Q2 2024 Mercer International Inc Earnings Call

Operator: Good morning, and welcome to Mercer International's second quarter 2024 earnings conference call. On the call today is Juan Carlos Bueno, President and Chief Executive Officer of Mercer International, and Robert Short, CFO and Secretary. I'll now hand the call over to Richard.

Operator: Good morning and welcome to Mercer International's second quarter, 2024, in this conference call.

Good morning, and welcome to Mercer Internationals second quarter 2024 earnings conference call on the call today is Juan Carlos <unk>, President and Chief Executive Officer of Mercer International and Robert <unk>, CFO and Secretary I'll now hand, the call over to Richard.

Operator: On the call today is Juan Carlos Bueno, President, Chief Executive Officer of Mercer International, and Robert Short, CFO and Secretary.

Richard Short: I'll now hand the call over to Richard Short. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the second quarter before turning the call over to Juan Carlos to provide further color into the markets, our operations, and our strategic initiatives.

Richard: Good morning, everyone. Thanks for joining us today.

Speaker Change: Good morning, everyone. Thanks for joining us today.

Richard: I will begin by touching on the financial and operating highlights of the second quarter before turning the call over to Juan Cardos to provide further color on the markets, our operations, and our strategic initiatives. Also, for those of you that have joined the call today 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, according to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, we will be making forward-looking statements in this morning's conference call.

Robert: I will begin by touching on our financial and operating highlights of the second quarter before turning the call over to Juan Carlos to provide further color into the markets our operations and our strategic initiatives.

Richard Short: Also, for those of you that have joined the call today 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 be making forward-looking statements in this morning's conference call.

Speaker Change: Also for those of you that have joined the call today by telephone there was presentation material that we have attached to the investors section of our website.

Richard: 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. For the quarter, our EBITDA totaled $30 million, compared to Q1's EBITDA of $64 million. The lower results were driven by 37 days of planned major maintenance downtime split between 2 mils compared to no downtime in Q1. We estimate the planned downtime adversely impacted our EBITDA by approximately $60 million. After adjusting for the planned maintenance downtime impact,

Speaker Change: But before turning to our results I would like to remind you that we will be making forward looking statements in this morning's conference call.

Richard Short: 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. This quarter, our EBITDA total $30 million compared to Q1 EBITDA of $64 million. The lower results were driven by 37 days of planned major maintenance downtime split between two mills compared to no downtime in Q1. We estimate the planned downtime adversely impacted our EBITDA by approximately $60 million. After adjusting for the planned maintenance downtime impact, the improved operating results were primarily driven by higher pulp sales realizations.

Speaker Change: According to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Speaker Change: 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.

Speaker Change: This quarter, our EBITDA totaled $30 million compared to Q1's EBITDA of $64 million.

Speaker Change: The lower results were driven by 37 days of planned major maintenance downtime split between.

Speaker Change: Two males compared to no downtime in Q1.

Speaker Change: We estimate the planned downtime adversely impacted our EBITDA by approximately $60 million.

Speaker Change: After adjusting for the planned maintenance downtime impact the.

Richard: The improved operating results were primarily driven by higher pulp sales realizations. Our pulp segment contributed quarterly EBITDA of $32 million, and our solid wood segment contributed quarterly EBITDA of $3 million. You can find additional segment disclosures in our Form 10-Q, which can be found on our website and the SEC.

Speaker Change: The improved operating results were primarily driven by higher pulp sales realizations.

Richard Short: Our pulp segment contributed quarterly EBITDA of $32 million, and our Solid Wood segment contributed quarterly EBITDA of $3 million.

Speaker Change: Our pulp segment contributed quarterly EBITDA of $32 million and our solid wood segment contributed quarterly EBITDA of $3 million.

Richard Short: You can find additional segment disclosures in our Form 10-Q, which can be found on our website and the SEC's. Strong demand for pulp and Q2 combined with softwood supply interruptions in Finland pushed prices higher than Q1 in all our major markets. In China, the Q2 average MBSK net price was $811 per ton, up $66 from Q1. European MBSK list prices averaged $1,602 per ton in the current quarter, an increase of $202 from Q1. And the North American MBSK list priced average $1,697 per ton in the current quarter and increased up $257 from Q1. The North American NBHK average Q2 list price was $1,437 per ton, up $214 from Q1.

Speaker Change: You can find additional segment disclosures in our Form 10-Q, which can be found on our website and the SEC.

Richard: Strong demand for pulp in Q2 combined with softwood supply interruptions in Finland pushed prices higher than Q1 in all our major markets. In China, the Q2 average MBSK net price was $811 per tonne, up $66 from Q1. European MBSK list prices averaged $1,602 per tonne in the current quarter, an increase of $202 from Q1. And the North American MBSK list price averaged $1,697 per ton in the current quarter, an increase of $257 from Q1.

Speaker Change: Strong demand for pulp and Q2 combined with softwood supply interruptions in Finland push prices higher than Q1 in all our major markets.

Speaker Change: In China, the Q2 average M. B S. K net price was $811 per ton up $66 from Q1.

Speaker Change: European M. B S. K list prices averaged $1602 per ton in the current quarter, an increase of $202 from Q1.

Speaker Change: And the North American M. B S. K list price to average $1697 per ton in the current quarter, an increase of $257 from Q1.

Richard: The North American NBHK average Q2 list price was $1,437 per ton, up $214 from Q1. The price gap between softwood and hardwood pulp narrowed slightly this quarter in China, with the average Q2 net eucalyptus hardwood price at $735 per ton, up $73 from Q1. Total pulp sales volumes in the second quarter decreased by 132,000 tonnes to 433,000 tonnes, driven by lower production from planned maintenance downtime and the disposition of our equity interest in the Caribou Mill at the end of Q1. All our mills ran well this quarter.

Speaker Change: The North American N V. H K average Q2 list price was $1437 per ton.

Speaker Change: <unk> $214 from Q1.

Richard Short: The price gap between softwood and hardwood pulp narrowed slightly this quarter in China, with the average Q2 net eucalyptus hardwood price at $735 per ton, up $73 from Q1. Total pulp sales volumes in the second quarter decreased by 132,000 tons to 433,000 tons, driven by lower production from plant maintenance downtime and the disposition of our equity interest in the Caribou Mail at the end of Q1. All our meals ran well this quarter. In Q2, we had a total of 44 days of downtime at our meals, which included the 37 days for planned Andrial maintenance, and the seven days due to slower than expected start-ups.

Speaker Change: The price gap between softwood and hardwood pulp narrowed slightly this quarter in China with the average Q2, net eucalyptus hardwood price at $735 per ton.

Speaker Change: Up $73 from Q1.

Speaker Change: Total pulp sales volumes in the second quarter decreased by 132000 tons to 433000 tons driven by lower production from planned maintenance downtime.

Speaker Change: And the disposition of our equity interest in the Caribou mill at the end of Q1.

Speaker Change: Yeah.

Speaker Change: All our mills ran well this quarter in Q2, we had a total of 44 days of downtime at our mills, which included the 37 days for planned annual maintenance and seven days due to slower than expected start ups.

Richard: In Q2, we had a total of 44 days of downtime at our mills, which included 37 days for planned annual maintenance and 7 days due to slower than expected start-ups. In Q1, we had no planned maintenance downtime. After adjusting for the planned maintenance and impact of the disposition of our equity interest in the Caribou Mill at the end of Q1, pulp production was flat from the first quarter. For our solid wood segment, lumber pricing was mostly flat, as modestly higher prices in Europe were offset by lower prices in the U.S. market. Overall, in Q2, lumber markets remained weak. The Random Lengths U.S. benchmark for Western SPF No.

Richard Short: In Q1, we had no planned maintenance downtime. After adjusting for the planned maintenance and impact of the disposition of our equity interest in the Caribou mill at the end of Q1, Pope production was flat from the first quarter. For our solid wood segment, lumber pricing was mostly flat as modestly higher prices in Europe were offset by lower prices in the US market. Overall, in Q2, lumber markets remained weak. The random links US benchmark for Western SPF number 2 and better, average price was $386 per thousand boardfeet in Q2 compared to $447 in Q1. Today, the average benchmark price for Western SPF and better is around $355 per thousand boardfeet, about 16% decreased from the beginning of Q2.

In Q1, we had no planned major maintenance downtime.

Speaker Change: After adjusting for the planned maintenance and impact of the disposition of our equity interest in the caribou mill at the end of Q1 pulp production was flat from the first quarter.

Speaker Change: For our solid wood segment lumber pricing was mostly flat as modestly higher prices in Europe were offset by lower prices in the U S market.

Speaker Change: Overall in Q2 lumber markets remained weak.

Richard: 2 and better, the average price was $386 per thousand board feet in Q2, compared to $447 in Q1. Today, that average benchmark price for Western SPF and better is around $355 per 1,000 boards, about 16% decrease from the beginning of Q2. For Q3, we are expecting generally flat lumber prices in the U.S. and European markets as demand is expected to remain... In the second quarter, we recognized a non-cash goodwill impairment of $34 million, or 51 cents per share, related to the Torgal facility as a result of ongoing weakness in the European lumber, pallet, and biofuel markets. Juan Carlos will have more to say on this in a moment.

Speaker Change: The random lengths U S benchmark for Western SPF number two and better average price was $386 per thousand board feet in Q2 compared to $447 in Q1.

Speaker Change: Today that average benchmark price for western SPF and better is around $355 per thousand board feet about 16% decrease from the beginning of Q2.

Richard Short: For Q3, we are expecting generally flat lumber prices in the US and European markets as demand is expected to remain weak.

Speaker Change: For Q3, we are expecting generally flat lumber prices in the U S and European markets as demand is expected to remain weak.

Richard Short: In the second quarter, we recognized a non-cash goodwill impairment of $34 million, or $51 per share, related to the Torgao facility as a result of ongoing weakness in the European lumber, pallet, and biofuel markets. One cartel will have more to say on this in a moment. Lumber production for Q2 was 111 million boardfeet, down 12% due to plan maintenance. Lumber sales volumes were 117 million boardfeet in Q2, down 4%, reflecting the lower production. Our consolidated electricity sales volume totaled 219 gigawatt hours in the quarter, down about 41 gigawatt hours from Q1, reflecting the lower production at our mills.

In the second quarter, we recognized a noncash goodwill impairment of 30 $34 million or 51 cents per share related to the torque out facility as a result of ongoing weakness in the European lumber palette and biofuel markets.

Speaker Change: And Carlos will have more to say on this in a moment.

Richard: Lumber production for Q2 was 111 million board feet, down 12% due to planned maintenance. Lumber sales volumes were 117 million board feet in Q2, down 4%, reflecting the lower production. Our consolidated electricity sales volume totaled 219 gigawatt-hours in the quarter, down about 41 gigawatt-hours from Q1, reflecting lower production at our mills. However, pricing in Q2 was essentially flat at about $91 per MWh from $94 in Q1. In Q2, our pulp and solid wood segments' fiber costs were both flat compared to Q1, as supply remained stable. Production for our solid wood segment's mass timber operations was strong in Q2 at 11,000 cubic meters, an increase of about 54% from Q1 due to the timing of mass timber projects.

Carlos: Lumber production for Q2 was 111 million board feet down 12% due to planned maintenance.

Carlos: Lumber sales volumes were 117 million board feet in Q2.

Carlos: Down, 4%, reflecting the lower production.

Carlos: Our consolidated electricity sales volume totaled 219 gigawatt hours in the quarter down about 41 gigawatt hours from Q1, reflecting the lower production at our mills.

Richard Short: Pricing in Q2 was essentially flat at about $91 per megawatt hour from $94 in Q1. In Q2, our pulp and solid wood segments' fiber costs were both flat compared to Q1; the supply remains stable. Production for our solid wood segments mass timber operations was strong in Q2 at 11,000 cubic meters, an increase of about 54% from Q1 due to the timing of mass timber projects.

