MERC 10-K & 10-Q changes, risk factors and insider trading

The forest products industry is highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can cause material fluctuations in prices. The markets for our principal products, being pulp and lumber, are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating (31) results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macroeconomic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is mainly based upon price, which is generally determined by supply relative to demand.

Currently, we are aware of approximately 0.42.6 million ADMTs of announced net hardwood pulp production capacity increases, primarily of softwood kraft pulpincreases scheduled to come online in 2025.2026. However, we cannot predict whether additional new capacity will be announced or will come online in the future. If any new capacity,pulp particularly for NBSK pulp,capacity is not absorbed in the market or offset by curtailments or closures of older, high-cost pulp mills, the increase could put downward pressure on pulp prices and materially adversely affect our results of operations, margin and profitability. Additionally, while NBHK pulp is not a direct competitor to NBSK pulp, if any future increases in NBHK pulp supply are not absorbed by demand growth, such supply could put downward pressure on NBSK pulp prices as well.

A pulp producer's actual sales realizations are based on third-party industry quoted list prices net of customer discounts, rebates and other selling concessions. Global pulp and lumber markets have historically been characterized by considerable swings in prices which have and will result in variability in our earnings. Prices for pulp and lumber are driven by many factors outside our control. We have little influence over the timing and extent of price changes. Because market conditions beyond our control determine the prices for pulp and lumber, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or reducecurtail or cease production at one or more of our mills. Therefore, our profitability depends on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. Fluctuations in market dynamics may also cause us to pursue strategic divestitures. Curtailments or divestitures may also result in long-lived asset or other impairments and the incurrence of related expenses such as severance, pension, environmental remediation, and care and maintenance costs. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.

Governmental regulations related to the environment, forest stewardship and green or renewable energy can also affect the supply of fiber. In Europe, governmental initiatives to increase the supply of renewable energy have led to more renewable energy projects, including in Germany. Demand for wood residuals from such energy producers has generally put upward pressure on prices for wood residuals. In addition, the reduction in natural gas supply and increase in energy prices in Germany resulting from the Ukraine war has previously increased both the demand and prices for wood chips and residuals resulting in higher per unit fiber costs for (32) our German mills in recent years.

Availability of fiber may be further limited by adverse responses to and prevention of wildfires, weather, insect infestation, disease, ice storms, windstorms, flooding and other natural causes. In addition, the quantity, quality and price of fiber we receive could be affected by man-made causes such as those resulting from industrial disputes, material curtailments or shut down of operations by suppliers, government orders and legislation (including new taxestaxes, tariffs or tariffsduties). See “ – The impacts of changes in international trade policies, including tariffs, duties or other trade barriers by the United States, or other nations, may adversely impact our business, financial condition and results of operations”. In our Western Canadian operations, fiber supply may also be impacted by unsettled land and title claims by, and government relations and actions relating to, IndigenousFirst Nations. Any or a combination of these factors can affect fiber prices in a region.

Inflation or a sustained increase in our key production and other costs would lead to higher manufacturing costscosts, which could reduce our margins.

The global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting (33) from Russia's invasion of Ukraine and conflicts in the Middle East. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials. Furthermore, governments in the United States, the European Union, the United Kingdom, Canada and others have imposed financial (33) and economic sanctions on certain industry segments and various parties in Russia. We are monitoring the conflicts including the potential impact of financial and economic sanctions on the global economy and particularly the economies of Europe. Increased trade barriers, sanctions and other restrictions on global or regional trade could adversely affect our business, financial condition and results of operations. Although we have no operations in RussiaRussia, Ukraine or Ukraine,areas of conflict in the Middle East, the destabilizing effects of Russia'sthese invasion of Ukraineevents could have other adverse effects on our business, including transportation, logistics, fiber supply and energy availability. Further escalation of geopolitical tensions relatedcould, toamong thisother militarythings, conflictimpact economic and/or itsmarket expansion couldconditions, result in loss of property, expropriation, cyberattacks, supply disruptions, plant closures and an inability to obtain key supplies and materials, as well asor adversely affect both our and our customers’ supply chains and logistics, particularly in Europe.

The impacts of proposedchanges tariffsin international trade policies, including tariffs, duties or other trade barriers by the United States, or other nations, may adversely impact our business, financial condition and results of operations.

