Q1 2025 Mercer International Inc Earnings Call

Operator: Good morning and welcome to Mercer's International First Quarter 2025 Earnings Conference Call.

Good morning, and welcome to Mercer is international.

Speaker Change: First quarter 2025 earnings conference call on the call today is Juan Carlos Bueno, Mercury's, President and Chief Executive Officer Officer, and Richard short Mercer as Chief Financial Officer, and Secretary I will now hand, the call over to Richard.

Operator: On the call today is Juan Carlos Bueno, Mercer's President and Chief Executive Officer, and Richard Short, Mercer's Chief Financial Officer and Secretary. I will now hand the call over to Richard. You may go ahead. Good morning everyone. Thanks for joining the call today.

You May go ahead.

Speaker Change: Thanks, Tracy good morning, everyone.

Richard Short: I will begin by touching on the financial and operating highlights of the first quarter before turning the call to Juan Carlos to provide further color into the markets, our operations, and our strategic initiatives. Also, for those of you that have joined today's call by telephone, there is a presentation material that we've 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. 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.

Speaker Change: Thanks for joining the call today I will begin by touching on the financial and operating highlights of the first quarter before turning the call to Juan Carlos to provide further color into the markets our operations and our strategic initiatives.

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

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

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

Speaker Change: 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.

Richard Short: This quarter, our EBITDA was $47 million, compared to Q4 EBITDA of $99 million. The lower results are primarily attributed to 22 days of planned major maintenance downtime at our Selgar mill. compared to no planned downtime in Q4. We estimate this downtime adversely impacted our EBITDA by approximately $30 million in direct costs and lower production. Q1 results, when compared to Q4, were also negatively impacted by 4. Our pulp segment contributed quarterly EBITDA of $50 million in Q1. You can find additional segment disclosures in our Forum 10 queue, which can be found on our website and that.

Speaker Change: This quarter, our EBITDA was $47 million compared to Q4 EBITDA of $99 million.

Speaker Change: The lower results are primarily attributed to 22 days of planned major maintenance downtime at our <unk> mill.

Speaker Change: Compared to no planned downtime in Q4.

Speaker Change: We estimate this downtime adversely impacted our EBITDA by approximately $30 million indirect and direct costs and lower production.

Speaker Change: Q1 results when compared to Q4 were also negatively impacted by foreign exchange.

Speaker Change: Our pulp segment contributed quarterly EBITDA of $50 million in Q1, and our solid wood segment EBITDA essentially broke even.

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

Richard Short: In the first quarter, MVSK published prices mostly increased in all our key markets compared to Q4 due to stable demand and supply conditions. However, our sales realizations were relatively flat due to the normal lag in realizing the benefit of higher prices. Q1, the European MBSK list price averaged $1,550. an increase of $50 from The North American MBSK list price averaged $1,753 per ton, an increase of $66 per ton. For China, the MBSK net price was $793 per tonne in Q3. An increase of $26 from Q4. Hardwood sales realizations were essentially flat in Q1 compared to Q4 as higher prices in China were offset by lower prices in North America.

Speaker Change: In the first quarter M. P. S. K published published prices, mostly increased in all of our key markets compared to Q4 due to stable demand.

Speaker Change: Fly constraints however.

Speaker Change: However, our sales realizations were relatively flat due to the normal lag in realizing the benefit of higher prices.

Speaker Change: In Q1, the European M. B S came this price averaged $1550 per ton an increase of $50 from Q4.

Speaker Change: And the North American M. B S came this price averaged $1753 per ton an increase of $66 from Q4.

Speaker Change: In China, the N B S. K net price was $793 per ton in Q1, an increase of $26 from Q4.

Speaker Change: Hardwood sales realizations were essentially flat in Q1 compared to Q4 as higher prices in China were offset by lower prices in North America.

Richard Short: In China, the Q1 average MBHK net price was $578 per ton, up $30 compared to Q4, resulting in the average price gap this quarter between MBSK and MBHK in China being $215 per ton. We believe the price gap... beginning to widen. The North American MBHK average Q1 list price was $1,268, down $30 from Q4. Pulp sales volumes in the first quarter increased by 26,000 times. 478,000 This increase is attributed to the timing of sale. We had 22 days of planned downtime in Q1 compared to no days of scheduled downtime in Q4, which negatively impacted Q1 EBITDA by about $30 million in direct costs and reduced production.

Speaker Change: In China, the Q1 average M. B H K net price was $578 per ton up $30 compared to Q4, resulting in the average price gap this quarter between M. B S. K N V H, K and China being $215 per ton.

Speaker Change: We believe the price gap.

Speaker Change: Art.

Speaker Change: Is beginning to widen.

Speaker Change: The North American M. P. H D average Q1 list price was $1268 down $30 from Q4.

Speaker Change: Pulp sales volumes in the first quarter increased by 26000 tons to 478000 tons. This increase is attributed to the timing of sales.

Speaker Change: We had 22 days of planned downtime in Q1 compared to no days of scheduled downtime in Q4, which negatively impacted Q1, EBITDA by about $30 million indirect costs and reduced production.

Richard Short: After adjusting for the scheduled downtime, hope production modestly increased from the fourth quarter, driven by improved production at our Canadian...

Speaker Change: After adjusting for the scheduled downtime pulp production modestly increase from the fourth quarter driven by improved production at our Canadian Mills.

Richard Short: This is the second quarter of 2025. We had 18 days of planned maintenance downtime at our Peace River... Three days of planned maintenance downtime at our Stendhal... combined should have roughly the same EBITDA effect as the Q1 Celgar shot. For our solid wood segment, realized lumber prices increased in the first quarter compared to the fourth quarter. This was driven by higher prices in both the U.S. and European markets, which was a result of reduced supply and steady demand. Random Lengths US Benchmark for Western SPF No. 2 Embedder. Average price was $492 per thousand board feet in Q1.

Speaker Change: In the second quarter of 2025, we had 18 days of planned maintenance downtime at our Peace River mill.

Speaker Change: Three days of planned maintenance downtime at our Stendal mill, which combined should have roughly the same EBITDA effect is the Q1 sell their shops.

Speaker Change: For our solid wood segment realized lumber prices increased in the first quarter compared to the fourth quarter.

Speaker Change: This was driven by higher prices in both the U S and European markets, which was a result of reduced supply and steady demand.

Speaker Change: The random lengths U S benchmark for Western SPF number two and better average price was $492 per thousand board feet in Q1 compared to $435 per thousand board feet in Q4.

Richard Short: compared to $435 per thousand board feet in Q4. Today, that benchmark price for Western SPF No. 2 Embedder is around $485 per thousand Lumber production was a near record 128 million board feet in up 12% from Q4 due to seasonal downtime in the fourth quarter. Lumber sales volumes were also a near record at $131 million. up about 6% from Q4. Electricity sales totaled 235 GWh in the quarter, which was about the same as Q4. Pricing in Q1 modestly increased to about $112 per MWh from $109 in Q4. higher spot price In Q1, our pulp segment had stable fiber costs compared to Q4.

Speaker Change: Today, the benchmark price for Western SPF number two and better is around $485 per thousand board feet, an increase of about $40 from the beginning of the year.

Speaker Change: Lumber production was a near record 128 million board feet in Q1 up 12% from Q4 due to seasonal downtime in the fourth quarter.

Speaker Change: Lumber sales volumes were also a near record at a 131 million board feet.

Speaker Change: About 6% from Q4.

Speaker Change: Electricity sales totaled 235 gigawatt hours in the quarter, which was about the same as Q4.

Speaker Change: Pricing in Q1 modestly increased to about $112 per megawatt hour from $109 in Q4 due to higher spot prices in Germany.

Speaker Change: In Q1, our pulp segment had stable fiber cost compared to Q4.

Richard Short: For our solid wood segment, per unit fiber costs increase in Q1 driven by strong demand for saw logs. Our mass timber operations within the solid wood segment maintain stable sales volumes in Q1 compared to Q2. We continue to see strong and growing underlying interest in Mass. However, the prevailing high interest rate environment is currently impacting project timelines and overall market. We believe this is a temporary head... Currently, we are seeing some planned project start dates slipping from 2025 into 2020.

Speaker Change: Our solid wood segment per unit fiber costs increased in Q1, driven by strong demand for saw logs in Germany.

Speaker Change: Our mass timber operations within the solid wood segment maintain stable sales volumes in Q1 compared to Q4.

Speaker Change: We continue to see strong and growing underlying interest in mass timber. However, the prevailing high interest rate environment is currently impacting project time lines and overall market momentum.

Speaker Change: We believe this is a temporary headwind.

Speaker Change: Currently we are seeing some planned project start dates slipping from 2025 into 2026.

Richard Short: We reported a consolidated net loss of $22 million for the first quarter or $0.33 per share compared to a net income of $17 million or $0.25 per share in the fourth quarter. Consumed about $3 million of cash in Q1, compared to about $54 million in Q2. You will recall we repaid $100 million of senior notes in Q4 last year. which was partially offset by strong operational cash flow. In Q1, our net working capital excluding non-cash items increased roughly $23 million due to seasonal working capital cuts. We expect most of this working capital build to reverse in years to come.

Speaker Change: We reported a consolidated net loss of $22 million for the first quarter or <unk> 33 per share compared to a net income of $17 million or 25 per share in the fourth quarter.

Speaker Change: We consumed about $3 million of cash in Q1 compared to about $54 million in Q4. The river will recall, we repaid $100 million of senior notes in Q4 last year, which was partially offset by strong operational cash flow generation.

Speaker Change: In Q1, our net working capital excluding noncash items increased roughly $23 million due to seasonal working capital movements. We expect most of this working capital build to reverse in Q2.

Richard Short: In Q1, we invested a total of $20 million in capital across our facility. This included the completion of the woodroom upgrade at ArcelorMittal. This project is expected to decrease our reliance on sawmill residuals and lower per unit fiber cost. At the end of Q1, our liquidity position totaled $471 million, comprised of about $182 million of cash and $289 million of undrawn revolvers.