Carlos: Pricing in Q2 was essentially flat at about $91 per megawatt hour from $94 in Q1.

Carlos: In Q2, our pulp and solid wood segments fiber costs were both flat compared to Q1, our supply remains stable.

Yeah.

Carlos: Production for our solid wood segments mass timber operations were strong in Q2 at 11000 cubic meters, an increase of about 54% from Q1 due to the timing of mass timber projects.

Richard Short: We reported a consolidated net loss of $68 million for the second quarter, or $1.01 per share, compared to a net loss of $17 million, or $25 per share, in Q1. We consumed about $11 million of cash in Q2 compared to about $40 million in Q1. Our networking capital was lower in Q2 by roughly $49 million, which provided the cash to repay $45 million of borrowings on our revolving credit facilities. As our operating cash flow improves, we will continue to target opportunistic debt reduction. At the end of Q2, our liquidity position told us $581 million, a modest improvement from Q1, and comprised $263 million of cash and about $317 million of undrawn revolving.

Juan Carlos Bueno: We reported a consolidated net loss of $68 million for the second quarter, or $1.01 per share, compared to a net loss of $17 million, or $0.25 per share, in Q1. We consumed about $11 million of cash in Q2, compared to about $40 million in Q1. Our net working capital was decreased in Q2 by roughly $49 million, which provided the cash to repay $45 million of borrowings on our revolving credit facility. As our operating cash flow improves, we will continue to target opportunistic debt reduction.

Carlos: We reported a consolidated net loss of $68 million for the second quarter for $1.01 per share compared to a net loss of $17 million or 25 per share in Q1.

Carlos: We consumed about $11 million of cash in Q2 compared to about $40 million in Q1.

Carlos: Our networking capital was lower in Q2 by roughly $49 million, which provided the cash to repay $45 million of borrowings on our revolving credit facilities.

Carlos: As our operating cash flow improves we will continue to target opportunistic debt reduction.

Juan Carlos Bueno: At the end of Q2, our liquidity position totaled $581 million, a modest improvement from Q1, and comprised $263 million of cash and about $317 million of undrawn revolvers. Finally, our board has approved a quarterly dividend of seven and a half cents per share for shareholders of record on September 25th, for which payment will be made on October 3rd, 2024. That concludes my overview of the financial results; I'll now turn the call over to Juan Carlos.

Carlos: Okay.

Carlos: At the end of Q2, our liquidity position totaled $581 million, a modest improvement from Q1 and comprised $263 million of cash and about $317 million of Undrawn revolvers.

Richard Short: Roberts. Finally, our board has approved a quarterly dividend of 7.5 cents per share for shareholders of record on September 25th, for which payment will be made on October 3rd, 2024.

Carlos: Finally, our board has approved a quarterly dividend of seven five cents per share for shareholders of record on <unk>.

Carlos: September 25 for which payment will be made on October three 2024.

Richard Short: That ends my overview of the financial results.

Carlos: That ends my overview of the financial results I will now turn the call over to Juan Carlos.

Juan Carlos Bueno: I'll now turn the call over to Juan Carlos. Thanks, Rich. Our Q2 operating results were positively impacted by significantly improved pulp pricing, our mass timber business, and lower energy costs. These positive effects were more than offset by planned maintenance downtime, which negatively impacted our Q2 EBDA when compared to Q1 by about $60 million. Overall, all our meals run well this water, but the planned downtime and related slow start-ups negatively impacted our sales volume relative to Q1's record pulp sales volumes. Our lower Q2 sales volumes also reflect the divestment of the caribou meal at the end of Q1.

Juan Carlos: Thanks Rich.

Juan Carlos Bueno: Our Q2 operating results were positively impacted by significantly improved pulp pricing, our mass timber business, and lower energy costs. However, these positive effects were more than offset by planned maintenance downtime, which negatively impacted our Q2 EBITDA when compared to Q1 by about $60 million. Overall, all our mills ran well this quarter, but the planned downtime and related slow start-ups negatively impacted our sales volume relative to Q1's record sales volume. Our lower Q2 sales volumes also reflect the divestment of the Caribou Mail business at the end of Q1.

Juan Carlos: Our Q2 operating results were positively impacted by significantly improved pulp pricing, our mass timber business and lower energy costs.

Juan Carlos: These positive effects were more than offset by planned maintenance downtime.

Juan Carlos: Which negatively impacted our Q2 EBITDA when compared to Q1 by about $60 million overall.

Juan Carlos: Overall, all our mills run well this quarter, but the planned downtime and related slow startups negatively impacted our sales volume relative to Q1's record pulp sales volumes.

Juan Carlos: Our lower Q2 sales volumes also reflect the divestment of the Cariboo mill at the end of Q1.

Juan Carlos Bueno: I am pleased to note also that within our solid wood segment, our mass timber business was able to execute on some tight deadlines this quarter, which resulted in positive operating results. I will have more to say about this in a moment. As Rich noted, this quarter we wrote off the goodwill we recorded with the acquisition of Torgau. Regardless of the technical rules around accounting for goodwill, the fact is the pallet and lumber businesses in Europe have been weaker for longer than we anticipated. This is due to a number of factors, including the high interest rate environment in Europe that has had a dramatic negative impact on the construction business, with a direct impact on lumber prices.

Juan Carlos Bueno: I am pleased to note also that within our solid wood segment, our mass timber business was able to execute on some tight deadlines this quarter, which resulted in positive operating results. I will have more to say about this in a moment.

Speaker Change: I am pleased to Knowles to note also that within our solid wood segment, our mass timber business was able to execute on some tight deadlines this quarter, which resulted in positive operating results I will have more to say about this in a moment.

Juan Carlos Bueno: As Rich noted, this quarter we wrote off the goodwill we recorded with the acquisition of Torgau. Regardless of the technical rules around accounting for goodwill, the fact is, the pallet and lumber businesses in Europe have been weaker for longer than we anticipated. This is due to a number of factors, including the high interest rate environment in Europe that has had a dramatic negative impact on the construction business, with a direct impact on lumber prices. And, in addition, the unprecedented slowdown of the German economy has reduced the commercialization of goods, which is critical for the pallet business.

Speaker Change: As rich noted this quarter, we wrote off the goodwill we recorded with the acquisition of Targa, regardless of the technical rules around accounting for goodwill to practice, the pallet and lumber businesses in Europe have been weaker for longer than we anticipated.

Speaker Change: And this is due to a number of factors, including the high interest rate environment in Europe that has had a dramatic negative impact on the construction business.

Speaker Change: With a direct impact on lumber prices.

Juan Carlos Bueno: In addition, the unprecedented slowdown of the German economy has reduced the commercialization of goods, which is critical for the pallet business. Despite this right-down, we continue to expect to realize significant shareholder value from this investment, including the synergies we identified as part of our acquisition strategy. We are currently ahead of schedule on our capital investment at Torgau that will expand the mill's dimensional lumber capability and expect to begin to see the benefit of this investment in mid 2025. In Q2, we invested roughly 20 million dollars in our operations. As previously announced, our stronger operating results outlook has allowed us to adjust our planned 2024 capital spending to be between $120 million.

Speaker Change: In addition, the unprecedented slowdown of the German economy has reduced the commercialization of goods, which is critical for the pellet business.

Juan Carlos Bueno: But despite this write-down, we continue to expect to realize significant shareholder value from this investment, including the synergies we identified as part of our acquisition strategy. We're currently ahead of schedule on our capital investment at Torgau that will expand the mill's dimensional lumber capacity and expect to begin to see the benefit of this investment in mid-2025. In Q2, we invested roughly $20 million in our operations.

Speaker Change: But despite the write down we continue to expect to realize significant shareholder value from this investment, including the synergies we identified as part of our acquisition strategy.

Speaker Change: We're currently ahead of schedule on our capital and investment of cargo that will expand the mills dimensional lumber capacity and expect to begin to see the benefit of this investments in mid 2025.

Speaker Change: In Q2, we invested roughly $20 million in our operations as previously announced our stronger operating results outlook has allowed us to adjust our plan 2020 for capital spending to be between 101 hundred $20 million.

Juan Carlos Bueno: As previously announced, our stronger operating results outlook has allowed us to adjust our planned 2024 capital spending to be between $100 and $120 million. You will recall that last quarter we restarted both our Torgau Lumber Expansion Project and the Spokane Sorting Line Project. Both of them will provide significant added value and were originally contemplated as part of our investment strategy for each mill. We remain optimistic about our cash generation forecast for the remainder of 2024, and we'll be prioritizing debt reduction as we move forward.

Juan Carlos Bueno: You will recall that last quarter we restarted both our Torgau lumber expansion project and the Spokane sorting line project. Both of them will provide significant added value and were originally contemplated as part of the investment strategy for each mill. We remain optimistic about our cash generation forecast for the remainder of 2024 and will be prioritizing debt reduction as we move forward. Overall, bulk markets improved significantly in the quarter, with both the European and North American markets showing the most improvement. We were seeing improved demand from European paper and tissue producers. This demand was primarily the result of merchant destocking and logistical challenges around Chinese imports.

Speaker Change: You will recall that last quarter, we restarted both our targa lumber expansion project and the Spokane sourcing line project.

Speaker Change: Both of them will provide significant added value and were originally contemplated as part of our investment strategy for each mill.

Speaker Change: We remain optimistic about our cash generation forecast for the remainder of 2024, and we will be prioritizing debt reduction as we move forward.

Juan Carlos Bueno: Overall, pulp markets improved significantly in the quarter, with both the European and North American markets showing the most improvement. We were seeing improved demand from European paper and tissue producers, although this demand was primarily the result of merchant destocking and logistical challenges around Chinese imports.

Speaker Change: Overall pulp markets improved significantly in the quarter with both the European and North American markets showing the most improvement.

Speaker Change: We were seeing improved demand from European paper and tissue producers since demand was primarily the result of merchant destocking and logistical challenges around Chinese imports.

Juan Carlos Bueno: To a lesser extent, we were also seeing demand increases in North America. The permanent closure of NBSK mills in the last two years, the impact of the Finnish transport strike, and the significant unplanned downtime at one of Finland's largest mills created softwood supply challenges, further tightening the supply-demand dynamic. Looking forward, we expect modest downward pulp price pressure into the third quarter due to slower seasonal paper demand. However, we expect some positive pricing pressure late in Q3 and through Q4 due to both ongoing global softwood supply challenges and increased seasonal paper demand. We're closely monitoring the Canadian Railway Union labor issues and have taken steps to mitigate the potential impact they may have.

Juan Carlos Bueno: To a lesser extent, we were also seeing demand increases in North America. The permanent closure of NBSK mills in the last two years, the impact of the finished transport strike, and the significant unplanned downtime at one of Finland's largest mills created software supply challenge. 3-3-3-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4-4 We're closely monitoring the Canadian Railway Union labor issues and have taken steps to mitigate the potential impact it may have. In Q2, we produce 422,000 tons of pulp compared to 539,000 tons in Q1. This reduction was due to the impact of the 44 days of major maintenance that we had in Q2, plus the divestment of Caribou mail at the end of Q1.

Speaker Change: To a lesser extent, we're also seeing demand increases in North America.

Speaker Change: The permanent closure of N V S. K mills in the last two years the impact of the finished transport strike in the significant unplanned downtime at one of the Finland's largest mills created softwood supply challenges.

Speaker Change: Further tightening the supply demand dynamics.

Speaker Change: Looking forward, we expect modest downward pulp price pressure into the third quarter due to slower seasonal paper demand. However, we expect some positive pricing pressure late in Q3 and through Q4.

Speaker Change: Due to both ongoing global softwood supply challenges and increased seasonal paper demand.

Speaker Change: We're closely monitoring the Canadian Railways Union labor issues and have taken steps to mitigate the potential impact it may have.