OnIn February 1, 20252025, the President of the United States signed executive orders directingimposing tariffs on Canada and Mexico. Following a temporary pause, these tariffs went into effect in March 2025. While an exemption was subsequently issued for goods compliant with the United StatesStates-Mexico-Canada Agreement (USMCA), any products failing to imposemeet athe 25%strict tariffrules onof allorigin remain subject to tariffs. Effective August 2025, goods originating from CanadaEurope andbecame Mexico,subject andto ana additionalnew 10%reciprocal tariff regime which established a baseline duty. Furthermore, while a trade agreement reached in November 2025 reduced the rate of duty on goods imported from China.China, Whilethey 30-dayremain pausessubject to continued tariffs, and specific trade restrictions and retaliatory measures remain in tariffs against Canada and Mexico were announced on February 3, 2025, we do not currently know when or if such tariffs will take effect or their duration.place. Tariffs on Canadiangoods goodsoriginating from Europe and Canada (and any new tariffs, retaliatory tariffs or other trade protectionist measures implemented in connection therewith) and threatened imposition of tariffs against the European Union could have a material adverse impact on the sales of our products to customers in the United States. In 2024,2025, a significant portion of pulp segment revenues from our Canadian pulp mills and approximately 10% of our overall pulp segment revenues were from the United States. The U.S. market accounted for approximately 47%46% of our lumber revenues and approximately 41% of our lumber sales volumes in 2024.2025.

If implemented, the tariffs and any retaliatory measures could also impact our raw material costs and result in volatility in transportation costs and logistics disruptions and delays. For example, in 2024, our Celgar pulp mill sourced a significant portion of its fiber requirements from United States suppliers. It is also possible that tariffs between the United States and other countries, such as China and the European Union may benefit certain aspects of our business, including potential positive impacts on our Canadian dollar and Euro denominated costs, lowering our fiber costs or making our European Union solid wood products more competitive against those of United States competitors.

While we are taking steps to seek to mitigate their potential impact on our business, given thatthese developments are ongoing with respect to these proposed tariffs and other measures,ongoing, their impacts are uncertain and could (34) adversely affect our business, financial condition and results of operations.

Our operations and those of our suppliers are subject to climate change variations which can impact the productivity of forests, the abundance of species, harvest levels and fiber supply. Further, over the last few years, changing weather patterns and climate conditions due to natural and man-made causes have added to the frequency and unpredictability of natural disasters like wildfires, insect infestation of softwood forests, floods, rain, wind, snow and ice storms. One or a combination of these factors could adversely affect our fiber supply which is our largest cash production cost. There are differing scientific studies and opinions relating to the severity, extent and speed at which climate change is or may be occurring around the world. As a result, we are currently unable to identify and predict all of the specific consequences of climate change (35) on our business and operations.

a greater susceptibility of northern forests to disease, fire and insect infestation, which could diminishnegatively impact fiber availability;

the loss of fresh waterfreshwater transportation for logs and pulp due to lower water levels;

(35) the loss of northern forests in areas in sufficient proximity to our mills to competitively acquire fiber; and lowerregulatory reductions in allowable harvest levels decreasing the supply of harvestable timber and, as a consequence, wood residuals.

Any of these natural disasters could also affect woodlands or cause variations in the cost of raw materials, such as fiber or restrict or negatively impact our logistics and transportation of goods and materials. Changes in precipitation could make wildfires more frequent or more severe,severe and could adversely affect timber harvesting and the supply of fiber to our operations. The effects of global, regional and local weather conditions, and climate change, including the costs of complying with evolving climate change regulations and transition costs relating to a low carbon economy could also adversely impact our results of operations.

(36) prolonged supply disruption of major inputs;

Trends in non-print media are expected to continue to adversely affect demand for traditional print media, including for printing, writing and graphic papers. Neither the timing nor the extent of these trends can be predicted with certainty. Our paper, magazine, book and catalog publishing customers could increase their (37) use of, and compete with, non-print media, including multimedia technologies, electronic storage and communication platforms which could further reduce their consumption of papers and in turn their demand for market pulp. The demand for such paper products has weakened significantly over the last several years and was negatively impacted by the COVID-19 pandemic, which further altered consumer habits.years.

