NASDAQ: MERC

•
Solid Wood – consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals at our sawmills and other facilities in Germany and our mass timber facilities in North America.

We have consolidated annual production capacity of approximately 2.1 million ADMTs of kraft pulp, 1,023 MMfbm of lumber, 210,000 m3 of CLT, 45,000 m3 of glulam, 17 million pallets, 230,000 tonnes of biofuels (wood pellets and briquettes) and 398 MW of electrical generation.

Pulp Segment

We are one of the world’s largest producers of “market” NBSK pulp, which is pulp that is sold on the open market. Our size provides us with increased presence, better industry information in our markets and close customer relationships with many large pulp consumers.

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We operate four modern and highly efficient pulp mills. These include two NBSK mills in Germany and one NBSK mill and one “swing” kraft mill in Western Canada which produces both NBSK and NBHK.

We are the sole NBSK producer, and the only significant market pulp producer in Germany, which is the largest pulp import market in Europe. Our operations are positioned to supply China and other Asian markets through our Canadian mills’ ready access to the Port of Vancouver and through our German mills’ existing logistics arrangements.

In addition, as a result of the significant investments previously made in cogeneration equipment, all of our mills generate and sell a significant amount of surplus “green” energy. We also produce and sell tall oil from black liquor, a by-product of our production process, which is used as both a chemical additive and as a green energy source.

Of our consolidated annual production capacity of approximately 2.1 million ADMTs of kraft pulp, approximately 1.8 million ADMTs, or 86%, is NBSK and the balance is NBHK.

Key operating details for each of our pulp mills are as follows:

•
Stendal mill – Our Stendal mill is a modern, efficient ISO 9001, 14001, 38200 and 50001 certified NBSK pulp mill that has an annual production capacity of approximately 740,000 ADMTs and 148 MW of electrical generation. The Stendal mill is located near the town of Arneburg, Germany, approximately 80 miles west of Berlin.

•
Rosenthal mill – Our Rosenthal mill is a modern, efficient ISO 9001, 14001, 38200 and 50001 certified NBSK pulp mill that has an annual production capacity of approximately 360,000 ADMTs and 57 MW of electrical generation. The Rosenthal mill is located in the town of Rosenthal am Rennsteig, Germany, approximately 185 miles south of Berlin.

•
Celgar mill – Our Celgar mill is a modern, efficient ISO 9001 and 14001 certified NBSK pulp mill that has an annual production capacity of approximately 520,000 ADMTs and 100 MW of electrical generation. The Celgar mill is located near the city of Castlegar, British Columbia, Canada, approximately 375 miles east of Vancouver.

•
Peace River mill – Our Peace River mill is a modern, efficient ISO 9001 and 14001 certified mill that produces both NBSK and NBHK pulp and has an annual production capacity of approximately 475,000 ADMTs and 65 MW of electrical generation. The Peace River mill is located near the town of Peace River, Alberta, Canada, approximately 305 miles north of Edmonton. Peace River also holds two 20-year renewable governmental forest management agreements and three deciduous timber allocations in Alberta with an aggregate allowable annual cut of approximately 2.9 million m3 of hardwood and softwood allocations totaling 375,000 m3.

Our pulp mills are some of the newest and most modern pulp mills in Europe and North America. We believe the relative age, production capacity and electrical generation capacity of our mills provide us with certain manufacturing cost and other advantages over many of our competitors. We believe our competitors’ older mills do not have the equipment or capacity to produce or sell surplus power or chemicals in a meaningful amount. In addition, as a result of the relative age of our mills, they benefit from lower maintenance capital requirements and higher efficiency relative to many of our competitors’ mills.

The following table sets out our pulp production, sales and revenues for the periods indicated:

Year Ended December 31,

2025

2024(1)

2023

Pulp production ('000 ADMTs)

1,834.7

1,843.1

1,965.6

Pulp sales ('000 ADMTs)

1,829.9

1,899.8

1,951.2

Pulp revenues (in thousands)

$

1,304,823

$

1,460,460

$

1,402,620

(1)
In March 2024, we disposed of our 50% joint venture interest in the Cariboo Pulp & Paper Company (“CPP”).

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Our Rosenthal mill is equipped with an operational state-of-the-art pilot lignin facility capable of producing approximately 300 tonnes of lignin per year. We believe that, over the long-term, lignin represents an important strategic opportunity as a sustainable, bio-based material with the potential to displace conventional hydrocarbon products.

As previously announced, in 2025, our Peace River mill commenced operation of a carbon capture demonstration unit. The project is in its initial stages and is jointly developed with Svante Technologies Inc., referred to as “Svante”, a carbon capture and removal solutions provider. See “– Innovation”.