Juan Carlos Bueno: In Q2, we produced 422,000 tons of pulp compared to 539,000 tons in Q1. This reduction was due to the impact of the 44 days of major maintenance that we had in Q2, plus the divestment of Carrie Boone Mill at the end of Q1. Our remaining major maintenance downtime in 2024 is scheduled as follows. In Q3, Rosenthal will take a 14-day maintenance shut, and Selga will take a four-day mini-shut, which will amount to about 20,000 tons of production loss in total, and we won't have any maintenance shutdowns in Q4.

Speaker Change: In Q2, we produced 422000 tons of pulp compared to 539000 tonnes in Q1.

Speaker Change: This reduction was due to the impact of the 44 days of major maintenance that we had in Q2 plus.

Speaker Change: Plus the divestment of Caribou mill at the end of Q1.

Juan Carlos Bueno: Our remaining major maintenance downtime in 2024 is scheduled as follows. In Q3, Rosenthal will take a 14-day maintenance shot, and Selgar will take a 4-day mini-shot, which will amount to about 20,000 tons production loss in total. And we won't have any maintenance planned shutdown in Q4. As a reminder, Selgar will not have a major maintenance shot in 2024, as the mail has moved to an 18-month maintenance schedule. Our solid wood segment results benefited from improved mass timber sales in Q2, but was not enough to compensate for the impact of lower lumber prices on average, with some small pockets of improvement in Europe while the U.S.

Speaker Change: Our remaining major maintenance downtime in 2024 is.

Speaker Change: As scheduled as follows in Q3 Rosenthal will take up 14 day maintenance shut and <unk> will take a four day, many shots, which will amount to about 20000 tons production loss in total.

Speaker Change: And we won't have any maintenance planned shutdown in Q4.

Juan Carlos Bueno: As a reminder, Selga will not have major maintenance shut-downs in 2024 as the mill has moved to an 18-month maintenance schedule. Our solid wood segment results benefited from improved mass timber sales in Q2 but were not enough to compensate for the impact of lower lumber prices on average, with some small pockets of improvement in Europe while the U.S. market weakened. High interest rates globally continue to weigh on housing starts and construction in general.

Speaker Change: As a reminder, saga would not have a major maintenance shut in 2024 as <unk> has moved to an 18 months maintenance schedule.

Speaker Change: Our solid wood segment results benefited from improved mass timber sales in Q2.

Speaker Change: But it was not enough to compensate for the impact of lower lumber prices on average with some small pockets of improvement in Europe, while the U S market weakened hi.

Juan Carlos Bueno: Market weakened. High interest rates globally continue to weigh on housing starts and construction in general. We expect you three lumber prices to stay essentially flat. There may be some short-term lumber pricing upside due to recently announced lumber production retirements, that current forest fire situation in western Canada and the potential for up-or-longed Canadian railway strike. Any meaningful long-term improvement would be dependent on improved economic conditions. That said, we continue to believe that low-lumber inventories, the large number of sum-elkirtailments, relatively low-housing stock, potential wood-sort shortages created by Canadian forest fires, and home-owner demographics are still very strong fundamentals for the construction industry, and this will put sustained positive pressure on the supply-demand balance of this business in the mid-term.

Speaker Change: High interest rates globally continue to weigh on housing starts and construction in general.

Juan Carlos Bueno: We expect Q3 lumber prices to stay essentially flat. There may be some short-term lumber price upside due to recently announced lumber production curtailments, the current forest fire situation in Western Canada, and the potential for a prolonged Canadian railway strike. However, any meaningful long-term improvement will be dependent on improved economic conditions.

Speaker Change: We expect Q3 lumber prices to stay essentially flat.

Speaker Change: There may be some short term lumber pricing upside due to recently announced lumber production curtailments that current forest fire situation in Western Canada, and the potential for a prolonged prolonged Canadian railways strike any.

Speaker Change: Any meaningful long term improvement would be dependent on improved economic conditions.

Juan Carlos Bueno: That said, we continue to believe that low lumber inventories, the large number of sawmill curtailments, relatively low housing supply, potential wood shortages created by Canadian forest fires, and homeowner demographics are still very strong fundamentals for the construction industry, and this will put sustained positive pressure on the supply-demand balance of this business in the midterm. In Q2, 39% of our lumber sales volume was sold in the U.S. as we continue to optimize our mix of products and target markets to current conditions. Today, our mass timber order file sits at about $55 million.

Speaker Change: That said, we continue to believe that low lumber inventories the large number of sawmill curtailments relatively low housing stock potential would start shortages created by Canadian forest fires.

Speaker Change: And homeowner demographics are still very strong fundamentals for the construction industry and this will put sustained positive pressure on the supply demand balance of this business in the midterm.

Juan Carlos Bueno: In Q2, 39 percent of our lumber sales volume was sold in the U.S. as we continue to optimize our mix of products and target markets to current conditions. Today, our mass timber order file sits at about $55 million. We continue to receive many inbound project inquiries, and our finding developers are taking their projects to the point of being ready to execute once the interest rate environment improves. Economic stability will meaningfully improve the short-term demand for mass timber. In addition, we remain confident that the environmental, economic, and aesthetic benefits of mass timber will allow this building product to grow in popularity at a pace similar to that what we've seen in Europe.

Speaker Change: In Q2.

Speaker Change: 39% of our lumber sales volume was sold in the U S. As we continued to optimize our mix of products in target markets to current conditions.

Speaker Change: Today, our mass timber order file sits at about $55 million.

Juan Carlos Bueno: We continue to receive many inbound project inquiries, and our finding developers are taking their projects to the point of being ready to execute once the interest rate environment improves. Economic stability will meaningfully improve the short-term demand for mass timber. In addition, we remain confident that the environmental, economic, and aesthetic benefits of mass timber will allow this building product to grow in popularity at a pace similar to that which we've seen in Europe.

Speaker Change: We continue to receive many inbound project inquiries on our finding developers are taking their projects to the point of being ready to execute once the interest rate environment improves.

Speaker Change: Economic stability will meaningfully improve the short term demand for mass timber. In addition, we remain confident that the environmental economic and aesthetic benefits of mass timber will allow this building product to grow in popularity at a pace similar to that what we've seen in Europe.

Juan Carlos Bueno: We are well positioned to take advantage of that market growth as we have roughly 35 percent of North American mass timber production capacity, a broad range of product offerings, and a large geographic footprint giving us competitive access to the entire North American market. On the other hand, shipping pallets remain weak due to the overhang of the European economy, particularly in Germany. However, due to our efforts to improve our product mix, we saw a slight increase in average pallet prices in Q2. Once the economy begins to show signs of recovery, we accept pallet prices to return to normal levels, allowing this asset to deliver significant shareholder value.

Juan Carlos Bueno: We are well positioned to take advantage of that market growth as we have roughly 35% of North American mass timber production capacity, a broad range of product offerings, and a large geographic footprint giving us competitive access to the entire North American market. On the other hand, shipping pallets remain weak due to the overhang of the European economy, particularly in Germany.

Speaker Change: We are well positioned to take advantage of that market growth as we have roughly 35% of north American mass timber production capacity abroad.

Speaker Change: A broad range of product offerings, and our large geographic footprint, giving us competitive access to the entire north American market.

Speaker Change: On the other hand shipping pallets remain.

Speaker Change: Weak due to the overhang of the European economy, particularly in Germany.

Juan Carlos Bueno: However, due to our efforts to improve our product mix, we saw a slight increase in average pallet prices in Q2. Once the economy begins to show signs of recovery, we expect pallet prices to return to normal levels, allowing this asset to deliver significant shareholder value. Heating pellets were down slightly in Q2 due to expected seasonality in this market, but we expect demand and prices to increase in Q3 as customers build their winter stocks.

Speaker Change: However, due to our efforts to improve our product mix, we saw a slight increase in average <unk> prices in Q2.

Speaker Change: Once the economy begins to show signs of recovery, we expect pilot prices to return to normal levels, allowing this asset to deliver significant shareholder value.

Juan Carlos Bueno: Heating pallets were down slightly in Q2 due to expected seasonality in this market, but we expect demand and prices to increase in Q3 as customers build their winter stocks. As I previously noted, we have restarted strategic and high return capex projects at both our Torgau and Spokane mills. I have already spoken about Torgau's project, and I wanted to remind you, our Spokane project was also originally envisioned as part of our investment strategy for this mill. This project is focused on the mill's wood infeed and sorting processes. Once this project is complete in mid 2025, the mill will be able to source lower cost speed stock and process it into high quality lamb stock.

Speaker Change: Heating pellets were down slightly in Q2 due to expected seasonality in this market.

Speaker Change: But we expect demand and prices to increase in Q3 as customers build their winter stocks.

Juan Carlos Bueno: As I previously noted, we have restarted strategic and high-return CAPEX projects at both our Torgau and Spokane mills. I've already spoken about Torgo's project, and I wanted to remind you our Spokane project was also originally envisioned as part of our investment strategy for this mill. This project is focused on the mill's wood infeed and sorting process.

Speaker Change: As I previously noted we have restarted strategic and high return Capex projects at both our tour got one in Spokane Mills.

Speaker Change: I've already spoken about tour goes project and I wanted to remind you. Our Spokane project was also originally envisioned as part of our investment strategy for this mill.

Speaker Change: This project is focused on the mills wood in feed and sourcing processes.

Juan Carlos Bueno: Once this project is complete in mid-2025, the mill will be able to source lower-cost feedstock and process it into high-quality lampstock. Ultimately, this will significantly reduce the mill's fiber costs. In Q2, our overall fiber costs were flat from Q1.

Speaker Change: Once this project is complete in mid 2025 day mill will be able to source lower cost feedstock and processes into high quality lab stock ultimately this will significantly reduce the mill's fiber costs.

Juan Carlos Bueno: Ultimately, this will significantly reduce the mill's fiber costs. In Q2, our overall pulp fiber costs were flat from Q1. In Germany, a steady supply of sandal chips resulted in modest cost decreases, and in Canada, a ramp up of Peace Rivers, Woodroom and our Selga Woodroom strategy would strategy also kept our fiber costs in check. Looking ahead, we expect our fiber costs to remain stable for both our pulp and solid wood businesses in Q3. I am pleased with our new lightning extraction plant ramp up, and the partnerships we have entered into to support the future commercialization of this product.

Speaker Change: In Q2, our overall pulp fiber costs were flat from Q1.

Juan Carlos Bueno: In Germany, a steady supply of sun-billed ships resulted in modest cost decreases, and in Canada, a ramp-up of Peace River's woodroom and Arcelga woodroom strategy. Wood's strategy also kept our fiber costs in check. Looking ahead, we expect our fiber costs to remain stable for both our pulp and solid wood businesses in Q3. I am pleased with our new lignin extraction plant ramp-up and the partnerships we have entered into to support the future commercialization of this product.

Speaker Change: In Germany, a steady supply of sandal chips resulted in modest cost decreases and in Canada, our ramp up of peace river's wood room, and our saga Wood room strategy. What's strategy also kept our hybrid costs in check.

Speaker Change: Looking ahead, we expect our fiber cost to remain stable for both our pulp on solid wood businesses in Q3.

Speaker Change: I am pleased with our new lignin extraction plant ramp up and the partnerships. We have entered into to support the future commercialization of this product I expect to share our vision for this product in the near future. As a reminder, this new lignin plant is a large step towards Mercer being able to develop a portfolio of novel novel offerings.

Juan Carlos Bueno: I expect to share our vision for this product in the near future. As a reminder, this new lightning plant is a large step towards immersive being able to develop a portfolio of novel offerings before going commercial with it. We are excited about the future prospects of this product as a sustainable alternative to fossil fuel-based products, such as in adhesives and advanced battery elements, among many others. These aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy or adding shareholder value. As the world becomes more sensitive to reducing carbon emissions, we believe that products like lightning, mass timber, green energy, lumber, and pulp will play increasingly important roles in displacing carbon-intensive products, products like concrete and steel for construction or plastic for packaging.