The majority of our employees are part of a union or are represented by a works council and we have collective agreements in place with our employees at all of our mills, other than the Peace River mill, Mercer Spokane facility, Torgau facility and Mercer Conway facility, which are non-union and not represented by a works council. Although we have not experienced any material work stoppages in the past, there can be no assurance that we will be able to negotiate acceptable collective agreements or other satisfactory arrangements with our employees upon the expiration of our collective agreements. This could result in a strike or work stoppage by the affected workers. The registration or renewal of the collective agreements or the outcome of our wage negotiations could result in higher wages or benefits paid. Many of the employment positions in our operations require technical or other operating training and/or experience. Changing demographics may make it more difficult for us to recruit skilled employees in the future. Accordingly, we could experience a significant disruption of our operations or higher ongoing labor costs, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, whenever we seek to reduce the workforce at any of our mills, the affected mill's labor force could seek to hinder or delay such actions, we could incur material severance or other costs and our operations could be disrupted.

We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. For example, in 2025, the protracted down-cycle in hardwood pulp prices led us to recognize a $203.5 million non-cash impairment charge against the long-lived assets of the Peace River mill. See “ - Results of Operations - Non-Cash Impairments of Long-Lived Assets”. Should the markets for our products deteriorate or should we decide to invest capital differentlydifferently, make operational changes at our mills or should other cash flow assumptions change, it is possible that we will be required to record non-cash impairment charges in the future that could have a material adverse effect on our results of operations.

We market and sell pulp, lumber and other solid wood products with specific designations to certain globally recognized forest management and chain of custody standards as well as product specifications to meet customers’ requirements. Our ability to conform to new or existing guidelines for certification depends on a number of factors, many of which are beyond our control, such as: changes to the standards or the interpretation or the application of the standards; the collaboration of our suppliers in the timely sharing of product information; the adequacy of government-implemented conservation measures; and in CanadaCanada, the existence of or potential territorial disputes between First Nations peoples and governments. If we are unable to offer certified products, or to meet commitments to supply certified productproducts or meet the product specifications of our customers, it could adversely affect the marketability of our products and our ability to compete with other producers.

We use information technologies to manage our operations and various business functions. We rely on various technologies to process, store and report on our business and to communicate electronically between (39) our facilities, personnel, customers and suppliers as well as for administrative functions and many of such technology systems are dependent on one another for their functionality. We also use information technologies to process financial information and results of operations for internal reporting purposes and to comply with regulatory, legal and tax requirements. We rely on third-party providers for some of these information technologies and support. Our ability to effectively manage our business and coordinate the production, distribution and sale of our products is highly dependent on our technology systems. Despite our security design and controls and other operational safeguards, and those of our third-party providers, our information technology systems may be vulnerable to a variety of interruptions, including during the process of upgrading or replacing hardware, software, databases or components thereof, natural disasters, terrorist attacks, telecommunications failures, computer viruses, cyberattacks, hackers, unauthorized access attempts and other security issues or may be breached due to employee error, malfeasance or other disruptions. Any such interruption or breach could result in operational disruptions or the misappropriation of sensitive data that could subject us to additional reporting requirements, litigation, governmental investigations or proceedings or have a negative impact on our reputation. There can be no assurance that such disruptions or misappropriations and the resulting repercussions will not negatively impact our cash flows and materially affect our results of operations or financial condition.

In addition, many of our information technology systems, such as those we use for administrative functions, including human resources, payroll, accounting and internal and external communications, as well as the (39) information technology systems of our third-party business partners and service providers, whether cloud-based or hosted in proprietary servers, contain personal, financial or other information that is entrusted to us by our customers and personnel. Many of our information technology systems also contain proprietary and other confidential information related to our business, such as business plans and research and development initiatives. If we or a third-party were to experience a material breach of our or such third-party's information technology systems that results in the unauthorized access, theft, use, destruction or other compromises of our customers’ or personnel’s data or confidential information stored in such systems, including through cyberattacks or other external or internal methods, it could result in a violation of applicable privacy and other laws and subject us to additional reporting requirements, litigation and governmental investigations and proceedings, any of which could result in our exposure to material liability.

(40) a significant amount of our operating cash flow is dedicated to the payment of interest and principal on our indebtedness, thereby diminishing funds that would otherwise be available for our operations and for other purposes;

The indentures that govern our Senior Notes, and our credit facilities contain restrictive covenants which impose operating and other restrictions on us and our subsidiaries. These restrictions will affect, and in many respects will limit or may prohibit, our ability to, among other things, incur or guarantee additional indebtedness, pay dividends or make distributions on capital stock or redeem or repurchase capital stock, make investments or acquisitions, create liens and enter into mergers, consolidations or transactions with affiliates. The terms of our indebtedness also restrict our ability to sell certain assets, apply the proceeds of such sales and reinvest in our business.