Speaker Change: In Q1, we invested a total of $20 million in capital across our facilities. This included the completion of the wood room upgrade at our silver mill.

Speaker Change: This project is expected to decrease our reliance on sawmill residuals and lower per unit fiber costs.

Speaker Change: Yeah.

Speaker Change: At the end of Q1, our liquidity position totaled $471 million comprised of about $182 million of cash and $289 million of Undrawn revolvers.

Richard Short: Finally, our board has approved a quarterly dividend of 7.5 cents per share for shareholders of record on June 26, for which payment will be made on July 3, 2025.

Speaker Change: Finally, our board has approved a quarterly dividend of seven and a half cents per share for shareholders of record on June 26 for which payment will be made on July 3rd 2025.

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

Speaker Change: That ends my overview of the financial results I'll now turn the call over to Juan Carlos.

Juan Carlos Bueno: I'll now turn the call over to Juan Carlos. Thanks, Rich. I would like to begin with a topic we get asked a lot. most, which is tariffs. As it stands today, our products are not being subject to tariff. The pulp and mass timber we import from Canada into the US and the lumber we import from Germany into the US are currently not subject to tariffs, but they're subject to a Section 232 review due to be published no later than November 2025. In addition, the wood chips we import into Canada from the U.S. are not included in the counter tariffs that Canada has said it could apply.

Juan Carlos: Thanks, Rich I would like to begin with the topic, we get asked most.

Speaker Change: But just tariffs.

Juan Carlos: As it stands today, our products are not being subject to tariffs.

Juan Carlos: Pulp and mass timber, we imported from Canada into the U S and the lumber we imported from Germany.

Juan Carlos: The U S arguably not subject to tariffs, but they are subject to a section 232 review due to be published no later than November 2025.

Juan Carlos: In addition, the wood chips, we import into Canada from the U S are not included in the counter tariffs.

Juan Carlos: Canada has said it could apply.

Juan Carlos Bueno: To give our direct tariff exposure some context, on average, we sell about 200,000 tons of pulp into the U.S. annually. About two-thirds of this volume is hardwood pulp. We also export from Germany about 200 million board feet of lumber to the U.S. In contrast, our main import from the U.S. into Canada is wood chips for our Selgar pot mill, which today amounts to about 35% of the fiber consumption of the world. We are experiencing some exposure in the form of secondary effects, particularly as it relates to a weaker U.S. dollar and to a lesser degree, a weaker pulp demand in China and in the U.S.

So gave our direct tariff exposure some context on average we sell about 200000 tons of pulp into the U S annually.

Juan Carlos: About two thirds of this volume is hardwood pulp.

Juan Carlos: We also export from Germany about 200 million board feet of lumber to the U S.

Juan Carlos: In contrast, our main import from the U S into Canada is what chips for ourselves our pulp mill, which today amounts to about 35% of the fiber consumption of the mill.

Juan Carlos: We are experiencing some exposure in the form of secondary effects, particularly as it relates to a weaker U S dollar and to a lesser degree a weaker pulp demand in China and in the U S lumber market.

Juan Carlos Bueno: lumber market.

Juan Carlos Bueno: We're watching trade policy developments closely and have contingency plans in place to mitigate any potential tariffs. With this global economic uncertainty in the background, we have refined our 2025 plan to ensure we can deliver on our top priorities. which are maximizing the operating rates of our mills and generating cash to reduce debt. As such, we have launched a company-wide program that targets $100 million that will be generated from improved operational efficiency as well as cost savings by the end of 2026 when compared to 2024. In addition, in 2025, we're targeting a reduction of inventories of $20 million and a reduction of our 2025 CapEx of another $20 million.

Juan Carlos: We're watching trade policy developments closely and have contingency plans in place to mitigate any potential tariff impact.

Juan Carlos: With this global economic uncertainty in the background, we have refined our 2025 plans to ensure we can deliver on our top priorities, which are maximizing the operating rates of our mills and generating cash to reduce debt.

Juan Carlos: As such we have launched a company wide program that targets of $100 million that will be generated from improved operational efficiency as well as cost savings by the end of 2026 when compared to 2024.

Juan Carlos: In addition in 2025, we are targeting a reduction of inventories up $20 million and a reduction of our 2025 capex of another $20 million.

Juan Carlos Bueno: Our efforts are well underway to achieve this goal of $100 million of improvement in our bottom line results, and I am confident we will reach this goal. We look forward to sharing updates on our progress as time progresses. In Q1, our mills ran well. Our EBITDA of $47 million reflects a heavy maintenance quarter that saw our Selgar mill down for 22 days. We also experienced a weakening of the U.S. dollar, which negatively impacted our results relative to Q4 last year. That said, there is a potential benefit for Selgar Mill as the weaker dollar should enhance the mill's purchasing power for U.S.

Juan Carlos: Our efforts are well underway to achieve this goal of $100 million of improvement in our bottom line results.

Juan Carlos: I'm confident we will reach this goal.

Juan Carlos: We look forward to sharing updates on our progress as time progresses.

Speaker Change: In Q1, our mills ran well.

Speaker Change: <unk> EBITDA of $47 million reflects our heavy maintenance quarter that saw our Sagar mill down for 22 days.

Speaker Change: We also experienced a weakening of the U S dollar, which negatively impacted our results relative to Q4 last year.

Speaker Change: That said there is a potential benefit for our sugar mill as the weaker dollar should enhance the mills purchasing power for U S source fiber, which accounts as I said earlier for roughly 35% of its supply.

Juan Carlos Bueno: source fiber, which accounts, as I said earlier, for roughly 35% of its supply. Fiber costs were up in Germany, most notably for our sawmills. And although pulp pricing was generally up, we sold a larger proportion of hardwood pulp this quarter compared to Q4, which negatively impacted our mill net. Positive market momentum continued in the second quarter, but as I just mentioned, we're beginning to see the impact of global economic uncertainty. negatively affecting buy-in patterns and pricing in some of our markets. We're also expecting to see some modest fiber cost inflation and lower energy sales prices in the second quarter.

Speaker Change: Fiber costs were up in Germany, most notably for our sawmills and pulp pricing was generally up we sold a larger proportion of hardwood pulp this quarter compared to Q4.

Which negatively impacted our mill nets.

Speaker Change: Positive market momentum continued into the second quarter, but as I. Just mentioned, we are beginning to see the impact of global economic uncertainty negatively affecting buying patterns and pricing in some of our markets.

Speaker Change: We're also expecting to see some modest fiber cost inflation and lower energy sales prices in the second quarter.

Juan Carlos Bueno: In the meantime, the U.S. dollar weakened further in this first month of the current quarter and is under pressure of the U.S. government's proposed punitive tariff to reject the U.S. dollar.

Speaker Change: In the meantime, the U S dollar weakened further in this first month of the current quarter.

Speaker Change: And it is under pressure, although U S government's proposed punitive tariff regime.

Juan Carlos Bueno: The ultimate impact of trade barriers remains unclear and is likely to remain this way until the third quarter, but we will continue to work on mitigation strategies and remain flexible to manage through the uncertain times. In the meantime, we continue to maintain an open dialogue with our customers, government officials, and our industry associations. We're prepared to take swift action redirecting products to other geographies if necessary and adjusting our operations accordingly depending on the scenario that actually plays out. Now, turning to the pulp markets, softwood pricing is expected to remain strong in most markets. We continue to believe that overall demand for softwood will be steady in the midterm, which when combined with reduced supply will create some upward pricing pressure in most markets in the second quarter of 2025.

Speaker Change: The ultimate impact of trade barriers remains unclear and is likely to remain this way until the third quarter, but we will continue to work on mitigation strategies and remain flexible to manage through the uncertainty.

Speaker Change: In the meantime, we continue to maintain an open dialogue with our customers government officials and our industry associations.

Speaker Change: We're prepared to take Swift action redirecting products to other geographies, if necessary and adjusting our operations accordingly, depending on the scenarios that actually plays out.

Now turning to the pulp markets softwood pricing is expected to remain strong in most markets. We continue to believe that overall demand for softwood will be studying the midterm, which when combined with reduced supply will create some upward pricing pressure in most markets in the second quarter of 2025.

Juan Carlos Bueno: In the first quarter, hardware pricing strengthened in China due to seasonally strong demand and weakened supply due to heavy South American producer maintenance. Conversely, hardwood pricing weakened itself in North America due to the weaker demand. More broadly, we continue to believe that the longer term outlook for softwood pulp supply demand dynamics is favorable due to the reduced supply and increasing demand for long fiber pulp. Despite the uncertainties of tariffs, we believe that the significant contrast between the supply-demand fundamentals for softwood and hardwood pulp will drive the price difference between these two grades to levels well beyond historical norms. At the moment, we believe the net price gap in China is growing.

Speaker Change: In the first quarter hardwood pricing strengthened in China due to seasonally strong demand and weekend supply due to heavy south American producer maintenance <unk>.

Speaker Change: Conversely, hardwood pricing weakened in south and North America due to the weaker demand.

Speaker Change: More broadly we continue to believe that the longer term outlook for softwood pulp supply demand dynamics is favorable due to the reduced supply and increasing demand for long fiber pulp. These.

Speaker Change: Despite the uncertainties of tariffs, we believe that the significant contrast between the supply demand fundamentals for softwood and hardwood pulp will drive the price difference between these two grays to levels well beyond historical norms.

At the moment, we believe the net price gap in China is growing we expect a wider price differential to persist well into 2025 as a reminder, softwood represents roughly 85% of our annual pulp sales volumes.

Juan Carlos Bueno: We expect a wider price differential to persist well into 2025. As a reminder, softwood represents roughly 85% of our annual bulb sales volume. As we have highlighted in previous calls, we believe that the ability of papermakers to substitute hardwood pulp in the place of softwood pulp is limited due to most of the potential substitution options having already been implemented. and that only a marginal amount would still be possible. All our mills ran well, with Celgard being down for 22 days of plant maintenance, equating to about 30,000 tons of lost production. In total, we produced almost 460,000 tons in Q1, and after allowing for Celgar's shot that equates to about a 20,000 ton improvement over Q4 production.