Juan Carlos Bueno: I expect to share our vision for this product in the near future. As a reminder, this new lignin plant is a large step towards Mercer being able to develop a portfolio of novel offerings before going commercial with them. We're excited about the future prospect of this product as a sustainable alternative to fossil fuel-based products, such as in adhesives and advanced battery elements, among many others. This aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy while adding shareholder value.

Speaker Change: Before going commercial with it we're excited about the future prospects of this product as a sustainable alternative to fossil fuel based products such as in adhesives and advanced battery elements among many others.

Speaker Change: <unk> designs perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with our circular carbon economy, while adding shareholder value.

Juan Carlos Bueno: As the world becomes more sensitive to reducing carbon emissions, we believe that products like lignin, mass timber, green energy, lumber, and pulp will play increasingly important roles in displacing carbon-intensive products, such as concrete and steel for construction or plastic for packaging. Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative for the wood products industry. We remain committed to our 2030 carbon reduction targets and believe our products form part of the climate change solution.

Speaker Change: As the world becomes more sensitive to reducing carbon emissions, we believe that products like lignin mass timber green energy lumber and pulp will play increasingly important roles in displacing carbon intensive products products like concrete and steel for construction or plastic packaging.

Juan Carlos Bueno: Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative to the wood products industry. We remain committed to our 2030 carbon reduction targets and believe our products form part of the climate change solution. In fact, we believe that in the fullness of time, demand for low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions. We remain bullish on the long-term value of pulp and are committed to better balance our company through faster growth in our lumber and mass timber business.

Speaker Change: Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative to the wood products industry.

Speaker Change: We remain committed to our 2030 carbon reduction targets and believe our products form part of the climate change solutions.

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

Juan Carlos Bueno: In fact, we believe that in the fullness of time, demand for low-carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions. We remain bullish on the long-term value of pulp and are committed to better balancing our company through faster growth in our lumber and mass timber business. In closing, I am pleased that our pulp markets have improved and that we have the majority of our major maintenance behind us.

Speaker Change: We remain bullish on the long term value of pulp on a committed to better on to better balance our company through faster growth in our lumber and mass timber businesses.

Juan Carlos Bueno: In closing, I am pleased that our pulp markets have improved and that we have the majority of our major maintenance behind us. We are expecting strong operating results from this segment in the second half of 2024. Regarding our solid wood segment, we expect weak economic conditions to continue to keep pressure on demand for construction products and pallets. Finally, we will remain focused on our cost saving initiatives and will continue to prioritize debt reduction as we manage our cash and liquidity prudently.

Speaker Change: In closing I am pleased that our pulp markets have improved and that we have the majority of our major maintenance behind us we're expecting strong operating results from this segment in the second half of 2024 rigs.

Juan Carlos Bueno: We're expecting strong operating results from this segment in the second half of 2024. Regarding our solid wood segment, we expect weak economic conditions to continue to keep pressure on demand for construction products and pallets. Finally, we will remain focused on our cost-saving initiatives and will continue to prioritize debt reduction as we manage our cash and liquidity prudence. Thanks for listening, and I will now turn the call back to the operator for questions. Thank you.

Speaker Change: Regarding our solid wood segment, we expect weak economic conditions to continue to keep pressure on demand for construction products and pallets.

Speaker Change: Finally, we will remain focused on our cost saving initiatives and we will continue to prioritize debt reduction as we manage our cash and liquidity prudently.

Juan Carlos Bueno: Thanks for listening, and I will now turn the call back to the operator for questions. Thank you.

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

Operator: Thank you. If you would like to ask a question, please press Star 1-1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press Star 1 1 again. Our first question comes from Hamir Patel with CIBC. Your line is open.

Operator: If you like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.

Speaker Change: Thank you if you'd like to ask a question. Please press star one one.

Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Hamir Patel: Our first question comes from Hamir Patel with CIBC. Your line is open. Hi, good morning. One Carlos, once the projects at Torgaro are completed, I think are slated for mid 2025, how do you see the percent of your lumber shipments that you sell to the U.S. changing?

Speaker Change: Our first question comes from <unk> Patel with CIBC. Your line is open.

Hamir Patel: Good morning, Juan Carlos. Once the projects at Torgau are completed, which I think are slated for mid-2025, how do you see the percent of your lumber shipments that you sell to the U.S. changing?

Patel: Hi, good morning.

Speaker Change: Juan Carlos once the projects at the tour Gal are completed.

<unk> Patel: Which I think are slated for mid 2025, how do you see the percent of fewer lumber shipments that you sell to the U S changing.

Juan Carlos Bueno: Hello, Hamir. Yes, what we are expecting with these investments is that once everything is concluded, we'll have about a 25% increase in our timber capacity. So we will be able to work with at least 200,000 cubic meters more of wood into our mill. When we look at our total planed lumber capacity, we think that we may be able to add about 240,000 cubic meters of planing capacity.

Juan Carlos Bueno: Hello, Hamir. Yes, what we are expecting with these investments is that once everything is concluded, we'll have about a 25% increase in our timber capacity. So we will be able to work with at least 200,000 cubic meters more of wood into our mill. When we look at our total plain lumber capacity, we're thinking that we may be able to add about 240,000 cubic meters of planning capacity. So obviously, a part of that will be destined to the U.S. How much goes to the U.S. will be determined as we normally do based on how we see prices developing in Europe versus the U.S.

Speaker Change: Hello, Javier yes, what we're expecting with these investments is that once everything is concluded we will have.

Javier: About 25% increase in our timber capacity, so we will be able to work with at least 200000.

Speaker Change: Cubic meters more of wood into our mill.

Speaker Change: When we look at our total planed lumber capacity, we're thinking that we may be able to add about 220 <unk>.

40000 cubic meters are planning capacity.

Juan Carlos Bueno: So obviously, a part of that will be destined to the U.S. How much goes to the U.S. will be determined as we normally do based on how we see prices developing in Europe versus the U.S. If you think for a minute, I think it was last quarter or the quarter before that, we were talking about how much was going to the U.S. I think we were up to 55% of our business going to the U.S. a few quarters ago.

Speaker Change: So obviously, a part of that will be destined to the U S. How much goes to the U S will be determined as we normally do based on how we see prices developing in Europe versus the U S. If.

Hamir Patel: If you think for a minute, I think it was last quarter or the quarter before that, we were talking about how much was going to the U.S. I think we were up to 55% of our business going to the U.S. a few quarters back.

Speaker Change: If you think for a minute I think it was last quarter was a quarter before that you were talking about how much was going to the U S. I think we were up to 55% of our business going to the U S. A few quarters back this quarter, we close at 39% and this is because we saw some important improvements in the UK and Ireland.

Juan Carlos Bueno: This quarter, we closed at 39%, and this is because we saw some important improvements in the UK and Ireland market, and therefore we decided to divert a little bit more of lumber to that space. So we will keep on having that fluctuation. I would say, on average, anywhere between 40 to up to 60% as a maximum would be the amount that would flow into the U.S. at any given point in time.

Juan Carlos Bueno: This quarter, we closed at 39%, and this is because we saw some important improvements in the U.K. and Ireland markets. And therefore, we decided to divert a little bit more lumber to that space. So we will keep on having that fluctuation. I would say on average anywhere between 40 and up to 60 percent, as a maximum, would be the amount that would flow into the U.S. at any given point in time.

Speaker Change: And therefore, we decided to to divert a little bit more of lumber to that space.

Speaker Change: So we will keep on having that fluctuation I would say on average anywhere between 40 to up to 60%.

Speaker Change: As a maximum would be the amount that would flow into the U S. At any given point in time.

Operator: Good morning and welcome to Mercer International's second quarter, 2024 in this conference call.

Hamir Patel: Okay, great. Thanks from Crosets. That's helpful.

Juan Carlos Bueno: Okay, great. Thanks, Juan Carlos. That's, that's helpful. I don't want to talk about, you know, on the pulp side, there were some reports recently in RISI that Susanna was piloting a kind of new hybrid grade, which I think they're called the Eucastrong to compete with. Softwood, how do you see the threat to NBSK from some of the innovations that are playing out on the hardwood side?

Speaker Change: Okay, great. Thanks, Ron that's helpful.

Operator: On the call today is Juan Carlos Bueno, President Chief Executive Officer of Mercer International and Robert Short, CFO and Secretary.

Hamir Patel: I wanted to ask you on the pulps side, there's been some reports recently and we see that Susanna was piloting a kind of new hybrid grade, which I think they call the U.S. strong to compete with softwood. How do you see the threat to NBSK from some of the hardwood side? As always, those faults will end up finding some space. The way that we see it is, as we work through our customers and our teams, not only our sales team but our market development teams of the technical guys that are working close with customers to make sure that their furnaces are properly set up for the products that they end up producing, that bond we keep on strengthening further and further.

Speaker Change: And I want to ask you on the pulp side, there's been some reports recently and we see that Suzanne I always piloting a new hybrid Craig.

Richard Short: I'll now hand the call over to Richard Short. Good morning everyone, thanks for joining us today. I will begin by touching on the financial and operating highlights of the second quarter before turning the call over to Juan Carlos to provide further color into the markets, our operations and our strategic initiatives. Also, for those of you that have joined the call today by telephone, there is presentation material that we have attached to the investor section of our website.

Speaker Change: So I think they're called the UK strong to compete with soy.

Speaker Change: Softwood.

Speaker Change: How do you see the threat to N B S K.

Speaker Change: From from some of the innovations that are playing out on the hardwood side.

Juan Carlos Bueno: As always, those faults will end up finding some space. The way that we see it is as we work with our customers and our teams. Not only our sales team but our market development teams, the technical guys that are working closely with customers to make sure that their furnaces are properly set up for the products that they end up producing. That bond, we keep on strengthening further and further. So substituting that with an unknown grade, I know it's going to be quite challenging.

Speaker Change: As always those folks will will end up finding some space.

Speaker Change: The way that we that we see it is as we work through our customers and our teams not only our sales team, but our market development teams of the technical guys that are working close with customers to make sure that their furnaces are properly set up for their products that they ended up producing that.

Richard Short: But before turning to our results, I would like to remind you that we will be making 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. This quarter are EBITDA total $30 million compared to Q1 EBITDA of $64 million.

Speaker Change: That bond, we keep on strengthening further and further so substituting that with our with the unknown great I know, it's going to be quite challenging. So we have we have comfort in making sure that.

Juan Carlos Bueno: So substituting that with an unknown grade, I know it's going to be quite challenging. So we have comfort in making sure that with those customers that we've had long-standing relationship with our softwood pulp, that those will remain. and therefore we don't see this as a very significant threat. I wouldn't be surprised if a product like this ends up flowing more into a less demanding market, whether it's China or others that quality is a bit more flexible. But in the case of some of the markets that we play or some of the customers that we play, I think it's going to be a bit more challenging.

Juan Carlos Bueno: So we have comfort in making sure that with those customers that we've had longstanding relationships with our softwood pulp, that those will remain, and therefore, we don't see this as a very significant threat. I wouldn't be surprised if a product like this ends up flowing more into a less demanding market, whether it's China or others where quality is a bit more flexible. But in the case of some of the markets that we play in, or some of the customers that we serve, I think it's going to be a bit more challenging.

With those customers that we've had long standing relationship with her softwood pulp.

Speaker Change: But those will remain.

Richard Short: The lower results were driven by 37 days of planned major maintenance downtime split between two mills compared to no downtime in Q1. We estimate the planned downtime adversely impacted our EBITDA by approximately $60 million. After adjusting for the planned maintenance downtime impact, the improved operating results were primarily driven by higher pulp sales realizations. Our pulp segment contributed quarterly EBITDA of $32 million in our Solid Wood segment contributed quarterly EBITDA of $3 million.