Our pulp mills generate and sell surplus electricity, providing us with a stable revenue source unrelated to pulp prices. Our German pulp mills also generate tall oil from black liquor, which is sold to third parties for use in numerous applications, including biofuels. Since our energy and chemical production are by-products of our pulp production process, there are minimal incremental costs and our surplus energy and chemical sales are highly profitable. All of our mills generate and sell surplus energy to regional utilities or the regional electrical market. Our Celgar mill is party to a fixed electricity purchase agreement with the regional public utility provider for the sale of surplus power which runs until October 2030.

The following table sets out the amount of surplus energy we produced and sold and revenues from the sale of such surplus energy and chemicals in our pulp segment for the periods indicated:

Year Ended December 31,

2025

2024

2023

(MWh)

($)

(MWh)

($)

(MWh)

($)

(in thousands)

(in thousands)

(in thousands)

Surplus electricity(1)

718,948

69,561

797,218

72,705

832,587

89,134

Chemicals

12,296

15,391

24,376

Total

81,857

88,096

113,510

(1)
Does not include our 50% joint venture interest in CPP, which was accounted for using the equity method. In March 2024, we disposed of this interest.

We serve pulp customers in Europe, Asia and North America. We primarily work directly with customers to capitalize on our geographic diversity, coordinate sales and enhance customer relationships. We believe our ability to deliver high-quality pulp on a timely basis and our customer service makes us a preferred supplier for many customers.

Solid Wood Segment

Our solid wood segment consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals from our sawmills and other facilities located in Germany and our mass timber facilities in North America.

Since 2021, we have invested approximately $396.6 million to expand our solid wood activities and product mix, to acquire the Spokane facility in 2021, the Torgau facility in 2022 and the Conway facility and three mass timber production facilities in British Columbia, Canada in June 2023. We combined the British Columbia facilities into one facility, referred to as the “Okanagan facility” after completing the acquisition.

In addition, since 2021 we have invested approximately $159.4 million in capital expenditures in our solid wood segment to increase production, lower costs and enhance efficiency.

Our solid wood segment has an aggregate capacity of approximately 1,023 MMfbm of lumber, 210,000 m3 of CLT, 45,000 m3 of glulam, 17 million pallets, 230,000 tonnes of biofuels and 28 MW of electrical generation.

The following is a description of the mills and facilities comprising our solid wood segment:

•
Friesau mill – Our Friesau mill is ISO 50001 and 38200 certified and has an annual production capacity of approximately 550 MMfbm of lumber and 13 MW of electrical generation. The mill is located in Friesau, Germany, approximately 185 miles south of

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Berlin and 10 miles west of our Rosenthal mill and is one of the Rosenthal mill’s largest fiber suppliers. The mill has a diverse product line ranging from custom rough green and dry lumber for the European market to kiln-dried, dimension lumber for the United States, Japan, United Kingdom and other export markets.

•
Torgau facility – Our Torgau facility is ISO 50001 certified and is an integrated sawmill and value-add pallet production facility, with an annual production capacity of approximately 473 MMfbm of lumber, 17 million pallets and 15 MW of electrical generation. The Torgau facility can also produce up to 230,000 tonnes of biofuels, consisting of wood pellets and briquettes, used to generate electricity and thermal energy. The Torgau facility is currently one of the world’s largest producers of Euro-pallets, the standard European shipping pallet. The Torgau facility is located in Torgau, Germany, approximately 70 miles south of Berlin.

•
Spokane facility – The Spokane facility is a modern, state-of-the-art manufacturing facility that was built in 2019 and has an annual production capacity of 140,000 m3 of CLT. The Spokane facility includes 253,000 square feet of manufacturing space. We believe that the facility is one of the largest CLT facilities in North America, currently representing approximately 20% of North American CLT capacity. CLT is a wood panel product, made from adhering layers of sawn lumber and is used as a more sustainable alternative to steel and concrete in building projects.

•
Conway facility – The Conway facility is a modern, state-of-the-art manufacturing facility that was built in 2021 and has an annual combined capacity of approximately 75,000 m3 of CLT and glulam. The Conway facility includes over 280,000 square feet of manufacturing space, and is strategically located in the Southern United States in proximity to growing construction markets with access to a large high-quality regional wood basket.

•
Okanagan facility – The Okanagan facility has an annual capacity of approximately 40,000 m3 of glulam and CLT. As glulam is commonly incorporated into mass timber construction projects, these assets complement our other mass timber facilities and enhance our ability to service the growing customer base for our mass timber business.