Our ability to repay or refinance our indebtedness will depend on our future financial and operating performance. Our performance, in turn, will be subject to prevailing economiceconomic, market and competitive conditions, as well as financial, business, legislative, regulatory, industry and other factors, many of which are beyond our control. Our ability to meet our future debt service and other obligations may depend in significant part on the extent to which we can successfully implement our business strategy. We cannot assure you that we will be able to implement our strategy fully or that the anticipated results of our strategy will be realized. Our German Revolving Facility matures in September 2027 and Canadian Revolving Facility matures in January 2027. Additionally, our 2028 Senior Notes and 2029 Senior Notes mature in October 2028 and February 2029, respectively. Over the next severalcoming years, we will require financingneed to refinance maturing debt obligations (unless extended), and such refinancing may not be available on favorable terms or at all. To facilitate our refinancing efforts and in order to reduce our overall indebtedness, we may consider strategic actions such as, among other things, dispositions, sales of assets or reductions or delays of capital expenditures. We cannot assure you that any such actions, if necessary, could be implemented on commercially reasonable terms or at (41) all. An inability to refinance maturing indebtedness, as necessary, or to do so on favorable terms could have a material adverse effect on our liquidity and capital resources and may negatively impact our business and financial results.

As demand for our products has principally historically been determined by general global macroeconomic activities,Historically, demand and prices for our products have historicallybeen principally determined by general global macroeconomic activities and have decreased substantially during economic slowdowns. A significant economic downturn may affect our sales and profitability. Further, our suppliers and customers may also be adversely affected by an economic downturn. Additionally, restricted credit and capital availability restrains our customers’ ability or willingness to purchase our products, resulting in lower revenues. Depending on the severity and duration, the effects and consequences of a global economic downturn could have a material adverse effect on our liquidity and capital resources, including our ability to raise capital, if needed, and otherwise negatively impact our business and financial results.

The rise of economic nationalist sentiments, trade protectionism and geopolitical security has led to increasing political uncertainty and unpredictability throughout the world. Additionally, there can be no assurance that additional or new trade tensions, imposition of import and export restrictions and tariffs will not arise between various trade partners. These potential developments, market perceptions concerning these and related issues and the attendant regulatory uncertainty regarding, for example, the posture of governments with respect to international trade or national security issues, could have a material adverse effect on global trade and economic growth which, in turn, can adversely affect our business, results of operationoperations and financial condition.

Increased trade protectionism or the perception that it may occur could materially adversely affect our business. Increasing trade protectionism may cause an increase in the cost of products exported from regions globally, the length of time required to transport products, and the risks associated with exporting products. Such increases may have an adverse impact on our business, operating schedule and financial condition. If the current global economy or outlook is undermined by downside risks and there is a prolonged economic downturn, governments may resort to new or enhanced trade barriers to protect their domestic industries against imports, thereby depressing demand.

We have manufacturing operations in Germany, Canada and the United States. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars. However, the majority of our sales are in products quoted in dollars. Our results of operations and financial condition are reported in dollars. As a result, our costs generally benefit from a strengthening dollar but are adversely affected by a decrease in the value of the dollar relative to the euro and to the Canadian dollar. Such declines in the dollar relative to the euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect (42) on our business, financial condition, results of operations and cash flows.

Further, while a strengthening dollar generally lowers our costs and expenses in Germany and Canada, it increases the cost of pulp to our customers and generally puts downward pressure on pulp prices and reduces our energy, chemical, pallet, biofuel, wood residual and European lumber sales revenues as they are sold in euros and Canadian dollars.

As a result of higher than acceptable rates of inflation, many central banks raised interest rates through 2022 and 2023. While various central banks initiated interest rate reductions in the second half of 2024,2024 and throughout 2025, interest rates remain at relatively high levels. They may also fluctuate in the future.

Health epidemics or pandemics have in the past and may in the future impact macroeconomic conditions, supply chains and other global economic activities. Governmental responses thereto, including operational restrictionsrestrictions, adversely affect our business, operations and financial results. The duration and scope of a health (43) epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures. The extent that an epidemic or pandemic may impact our business, operations and financial results will depend on numerous factors, which may be evolving and not subject to accurate prediction. Additionally, a health epidemic or pandemic may also heighten other risks disclosed in these risk factors, including, but not limited to, those related to the availability and costs of labor, raw materials and supply chain interruptions.