Speaker Change: And therefore, we don't see this as a as a.

Speaker Change: Very significant threat threat.

Speaker Change: I wouldn't be surprised if a product like this ends up flowing more into less demanding market, whether it's china or others that that quality is a bit more flexible.

Speaker Change: But in the case of some of the markets that we play with some of the customers that we play I think it's going to be a bit more challenging.

Hamir Patel: Okay, fair enough.

Hamir Patel: Kim. Fair enough, but that's all I had. I'll turn it over.

Speaker Change: Okay fair enough, but that's that's all I had I'll turn it over thank you.

Hamir Patel: That's all I had.

Operator: I'll turn it over.

Operator: Thank you.

Speaker Change: Yes.

Operator: Thank you. Our next question comes from Brandon Hull with CIFC Asset Management. Your line is open.

Brandon Hol: Our next question comes from Brandon Hol with CIFCS at management. Your line is open. Hi, good morning. Thanks for taking my question. Just a real quick question about the pulp market as you're seeing it right now. Could you give a little color on what you're seeing in Asia? I guess some of the trade publications were saying that prices in Asia were moving down pretty substantially last week. I just wanted to see if you're seeing that and what the sort of play on interplay between what you see there and what happens in Europe. Absolutely, Brandon.

Speaker Change: Thank you. Our next question comes from Brandon Hall, with CFC asset management. Your line is open.

Richard Short: You can find additional segment disclosures in our Form 10Q, which can be found on our website and the SEC's. Strong demand for pulp and Q2 combined with softwood supply interruptions in Finland pushed prices higher than Q1 in all our major markets. In China, the Q2 average MBSK net price was $811 per ton, up $66 from Q1. European MBSK list prices averaged $1,602 per ton in the current quarter, an increase of $202 from Q1.

Brandon Hull: Hi, good morning. Thanks for taking my question. Just a real quick question about the pulp market as you're seeing it right now. Could you give a little color on what you're seeing in Asia? I guess some of the trade publications were saying that prices in Asia were moving down pretty substantially last week. I just wanted to see if you're seeing that and what the sort of play on, interplay between what you see there and what happens in Europe.

Brandon Hall: Hi, Good morning, Thanks for taking my question just a real quick question about the pulp market.

Brandon Hall: You're seeing it right now could you give a little color on what Youre seeing in Asia I guess some of the trade publications were saying that prices in Asia were moving down pretty substantially last week I just wanted to see if youre seeing that in and what the sort of play an interplay between what you see there and what happens in Europe.

Juan Carlos Bueno: Absolutely, Brandon. Yeah, obviously, there's We need to make two distinctions. The first one is what's happening on hardwood versus what's happening on softwood. It's undeniable that there's been a correction, an important correction on hardwood, probably about $100. And this is on the back of Cerrado and from Susano coming up, and that was 2.6 million tons. And also the Liangshan product in China, a project in China, that was 1.7 million tons.

Brandon Hall: Absolutely Brandon Yeah, obviously, there's.

Juan Carlos Bueno: Obviously, we need to make two distinctions. The first one, what's happening on hardwood versus what's happening on softwood. Hardwood, it's undeniable that there has been a correction, an important correction on hardwood, probably about a hundred dollars. And this is on the back of Cerrado from Susano coming up, and that was 2.6 million tons. And also the Liangshan product in China, project in China, that was 1.7 million tons. So that, all that pulp coming to market, obviously that puts pressure. It makes sense that in a market that is oversupplied, you would start seeing some corrections very quickly.

Brandon Hall: Need to make to distinctions the first one whats happening on hardwood versus what's happening on softwood.

Richard Short: And the North American MBSK list priced average $1,697 per ton in the current quarter and increased up $257 from Q1. The North American NBHK average Q2 list price was $1,437 per ton, up $214 from Q1. The price gap between softwood and hardwood pulp narrowed slightly this quarter in China with the average Q2 net eucalyptus hardwood price at $735 per ton, up $73 from Q1. Total pulp sales volumes in the second quarter decreased by 132,000 tons to 433,000 tons driven by lower production from plant maintenance downtime and the disposition of our equity interest in the Caribou Mail at the end of Q1.

Brandon Hall: Hardwood.

Brandon Hall: Deniable that there's been a correction unimportant correction on hardwood probably about a about a $100 and this is on the back of upside rather than from Susana <unk> coming up and that was $2 6 million tonnes and also the Langston product in China project in China that was $1 7 million tonnes. So so.

Juan Carlos Bueno: So all that pulp coming to market obviously puts pressure on prices. It makes sense that in a market that is oversupplied, you would start seeing some corrections very quickly. And that is what has happened.

Brandon Hall: That all that pulp coming to market, obviously that puts pressure it makes sense that in a market that is oversupplied.

Brandon Hall: You would start seeing some corrections.

Juan Carlos Bueno: And that is what has happened.

Brandon Hall: Very quickly and that is what has happened.

Juan Carlos Bueno: However, the situation in softwood is different. If anything, softwood is still under a very tight situation when it comes to supply. So very, very different from where we see hardwood.

Juan Carlos Bueno: However, the situation in softwood is different. If anything, softwood is still under a very tightness situation when it comes to supply. So very, very different from where we see hardwood. Even when we look at the demand to capacity ratio, the way it's evolving, we're saying that we're seeing that softwood is going to 93% next year. And hardwood is going to go down to about 86%. So again, the pressure on hardwood will remain, while softwood will be in a very different situation. That would mean that the spread between the two will expand. And obviously there's going to be some pressure on substitution and whatnot, but I think the fundamentals for softwood being so tight on supply are going to be still very relevant.

Speaker Change: However, it does situation in softwood is different.

Speaker Change: If anything softwood, it's still under a very tightness situation when it comes to supply so very very different from where we see hardwood.

Richard Short: All our meals ran well this quarter. In Q2, we had a total of 44 days of downtime at our meals, which included the 37 days for planned andrial maintenance, and the seven days due to slower than expected start-ups. In Q1, we had no planned maintenance downtime. After adjusting for the planned maintenance and impact of the disposition of our equity interest in the caribou mill at the end of Q1, Pope production was flat from the first quarter.

Juan Carlos Bueno: Even when we look at the demand to capacity ratio, the way it's evolving, we see that softwood is going to 93% next year, and hardwood is going to go down to about 86%. So again, the pressure on hardwood will remain, while softwood will be in a very different situation. That would mean that the spread between the two will expand, and obviously, there's going to be some pressure on substitution and whatnot, but I think the fundamentals for softwood being so tight on supply are going to be still very relevant.

Speaker Change: Even when we look at the demand to capacity ratio the way it's evolving.

Speaker Change: We're saying that we're seeing that softwood is going to 93%.

Speaker Change: Next year and hardwood is going to go down to about 86%. So again.

Speaker Change: Pressure on hardwood will remain.

Speaker Change: While softwood will be in a very very different situations.

Speaker Change: That would mean that the spread between the two will expand.

Richard Short: For our solid wood segment, lumber pricing was mostly flat as modestly higher prices in Europe were offset by lower prices in the US market. Overall, in Q2, lumber markets remained weak. The random links US benchmark for Western SPF number 2 and better, average price was $386 per thousand boardfeet in Q2 compared to $447 in Q1. Today, that average benchmark price for Western SPF and better is around $355 per thousand boardfeet, about 16% decreased from the beginning of Q2.

Speaker Change: And obviously, there's going to be some pressure on substitution and whatnot, but I think the fundamentals for softwood being so tight on supply are going to be still very relevant. Even if you think about I think it was recently this week there was another announcement from another mill in Finland.

Juan Carlos Bueno: Even if you think about, I think it was recently this week, there was another announcement from another mill in Finland that they're already thinking about, laying people off and stopping for, I think it's three months, or so I understood it. And this is a big mill.

Speaker Change: So they are already thinking about.

Speaker Change: Laying people off and then stopping for I think it's three months what I understood. It was and this is a this is a big mill.

Juan Carlos Bueno: If they stop for three months, it's almost taking away another 200,000 tons of pulp from the market in any given year if it's only three months. So again, it just exacerbates the fact that supply of softwood continues to be tight and will be even tighter as we progress. And what that will translate into is that even if hardwood drops by 100 like it did, the drop in softwood would be mitigated pretty much and very limited. So far, softwood prices have come down a bit. I would say probably less than $50.

If they stop for three months, it's almost taken away another 200000 tonnes of pulp in the upfront market.

Speaker Change: In any given year, if its only three months. So again it just exacerbates. The fact that supply on softwood continues to be tight and we will be even tighter as we progress and that would have put that will translate into is that even if hardwood drops by 100 like it did.

Juan Carlos Bueno: So again, it just exacerbates the fact that supply on softwood continues to be tight and will be even tighter as we progress. And that would have what that will translate into is that even if hardwood drops by 100 like it did, the drop in softwood would be mitigated pretty much and very limited.

Richard Short: For Q3, we are expecting generally flat lumber prices in the US and European markets as demand is expected to remain weak. In the second quarter, we recognized a non-cash goodwill impairment of $34 million or $51 per share related to the Torgao facility as a result of ongoing weakness in the European lumber, pallet, and biofuel markets. One cartels will have more to say on this in a moment. Lumber production for Q2 was 111 million boardfeet down 12% due to plan maintenance.

Speaker Change: The drop in softwood would be mitigated pretty much.

Brandon Hol: So far, the softwood prices have come down a bit. I would say probably less than $50, and that's more or less where we think they will most likely remain. Our belief is that as the year progresses and we get past this summer season, which obviously comes with low demand both in Europe and in China, demands will pick up again and prices can recover a little bit of the lost ground in this Q3. Again, not we don't expect that ground to be very significant in Q3. If that helps, random? Yeah, that's good color. Thank you very much. And then in Germany, and obviously you talked about the struggles, the economic struggles there. Are you seeing any signs of improvement there yet, or is it sort of bouncing along this low level? It's still very timid. Obviously, we see that at least the European authorities' interest rates are starting to come down, which is a good sign. However, Germany as a country in itself is probably lagging a little bit behind the rest of Europe, which is contrary to what everybody's used to when Germany's the one that's leading the pace. In this case, it's different. It is lagging behind a bit, and that is probably the reason why we believe that the improvement or the recovery, especially in the construction sector, is going to take a bit longer than what you would expect. And that's what keeps us a bit more conservative on what we think we can expect for either lumber prices or, in the case of the German economy itself, what we can expect for the pallet prices in the short term. We're hoping for more of a half second half 2025 commencement of some signs of improvement because even if interest rates are cut now, that doesn't mean that immediately you have an impact and lumber prices will go immediately up. We believe that there's a lag between one action and another, so that's a little bit of the timing that we have in our planning. Okay, thanks very much. We're taking the questions. Thank you. As a reminder, if you'd like to ask a question, please press store 1-1. Our next question comes from Kasia Copytech with TD Cowan. Your line is open. Hi, good morning, everyone. It's Kasia on the line. You're articulated focus on leveraging over the next term. Just curious about your updated thoughts on potential asset divestitures to expedite that. Hi, Kasia. Yeah, the only thing that we've got on the books right now for sale is sand at all, and that process is ongoing, and we don't expect any further write-down on that. Okay, that's right. Can you talk about your order file and how that varies throughout the cycle? Just getting trying to get a sense if there's going to be any order file timing lags reflected in your Q3 average price realization. Are you referring to a mass timber? No? Yeah, so I guess I'll maybe expand on what you mean by order file a little bit because we sell primarily spot in Asia and in Europe, where we basically sell the meals out every month.

Speaker Change: Very limited.

Speaker Change: So far the softwood prices they have come down a bit.

Speaker Change: I would say probably less than $50.