Speaker Change: As we have light as highlighted in previous calls we believe that the ability of paper makers to substitute hardwood pulp in the place of softwood pulp is limited due to most of the potential substitution options, having already been implemented and that only a marginal amount would still be possible.

Speaker Change: All of our mills ran well with <unk> being down for 22 days of planned maintenance equating to about 30000 tons of lost production.

Speaker Change: In total we produced almost 460000 tonnes in Q1, and after allowing for cellulose shots that equates to about a 20000 ton improvement over Q4 production.

Juan Carlos Bueno: In addition, our lumber production improved relatively to Q4 by over 10%. While we improved our production output this quarter, we continue to put strong emphasis on further improving the reliability of our assets across all businesses. In Q1, as expected, our overall pulp fiber costs were steady relative to Q4. In Germany, we saw increased demand for saw logs, which pushed up the price of sawmill chips, while in Canada, costs were down slightly thanks to our Peace Rivers woodroom, as well as our fiber sourcing strategy in Celgar. The increased demand for saw logs in Germany has also pushed the price of fiber up for sawmilling jobs.

Speaker Change: In addition, our lumber production improve relatively to Q4 by over 10%.

Speaker Change: While we improved our production output this quarter, we continued to put strong emphasis on further improving the reliability of our assets across all businesses.

Speaker Change: In Q1 as expected our overall pulp fiber costs were steady relative to Q4 in Germany, we saw increased demand for saw logs.

Speaker Change: Pushed up the price of sawmill chips, while in Canada costs were down slightly thanks to our peace river's wood room, as well as our fiber sourcing strategy and Sagar being.

Speaker Change: The increased demand for saw logs in Germany has also pushed the price of fiber up four saw milling business.

Juan Carlos Bueno: Looking ahead to Q2, we expect fiber costs to remain stable for our pulp business. and with a small increase of about 10% for solid wood business. Our solid wood segment continues to be held back by a weak European economy and the impact of high interest rates on the construction industry. Despite some modest price improvements in the U.S. lumber market, as a result, our solid wood segment posted an almost break-even EBITDA in Q1, with high U.S. lumber pricing offsetting the sustained weak demand for pallets. Our mass timber business took a nice step forward in 2024. When our facilities were running full, but only on one shift, we saw meaningful profitability.

Speaker Change: Looking ahead to Q2, we expect fiber cost to remain stable for our pulp business.

Speaker Change: With a small increase of about 10% for a solid wood business.

Speaker Change: Our solid wood segment continues to be held back by a weak European economy, and the impact of higher interest rates on the construction industry.

Speaker Change: Despite some modest price improvements in the U S lumber market as a result, our solid wood segment posted an almost breakeven EBITDA in Q1 with high U S lumber pricing offsetting the sustained weak demand for pellets.

Our mass timber business took a nice step forward in 2024 when.

Speaker Change: When our facilities were running full but only on one shift we saw meaningful profitability.

Juan Carlos Bueno: The uncertainty surrounding the economy on the back of the trade war is forcing developers to delay the construction as they grow concerned about potential cost escalations down the road given the long lead times of their projects, pushing them into late 25 or 26. On the positive side, however, we are currently receiving an increasing volume of inbound projecting. Based on our order book today, we're expecting a weaker second and third quarter with improvement beginning in the fourth quarter. And at this point, we believe we will be ramping up one of our facilities to two shifts already in early 2026.

Speaker Change: The uncertainty surrounding the economy on the back of the trade war is forcing developers to delay the construction as they grow concerned about potential cost escalation stand the road given the long lead times of their projects pushing them into late 'twenty, five or 'twenty or 'twenty six on.

Speaker Change: On the positive side. However, we are currently receiving an increasing volume of inbound project inquiries based on our order book today, we're expecting a weaker second and third quarter with improvement beginning in the fourth quarter.

Speaker Change: And at this point, we believe we will be ramping up one of our facilities to two shifts already in early 2026.

Juan Carlos Bueno: Today, our mass timber order file sits at about $24 million. We remain confident that the environmental, economic, speed of construction, and aesthetic benefits of mass timber will allow this building product to grow in popularity at a pace similar to what happened in Europe. As such, we are highly confident in this business being a growth engine for Mercer. We're well-positioned to take advantage of that market growth as we have roughly 30% of North American cross-laminated timber production capacity, a broad range of product offerings, including design and installation services, and a large geographic footprint with manufacturing sites in the Northwest as well as the Southeast, giving us competitive access to the entire North American market.

Speaker Change: Today, our mass timber order files sits at about $24 million.

Speaker Change: We remain confident that the environmental economic speed of construction and aesthetic benefits of mass timber will allow this building products to grow in popularity at a pace similar to what happened in Europe.

Speaker Change: As such we're highly confident in this business being a growth engine for Mercer.

Speaker Change: We are well positioned to take advantage of that market growth as we have roughly 30% of North American cross laminated timber production capacity, a broad range of product offerings, including design and installation services and a large geographic footprint with manufacturing sites in the northwest as well as the southeast, giving us competitive access to the entire.

Speaker Change: North American market, we have positioned ourselves to be a one stop shop for mass timber installations.

Juan Carlos Bueno: We have positioned ourselves to be a one-stop shop for mass timber installation. We expect lumber pricing to be modestly weaker in the U.S. market at the end of the second quarter due to the impact of the current economic environment on customer demand. In contrast, we expect modest upward pricing pressure in the European market, primarily due to increasing SOLOC prices. However, any meaningful long-term improvement in either the European or U.S.

Speaker Change: We expect lumber pricing to be modestly weaker in the U S market at the end of the second quarter due to the impact of the current economic environment and customer demand in.

In contrast, we expect modest upward pricing pressure in the European market, primarily due to increasing saw log prices.

Speaker Change: However, any meaningful long term improvement in either the European or U S markets will be dependent on improved economic conditions and lower interest rates.

Juan Carlos Bueno: markets will be dependent on improved economic conditions and lower interest rates. Now the cost competitive setup we have in Freesale gives us the flexibility to have a strong presence in Europe, the U.S., and the quality sensitive Japanese market. In Q1, 39% of our lumber volume was sold in the U.S. as we continue to optimize our mix of products and target markets to current conditions. We continue to believe that low lumber inventories, the large number of sawmill curtailments, reduced allowable cut limits, relatively low housing stock, 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.

Speaker Change: Now the cost the cost competitive setup, we haven't pre sale gain.

Speaker Change: It gives us the flexibility to have a strong presence in Europe, the U S and the quality sensitive Japanese market in.

Speaker Change: In Q1, 39% of our lumber volume was sold in the U S. As we continued to optimize our mix of products and target markets to current conditions.

Speaker Change: We continue to believe that low lumber inventories the large number of sawmill curtailments reduced allowable cut limits relatively low housing stock 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: Our shipping pallet market remains weak, with pallet pricing staying flat due to the overhang of the European economy, particularly in Germany. Once the economy begins to show signs of recovery, we expect pallet prices to recover towards more historical levels, allowing Torgau to deliver significant shareholder value. Heating pellet prices were up slightly in Q1 due to seasonality in this market and we expect demand and prices to be slightly lower in Q2 as warmer European temperatures take hold.

Speaker Change: Our shipping pallet market remains weak with pilot pricing staying flat due to the overhang of the European economy, particularly in Germany.

Speaker Change: Once the economy begins to show signs of recovery, we expect pilot prices to recover towards more historical levels.

Speaker Change: Bowing torque out to deliver significant shareholder value.

Speaker Change: Heating pellet prices were up slightly in Q1 due to seasonality in this market and we expect demand and prices to be slightly lower in Q2 as warmer European temperatures take hold.

Juan Carlos Bueno: As part of our objective to keep all of our pot mills running reliably, we are planning for major maintenance shutdowns at all mills throughout the year. Our current schedule is the following. In Q1, Selva was down for 22 days, which is longer than usual for this male. The Woodroom Project is now completed and being commissioned. The post-shot startup of the mill was slower than planned and resulted in five days of lost production, which will impact you too, but it's now running well. In Q2, Peace River was down for 18 days. as they already went through their shutdown, or about 24,000 tons.

Speaker Change: As part of our objective to keep all of our pulp mills running reliably we're planning for major maintenance shutdowns at all mills throughout the year. Our current schedule is the following.

Speaker Change: In Q1 Saga was down for 22 days, which is longer than usual for this mill.

Speaker Change: Wood room project is now completed and being commissioned.

Speaker Change: The post shut startup of the mill was slower than planned and resulted in five days of loss production of which will impact Q2, but is now running well.

Speaker Change: In Q2 Peace River was down for 18 days.

Speaker Change: As they already went through their shutdown or about 24000 tons and Stendal will take a short three day shut or roughly 6000 tons.

Juan Carlos Bueno: And Stenda will take a short three-day shut, or roughly 6,000. In Q3, Rosenthal will be down for 14 days or about 14,000 tons. and Selga will take four days, equivalent to 5,500. And in Q4, Stendhal will be down for 18 days, equivalent to 37,000. In total, that is 79 days of planned downtime compared to 57 in 24. The increase in 2025 planned maintenance days is due to cell guard not taking any major shot in 2024, now that it is on an 18-month maintenance cycle.

Speaker Change: In Q3, Rosenthal will be down for 14 days or about 14000 tons.

Speaker Change: <unk> will take four days equivalent to 5000.

Speaker Change: 500 tons.

Speaker Change: And in Q4, Stendal will be down for 18 days equivalent to 37000 tons.

Speaker Change: In total that is 79 days of planned downtime compared to 57% and 24.

