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Mercer's (MERC) Q1 results were just released and were quite impressive. The press release can be found on Edgar. Increases in pulp prices as we previously reported have resulted in the highest gross margins at Mercer since the end of 2007 and highest EBITDA margin since 3/31/08. Considering Mercer's market cap back then, adjusted for the increased imputed share count assuming conversion of the new jan 2012 notes, results in a far higher stock price than present levels yet Mercer's prospects for the coming quarters are far more favorable than that end of 2007/early 2008 time period.

For current Q2, further improved results almost certainly will come because, since 3/31 quarter end, Mercer has successfully implemented another $70+/ton in pulp price increases, PLUS a weaker EURO in the current quarter adds additional wind to the back of operating results. Q4 will enjoy the beginning of $CAD20+MM/yr of incremental cash flow from the startup of the Celgar plant's bioenergy turbine and already contracted energy sales to BC Hydro.

For holders in the convertible bonds like us, the quarter's results in the issuing Restricted Group (celgar/rosenthal plants) improved cash interest coverage to >3X. An upgrade in Mercer's Credit rating is a possibility but might require another quarter of continued positive cash flow and accumulated nest egg.

The conference call for Q1 results is Tuesday morning. Here are the details (.pdf).

Some outstanding company investor presentations can be found here.

Disclosure: Long MERC 8.5% convertible sub debt due Jan 2012. Short some MERC common stock. NET long. Author may buy or sell either of these securities at any time.

Source: Mercer's Q1 Results and EBITDA Bode Well for Near Future