Juan Carlos Bueno: And that's more or less where we think they will most likely remain. Our belief is that as the year progresses and we get past the summer season, which obviously comes with low demand, both in Europe and in China. Demand will pick up again, and prices, and we can recover a little bit of the lost ground in this Q3. Again, we don't expect that ground to be very significant in Q3. I hope that that helps. Brandon

Speaker Change: And that's more or less what we think they will most likely remain our belief is that as the year progresses, and we get past the summer season, which obviously comes with low demand.

Richard Short: Lumber sales volumes were 117 million boardfeet in Q2, down 4% reflecting the lower production. Our consolidated electricity sales volume totaled 219 gigawatt hours in the quarter, down about 41 gigawatt hours from Q1, reflecting the lower production at our mills. Pricing in Q2 was essentially flat at about $91 per megawatt hour from $94 in Q1. In Q2, our pulp and solid wood segments fiber costs were both flat compared to Q1, the supply remains stable.

Speaker Change: Both in Europe and in China.

Speaker Change: <unk> will pick up again and in prices and can we can recover a little bit of the lost ground. In this Q3 again, not we don't expect that to be very significant in Q3.

Brandon Hall: That helps Brandon.

Brandon Hull: That's a good color. Thank you very much.

Brandon Hall: That's good color. Thank you very much and then.

Speaker Change: In Germany, and obviously you talked about the struggle with the economic struggles. There are you seeing any signs of improvement there yet or is it sort of bouncing along this low level.

Richard Short: Production for our solid wood segments mass timber operations was strong in Q2 at 11,000 cubic meters, an increase of about 54% from Q1 due to the timing of mass timber projects. We reported a consolidated net loss of $68 million for the second quarter, or $1.01 per share compared to a net loss of $17 million or $25 per share in Q1. We consumed about $11 million of cash in Q2 compared to about $40 million in Q1.

Speaker Change: It's still very timid.

Speaker Change: Obviously, we see that.

Speaker Change: At least the European authorities.

Brandon Hull: And then in Germany, and obviously you talked about the struggles, the economic struggles there. Are you seeing any signs of improvement there yet? Or is it sort of bouncing along at this low level?

Speaker Change: <unk> are starting to come down which is a good sign.

Speaker Change: However, Germany is.

Juan Carlos Bueno: It's still very timid. Obviously, we see that at least the European authorities' interests are starting to come down, which is a good sign. However, Germany as a country is probably lagging a little bit behind the rest of Europe, which is contrary to what everybody is used to when Germany is the one that's leading the pace. In this case, it's different.

Speaker Change: As a country in itself is probably lagging a little bit behind the rest of Europe, which is country to what everybody is used to have in Germany is the one that's that's leading the pace in this case, it's different it is lagging behind a bit.

Brandon Hull: It is lagging behind a bit. And that is probably the reason why we believe that the improvement or recovery, especially in the construction sector, is going to take a bit longer than you would expect. And that's what keeps us a bit more conservative on what we think we can expect from either lumber prices or, in the case of the German economy itself, what we can expect for pallet prices in the short term.

Speaker Change: And that is probably the reason why we believe that the improvement or the recovery, especially in the construction sector is going to take a bit longer than what you would expect.

Richard Short: Our networking capital was lower in Q2 by roughly $49 million, which provided the cash to repay $45 million of borrowings on our revolving credit facilities. As our operating cash flow improves, we will continue to target opportunistic debt reduction. At the end of Q2, our liquidity position told us $581 million, a modest improvement from Q1, and comprised $263 million of cash and about $317 million of undrawn revolving.

Speaker Change: And and that's what keeps us a bit more conservative on what we think we can expect from poor either lumber prices or in the case of the Germany economy itself. What we can expect for the pellet prices in the in the short term, we're hoping for more of a half second half of 2025.

Brandon Hull: We're hoping for more of a half-second, half-2025 commencement of some signs of improvement. Because even if interest rates are cut now, that doesn't mean that immediately you will have an impact, and lumber prices will go immediately up. We believe that there's a lag between one action and another. So that's a little bit of the timing that we have in our planning.

Robert Short: Roberts.

Speaker Change: Commencement of some signs of improvement because even if interest rates are cut now.

Robert Short: Finally, our board has approved a quarterly dividend of 7.5 cents per share for shareholders of record on September 25th, for which payment will be made on October 3rd, 2024. That ends my overview of the financial results.

Speaker Change: That doesn't mean that immediately you will have an impact in lumber prices will go immediately up we believe that theres a lag between one action or another.

Juan Carlos Bueno: I'll now turn the call over to Juan Carlos. Thanks, Rich. Our Q2 operating results were positively impacted by significantly improved pulp pricing, our mass timber business, and lower energy costs. These positive effects were more than offset by planned maintenance downtime, which negatively impacted our Q2 EBDA when compared to Q1 by about $60 million. Overall, all our meals run well this water, but the planned downtime and related slow start-ups negatively impacted our sales volume relative to Q1's record pulp sales volumes.

Speaker Change: So that celebrate of the timing that we have in our in our planning.

Brandon Hull: Okay, thanks very much for taking the question.

Speaker Change: Okay. Thanks, very much for taking the questions.

Operator: Thank you. As a reminder, if you'd like to ask a question, please press star 11. Our next question comes from Kasia Kopytek with T.D. Cowan. Your line is open.

Speaker Change: Thank you.

Speaker Change: Wonder if you'd like to ask a question. Please press star one one.

Speaker Change: Our next question comes from Casey a copy tech with TD Cowen Your line is open.

Kasia Kopytek: Hi. Good morning, everyone. It's Kasia on the line. You articulated a focus on deleveraging over the midterm. Just curious about your updated thoughts on potential asset divestitures to expedite that.

Speaker Change: Hi, good morning, everyone and cash on the line.

Speaker Change: You articulated okay.

Speaker Change: Bridging over the mid term.

Speaker Change: Just curious about your thoughts on potential asset divestitures to expedite that.

Richard: Hi Kasia, the only thing that we've got on the books right now for sale is Xanthanol. That process is ongoing, and we don't expect any further writing on that.

Speaker Change: Hi, Cassia.

Juan Carlos Bueno: Our lower Q2 sales volumes also reflect the divestment of the caribou meal at the end of Q1. I am pleased to note also that within our solid wood segment, our mass timber business was able to execute on some tight deadlines, this quarter, which resulted in positive operating results. I will have more to say about this in a moment. As Rich noted, this quarter we wrote off the goodwill we recorded with the acquisition of Torgau.

Cassia: The only thing that we've got on.

Speaker Change: On the books right now for sale is that at all and.

Speaker Change: That process is ongoing and we don't expect any further write down on that.

Cassia: Okay Gotcha.

Kasia Kopytek: Okay, gotcha. Rich, can you talk about your order file and how that varies throughout the cycle, just trying to get a sense if there's going to be any order file timing lags reflected in your Q3 average price realization?

Cassia: <unk>.

Speaker Change: Rich can you talk about your order file and how that vary throughout the cycle, just getting trying to get a sense. If there's any timing lag are reflected in your Q3 average price realization.

Kasia Kopytek: Are you referring to mass timber? No, sorry, pulp.

Juan Carlos Bueno: Regardless of the technical rules around accounting for goodwill, the fact is the pallet and lumber businesses in Europe have been weaker for longer than we anticipated. This is due to a number of factors including the high interest rate environment in Europe that has had a dramatic negative impact on the construction business with a direct impact on lumber prices. In addition, the unprecedented slowdown of the German economy has reduced the commercialization of goods, which is critical for the pallet business.

Speaker Change: Are you referring to mass timber.

Richard: No, sorry, Polk.

Speaker Change: No sorry pulp.

Speaker Change: Paul.

Speaker Change:

Richard: Yeah, so I guess maybe expand on what you mean by an order file a little bit because we sell primarily spot in Asia, and in Europe, we basically sell the mills out every month. Yeah, we've got pretty low inventories across the board.

Yeah. So I guess, maybe expand on what you mean by order file a little bit because we sell primarily.

Speaker Change: Spot.

Speaker Change: In Asia.

Speaker Change: And in Europe are we.

Speaker Change: Basically sell the mills out every month.

Kasia Kopytek: Yeah, we've got pretty low inventories across the board. That's okay, so we sell every month, but if you're selling to a customer, it wouldn't shift for almost two weeks or three weeks at this point. What does that look like? Okay, for delivery times, again, it depends on Europe, or it's a number of weeks, like one to two weeks generally depends where it's going. But in Asia, yeah, it would take 30 to 60 days to deliver. Okay, got it. Yeah, I'm just trying to get a sense. You know, prices are rolling off here, but maybe, maybe, you know, not all of that's going to be reflected in Q3; maybe some of that will bleed into Q4, just trying to get a sense of the timing.

Speaker Change: Yes, we've got pretty low inventories across the board.

Kasia Kopytek: Gotcha. Okay, so every month, but if you're selling to a customer, it wouldn't ship for, let's say, two weeks or three weeks at this point. What does that lag look like?

Speaker Change: Got you Okay. So every month, but if you are selling to a customer it wouldn't ship for let's say two weeks or three three weeks at this point what does that.

Juan Carlos Bueno: Despite this right-down, we continue to expect to realize significant shareholder value from this investment, including the synergies we identified as part of our acquisition strategy. We are currently ahead of schedule on our capital investment at Torgau that will expand the mill's dimensional lumber capability and expect to begin to see the benefit of this investment in mid 2025. In Q2, we invested roughly 20 million dollars in our operations, as previously announced, our stronger operating results outlook has allowed us to adjust our planned 2024 capital spending to be between $120 million.

Richard: Okay, for delivery times, again, it depends in Europe where it's a number of weeks, like one to two weeks. Generally, it depends where it's going. But in Asia, yeah, it would take 30 to 60 days.

Speaker Change: Okay for delivery times again, it depends on Europe for a number of weeks like one to two weeks generally where it depends where its going but in Asia, yes. It would take 30 to 60 days.

Speaker Change: To deliver okay.

Kasia Kopytek: Okay, got it. Yeah, I'm just trying to get a sense, prices are rolling off here, but maybe, maybe, not all of that's going to be reflected in Q3, maybe some of that will bleed into Q4, just trying to get a sense of the timing. But that's good color, thanks. Okay. Sorry, go ahead. You were about to say something.

Speaker Change: Okay got it yeah, I'm, just trying to get a sense of how prices are rolling out here, but maybe maybe not all of that's going to reflect in Q3 and maybe some of that will bleed into Q4, just trying to get a sense of the timing.

Kasia Kopytek: But that's a color thing. Yeah, okay, great. Sorry, go ahead; you were about to say something. Yeah, I was just going to say, if you're trying to use like an average, like a 45-day average, it's probably the for your modeling purposes. Okay, yeah, I got it. That's a good role from things.

Speaker Change: That's great color. Thanks, yes.

Speaker Change: Yes, okay, great sorry.

Speaker Change: Sorry go ahead, you are about to say something I was just going to say if you're trying to use like an average like a 45 day average would probably be.

Richard: Yeah, I was just going to say if you're trying to use like an average, like a 45-day average would probably be good for your modeling.

Juan Carlos Bueno: You will recall that last quarter we restarted both our Torgau lumber expansion project and the Spokane sorting line project. Both of them will provide significant added value and were originally contemplated as part of investment strategy for each mill. We remain optimistic about our cash generation forecast for the remainder of 2024 and will be prioritizing debt reduction as we move forward. Overall, bulk markets improved significantly in the quarter, with both the European and North American markets showing the most improvement.

Speaker Change: For your modeling purposes.

Kasia Kopytek: Okay, yeah, I got it. That's a good rule of thumb. So a good pickup on the top line for the mass timber business is that EBITDA positive at this point?

Speaker Change: Okay got it that's a good rule of thumb.