Markets for kraft pulp are global, cyclical and commodity based.commodity-based. Our financial performance depends on a number of variables that impact sales and production costs. Sales and production results for kraft pulp are influenced largely by the market price for kraft pulp, fiber costs and foreign currency exchange rates. Kraft pulp prices are highly cyclical and primarily determined by the balance between supply and demand. Pricing and demand are influenced by global macroeconomic conditions, changes in consumption and industry capacity, the level of customer and producer inventories and fluctuations in exchange rates. The third-party industry quoted average European list prices for NBSK pulp between 20152016 and 20242025 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,635 per ADMT in 2024. In the same period, third-party industry quoted average North American list prices for NBHK pulp have fluctuated between a low of $820 per ADMT in 2016 to a high of $1,620 per ADMT in 2022.

Energy and chemical production and sales are key revenue sources for us. Further initiatives to increase our generation and sales of renewable energy, chemicals and other by-products will continue to be a key focus for us. Such further initiatives may require additional capital spending.

We currently expect NBSK pulp prices to modestly increase in all our markets in the first half of 20252026 asdue a result ofto stable demand and continuedglobal supply constraints. For NBHK pulp prices, we currently expect a modest increase in the first half of 2025 due to stable demand.

In our solid wood segment, we currently expect U.S. and European lumber prices to modestly increase slightly in the first half of 20252026. asIn athe resultU.S., ofthe limitedincrease supply.is driven by reduced overall supply, resulting from lower production from Canadian producers. In Europe, we currently expect lumber prices to modestlythe increase is due to strongerrising demandfiber driven by improved economic conditions in certain European countries.costs. We currently expect mass timber prices to decreaseremain under pressure in the first half of 20252026 asprimarily due to overall market weakness linked to the relatively high interest rate environment continues to soften demand.environment. Pallet prices are expected to be generally stable in the first half of 2025.2026.

Does not include our 50% joint venture interest in CPP, which iswas accounted for using the equity method. In 2024, we disposed of this interest.

Pulp Segment – Year Ended December 31, 20242025 Compared to Year Ended December 31, 20232024

Pulp segment revenues, comprised of pulp, energy and chemical revenues, modestlydecreased increasedby approximately 10% to $1,386.7 million in 2025 from $1,548.6 million in 2024 from $1,516.1 million in 2023 as higher pulp revenues were partially offsetdriven by lower energyrevenues andfrom chemicalall revenues.our products.

Energy and chemicalPulp revenues decreased by approximately 22%11% to $88.1$1,304.8 million in 2025 from $1,460.5 million in 2024 from $113.5 million in 2023 primarily as a result of lower sales realizations.realizations and volumes.

TransportationEnergy costsand forchemical our pulp segmentrevenues decreased by approximately 6%7% to $145.7$81.9 million in 2025 from $88.1 million in 2024 fromprimarily $154.9as milliona inresult 2023 driven byof lower freight rates and pulpchemical sales volumes.realizations.

Except as set forth below, there have been no material changes to the factors disclosed in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2025.2025 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2026.

In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of MarchJune 31,30, 2026, unless otherwise stated; (iv) our reporting currency is dollars and references to “€” mean euros and “C$” mean Canadian dollars; (v) “ADMTs” mean air-dried metric tonnes; (vi) “CLT” mean cross-laminated timber; (vii) “glulam” mean glue-laminated timber; (viii) “m3” mean cubic meters; (ix) “NBSK” mean northern bleached softwood kraft; (x) “NBHK” mean northern bleached hardwood kraft; (xi) “MW” mean megawatts and “MWh” mean megawatt hours; (xii) “Mfbm” mean thousand board feet of lumber and “MMfbm” mean million board feet of lumber; and (xiii) our lumber metrics are converted from m3 to Mfbm using a conversion ratio of 1.6 m3 of lumber equaling one Mfbm, which is the ratio commonly used in the industry.

The following discussion and analysis of our results of operations and financial condition for the three and six months ended MarchJune 31,30, 2026 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission, referred to as the “SEC”.

In the firstsecond quarter of 2026, our NBSK pulp sales realizationrealizations waswere relatively steady compared to the fourthfirst quarter of 2025.2026. WhileIn EuropeanEurope, third-party list prices held flat as weak demand was offset by scheduled maintenance and curtailments. Similarly, North American third-party published list prices increased,remained thisflat, waswith offsetexcess byregional highersupply discounts.offsetting improving demand. The Chinese market continued to be pressured by an oversupplied paper sector and weak demand linked to prevailing economic and trade uncertainties. Similarly, North American prices were tempered by excess regional inventory. Conversely, our NBHK pulp sales realizations increasedincreased. asThis awas resultdriven ofby higher prices drivenin byNorth strongerAmerica, demandwhich andbenefited from global supply constraints, lower inventory levels.levels, and steady demand. However, prices in China were flat as continued regional overcapacity offset the impact of global supply constraints.