Speaker Change: The increase in 2025 planned maintenance days is due to sell guard not taking any major shut in 2024 now that it is an 18 month maintenance cycle.

Juan Carlos Bueno: In light of recent economic uncertainty, we have reduced planned CAPEX and now expect to spend about $100 million on capital projects in 2025. This capital budget is heavily weighted to maintenance, environmental, and safety projects and includes both Torgau's lumber expansion project and Celgar's recently completed woodroom project. Torgau's project will increase the volume of dimensional lumber available for the U.S. market by about 240,000 cubic meters annually, with upgrades to the log-in feed system and the addition of more planing capacity. We expect to reach a little bit over 100,000 cubic meters already in 2025. This was envisioned as part of our original investment thesis to increase the mills value added product mix and maximize potential.

Speaker Change: In light of recent economic uncertainty, we have reduced planned capex and now expect to spend about $100 million on capital projects in 2025 <unk>.

Speaker Change: This capital budget is heavily weighted to maintenance environmental and safety projects and includes both Doghouse Library expansion project in <unk> recently completed wood room project.

Speaker Change: Doghouse project will increase the volume of dimensional lumber available for the U S market by about 240000 cubic meters annually with upgrades to the logging feed system and the addition of more planning capacity.

Speaker Change: We expect to reach a little bit over 100000 cubic meters already in 2025.

Speaker Change: This was envisioned as part of our original investment thesis to increase the mill's value added product mix and maximize potential synergies.

Juan Carlos Bueno: Our new lignin extraction pilot plant at Rosenthal continues to run exceptionally well. Our product development is going according to plan. We're excited about the future prospect of this product as a sustainable alternative to fossil fuel-based products like adhesives and advanced battery elements. We believe this product can be the foundation for a profitable business segment with strong growth potential. The fundamentals of this business align perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy while adding shareholder value on our existing assets. As the world becomes more demanding about reducing carbon emissions, we believe that products like mass timber, green energy, lumber, pulp, and lignin will play increasingly important roles in displacing carbon-intensive products, products like concrete and steel for construction or plastic for packaging.

Speaker Change: Our new learning instruction pilot plant at Rosenthal continues to run exceptionally well.

Speaker Change: Our product development is going according to plan, we're excited about the future prospects of this product as a sustainable alternative to fossil fuel based products like adhesives and advanced battery elements.

Speaker Change: We believe this product can be the foundation for a profitable business segment with strong growth potential.

Speaker Change: The fundamentals of this business align perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with the circular carbon economy, while adding shareholder value on our existing asset base.

Speaker Change: As the world becomes more demanding about reducing carbon emissions, we believe that products like mass timber green energy lumber pulp and lignin 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. 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 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 growth in our lumber and mass timber business.

Speaker Change: Furthermore, the potential demand for sustainable fossil fuels 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. In fact, we believe that demand for low carbon products was dramatically increases that will look for solutions to reduce its carbon emissions we.

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

Juan Carlos Bueno: I would also like to know... that we're beginning a Feld 2 engineering review on the potential for a carbon capture project at our Peace River Mill. We have a lot of work to do given the early stages of this review, but we're excited about the potential a project like this could have on the economics of this mill.

Speaker Change: I would also like to note that we are beginning a failed to engineering review and the potential for carbon capture project at our Peace River Mill.

Speaker Change: We have a lot of work to do given the early stages of this review, but we're excited about the potential a project like this could have on the economics of this mill.

Juan Carlos Bueno: We will publish our 2024 Sustainability Report in the coming weeks. I invite you to go to our website and have a look at this report as it highlights our main initiatives and our progress on our sustainably sustainability related targets.

Speaker Change: We will publish our 2020 for sustainability report in the coming weeks I invite you to go to our website and have a look at this report as it highlights our main initiatives on our progress on our sustainably sustainability related targets.

Juan Carlos Bueno: While I'm encouraged by the softwood pulp market outlook, it's disappointing to see the overall market uncertainty that the trade war and As a result, and as I noted above, I have asked our operators to focus on driving efficiency through aggressively reducing costs while enhancing reliability. Thank you very much. We remain committed to increasing shareholder value by reducing our leverage through aggressive cost reduction programs, strong mill reliability, operational realization, and prudent capital management.

Speaker Change: While I'm encouraged by the softwood pulp market outlook, it's disappointing to see the overall market uncertainty that the trade war unleashes I'm.

Speaker Change: As a result, and as I noted above.

Speaker Change: I have asked our operators to focus on driving efficiency through aggressively reducing costs, while enhancing reliability to strengthening our resilience and readiness for potential tariff impacts, including being ready with various tariff mitigation strategies.

Speaker Change: We remain committed to increasing shareholder value by reducing our leverage through aggressive cost reduction programs strong mill reliability operational reallocation.

Speaker Change: And prudent capital management.

Operator: Thanks for listening, and I will now turn the call back to the operator for questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

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

Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

Speaker Change: We will pause for just a moment to compile the Q&A roster.

Sandy Burns: Your first question comes from the line of Sandy Burns with Spifle. You may go ahead. Hi, good morning, everyone, and thanks for all the color and information about the Uncertain Outlook. But I was wondering, you know, on slides nine and ten, you mentioned. Disclosure in the form of secondary effects and you are starting to see some negative impact on pricing in some markets. I was hoping you could elaborate on those bullet points, those comments a little bit more. Yeah, absolutely, Sandy. The secondary effects when we talk about tariffs is basically related to things like the weakening of the U.S.

Speaker Change: Your first question comes from the line of Sandy Burns with Stifel. You May go ahead.

Sandy Burns: Hi, good morning, everyone and thanks for all the color and information about the uncertain outlook, but I was wondering on slides nine and 10 you mentioned.

Speaker Change: Exposure in the form of secondary effects and you are starting to see some negative impact on pricing in some markets.

Speaker Change: You could elaborate on those bullet points those comments a little bit more.

Speaker Change: Yes, absolutely suddenly the secondary effects when we when we talk about tariffs is basically related to things like the weakening of the U S. Dollar.

Juan Carlos Bueno: dollar. We're seeing also, which obviously is evident for us, it impacts all our cost bases out of Europe and out of Canada. And then when you look at demand, in China particularly, there has been quite a slowdown in the last few days. Now they're going through a long weekend holiday. It's a five-day holiday. We'll see how the reaction is when they return from holiday, but there's been a halt in. in buying in China. And obviously, that has put pressure on prices, more significantly on hardwood than on softwood. But still, we don't know if it's a one-off, if it's something that will be recovered after they come back from the holidays.

Speaker Change: Ah, we're seeing also which obviously is evident and for us it impacts all of our cost basis out of Europe and out of Canada.

Speaker Change: As well as our cash balances.

Speaker Change: And then when you look at.

Speaker Change: <unk> demand.

Speaker Change: In China, particularly there has been quite a slowdown in the last few days.

Speaker Change: Now, they're going through a long weekend.

Speaker Change: Weekend holiday and its a five day holiday.

Speaker Change: We'll see how how the reaction is when they returned from holiday, but that's been a halt in.

Speaker Change: In buying in China, and obviously that has put pressure on prices.

More significantly on hardwood.

Speaker Change: Then on softwood, but still we don't know if it's a one off if it's something that will be recovered after they come back from the holidays, but obviously, we see that this all uncertainty the tariffs coming in coming out.

Juan Carlos Bueno: But obviously, we see that there's all uncertainty, the tariffs coming in, coming out, is just making people a little bit cautious about building inventories or having stuff shipped around the globe, not knowing when they arrive, whether they're going to be subject to a different tariff. So I think that's the comment around those collateral effects or indirect impacts that the tariffs are having.

Speaker Change: Is just create making people a little bit cautious about building inventories or having stopped shipped around the globe not knowing when they arrive whether they're going to be subject to a different tier four it's something different. So I think that's that's the comment around those collateral effects or indirect.

Speaker Change: <unk> that the tariffs are having.

Sandy Burns: Okay, great. That was helpful. And second and last one for me, you did mention how, given your typical lag in market pull prices versus your realizations. Your realizations were down a little bit this quarter versus the market prices up. I guess we still got two months left in the quarter, and you said in an uncertain pricing environment, but is there anything else that we should be thinking about, positively or negatively, in those first quarter price increases impacting your second quarter realizations? We don't see necessarily a big delta there. I think there's going to be more positive than negative when it comes to pulp prices when you compare Q2 with Q1.

Speaker Change: Okay, Great that was helpful and second and last one for me you did mention how given your typical lag in.

Speaker Change: Market pulp prices versus your realizations your realizations were down a little bit this quarter versus the market prices up I guess, we still got two months left in the corridor.

Speaker Change: And you said that in an uncertain pricing environment, but is there anything.

Speaker Change: Also we should be thinking about positively or negatively in in those first quarter price increases impacting your second quarter realizations.

Speaker Change:

Speaker Change: We don't see necessarily a big.

Speaker Change: Delta there I think there's going to be more positive than negative when it comes to pulp prices. When you compare Q2 with Q1.

Juan Carlos Bueno: and even lumber, also because there's a lag. Even though we've seen some, a relatively softness, a relative softness in lumber in the last few weeks, it takes a while for that to be dialed into the shipments. So, I, my interpretation is that Q2 will be positive on prices for both pulp and lumber when compared to Q1. Okay, great. Thank you. Good luck with everything. Thank you.

Speaker Change: And even lumber also because there's a lag even though we've seen some relatively softness a relative softness in lumber in the last few weeks.

Speaker Change: It takes a while for that to be dialed into the shipments.

Speaker Change: No.

Speaker Change: My interpretation is that Q2 will be positive on prices for both pulp and lumber when compared to Q1.

Speaker Change: Okay, great. Thank you good luck with everything.

Speaker Change: Thank you.

Sean Steuart: Your next question comes from the line of Sean Steuart with T. D. Cohen. You may go ahead. Thank you. Good morning. A couple questions. The cost savings objectives of $100 million by the end of 2026.