Kasia Kopytek: So could pick up on the top lines of the mass timber business. Is that you think I'm positive at this point? Yes, it is. It was a bit of a positive, I think, things since Q4 of last year. It was the first time that it was a bit of positive. It was very strong. It was strong; this quarter. So we're looking forward to the growth of the business in 2024. We're expecting it to be probably twice the amount of sales that we had in 2023. It should be around 110 million by the end of the year.

Speaker Change: So it did pick up on the top line to the mass timber business is that EBITDA positive at this point.

Juan Carlos Bueno: Yes, it is. It was a bit positive increase, I think, since Q4 of last year. It was the first time that it was a bit positive. It was very strong. It was strong this quarter, so we're looking forward to the growth of the business in 2024. We're expecting it to be probably twice the amount of sales that we had in 2023, and it should be around $110 million by the end of the year.

Speaker Change: Yes. It is it was EBITDA positive I think things since Q4 of last year. It was the first time that it was EBITDA positive.

Speaker Change: He was very strong it was strong this quarter so.

Speaker Change: We're looking forward to the to the growth of the business in 2024, we're expecting it to be probably twice the amount of sales that we had in 2023 it.

Juan Carlos Bueno: We were seeing improved demand from European paper and tissue producers. This demand was primarily the result of merchant destocking and logistical challenges around Chinese imports. To a lesser extent, we were also seeing demand increases in North America. The permanent closure of NBSK mills in the last two years, the impact of the finished transport strike and the significant unplanned downtime at one of the Finland's largest mills created software supply challenge. [inaudible] We're closely monitoring the Canadian Railway Union labor issues and have taken steps to mitigate the potential impact it may have.

Speaker Change: It should be around $110 million by the end of the year.

Juan Carlos Bueno: And Q2 was particularly strong. There were some projects delayed from Q1 that ended up being kind of all compounded into Q2 that made us run against the clock in Q2. We delivered all the projects on time. No complaints whatsoever, quality on spec, everything very well produced and delivered, and that allowed us to run our mills more efficiently on one shift only at this point in time.

Juan Carlos Bueno: And Q2 was particularly strong. There was some projects delayed from Q1 that ended up being kind of all compounded into Q2 that made us running against the clock in Q2. We delivered all the projects on time, and no complaints whatsoever quality on spec. Everything is very well produced and delivered. And that allowed us to run our meals more efficiently on one shift only at this point in time. So that's why Q2 was, I would say, more stronger or stronger than what we had planned for, as they were picking up a little bit of the slack on 20 from Q1.

Speaker Change: In Q2 was particularly strong there was some projects delayed from Q1 that ended up being kind of all compounded into Q2 that made us running against the clock in Q2.

Speaker Change: We delivered all the projects on time.

Speaker Change: No complaints whatsoever quality on spec everything very well produced and delivered.

And that allowed us to run our mills more efficiently on one shift only.

Speaker Change: At this point in time.

Juan Carlos Bueno: So that's why Q2 was, I would say, stronger or stronger than what we had planned for as they were picking up a little bit of the slack from Q1. And this is on the back of customers delaying some of their projects, and therefore we have to adjust with whatever the customer planning schedule is, and that's the situation that followed in Q2. In Q3 and in Q4, we don't have any more or very few of the big, big, large-scale projects that we had at the beginning of the year, so that's a little bit of a change in dynamic. It's going to be smaller projects that we attend to during the second half of the year.

Speaker Change: So that's why Q2 was I.

Speaker Change: I would say.

Speaker Change: More stronger or stronger than what we have planned for that we're picking up a little bit of the slack from 'twenty from Q1.

Juan Carlos Bueno: And this is on the back of customers delaying some of their projects, and therefore we have to adjust with whatever the customer planning schedule is. And that's the situation that followed in Q2. In Q3 and Q4, we don't have any more or very little of the big, big large scale projects that we had at the beginning of the year.

Speaker Change: And this is on the back of customers delaying some of their projects and therefore, we have to adjust with whatever.

Speaker Change: The customer planning schedule is.

Speaker Change: That's the situation that followed in Q2 and Q3 and Q4.

Juan Carlos Bueno: In Q2, we produce 422,000 tons of pulp compared to 539,000 tons in Q1. This reduction was due to the impact of the 44 days of major maintenance that we had in Q2, plus the divestment of caribou mail at the end of Q1. Our remaining major maintenance downtime in 2024 is scheduled as follows. In Q3, Rosenthal will take a 14-day maintenance shot and Selgar will take a 4-day mini-shot, which will amount to about 20,000 tons production loss in total.

Speaker Change: We don't have any more.

Speaker Change: Very little of the Big Big.

Speaker Change: Large scale projects that we had at the beginning of the year. So that's a little bit of a change in dynamic it's going to be smaller projects that we attend to during the second half of the year.

Kasia Kopytek: So that's a little bit of a change in dynamic. It's going to be smaller projects that we attend to during the second half of the year. Thanks for that. That's helpful. What can you remind me? What kind of EBITDA margins are you looking at for those sales? We talk about even the margins in the long term, more than specifically what we do right now. And we aim for 20% between 10 and 20% in the long run. It's going to be around 20% or more. That's what we expect of Master. December. Okay, and but right now, because it's just low single digits, do I imagine?

Kasia Kopytek: Thanks for that. That's helpful. Juan Carlos, can you remind me what kind of EBITDA emergence are you looking at for that, for those sales?

Speaker Change: Okay. Thanks for that that's helpful. Well Carlos can you remind me what kind of EBITDA margin.

Speaker Change: Are you looking at for that.

Speaker Change: Hello, Phil.

Juan Carlos Bueno: We talk about even margins in the long term, more than specifically what we do right now, and we aim for 20%, between 10% and 20%. In the long run, it's going to be around 20% or more. That's what we expect of MasterCard.

Speaker Change: We talk about EBITDA margins in the long term.

Speaker Change: More than more than specifically, what we do right now.

Speaker Change: And we aim for 'twenty.

Speaker Change: 20% between 10 and 20% in the long run it's going to be around 20% or more that's what we expect of mass timber.

Juan Carlos Bueno: And we won't have any maintenance planned shutdown in Q4. As a reminder, Selgar will not have a major maintenance shot in 2024 as the mail has moved to an 18-month maintenance schedule. Our solid wood segment results benefited from improved mass timber sales in Q2, but was not enough to compensate for the impact of lower lumber prices on average, with some small pockets of improvement in Europe while the U.S, market weakened. High interest rates globally continue to weigh on housing starts and construction in general.

Kasia Kopytek: Okay, and but right now, you're probably sort of just low single digits. I imagine something in that range? Yeah. Gotcha. That's all I had. Thanks very much, everyone.

Speaker Change: Okay, and but right now it just.

Kasia Kopytek: Something in that range? Yeah. Okay. Gotcha. That's all I had. Thanks very much, everyone. Thank you.

Speaker Change: Low single digit so I imagine you're in that range.

Speaker Change: Yes.

Speaker Change: Okay got you that's all I had thanks very much Iran.

Juan Carlos Bueno: And the important thing, Kasia, just to expand on that, keep in mind that right now the margins that we're seeing are running with one shift and not being able to, only in Q2 did we have those shifts practically full in our facilities. Going forward, as we expand this business, obviously, the margins can grow as we can put two shifts or even three shifts into those facilities. So, that is the key thing here is for us to grow this business in a way that we can add more shifts and take advantage of the capacity that we have installed and, therefore, have a better return on those fixed costs. [inaudible]

Juan Carlos Bueno: And the important thing, Kasia, just to expand on that, keep in mind that right now, the margins that we're seeing is running with one shift and not being able, only in Q2, we've had those shifts practically full in our facilities. Going forward, when we, as we expand this business, obviously the margins can grow as we can put two shifts or even three shifts into those facilities. So that is the key thing here is for us to grow this business in a way that we can add more shifts and take advantage of the capacity that we have installed and therefore have a better return on those fixed costs.

Kashyap: Thank you and the important thing Kashyap.

Kashyap: Just to expand on that.

Speaker Change: Keep in mind that right now at the margins that we're seeing is running with one shift and not being able to only in Q2, we had those shifts practically full in our facilities.

Juan Carlos Bueno: We expect you three lumber prices to stay essentially flat. There may be some short-term lumber pricing upside due to recently announced lumber production retirements that current forest fire situation in western Canada and the potential for up-or-longed Canadian railway strike. Any meaningful long-term improvement would be dependent on improved economic conditions. That said, we continue to believe that low-lumber inventories, the large number of sum-elkirtailments, relatively low-housing stock, potential wood-sort shortages created by Canadian forest fires, and home-owner demographics are still very strong fundamentals for the construction industry, and this will put sustained positive pressure on the supply demand balance of this business in the mid-term.

Speaker Change: Going forward when we as we expand this business.

Speaker Change: Obviously, the margins can grow as we can put two shifts or even three shifts into those facilities. So that is the key thing here is for us to grow this business in a way that we can add more shifts and take advantage of the capacity that we have installed and therefore.

Have a better return on those fixed costs.

Operator: Thank you.

Operator: Thank you. I'm showing no further questions at this time. I'd like to turn the call over to Juan Carlos Bueno for closing remarks.

Operator: I'm showing you for the questions at this time.

Speaker Change: Thank you I'm showing no further questions at this time I'd like to turn the call over to Juan Carlos <unk> for closing remarks.

Juan Carlos Bueno: I'd like to turn the call over to Juan Carlos Bueno for close your remarks. Okay, thank you, Michelle. And thanks to all of you for joining our call. Richard and I are available to talk more at any time, so don't hesitate to call one of us.

Juan Carlos Bueno: Okay, thank you, Michelle. 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. Otherwise, we look forward to speaking to you again on our next earnings call in November. Bye for now.

Juan Carlos: Okay. Thank you Michelle 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 otherwise we look forward to speaking to you again on our next earning call in November Bye for now.

Juan Carlos Bueno: Otherwise, we look forward to speaking to you again on our next earning call in November.

Juan Carlos Bueno: In Q2, 39 percent of our lumber sales volume was sold in the U.S, as we continue to optimize our mix of products and target markets to current conditions. Today, our mass timber order file sits at about $55 million. We continue to receive many inbound project inquiries, and our finding developers are taking their projects to the point of being ready to execute once the interest rate environment improves. Economic stability will meaningfully improve the short-term demand for mass timber.

Operator: Bye for now.

Operator: This concludes the program. You may now disconnect. Everyone have a great day.

Operator: This concludes the program. You may now disconnect.

This concludes the program you may now disconnect everyone have a great day.

Operator: Everyone, have a great day.

Juan Carlos: Okay.

Juan Carlos: [music].

Juan Carlos: Okay.

Juan Carlos: Okay.

Juan Carlos: Yes.

Juan Carlos: [music].

Juan Carlos Bueno: In addition, we remain confident that the environmental, economic, and aesthetic benefits of mass timber will allow this building product to grow in popularity at a pace similar to that what we've seen in Europe. We are well positioned to take advantage of that market growth as we have roughly 35 percent of North American mass timber production capacity, a broad range of product offerings, and a large geographic footprint giving us competitive access to the entire North American market.

Juan Carlos: Okay.

Juan Carlos: [music].

Juan Carlos Bueno: On the other hand, shipping pallets remain weak due to the overhang of the European economy, particularly in Germany. However, due to our efforts to improve our product mix, we saw a slight increase in average pallet prices in Q2. Once the economy begins to show signs of recovery, we accept pallet prices to return to normal levels, allowing this asset to deliver significant shareholder value. Heating pallets were down slightly in Q2 due to expected seasonality in this market, but we expect demand and prices to increase in Q3 as customers build their winter stocks.

Juan Carlos Bueno: As I previously noted, we have restarted strategic and high return capex projects at both our Torgau and Spokane Mills. I have already spoken about Torgau's project, and I wanted to remind you, our Spokane project was also originally envisioned as part of our investment strategy for this mill. This project is focused on the mill's wood infeed and sorting processes. Once this project is complete in mid 2025, the mill will be able to source lower cost speed stock and process it into high quality lamb stock.