As of MarchJune 31,30, 2026, the third-party industry quoted NBSK pulp list prices in Europe and North America were approximately $1,655 per ADMT and $1,590$1,570 per ADMT, respectively, and the third-party industry quoted NBSK QUARTERLY REPORT - PAGE 27 pulp net price in China was approximately $675$645 per ADMT. Prices for China are net of discounts, allowances and rebates.

In the secondthird quarter of 2026, we currently expect NBSK pulp prices to modestly increasedecrease in all our markets andas reduced supply is offset by lower seasonal demand. Conversely, we currently expect NBHK pulp prices to bemodestly relativelydecrease steady.as global supply constraints ease.

In the secondthird quarter of 2026, we currently expect lumber prices to remain stable in Europe as weak demand is offset by reduced supply, and modestly increase in the U.S. due to lower supply.customer Ininventory levels and capacity curtailments. During the secondsame quarter of 2026,period, we anticipate pallet prices to remain flat due to continued weak economic conditions in Europe and mass timber prices to remain relatively steady.

Per unit fiber costs for the pulp and solid wood segments increased in the firstsecond quarter of 2026 compared to the fourthfirst quarter of 20252026, driven by supply constraints and strong demand.demand in Germany. For the secondthird quarter of 2026, we currently expect per unit fiber costs are expected to stabilizeremain elevated at our German mills with a slight increase at our pulp mills. This increase is driven by continued strong demand for wood as improvedan availabilityenergy issource offsetas bya strongresult demand.of ongoing geopolitical conflicts. For our sawmills and Canadian pulp mills, per unit fiber costs are expected to modestly decrease as regional curtailments improve their fiber supply.

Operating EBITDA is a non-GAAP measure. See “Non-GAAP Financial Measures” for its description, limitations and why we consider it to be a useful measure. The following table provides a reconciliation of net loss to operating income (loss) and Operating EBITDA for the periods indicated:

Consolidated – Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Total revenues for the firstsecond quarter of 2026 decreasedremained byrelatively approximatelysteady 3%at $460.3 million compared to $489.3 million from $507.0$453.5 million in the same period of 2025.2025, Thisas decreasehigher wassales primarilyrealizations duefor toour solid wood products and higher pulp sales volumes were mostly offset by lower pulp sales realizations partially offset by modestly higher sales realizations from our other products.realizations.

Costs and expenses in the firstsecond quarter of 2026 increasedwere bygenerally approximatelyflat 4%at $519.3 million compared to $522.2 million from $500.2$511.9 million in the same period of 2025. This increase was primarily due toIn the negativesecond foreignquarter exchangeof impact from a weaker dollar on our euro and Canadian dollar denominated costs and expenses and2026, higher per unit fiber costs partiallywere mostly offset by the impact of lower planned maintenance costs.downtime and the benefits of our cost reduction initiatives. In the firstsecond quarter of 2026, costs and expenses included a non-cash inventory impairment charge of $22.0$29.0 million primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. In the same period of 2025, costs and expenses included a non-cash impairment of $11.0 million against hardwood inventory at our Peace River mill.

In the firstsecond quarter of 2026, cost of sales depreciation and amortization was relatively steadyflat at $40.7$37.9 million compared to $40.3$37.5 million in the same period of 2025.

Selling, general and administrative expenses were relatively flatsteady at $28.5$31.6 million in the firstsecond quarter of 2026 compared to $29.7$30.4 million in the same period of 2025.

In the firstsecond quarter of 2026, we had a negativepositive foreign exchange impact of approximately $21.5$6.4 million on our operating loss compared to the same period of 2025. This negativepositive impact was primarily due to the effect of a weakerstronger dollar oncompared ourto the euro and Canadian dollar denominatedon coststhe andrevaluation expenses.of dollar-denominated accounts receivable held at our operations as of June 30, 2026.

In the firstsecond quarter of 2026, our operating loss was $32.9$59.0 million compared to an operating incomeloss of $6.7$58.4 million in the same period of 2025. ThisIn decreasethe wassecond primarilyquarter dueof to lower pulp sales realizations,2026, higher per unit fiber costs and thelower negativepulp foreignsales exchangerealizations impactwere from a weaker dollar partiallymostly offset by the impact of lower planned maintenance costs.downtime and the benefits of our cost reduction initiatives. In the firstsecond quarter of 2026, our operating loss also included a non-cash inventory impairment chargeof $29.0 million compared to $11.0 million in the same period of $22.0 million.2025.

