Mercer International Inc. (NASDAQ:MERC)’s Cost Of Debt


Mercer International Inc. (NASDAQ:MERC)’s total debt at the end of 1Q2016 came down to $650.3 million from $628.3 million in the previous quarter and $698 million a year earlier. But the reduction in indebtedness cost Mercer its bottom-line.

Mercer posted EPS of $0.14 in 1Q2016, down from $0.21 in the corresponding quarter a year earlier. Because of Mercer’s exposure to the international markets, adverse currency translation terms weighed on earnings in the latest quarter.

The currency headwind also impacted 1Q2016. But another problem for the soft headline numbers was weaker average selling price for pulp. Mercer generated 1Q2016 revenue of $253.8 million down from $257.5 million in the like quarter a year ago.

Debt reduction

Although revenues and earnings in 1Q2016 weakened relative to a year ago, Mercer International Inc. (NASDAQ:MERC) managed to strengthen its balance sheet during the quarter. The company eliminated $23 million of its 2019 Senior Notes at a favorable cost of $23.1 million. Retiring the debt early means that Mercer has been able cut future costs relating to debts servicing.

Following the move to retire some of its outstanding debt before maturity, Mercer International Inc. (NASDAQ:MERC) said its debt to equity ratio decreased to 1.1 to 1 as at the end of the March quarter. That compared with debt to equity ratio of 1.4 to 1 as at the end of December quarter.

Pulp volume sales

Steady demand for pulp in China and Europe helped Mercer to ship more units of the product during 1Q2016. The company said pulp sales volumes rose about 13% in the latest quarter.

However, pulp prices were slightly weaker during the latest quarter thanks largely to a decline in the prices of hardwood pulp in Europe and China.

Shareholder return

Mercer International Inc. (NASDAQ:MERC) plans to distribute $0.115 per common share on July 7 to shareholders as part of its quarterly dividend payout. The dividend will capture shareholders of record as of June 7.


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