Speaker Change: Your next question comes from the line of Sean Stewart with TD <unk>.

Speaker Change: You May go ahead.

Sean Stewart: Thank you good morning couple of questions the cost savings objectives of 100 million by the end of 2026 can you give us some specific context on <unk>.

Juan Carlos Bueno: Can you give us some specific context on Cost buckets, productivity improvement targets, specific assets that you're looking at there, and any context on the cadence of those costs flowing through over the next two years. Absolutely, Sean, good question. On the cost reduction program or the profitability enhancement program that we have launched, first of all, we started on it in the very beginning of the year. And since then, we've been able to already capture quite a bit of indication of where the buckets or where the opportunities lie. Now, this program, as I mentioned, is company-wide, and we've obviously put a lot more emphasis on those assets that are in a weaker situation from a cash perspective.

Speaker Change: Cost bucket.

Sean Stewart: Productivity improvement target specific assets that you are looking at their end.

Sean Stewart: Any context on the cadence of those those costs flowing through over the next two years.

Sean Stewart: Absolutely Sean good.

Sean Stewart: Quick question on the on the cost reduction program or the profitability enhancement program that we have launched.

Sean Stewart: First of all we started on it and the very beginning of the year.

And since then we've been able to already captured quite a bit of of indication of where the buckets or where the opportunities lie now. This program as I mentioned is company wide.

Sean Stewart: And we've obviously put a lot more emphasis on those assets.

Sean Stewart: That are in a weaker situation.

Sean Stewart: From a cash perspective, so assets like tour Gal will have a much more dramatic.

Juan Carlos Bueno: So assets like Torgal will have a much more dramatic turnaround from that perspective, just as Peace River. And we're looking at all aspects, whether it's manning, whether it's logistic costs, handling or overhandling of fiber, looking at every single detail that would allow us to identify opportunities for reduction. Just as well, we're doing a similar exercise in the other mills that are running extremely well, whether it's Stendhal or Selgar or Rosenthal or Freesal. We've done also a restructuring already in mass timber. So there's a lot of things that are already underway.

Sean Stewart: Turnaround from that perspective, just as peace River.

Sean Stewart: And we're looking at all aspects, whether it's <unk>, whether it's mining whether it's our logistic costs.

Sean Stewart: Handling over handling of fiber.

Sean Stewart: Looking at every single detail that that would allow us to.

Sean Stewart: To identify opportunities for reduction.

Sean Stewart: As well, we're doing a similar exercise in the other mills that are that are running extremely well, whether we spend all of our salad bar or Rosenthal our freestyle.

Sean Stewart: We've done also a restructuring already in mass timber.

Sean Stewart: So there's a lot of things are already underway. When you look at the 100 million overall.

Sean Steuart: When you look at the $100 million overall, I believe that we should be able to get maybe $40 or $50 million already in 2025 when we compile everything that we have already done, plus the things that are in progress. And then the balance would be coming Okay, thanks for that detail.

Sean Stewart: I believe that we should be able to get maybe 40 or 50 million already in 2025.

Sean Stewart: When we compiled everything that we are have already done plus the things that are in progress and then the balance would be.

Sean Stewart: Coming next year.

Speaker Change: Okay. Thanks for that detail and then a follow up on your pulp market outlook and I appreciate everything you're saying for the second quarter with relative resilience.

Sean Steuart: And then just to follow up on your pulp market outlook, and I appreciate everything you're saying for the second quarter with relative resilience and North America and Europe. I guess through the latter half of the year, though, with China looking like it might be cracking their dominant buyer globally. Perspective on The ability to hold pricing for this industry in North America and Europe if China rolls over. Any perspective on what you're seeing for customer inventories in those markets? I guess a broader perspective on. how resilient those markets could be if China does weaken through the summer.

Speaker Change: North America, and Europe, I guess through the latter half of the year, though with China looking like it might be cracking their dominant buyer globally.

Speaker Change: Perspective on.

Speaker Change: The ability to hold pricing for this industry in North America, and Europe, if China rolls over.

Speaker Change: Any perspective on what you're seeing for customer inventories in those markets.

Speaker Change: I guess the broader perspective on that.

Speaker Change: How resilient in those markets could be if China does weaken.

Speaker Change: Through the summer.

Juan Carlos Bueno: Absolutely, Sean. In that respect, there's an element that comes into play which is very relevant at this point in time, and it is tariff. When you look at the European pulp that flows into the U.S., well, that is now taxed, or tariffs, excuse me. So that opens an opportunity for us. from Canada to become more competitive than the Europeans, which is something that, obviously, we are going to take advantage of because that allows us to ship products down south rather than across the ocean into China. So we are already moving our pieces so that we can have a bigger flow into the U.S.

Sean Stewart: Absolutely Sean.

Speaker Change: And in that respect.

Speaker Change: There is an element that comes into play which is very relevant at this point in time on it and it is tariffs.

Speaker Change: When you look at the European.

Speaker Change: Pulp that flows into the U S. Well that is now taxed or tariff excuse me so that opens an opportunity for us in from Canada.

Speaker Change: To become more competitive.

Speaker Change: Then the Europeans are.

Speaker Change: <unk> is something that obviously, we were going to take advantage of because that allows us to ship products down south rather than across the ocean.

Speaker Change: Into China. So we are already moving our pieces so that we can.

Speaker Change: Have a bigger flow into the U S than what we normally do.

Juan Carlos Bueno: than what we normally do. So it basically opens an opportunity for us in that regard. Now, as it comes to the price sustainability itself, what we believe is that still the supply situation for softwood is pretty constrained. That hasn't changed. And that is the biggest element that we believe will help keep the prices for softwood at levels similar to what we're seeing today. I don't expect any, if there's any flip right now, I don't expect that flip to be sustained over time, precisely due to those constraints on supply. And the other thing that we need to cautious about is that overall, there's globally, there's still a lot of pressure from a fiber perspective.

Speaker Change: So it basically opens an opportunity for us.

Speaker Change: In that regard now as it comes to the price sustainability itself.

Speaker Change: What we believe is that still.

Speaker Change: The the supply situation for softwood is pretty constrained.

Speaker Change: That hasnt changed and that is the biggest element that we believe will.

Speaker Change: We will help keep the prices.

Speaker Change: For softwood.

Speaker Change: At levels similar to what we're seeing today.

Speaker Change: I don't expect any if there's any flip right now I don't expect that that flip to be sustained over time precisely due to those constraints on supply and the other thing that we need to to cautious about is that overall, there's globally theres still.

Speaker Change: A lot of pressure from a fiber perspective, which obviously is as the cost of producing pulp goes up due to fiber going up obviously that puts even more stress on not allowing the prices to go down.

Juan Carlos Bueno: which obviously as the cost of producing goes up due to fiber going up, obviously that puts even more stress on not allowing the prices to go down. Even more, if you add the currency impact on it, then there's another effect right there. Because as you think of whether we're in Canada buying fiber in Canadian dollars or in Europe buying fiber in Euros, obviously those costs go up in U.S. terms with a devaluation of the U.S. dollar which again puts a limit on how much the producers are willing to let their prices go down when their costs are already going up.

Speaker Change: Up even more if you add the currency impact on it then then there is another effect right there.

Speaker Change: Because as you think of whether we're in Canada.

Speaker Change: Buying fiber in Canadian dollars or in Europe.

Speaker Change: Buying fiber in euros, obviously those costs go up in U S terms.

Speaker Change: With the devaluation of the U S dollar, which again.

Speaker Change: It's a limit on how much the producers are willing to let their prices go down when they are costs are already going up.

Sean Steuart: So I think those are the elements that would allow us to believe that prices will tend to hold for the remainder. That's great context.

Speaker Change: So I think those are the elements that would allow us to believe that prices will tend to hold to hold for the remainder of the year.

Speaker Change: That's great context, just one follow up there the the incremental volume you would move into the states is that.

Sean Steuart: Just one follow-up there. The incremental volume you would move into the states, is that... Spot market activity, are you able to contract that volume? How should we think about, I guess, relative discounts for what might be moved into states incrementally? Spot market activity. There are opportunities that we can take advantage of, and obviously we will do. And that's, when you look at the way that we've dealt our business in Europe versus North America, it is different in that regard. Like, most, if not all of our business in Europe is contracted. In the case of our North American mills, that is not the case.

Speaker Change: Spot market activity are you able to contract that volume how should we think about I guess relative discounts for what might be patented states.

Speaker Change: Spot market activity there are opportunities that we can take advantage of and obviously we will do.

Speaker Change: And that's when you look at our the way that we've dealt or our business in Europe versus North America. It is different in that regard like most if not all of our business in Europe is contracted.

Speaker Change: Case of our North American Mills that is not the case.

Juan Carlos Bueno: We have played traditionally a lot in the spot market, and yes, we have some contracts, but we used to play very much the market depending on what is more convenient. That's great.

Speaker Change: We have played traditionally a lot in the in the in the spot market and yes, we have some contracts that are but we used to play very much the market depending on what is more convenient to us.

Speaker Change: That's great. Okay. That's all I have for now thanks very much.

Sean Steuart: Okay, that's all I have for now. Thanks very much.

Matthew Mckellar: Your next question comes from the line of Matthew McKellar with RBC Capital Markets. Hi, good morning. Thanks for taking my questions. First for me, if we do see meaningful Section 232 tariffs introduced by the U.S., how would you expect the lumber market to evolve both in the U.S. and in Europe? And what kind of mitigation options would you have in this scenario?

Speaker Change: Your next question comes from the line of Matthew Mckellar with RBC capital markets. You May go ahead.

Matthew Mckellar: Hi, good morning, Thanks for taking my questions.

Matthew Mckellar: Just curious to me if we do see meaningful section 232 tariffs introduced by the U S. How would you expect the lumber markets evolve both in the U S and in Europe, and what kind of mitigation options would you have in this scenario.

