: Think about North America right now with all the political environment that we're facing, deportations and whatnot, labor for construction is a very significant issue, and we offer a solution for that problem. The amount of labor that is needed for mass timber construction is absolutely a fraction of what normal construction projects with concrete and steel would demand. So there is an alternative, there is a solution.

With with time and experience people will believe and catch up on it. Uh, but again, the 20% growth year-over-year is already proof that there is a good chance that we'll see that market flourish and and that umbrella, as you say, uh, shifting a little bit, uh, and, and giving some space for for Mass Timber to, to develop and substitute, um, traditional construction methods.

Speaker #1: And we offer a solution for that problem. The amount of labor that is needed for mass timber construction is absolutely a fraction of what normal construction projects with concrete and steel would demand.

Thank you.

Thank you. And this concludes the questioning answer session. I will now like to hand the call back over to Juan, Carlos Bueno for closing remarks.

Speaker #1: So there is an alternative . There is a solution . It is more cost effective now without any doubt , to to produce with , to construct or build with mass timber .

Juan Carlos Bueno: It is more cost effective, without any doubt, to construct or build with mass timber, but it takes time for developers, architects to understand mass timber. This is not something that everybody knows about. It's something that only with time and experience, people will believe and catch up on it. But again, the 20% growth year-over-year is already proof that there is a good chance that we'll see that market flourish, and that umbrella, as you say, shifting a little bit, and giving some space for mass timber to develop and substitute traditional construction methods.

Okay, thank you Shannon and thanks to all of you for joining our call, Rich. And I are available to talk more at any time. So don't hesitate to call 1 of us and otherwise we look forward to speaking to you again, on next earning call in May. Bye for now.

Speaker #1: But it takes time for developers , architectures , architects to , to understand mass timber . This is not something that everybody knows about .

This concludes today's conference, thank you for your participation. You may now disconnect

Speaker #1: It's something that only with with time and experience , people will believe and catch up on it . But again , the 20% growth year over year is already proof that there is a good chance that we'll see that market flourish and that umbrella , as you say , shifting a little bit and giving some space for for mass timber to develop and substitute traditional construction methods .

Speaker #7: Thank you .

Cole Hathorn: Thank you.

Speaker #2: Thank you. And this concludes the question and answer session. I would now like to hand the call back over to Juan Carlos Bueno for closing remarks.

Operator: Thank you. And this concludes the questioning and answer session. I would now like to hand the call back over to Juan Carlos Bueno for closing remarks.

Speaker #1: Okay . Thank you , Shannon , and thanks to all of you for joining our call . Rich and I are available to talk more at any time , so don't hesitate to call one of us and otherwise we look forward to speaking to you again on the next call in May .

Juan Carlos Bueno: Okay. Thank you, Shannon, and thanks to all of you for joining our call. Rich and I are available to talk more at any time, so don't hesitate to call one of us. And otherwise, we look forward to speaking to you again on our next earnings call in May. Bye for now.

Speaker #1: Bye for now .

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.

Q4 2025 Mercer International Inc Earnings Call

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