In the firstsecond quarter of 2026, other income was $1.8$0.5 million compared to other expenses of $0.2$1.1 million in the same period of 2025. Other income in the firstsecond quarter of 2026 primarily consisted of interest earned on cash. In the same period of 2025, other expenses primarily consisted of foreign exchange losses on dollarthe denominatedrevaluation of dollar-denominated cash held at our operations as the dollar weakened against the euro at the end of the periodperiod, mostly offset by interest earned on cash in the quarter.

DuringIn the firstsecond quarter of 2026, we had an income tax recovery of $8.2$13.4 million, or an effective tax rate of 14%,15%, and in the same period of 2025, we had an income tax provisionrecovery of $0.7$1.9 millionmillion, onor aan loss before incomeeffective tax rate of $21.6 million.2%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operateoperate, as we do not recognize tax recoveries for certain entities from which we do not expect to realize a tax benefit.

In the firstsecond quarter of 2026, our net loss was $52.0$76.0 million, or $0.78$1.13 per share, compared to $22.3$86.1 million, or $0.33$1.29 per shareshare, in the same period of 2025.

In the firstsecond quarter of 2026, Operating EBITDA decreasedwas negative $21.0 million compared to $7.8negative million from $47.1$20.9 million in the same period of 2025. ThisIn decreasethe primarilysecond resultedquarter fromof lower pulp sales realizations,2026, higher per unit fiber costs,costs and lower pulp sales realizations were mostly offset by the impact of lower planned maintenance downtime and the negativebenefits foreignof exchangeour impactcost fromreduction a weaker dollar partially offset by lower maintenance costs.initiatives. In the firstsecond quarter of 2026, our Operating EBITDA also included a non-cash inventory impairment chargeof $29.0 million compared to $11.0 million in the same period of $22.0 million.2025.

Pulp Segment – Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the firstsecond quarter of 2026 modestly decreased by approximately 9% to $345.0$325.1 million from $381.1$332.3 million in the same period of 2025 drivendue byto lower pulp revenues.

Pulp revenues in the firstsecond quarter of 2026 modestly decreased by approximately 11% to $319.2$303.3 million from $357.0$313.7 million in the same period of 2025 primarily as a result of lower sales realizations.realizations, partially offset by higher sales volume.

Energy and chemical revenues in the firstsecond quarter of 2026 wereincreased relativelyby stableapproximately at17% $25.8to $21.7 million comparedfrom to $24.1$18.6 million in the same period of 2025. This increase was primarily due to higher sales realizations, partially offset by lower sales volumes.

Total pulp production in the firstsecond quarter of 2026 was relatively flat at 465,717455,769 ADMTs compared to 458,909457,117 ADMTs in the same period of 2025. ThereOur German pulp mills reduced production during the quarter in response to high fiber prices, but this was offset by there being no planned maintenance downtime in the firstsecond quarter of 2026,2026 compared to 2223 days (approximately 29,70033,200 ADMTs) at our Celgarpulp millmills in the same period of 2025. This benefit was mostly offset by the impact of reducedPulp production at our German mills is expected to remain at reduced levels in the third quarter of 2026 due to ongoing high fiber supply constraints in Europe.costs.

ThereIn isthe third quarter of 2026, we currently noexpect a total of 40 days of planned annual maintenance downtime planned(approximately for42,600 ADMTs) at our pulp mills in the second quarter of 2026.mills.

PulpTotal pulp sales volumes in the firstsecond quarter of 2026 wereincreased relativelyby steadyapproximately at6% 470,700to 450,329 ADMTs comparedfrom to 477,879426,731 ADMTs in the same period of 2025,2025 consistentdriven withby the relativelytiming flatof production.sales.

In the firstsecond quarter of 2026, the third-party industry quoted average list price for NBSK pulp in Europe modestly increased compared tofrom the same period of 2025 primarily due to supply constraints. In the firstsecond quarter of 2026, the third-party industry quoted average list price for NBSK pulp in North America and the third-party industry quoted average net price in China for NBSK pulp in Chinaboth decreased compared to the same period of 2025. The decrease was primarily due to weak demand driven by the current economic climate and, in China, an oversupplied paper market. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,618$1,655 per ADMT and $1,563$1,577 per ADMT, respectively, in the firstsecond quarter of 20262026, compared to approximately $1,550$1,553 per ADMT and $1,753$1,820 per ADMT, respectively, in the same period of 2025. The third-party industry quoted average net price for NBSK pulp in China was approximately $685$658 per ADMT in the firstsecond quarter of 2026 compared to approximately $793$734 per ADMT in the same period of 2025. Prices quoted for China are net of discounts, allowances and rebatesrebates, whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.