Juan Carlos Bueno: Yes, Matthew, one of the things that we see in that regard is that before those tariffs come into effect, assuming that it's November, if they come into effect, then we have no idea if it's going to be 25% or nothing or 10%, who knows. Between now and then. The countervailing duties in Canada are going to grow significantly. And that is already a known fact. They will grow from an average of 14 to about 30%. So that will favor competitively, let's put it, our fiber or lumber coming out of Germany. So, we intend to basically capitalize on that opportunity that will happen regardless.

Speaker Change: Yes, Matthew one of the things that we've seen in that regard is that before those tariffs come into effect assuming that it's November if they come into effect and we have no idea, if it's going to be 25% or nothing or 10% who knows.

Matthew Mckellar: Uh huh.

Matthew Mckellar: Between now and then.

Matthew Mckellar: The countervailing duties in Canada.

Matthew Mckellar: <unk> are going to grow significantly.

Matthew Mckellar: And that is already up a known fact, they will grow from an average of 2014 to about 30%.

Matthew Mckellar: So that will favor.

Matthew Mckellar: Competitively, let's put it.

Matthew Mckellar: R. R R R fiber or lumber coming out of Germany.

Matthew Mckellar: So we intend.

Matthew Mckellar: To basically capitalize on that opportunity that will happen regardless.

Juan Carlos Bueno: We know that that is something that will come out in November or maybe sooner. Speculation is that it should be probably earlier than that. But again, since the Canadian lumber is going to be impacted already in a very significant way, the competitiveness of our product out of Pre-Sal will increase by default. So that won't necessarily force. to move or change geographies for or destinations for our products.

Matthew Mckellar: We know that that is something that that.

Matthew Mckellar: We'll come out in November or maybe sooner.

Matthew Mckellar: Our speculation is that it should be probably earlier than that.

Matthew Mckellar: But again since the Canadian lumber is going to be impacted already in a very significant way the competitiveness of our products out of pre salt.

Matthew Mckellar: We will increase by default.

Matthew Mckellar: So that won't necessarily forces to move or change geographies for or destinations for our products.

Juan Carlos Bueno: We are preparing Torgau as well. Torgau is starting to produce plain lumber, as I mentioned. That was part of the initial thesis when we acquired the mill, not for it to be a pallet mill, but to gradually become a lumber mill. This has becoming a reality as we speak, and that market, or one of the markets that we're aiming for that product is precisely the U.S. market. It is a complementary product to what we already have in Freesale. So those two combined go very well together with our customers. So that's the way that we see it.

We are preparing tour gal as well Darko is starting to produce planed lumber as I mentioned that was part of the initial thesis when we acquired the mill not for it to be a pilot mill, but to gradually become a lumber mill. This has becoming a reality as we speak.

Matthew Mckellar: And that market.

Matthew Mckellar: Or one of the markets that we're aiming for that product is precisely the U S market.

Matthew Mckellar: It is a complementary product to what we already have and freestyle. So those two combined to go very well together with our customers. So that's the way that we see it we don't see right now.

Juan Carlos Bueno: We don't see right now a situation where we would need to divert. our product to different geographies, again, on the back of the fact that Canadian lumber will be less competitive by itself, unfortunately, due to the countervailing tariffs.

Matthew Mckellar: Situation, where.

Matthew Mckellar: We would need to divert.

Matthew Mckellar: Our products to different geographies again on the back of the fact that Canadian lumber will be less competitive.

Matthew Mckellar: By itself Unfortunately due to the.

Matthew Mckellar: Countervailing tariffs.

Matthew Mckellar: Great, thanks very much for that color.

Matthew Mckellar: Great. Thanks, very much for that color.

Juan Carlos Bueno: And then last for me, you made some comments around how you think softwood to hardwood substitution will be limited from here with lots already having played out. Tiffany, I guess perspective you can share around in what end markets either by product or geography, that substitution story is further along versus where maybe there's further left to run. Absolutely, and this is something, when you think about it, substitution is a concept that you've heard around for years. It's not something new, it's something that every time that there's a price increase or a gap between the two fibers, we all talk about substitution, and yes, all customers, whether in specialties or tissue, they all try to push their furnaces to the limit to see how far they can go.

Matthew Mckellar: And then last for me you made some comments around how you think.

Matthew Mckellar: Softwood hardwood substitution will be limited from here with what's already having played out.

Matthew Mckellar: Do you have any I guess perspective, you can share around and what end markets either by product or geography subs.

Matthew Mckellar: Substitution story is further along versus where maybe there is further left to run.

Matthew Mckellar: Absolutely and this is something when you think about it substitution is a concept that you've heard around for four years, it's not something new it's something that every every time, there's a price increase or a gap between the two the two fibers, we all talk about substitution and yes all customers.

Matthew Mckellar: Whether in specialties or tissue, they all try to push their furnaces to <unk>.

Matthew Mckellar: So the limit to see how far they can go.

Juan Carlos Bueno: We've talked to customers openly about it, and we always ask the question, how far are you in your substitution scale? Can you do more? Do you think that's what you've done is about it? And the answer that we get is the vast majority of what we could have done, we already did, and we did it several years ago, and we keep on adding at it little by little every time, but it's just small pieces here and there. And this goes, whether it's tissue or specialties, because those are the markets where we play the most on right now, and yeah, the answers that we get directly from them is what I just shared.

Matthew Mckellar: We've talked to customers openly about it and we always ask the question.

Matthew Mckellar: How far are you in your substitution scale can you do more do you think thats what <unk> done is about it and the answers that we get is the vast majority of what we could have done we already did and we did it several years ago and we keep on adding at it.

Matthew Mckellar: Little by Little every time, but it's it's just small pieces here and there and this goes whether it's tissue or specialties.

Matthew Mckellar: Those are the markets, where we play the most on right now and and yes. The answers that we get directly from them is what I just shared most of it has been done.

Matthew Mckellar: Most of it has been done. Anything that is done right now is a little bit on top of it, but it's not a game changer. It's not something significant. Thanks very much for that perspective.

Matthew Mckellar: Anything that is done right now is a little bit on top of it but it's not a game changer. It is not something a cigna.

Matthew Mckellar: Significant.

Thanks, very much for that perspective, I'll turn it back.

Operator: I'll turn it back.

Cole Hathorn: Your next question comes from the line of Cole Hathorn with Jeffries. You may go ahead. Good morning, thanks for taking the questions. I'd just like your views on some of the raw material costs. You talked about saw log costs going up kind of 10% in the Germany region. I'm just wondering, are you seeing kind of same saw log costs as well as kind of wood chip and pulp wood costs so there's a diverging dynamic that you're seeing to your sawmills versus your pulp mills. And then I'd like to follow up on the price stability that you're calling out in Europe and North America versus China.

Speaker Change: Your next question comes from the line of Cole Hathorn with Jefferies. You May go ahead.

Cole Hathorn: Good morning, Thanks for taking the questions.

Speaker Change: Your views on some of the raw material costs you talked about.

Speaker Change: So log costs going up kind of 10% in the Germany region. I'm. Just wondering are you seeing kind of same.

Speaker Change: So log costs as well as kind of wood chip and pulpwood cost. So there's a diverging dynamic that youre seeing two youll saw mills versus your Youll pulp mills.

Speaker Change: And then.

Speaker Change: Like to follow up on the.

Speaker Change: The price stability that you're calling out in Europe.

Speaker Change: And North America versus China.

Juan Carlos Bueno: What do you think will help support that price stability in Europe versus China at this stage in softwood or even hardwood pulp, if you have a view there? Thank you. Perfect, yeah.

Speaker Change: What do you think will help support that price stability in Europe versus.

Speaker Change: China at this stage in software or even hardwood pulp if you have a view there. Thank you.

Speaker Change: Yep.

Juan Carlos Bueno: Thank you, Cole. Well, first of all, to your first question on the fiber cost increase. What we've seen is that the impact that we expect in Q2 versus Q1, that 10% in Q2, It's even more in the case of Torgau than anything else and a bit on Freesau, but it is on. basically created by the fact that there is less calamity wood. be harvested while the demand is still normal. So you have a kind of unbalanced situation because you have a lesser amount of wood being harvested, and therefore, obviously, a push in prices. The difference between Torgau and Freesau is given by the mix of products that we have.

Speaker Change: Thank you Carol well first of all to your first question on the fiber cost increases.

Speaker Change: What we've seen is that the impact that we expect in Q2 versus Q1 that 10% increase.

Speaker Change: It's even more than in the case of tour Gal.

Speaker Change: And then anything else and I bet on freestyle.

Speaker Change: It is on.

Speaker Change: Basically created by the fact that there is less calamity wood.

Speaker Change: To be harvested.

Speaker Change: While the demand is still normal.

Speaker Change: So you have account or you have a kind of unbalanced situation because you have a.

Speaker Change:

Speaker Change: A lesser amount of wood being harvested.

Speaker Change: And therefore, obviously a portion prices there's a difference between Togo increase though is given by the mix of products that we have obviously.

Juan Carlos Bueno: Obviously. The quality of Torgau now is increasing. because we were used to produce and buy lower quality wood because we were producing only pallets. And now we're buying higher quality wood because we're producing lumber. So therefore, we're going to see, just by that effect, a higher increase or relative increase in torgao than we do in free sale. Both of them are going up for the reasons that I just mentioned, that there's less wood being harvested. But it shows more on torgao because now we're producing lumber on top of pallets. And just the quality of the lumber required for that.

Okay.

Speaker Change: <unk> the quantity of Targa now is in is increasing.

Speaker Change: Because we were used to produce and by lower quality wood, because we were producing only pallets and now we're buying higher quality wood, because we're producing lumber. So therefore, we're going to see just by that effect are at a higher increase or relative increase in cargo than we do.

Speaker Change: Free so both of them are going up for the reasons that I, just mentioned that theres less wood being harvested, but it shows more on top on tour Gal because now we're producing lumber.

Speaker Change: On top of pallets, and just the quality of the numbers.

Speaker Change: Required for that is different.