Juan Carlos Bueno: Ultimately, this will significantly reduce the mill's fiber costs. In Q2, our overall pulp fiber costs were flat from Q1. In Germany, a steady supply of sandal chips resulted in modest cost decreases, and in Canada, a ramp up of peace rivers, woodroom and our Selga woodroom strategy would strategy also kept our fiber costs in check. Looking ahead, we expect our fiber costs to remain stable for both our pulp and solid wood businesses in Q3.

Juan Carlos Bueno: I am pleased with our new lightning extraction plant ramp up, and the partnerships we have entered into to support the future commercialization of this product. I expect to share our vision for this product in the near future. As a reminder, this new lightning plant is a large step towards immersive being able to develop a portfolio of novel offerings before going commercial with it. We are excited about the future prospects of this product as a sustainable alternative to fossil fuel based products, such as in adhesives and advanced battery elements among many others.

Juan Carlos Bueno: These aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy or adding shareholder value. As the world becomes more sensitive to reducing carbon emissions, we believe that products like lightning, mass timber, green energy, lumber and pulp will play increasingly important roles in displacing carbon intensive products, products like concrete and steel for construction or plastic for packaging. Furthermore, the potential demand for sustainable fossil fuel substitutes is very significant and has the potential to be transformative to the wood products industry.

Juan Carlos Bueno: We remain committed to our 2030 carbon reduction targets and believe our products form part of the climate change solution. In fact, we believe that in the fullness of time demand for low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions. We remain bullish on the long-term value of pulp and are committed to better balance our company through faster growth in our lumber and mass timber business.

Juan Carlos Bueno: In closing, I am pleased that our pulp markets have improved and that we have the majority of our major maintenance behind us. We are expecting strong operating results from this segment in the second half of 2024. Regarding our solid wood segment, we expect weak economic conditions to continue to keep pressure on demand for construction products and pallets. Finally, we will remain focused on our cost saving initiatives and will continue to prioritize debt reduction as we manage our cash and liquidity prudently.

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

Operator: If you like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.

Hamir Patel: Our first question comes from Hamir Patel with CIBC. Your line is open. Hi, good morning.

Juan Carlos Bueno: One Carlos, once the projects at Torgaro are completed, I think are slated for mid 2025, how do you see the percent of your lumber shipments that you sell to the U.S, changing? Hello, Hamir. Yes, what we are expecting with these investments is that once everything is concluded, we'll have about 25% increase in our timber capacity. So we will be able to work with at least 200,000 cubic meters more of wood into our mill.

Juan Carlos Bueno: When we look at our total plain lumber capacity, we're thinking that we may be able to add about 240,000 cubic meters of planning capacity. So obviously a part of that will be destined to the U.S. How much goes to the U.S, will be determined as we normally do based on how we see prices developing in Europe versus the U.S. If you think for a minute, I think it was last quarter or the quarter before that, we were talking about how much was going to the U.S.

Juan Carlos Bueno: I think we were up to 55% of our business going to the U.S, a few quarters back. This quarter, we closed at 39% and this is because we saw some important improvements in the UK and Ireland market and therefore we decided to divert a little bit more of lumber to that space. So we will keep on having that fluctuation. I would say on average anywhere between 40 to up to 60% as a maximum would be the amount that would flow into the U.S, at any given point in time. Okay, great. Thanks from Crosets. That's helpful.

Juan Carlos Bueno: I wanted to ask you on the pulps side, there's been some reports recently and we see that Susanna was piloting a kind of new hybrid grade, which I think they call the U.S, strong to compete with softwood. How do you see the threat to NBSK from some of the hardwood side? As always, those faults will end up finding some space. The way that we see it is as we work through our customers and our teams, not only our sales team but our market development teams of the technical guys that are working close with customers to make sure that their furnaces are properly set up for the products that they end up producing, that bond we keep on strengthening further and further.

Juan Carlos Bueno: So substituting that with an unknown grade, I know it's going to be quite challenging. So we have we have comfort in making sure that with those customers that we've had long-standing relationship with our softwood pulp, that those will remain, and therefore we don't see this as a very significant threat. I wouldn't be surprised if a product like this ends up flowing more into a less demanding market, whether it's China or others that quality is a bit more flexible, but in the case of some of the markets that we play or some of the customers that we play, I think it's going to be a bit more challenging. Okay, fair enough. That's all I had. I'll turn it over.

Operator: Thank you.

Brandon Hol: Our next question comes from Brandon Hol with CIFCS at Management. Your line is open. Hi, good morning. Thanks for taking my question. Just a real quick question about the pulp market as you're seeing it right now. Could you give a little color on what you're seeing in Asia? I guess some of the trade publications were saying that prices in Asia were moving down pretty substantially last week. I just wanted to see if you're seeing that and what the sort of play on interplay between what you see there and what happens in Europe. Absolutely, Brandon.

Juan Carlos Bueno: Obviously we need to make two distinctions. The first one, what's happening on hardwood versus what's happening on softwood. Hardwood, it's undeniable that there has been a correction, an important correction on hardwood, probably about about a hundred dollars. And this is on the back of Cerrado from Susano coming up and that was 2.6 million tons. And also the Liangshan product in China, Project in China, that was 1.7 million tons. So that, all that pulp coming to market, obviously that puts pressure. It makes sense that in a market that is oversupplied, you would start seeing some corrections very quickly. And that is what has happened.

Juan Carlos Bueno: However, the situation in softwood is different. If anything, softwood is still under a very tightness situation when it comes to supply. So very, very different from where we see hardwood. Even when we look at the demand to capacity ratio, the way it's evolving, we're saying that we're seeing that softwood is going to 93% next year. And hardwood is going to go down to about 86%. So again, the pressure on hardwood will remain while softwood will be in a very different situation.

Juan Carlos Bueno: That would mean that the spread between the two will expand. And obviously there's going to be some pressure on substitution and whatnot, but I think the fundamentals for softwood being so tight on supply are going to be still very relevant. So again, it just exacerbates the fact that supply on softwood continues to be tight and will be even tighter as we progress.

Juan Carlos Bueno: And that would have what that will translate into is that even if hardwood drops by 100 like it did, the drop in softwood would be mitigated pretty much and very limited, so far the softwood prices they have come down a bit I would say probably less than $50 and that's more or less where we think they will most likely remain our belief is that as the year progresses and we get past this summer season which obviously comes with low demand both in Europe and in China demands will pick up again and prices and we can recover a little bit of the lost ground in this Q3 again not we don't expect that ground to be very significant in Q3 of that helps random yeah that's that's good color thank you very much and then in Germany and obviously you talked about the struggles the economic struggles there are are you seeing any signs of improvement there yet or is it sort of bouncing along this low level it's still very timid obviously we see that you at least the European authorities interest are starting to come down which is a good sign however Germany as a country in itself is probably lagging a little bit behind the rest of Europe which is country to what everybody's used to when Germany's the one that's that's leading the pace and in this case it's different it is lagging behind a bit and that is probably the reason why we believe that the improvement or the recovery especially in the construction sector is going to take a bit longer than what you would expect and and that's what keeps us a bit more conservative on what we think we can expect from for either lumber prices or in the case of the German economy itself what we can expect for the pallet prices in the in the short term we're hoping for more of a half second half 2025 commencement of some signs of improvement because even if interest rates are cut now that doesn't mean that immediately you have an impact and lumber prices will go immediately up we believe that there's a lag between one action and another so that's a little bit of the timing that we have in our in our planning okay thanks very much we're taking the questions thank you as a reminder if you'd like to ask a question please press store 1-1 our next question comes from Kasia copy tech with TD Cowan your line is open hi good morning everyone it's cash on the line you're articulated focus on leveraging over the next term just curious about your updated thoughts on potential asset the vestiges to expedite that hi Kasia yeah the only thing that we've got on the books right now for sale is sand at all and that that process is ongoing and we we don't expect any further right down on that okay that's right can you talk about your order file and how that very throughout the cycle just getting trying to get a sense if there's going to be any order file timing lags reflected in your acute three average price realization are you referring to a mass timber no Yeah, so I guess I'll maybe expand on what you mean by order file a little bit because we sell primarily spot in Asia and in Europe are where we basically sell the meals out every month. Yeah, we've got pretty low inventories across the board.

Juan Carlos Bueno: That's okay, so we sell every month, but if you're selling to a customer, it wouldn't shift for almost two weeks or three weeks at this point. What does that look like? Okay, for delivery times, again, it depends on Europe, or it's a number of weeks, like one to two weeks generally depends where it's going, but in Asia, yeah, it would take 30 to 60 days to deliver. Okay, got it. Yeah, I'm just trying to get a sense.

Juan Carlos Bueno: You know, prices are rolling off here, but maybe, maybe, you know, not all of that's going to be reflected in Q3, maybe some of that will bleed into Q4, just trying to get a sense of the timing. But that's a color thing. Yeah, okay, great. Sorry, go ahead, you were about to say something. Yeah, I was just going to say, if you're trying to use like an average, like a 45 day average, it's probably the for your modeling purposes. Okay, yeah, I got it. That's a good role from things.

Kasia Kopytek: So could pick up on the top lines of the mass timber business. Is that you think I'm positive at this point? Yes, it is. It was a bit of a positive, I think, things since Q4 of last year. It was the first time that it was a bit of positive. It was very strong. It was strong, this quarter. So we're looking forward to the growth of the business in 2024. We're expecting it to be probably twice the amount of sales that we had in 2023.

Kasia Kopytek: It should be around 110 million by the end of the year. And Q2 was particularly strong. There was some projects delayed from Q1 that ended up being kind of all compounded into Q2 that made us running against the clock in Q2. We delivered all the projects on time and no complaints whatsoever quality on spec. Everything very well produced and delivered. And that allowed us to run our meals more efficiently on one shift only at this point in time.

Kasia Kopytek: So that's why Q2 was, I would say more stronger or stronger than what we had planned for as they were picking up a little bit of the slack on 20 from Q1. And this is on the back of customers delaying some of their projects and therefore we have to adjust with whatever the customer planning schedule is. And that's the situation that followed in Q2.

Juan Carlos Bueno: In Q3 and Q4, we don't have any more or very little of the big, big large scale projects that we had at the beginning of the year. So that's a little bit of a change in dynamic. It's going to be smaller projects that we attend to during the second half of the year. Thanks for that. That's helpful. What can you remind me?

Kasia Kopytek: What kind of EBITDA margins are you looking at for that for those sales? We talk about even the margins in the long term, more than specifically what we do right now. And we aim for 20% between 10 and 20% in the long run. It's going to be around 20% or more. That's what we expect of Master. December. Okay, and but right now, because it's just low single digits, do I imagine? Something in that range? Yeah. Okay. Gotcha.

Juan Carlos Bueno: That's all I had. Thanks very much, everyone. Thank you. And the important thing, Kasia, just to expand on that, keep in mind that right now, the margins that we're seeing is running with one shift and not being able, only in Q2, we've had those shifts practically full in our facilities. Going forward, when we, as we expand this business, obviously the margins can grow as we can put two shifts or even three shifts into those facilities.

Juan Carlos Bueno: So that is the key thing here is for us to grow this business in a way that we can add more shifts and take advantage of the capacity that we have installed and therefore have a better return on those fixed costs. Thank you.

Operator: I'm showing you for the questions at this time.

Juan Carlos Bueno: I'd like to turn the call over to Juan Carlos Bueno for close your remarks. Okay, thank you, Michelle. And thanks to all of you for joining our call, Richard, I are available to talk more at any time, so don't hesitate to call one of us. Otherwise, we look forward to speaking to you again on our next earning call in November.

Operator: Bye for now. This concludes the program. You may now disconnect. Everyone, have a great day.