In the firstsecond quarter of 2026, we had a negativepositive foreign exchange impact of approximately $15.7$7.8 million on Segment Operating EBITDA compared to the same period of 20252025. This positive impact was primarily due to the effect of a weakerstronger dollar oncompared ourto the euro and Canadian dollar denominatedon coststhe andrevaluation expenses.of dollar-denominated accounts receivable held at our operations as of June 30, 2026.

In the firstsecond quarter of 2026, we recorded a non-cash inventory impairment of $22.0$26.0 million primarily as a result of low pulp prices and high fiber costs.

In the firstsecond quarter of 2026, Segmentcosts Operatingand EBITDAexpenses for the pulp segmentmodestly decreased to $6.9$362.9 million from $49.9$368.7 million in the same period of 2025. This decrease was primarily resulteddue fromto lower pulpplanned salesmaintenance realizations,downtime, higherour percost unitreduction fiber costs,initiatives and the negativepositive foreign exchange impact from a weakerstronger dollardollar. These decreases were partially offset by lowerhigher maintenanceper costs.unit fiber costs and higher pulp sales volumes. In the firstsecond quarter of 2026, Segmentcosts Operatingand EBITDA alsoexpenses included a non-cash inventory impairment of $22.0$26.0 million.million compared to $11.0 million in the same period of 2025.

Solid Wood Segment – Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Solid wood segment revenues in the firstsecond quarter of 2026 increased by approximately 7%14% to $131.7$134.2 million from $122.7$117.3 million in the same period of 2025 as a result of higher revenue from all product categories except for lumber.

Lumber revenues inIn the firstsecond quarter of 20262026, lumber revenues decreased by approximately 8%15% to $60.1$56.6 million from $65.4$66.3 million in the same period of 2025 primarilyas duea toresult of lower sales volumes.

In the firstsecond quarter of 2026, manufactured products revenues increasedwere by$25.8 approximatelymillion 12%compared to $21.0 million from $18.8$12.4 million in the same period of 20252025. This increase was primarily duedriven toby higher sales volumes partially offset by lower salesand realizations.

Pallet revenues in the firstsecond quarter of 2026 increased by approximately 29%20% to $29.9$31.9 million from $23.2$26.6 million in the QUARTERLY REPORT - PAGE 26 same period of 2025 primarily due to higher sales realizations and volumes.

Biofuels, energy and wood residuals revenues in the firstsecond quarter of 2026 increased by approximately 36%66% to $20.8$19.8 million from $15.3$11.9 million in the same period of 2025 primarilydue as a result ofto higher sales realizations for wood residuals and biofuels.higher sales volumes.

Lumber production in the firstsecond quarter of 2026 decreasedwas byrelatively approximatelystable 9%at 123.8 MMfbm compared to 115.9 MMfbm from 128.0120.2 MMfbm in the same period of 2025 due to fiber supply constraints.2025.

Lumber sales volumes in the firstsecond quarter of 2026 decreased by approximately 14%17% to 112.1100.3 MMfbm from 130.9120.6 MMfbm in the same period of 2025 asdriven aby resultthe timing of lower production.sales.

Average lumber sales realizations in the firstsecond quarter of 2026 modestly increased by approximately 7% to $536$565 per Mfbm from $499$550 per Mfbm in the same period of 2025 primarily as a result of lower supply and higher fiber costs in the European market.2025. This increase was partiallyprimarily offsetdue byto lower averagecustomer salesinventory realizationlevels in the U.S. market due to weak demand. The U.S. market accounted for approximately 46%49% of our lumber revenues and approximately 42%43% of our lumber sales volumes in the firstsecond quarter of 2026. The balance of our lumber sales waswere mainly to Europe.

Manufactured products sales realizations decreasedincreased by approximately 36%67% to $1,801$2,206 per m3 in the firstsecond quarter of 2026 from $2,832$1,318 per m3 in the same period of 2025 asdriven by a shift in mass timber construction activity was weighted toward modest-scalehigher-value projects amid an elevated interest rate environment in the U.S.projects.