Juan Carlos Bueno: In the case of a fiber cost for the pulp mills, we basically don't see any dramatic changes. We were considering them basically flat across the quarter, maybe as a very small increase in Rosenthal on chips, but very little, so less than 5%. But all in all, it's basically, I would say for pulp, it's going to be relatively flat.

Speaker Change: In the case of our fiber cost for the pulp mills, we basically don't see any dramatic changes.

Speaker Change: We're considering them basically flat across the quarter.

Speaker Change: Maybe as a very small increase in rosenthal on chips.

Speaker Change: But very little.

Speaker Change: So.

Speaker Change: Less than 5%.

Speaker Change: But all in all it's basically I would say for pulp is going to be relatively flat.

Juan Carlos Bueno: And to your second point on Paul Price's stability. I would repeat a little bit of the comments made earlier. I think what we believe would hold that stability in Europe and in the U.S. or North America is precisely the supply situation. And right now, one of the things that I think is on the back of everybody is particularly those that are European producers. is the fact that with the, again, with the, currency changes. Some of those costs have raised. If there's pulp moving from Europe into the U.S., that pulp is now being tariffed. So there's additional elements that would make the Europeans, or some of the Europeans, that were already concerned about their cost We had seen already closures of mills in Finland late last year, just as we saw in Canada.

Speaker Change: And to your second point on pulp price stability.

I would I would repeat a little bit of the comments made earlier I think what we believe would hold.

Speaker Change: That stability in Europe, and in the U S or North America is precisely the supply situation.

Speaker Change: And right now.

Speaker Change: One of the things that I think is on the back of of everybody.

Speaker Change: Is particularly those that are European producers.

Speaker Change: Is the fact that with the again with the <unk>.

Speaker Change: Currency changes.

Speaker Change: Some of those are costs.

Speaker Change: Raised.

Speaker Change: If there is pulp.

Speaker Change: Moving from Europe into the U S that pulp is now being tariffs.

Speaker Change: So there is additional elements that would make the Europeans that Osama of Europeans that we're already concerned about their cost structure, we had seen already.

Speaker Change: Closures of mills in Finland late last year.

Speaker Change: Just as we saw in Canada.

Juan Carlos Bueno: We don't believe there's any relief from a cost perspective to them. If anything, I think with all this tariff situation, it's just got a bit more complicated. And therefore, we believe that that weakness of supply is still going to be a significant element in the outcome of whatever we see price-wise. And that's what our theory on why call prices should. are relatively stable.

Speaker Change: We don't believe Theres any relief from a cost perspective to them.

Speaker Change: If anything I think it's with all this tariff situation.

Speaker Change: <unk> got a bit more complicated.

Speaker Change: And therefore, we believe that that week.

Speaker Change: Weakness of supply is still going to be a significant element.

Speaker Change: And the outcome of whatever we see pricewise.

Speaker Change: And that's that's what our theory on.

Speaker Change: Pulp prices should remain.

Speaker Change: Relatively stable.

Cole Hathorn: Thank you. And then maybe just as a follow-up, on China Softwood Futures, we've seen a step down, but to the point you were making around the European cost base that shifted up. I mean, wood costs in the Nordic region are elevated. Now they've got FX challenges, considering your production base is in euros versus your sales prices in dollars, but the China Softwood Futures has moved lower. And you're a big supplier to that region from Canada, and I'm just wondering, is there anything that you think might be impacting the Softwood Futures, like more supply coming out of Russia or ability to settle with some of the Russian Softwood pulp?

Speaker Change: Thank you and then maybe just as a follow up on <unk>.

Speaker Change: China Softwood futures, we've seen a step down but you know to the point you were making around the European cost base that shifted up I mean wood cost in the Nordic region all elevated.

Speaker Change: Now they've got FX challenges considering your production base is in euros versus your sales prices in dollars, but the.

Speaker Change: The China is often futures has moved lower.

Speaker Change: And you're a big supplier to that region from from Canada, and I'm. Just wondering is there anything that you think might be impacting the softwood futures like more supply coming out of <unk>.

Speaker Change: Russia or ability to settle with some of the.

Speaker Change: The Russian softwood pulp I'm, just wondering if there's any dynamics that might be impacting either the domestic China resale or the.

Juan Carlos Bueno: I'm just wondering if there's any dynamics that might be impacting either the domestic China resale or the China Futures prices, because at $700 a ton, I suppose you're kind of into the cost curve. I'm just wondering if there's anything that you can highlight there. I think you hit it on the head, Cole, because Russian fiber flows, particularly in the exchange in China, is probably the most relevant fiber that is out there. And we know that it's the lower quality of all, and therefore very difficult to compare that with prime Canadian fiber, for that matter. or European.

Speaker Change: China futures prices, because at $700, a ton and I suppose you're kind of into the cost curve I'm. Just wondering if there's anything that you can highlight there.

Speaker Change: I think you hit it on the head.

Speaker Change: Because Russian fiber flows, particularly.

Speaker Change: Particularly in the in the exchange in China is probably the most relevant fiber that is out there.

Speaker Change: And we know that it's the lead the lower quality of all.

Speaker Change: And therefore very difficult to compare.

Speaker Change: That with Prime Canadian fiber.

Speaker Change: For that matter.

Speaker Change: Or European.

Juan Carlos Bueno: So I think, I do believe, just as you said, that the major factor creating that unbalance on those futures, is in fact, Russian fiber. And it is not new. When you look back a year, when you look back over the last several months, that has been a predominant element of discussion when it comes to the futures market, the fact that it is so much heavy on Russian fiber. The one being transacted, the one that is actually playing a big part in that. So maybe if I lead you on from there, I probably shouldn't assume that, you know, the import price necessarily matches to the futures price or necessarily the domestic China resale price.

Speaker Change: So I think I do believe just as you said that the major factor that creating that on balance.

Speaker Change: In that on those futures is in fact, Russia on fiber and it is not new.

Speaker Change: When you look back a year when you look back over the last several months that has been our predominant element.

Speaker Change: A discussion when it comes to the to the futures market.

Speaker Change: The fact that it's so much a heavy on Russian fiber being the one and the one being transacted the one being.

Speaker Change: The one that is actually playing a big part in that market.

Speaker Change: So maybe if I if I lead you on from there, it's I, probably shouldnt assume that the import price necessarily.

Speaker Change: Matches to the futures price or necessarily the domestic China resale price.

Richard Short: You know, there's potentially a gap where the import price is still a bit higher. I agree.

Speaker Change: Potentially our gap with our import prices stay a bit higher.

Speaker Change: Agree.

Richard Short: Cole, it's Rich here. One other thing to think about is with the weakening U.S. dollar, the Chinese buyers will have their yuan, will have a little bit more buying power. Thanks, Richard.

Cole Hathorn: Hey, Colgate rich here one other thing to think about is with the weakening U S. Dollar the Chinese buyers will have their one I'll have a little bit more buying power as well.

Speaker Change: Yeah.

Speaker Change: Thanks Richard.

Operator: Again, if you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: Again, if you would like to ask a question. Please press star one on your telephone keypad.

Roger Spitz: Your next question comes from the line of... Roger Spitz from Bank of America Thanks very much. Good morning. Can you please remind us what was the EBITDA impact of the 2024 pulp mill turnarounds? You had 57 days out at downtime last year. Roger, you want that at a total impact? Yeah, what I'm going with in this line of question is I'm trying to get a sense of You know, how many, you know, what's the impact of a day of turnaround, like Celgar? That was $1.35 million turnaround. Now, one of the questions I'll ask you is, is obviously not all turnarounds are the same.

Speaker Change: Your next question comes from the line of.

Speaker Change: Roger Spitz from Bank of America.

Speaker Change: Okay. Thank you very much good morning.

Speaker Change: Can you please remind us what was the EBITDA impact of the.

Speaker Change: The 2020 for pulp mill turnarounds, you had 57 days.

Speaker Change: Downtime last year.

Speaker Change: Roger you want to add a total impact.

Speaker Change: Yeah.

Speaker Change: Going way and your final question is I'm trying to get a sense of.

Speaker Change: Okay.

Speaker Change: Many.

What's the EBITDA impact of a day of turnaround like sell Gar.

Speaker Change: That was.

Speaker Change: One point to $85 million turnaround now one of the questions. I'll ask you is obviously not all turnarounds are the same and it's somewhat more expensive from a lesson learned.

Juan Carlos Bueno: And some are more expensive, some are less expensive.

Richard Short: I'm trying to get a rule of thumb to think about the impact of prior turnarounds and downtimes and how they impact your EBITDA. Okay, well, the rule of thumb is about, call it one and a half million dollars a day. You can test that because last year's total impact was about $80 million.

Speaker Change: I'm trying to get a rule of thumb.

Speaker Change: To think about the impact.

Speaker Change: Prior turnarounds in down times, and how they impact your EBITDA.

Speaker Change: Okay well.

Speaker Change: Our rule of thumb is about call it $1 5 million a day.

Speaker Change: And you can test that because last years total impact was about $80 million.

Speaker Change: Okay.

Richard Short: Perfect. I know these turnarounds are planned way ahead of time. Do you have days of turnaround for 2026 yet? I we do not know. We do not. But for example, as we have some mills that are on a 12 on an 18 month cycle. Uh, if we do the Stendhal shot in 2024, in late 2020, excuse me, in late 2025. We shouldn't have a shutdown in 20... Got it. Sam Bell was also 18 months. Yes, Dengal is on 18 months, just as Selgar is on 18. And how about, could you remind me on Rosenthal and Peace River?

Speaker Change: Perfect.

Speaker Change: And now these turnarounds are planned way ahead of time do you have any days of turnaround for 2026, yes.

Speaker Change: We do not know we do not but for example, as we have some mills that are on a 12 on an 18 month cycle.

Speaker Change: If we do the stendal shut in 2024 in late 2020 excuse me in late 2025.

Speaker Change: We shouldn't have a shutdown in 2006.

