Joining us from management on today’s call are, Jimmy Lee, President and Chairman; and David Gandossi, Executive Vice President and Chief Financial Officer and Secretary. I will now turn the call over to David Gandossi.David, please go ahead. David Gandossi Thanks Alex and welcome everyone to Mercer’s third quarter earnings conference call. I’ll begin with some prepared comments on the key financial aspects of the quarter and then I’ll pass the call to Jimmy, who will speak about the particulars of the market, our operating performance, and some of our strategic initiatives. As always, we’ll be pleased to answer any questions you may have following our remarks. Let me begin with a few comments about our financial performance. As expected, our third quarter was very strong and we are pleased to report another record EBITDA quarter. The pulp market sustained its relative strengths and we achieved new production records at two of our three mills. And the mill that not firmly achieve a record Rosenthal, completed a very expensive and complicated maintenance shut down that was completed on time and as planned. We experienced some strengthening of the Euro during the past two months and our German fiber costs while still higher than in recent years, have leveled off as we had expected. As you have seen in our press release, we’ve reported net income of €46.1 million for the quarter or EUR1.17 per share, compared to a net loss of EUR14.1 million or EUR0.39 per share in the same quarter in 2009. The net income includes EUR10.4 million of non-cash gains related to market-to-market valuations over US dollar denominated debt and fixed interest rate swap. Before these non-cash items, EPS was EUR0.91 per share. We recorded our highest quarterly EBITDA on the company’s history of EUR65.5 million or above $85 million. This compares to the previous record of EUR62.1 million or $79 million in the second quarter.
The most significant contributors to the increase in EBITDA compared to Q2 where the improvement in average pulp pricing along with lower energy and chemical costs. These improvements were partially offset by the impact of the weaker US dollar, the maintenance shut at Rosenthal, and lower sales volume as the market sorted out the uncertainty of pricing.Switching to cash flow, overall our cash position is EUR23 million higher than it was at the end of Q2. Inflows were dominated by EUR65 million from EBITDA and receipt of above EUR7 million from the Canadian Government’s Green Transformation Fund grants. I know there is interest in working capital movements related to our cash builds, so I’ll summarize these for you. In the nine month period ended September 30, our working capital, excluding cash and short-term debt grew by about EUR54 million, up from EUR54 million to EUR118 million. Looking at the components of the working capital in the quarter, finished goods are up approximately EUR14 million from Q2 and raw materials were up about EUR9 million. Receivables were down about EUR23 million to EUR102 million, primarily due to lower sales volumes. Accounts payable and accruals are relatively flat quarter-over- quarter. Quarter end finished goods inventories were high at 93,000 tons due to the heavy shipment volume scheduled in October. In the quarter, non-cash Working capital increases drew on cash by about EUR10 million on a net basis, capital expenditures drew about EUR9 million and we paid about EUR30 million towards debt service. When thinking about our cash fills, it’s also worth noting that we have a holdback receivable of about C$4 million of Green Transformation Fund works that we expect to receive from the Green Transformation Fund during the next several months. We have EUR26 million of undrawn revolvers available at Rosenthal and about EUR7 million available at Celgar. We currently have cash of about EUR85 million, which is comprised of approximately EUR48 million for the restricted groups and EUR37 million at Stendal. Read the rest of this transcript for free on seekingalpha.com