Speaker Change: Got it.

Speaker Change: Tim that we've also seen a lot.

Speaker Change: Yes, the angle is on 18 months <unk> in 18 months.

Speaker Change: And how about could you remind me on Rosenthal in Peace River.

Speaker Change: Peace River, how many micro these rivers on 12 and as well as Rosenthal.

Richard Short: Peace River is on 12 and as well as Roslyn. I've got it. Is there... Are those assets set up, or with money you can set them up so you can get them on a 18-month turnaround cycle? It is an objective, but it depends on, first of all, something that we need to review. It's obviously important that we check how the recovery boiler is behaving. That's one of the major pieces of equipment that determines whether you can stretch it or not stretch it. We talk to our insurance companies to make sure that they're comfortable with it.

Speaker Change: Got it.

Is there.

Speaker Change: Are those assets.

Speaker Change: Alright with money you can set them up so we can get them or not.

Jean Marc: Jean Marc.

Speaker Change: Turnaround cycle.

Speaker Change: It is it is an objective.

Speaker Change: But it depends on first of all something that we need to review its obviously important that we check.

Speaker Change: How the recovery boiler is behaving that's one of the major pieces of equipment that we that determines whether you can stretch it or not stretch it.

Speaker Change: We talked to our insurance companies to make sure that they're comfortable with it if they're not comfortable with it obviously, we cannot go forward. So it goes without saying that it is.

Juan Carlos Bueno: If they're not comfortable with it, obviously we cannot go forward. So it goes without saying that it is quite a bit of an exercise to demonstrate, particularly to the insurance companies, that we can go to 18 months. And if we have the get-go, the green light from then, then we pursue it to that effect. And it is something that we obviously want to do in our mills.

Speaker Change: A bit of an exercise to demonstrate.

Speaker Change: Particularly to the insurance companies that we can go to 18 months.

Speaker Change: And if we have to get go from the Green light from them than we pursue it.

Speaker Change: To that effect.

And it is something that we obviously want to do in our mills.

Juan Carlos Bueno: And we've achieved already two of them, and we keep on working on the other two as well.

Speaker Change: And we've achieved already two of them and we keep on working on the other two as well.

Roger Spitz: One more on this line of questioning. I know in particularly in Germany for other kinds of operations, there's I don't know what the word is. Stipulated turnarounds. That's not the right word, but I don't know. How does it work in Germany for pulp mills? Are there, whatever you call it, stipulated turnarounds or not? Right, regulations that say, and I'm using the wrong word here, I can't remember the right word, but I know that in like the chemical industry. You know, it's written in the law that you have to take a turnaround over certain periods, every period, period like 12 months or 18 months or maybe three years or whatever it is for that particular operation.

Speaker Change: One more on this line of questioning and now, particularly in Germany for other kinds of operations.

Speaker Change: I don't know what the word is stipulated.

Speaker Change: Turnarounds.

Speaker Change: That's not the right word.

Speaker Change: Although how does that work in Germany for a pulp.

Speaker Change: Pulp mills are there.

Speaker Change: Whatever you call it stimulated turnarounds.

Speaker Change: Pardon me inoculations that require.

Speaker Change: Sure.

Speaker Change: <unk> and <unk>.

Speaker Change: Is that what you mean run rate regulations that say.

Speaker Change: Well I'm using the wrong word here I cant remember the right word, but I know that the chemical industry.

Speaker Change: It's written into law.

Speaker Change: Turnaround.

Speaker Change: Okay.

Speaker Change: All of our certain periodically.

Every periodically.

Speaker Change: Like 12 months or 18 months or maybe three years or whenever it is for that particular operation I just don't know whether that's the case in Germany for a pulp mill or not.

Juan Carlos Bueno: I just don't know whether that's the case in Germany for a pulp mill or not. Yeah, Roger, so I guess the answer is no. I mean, these are high-pressure vessels that we're dealing with, and obviously, there's a ton of regulations around them. But like, for example, Stendhal is on an 18-month cycle, so whatever rules are in place there, we manage to work with the regulations.

Speaker Change: Yes, Roger So I guess the answer is no.

Speaker Change: These are high pressure pressure vessels that were dealing with and obviously, there's a ton of regulations around them.

Speaker Change: But like for example stand those on an 18 month cycle. So we.

Speaker Change: We met whatever rules are in place there we managed to work with the regulators and get the Green light. So there's no reason why.

Juan Carlos Bueno: Thank you for watching. Ricardo said that we have meet all the requirements around And to complement that, Roger, even though in the case of, for example, take Celgar. which went through that longer shut or standoff. In the year that they don't have that shut because they're in the, enjoying, let's say, the valley of the 18-month, we normally have a small one. So they normally stop for three or four days rather than the normal two weeks or whatever. So it's not that we don't do anything at all during that year, that they have a free ride.

Speaker Change: We couldnt do that with Rosenthal provided.

Juan Carlos: Juan Carlos said, we have meet all the requirements around the.

Speaker Change: The different boilers.

Speaker Change: And to complement that Roger even though in the case of for example, it takes take cell guard.

Speaker Change: Which went through that longer shot or stendal in the year that they don't have that shop, because they are in the enjoying let's say the the value of the 18 months, we normally have a small one.

Speaker Change: So the normally stop for three or four days, rather than the normal two weeks or whatever so it's not that we don't do anything at all during that year.

Speaker Change: They have.

Juan Carlos Bueno: No. There's usually a three to four-day shut. for other related matters. That is always good.

Speaker Change: Right no there's usually a three to four day shut.

Speaker Change: For other related matters.

Speaker Change: As always scheduled.

Roger Spitz: Got it, understood. Thanks very much for this information. Appreciate it.

Speaker Change: Got it understood. Thanks very much for this information I appreciate it.

Juan Carlos Bueno: Thanks, Roger.

Speaker Change: Roger.

Jim Cox: Your next question comes from the line of Jim Cox with PPM America. You may go ahead. Well, yeah, hi, thank you. Sorry, Roger just asked the questions about the downtime that I was going to ask. Thanks. No problem.

Speaker Change: Your next question comes from the line of Jim Cox with Ppm America You May go ahead.

Speaker Change: Yeah, Hi, Thank you sorry, Roger just ask the questions about the downtime that I was going to ask thanks.

Speaker Change: Oh pardon me.

Cole Hathorn: Your final question comes from the line of Cole Hathorn with Jeffrey, she may go ahead. Thanks for taking the follow-up. I'd just like to to ask around are you seeing any change in order patterns from your pulp customers either on the tissue side or Into various end markets and and the reason I ask is because obviously with with US tariffs, I'm just wondering if there's some front-running and Consumers stocked up in the US and then maybe on the European side We're also seeing very big divergence between what the consumer staples businesses are calling out from a demand perspective It's most relevant in the box market, right?

Speaker Change: Your final question comes from the line of Cole Hathorn with Jefferies. You May go ahead.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thanks for taking the follow up.

Speaker Change: I just wanted to to ask around are you seeing any change in order patterns from your pulp customers either on the tissue side or.

To various end markets and the reason I ask is because obviously with.

Speaker Change: With U S tariffs I'm just wondering if there is some front running and.

Speaker Change: Consumers stocked up in the U S. And then maybe on the European side. We're also seeing very big divergence between what the consumer Staples businesses are calling out from a demand perspective, that's most relevant in the box market right the Europe's up too.

Juan Carlos Bueno: The Europe's up to two to three and the US is down to so I'm just wondering if there's any difference in Customer stock levels or order patterns that are relevant. If not, I completely understand So far Cole, we haven't experienced anything That would be impactful In either Europe or North America in Europe. I think just the sole fact that it's mostly contract based and that our customers usually follow their contracts and their deliveries are scheduled from the beginning of the year. Yeah, we're not seeing any slowdown or any change at this point in time. The only impact that we're seeing, or the only effect that we're seeing is what I mentioned earlier around China, that there's clearly something there around slowing down or checking or trying to figure out how to move forward.

Speaker Change: Two to three and U S is down too. So I'm just wondering if there's any difference in.

Speaker Change: Customer stock levels of order patterns that are relevant if not to completely answer.

Speaker Change: So far call, we haven't experienced anything.

Speaker Change: That would be impactful.

Speaker Change: Either Europe, or North America, and Europe, I think just the sole fact that it's mostly contract based.

Speaker Change: And that our customers usually follow their contract.

Speaker Change: And their deliveries are scheduled from the beginning of the year.

Speaker Change: Yes, we're not seeing any slowdown or any change at this point in time.

Speaker Change: The only impact that we're seeing are the only effect that we're seeing is what I mentioned earlier around China that there's clearly something there.

Speaker Change: Around slowing down or checking or trying to figure out how to move forward.

Juan Carlos Bueno: But no, in the case of Europe or even North America, we haven't... We haven't seen much, at least that impact us, no. Again, the only, I would repeat myself. The only thing that we've seen is an opportunity for our Canadian pulp into the U.S. that we want to capitalize on. But that's about it.

Speaker Change: But up but no in the case of Europe, or even North America, we haven't seen.

Speaker Change: We haven't seen much.

Speaker Change: At least that impact us no again, the only I would repeat myself.

Speaker Change: The only thing that we've seen as an opportunity for our Canadian pulp into the U S.

Speaker Change: That we want to capitalize on.

Speaker Change: But that's that's about it.

Speaker Change: Thank you.

Operator: That concludes today's question and answer session.

Speaker Change: That concludes today's question and answer session I will now turn the call back over to Juan Carlos Thank you.

Juan Carlos Bueno: I will now turn the call back over to Juan Carlos. Thank you. Okay, thank you, Lacey, 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.

Speaker Change: Okay. Thank you Lacy 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 August Bye for now.

Operator: Otherwise, we look forward to speaking to you again on our next earnings call in August. Bye for now.

Speaker Change: Okay.

Operator: That concludes today's conference call. You may now disconnect.

That concludes today's conference call you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].