The European and U.S. lumber markets are very different. In the European market, lumber is generally customized in terms of dimensions and finishing. The U.S. market is driven primarily by demand from new housing starts and home renovation activities and dimensions and finishing are generally standardized. Additionally, lumber production and sales in Europe are commonly measured in m3, whereas in the U.S. they are measured in Mfbm.

The following table sets out our lumber, manufactured products, pallet and biofuels production, sales and revenues for the periods indicated:

Year Ended December 31,

2025

2024

2023

Lumber production (MMfbm)

472.2

475.6

462.3

Lumber sales (MMfbm)

464.8

470.4

500.5

Lumber revenues (in thousands)

$

247,572

$

217,471

$

217,939

Manufactured products production(1) (‘000 m3)

30.5

34.0

25.1

Manufactured products sales(1) (‘000 m3)

27.3

30.7

33.4

Manufactured products revenues(1) (in thousands)

$

57,470

$

100,565

$

58,895

Pallet production (‘000 units)

8,331.1

10,243.5

10,707.2

Pallet sales (‘000 units)

8,542.2

10,089.2

11,041.2

Pallet revenues (in thousands)

$

100,124

$

104,386

$

121,424

Biofuels production(2) (‘000 tonnes)

141.3

160.4

167.2

Biofuels sales(2) (‘000 tonnes)

135.5

184.4

144.8

Biofuels revenues(2) (in thousands)

$

34,454

$

40,082

$

40,680

(1)
Primarily includes CLT and glulam.

(2)
Includes pellets and briquettes.

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The Friesau mill and Torgau facility generate electricity for minimal incremental costs, all of which is sold, providing a stable revenue source unrelated to lumber prices. Both the Friesau mill and Torgau facility can sell surplus electricity at market prices or pursuant to special regulated rates under Germany's Renewable Energy Sources Act, referred to as the “Renewable Energy Act”. In 2025, the Friesau mill and Torgau facility primarily sold energy at their special regulated rates, which were generally higher than market prices.

The following table sets out the amount of surplus energy we produced and sold and revenues from the sale of surplus energy by our Friesau mill and Torgau facility for the periods indicated:

Year Ended December 31,

2025

2024

2023

(MWh)

($)

(MWh)

($)

(MWh)

($)

(in thousands)

(in thousands)

(in thousands)

Surplus electricity

136,967

18,992

126,280

16,512

160,161

21,451

Corporate Structure, History and Development of Business

Mercer Inc. is a corporation organized under the laws of the State of Washington whose common stock is quoted and listed for trading on the NASDAQ Global Select Market (MERC).

The following chart sets out our principal operating subsidiaries, all of which are directly or indirectly 100% owned, their jurisdictions of organization and their principal activities:

Name

Jurisdiction of Organization

Principal Activities

Mercer Stendal GmbH

Germany

Pulp, energy and chemical production and sales

Mercer Rosenthal GmbH

Germany

Pulp, energy and chemical production and sales

Mercer Celgar Limited Partnership

British Columbia, Canada

Pulp, energy and chemical production and sales

Mercer Peace River Pulp Ltd.

British Columbia, Canada

Pulp and energy production and sales

Mercer Timber Products GmbH

Germany

Lumber and energy production and sales

Mercer Spokane LLC

Washington, U.S.A.

CLT production and sales

Mercer Torgau GmbH & Co. KG

Germany

Pallets, lumber, biofuels and energy production and sales

Mercer Holz GmbH

Germany

Wood procurement and logistics

Mercer Conway Inc.

Delaware, U.S.A.

CLT and glulam production and sales

We entered into the pulp business in 1994 by acquiring our Rosenthal mill and in 1999 converted it to the production of kraft pulp. We subsequently expanded our pulp operations by constructing the Stendal mill at a cost of approximately $1.1 billion in 2004 and acquired the Celgar mill in 2005 and the Peace River mill in 2018.

In 2017, we entered into the solid wood business when we acquired the Friesau mill through our wholly owned subsidiary, Mercer Timber Products GmbH. In 2021, we acquired the Spokane facility for approximately $51.3 million. In September 2022, we acquired all of the outstanding shares of the parent company of Mercer Torgau GmbH & Co. KG, the owner of the Torgau facility, for approximately $263.2 million, inclusive of working capital. In June 2023, we acquired the Conway facility and Okanagan facility from the Structurlam group of companies for approximately $82.1 million.

Corporate Strategy

We strive to operate modern world class facilities with a high standard of environmental, social and governance performance. Our long-term strategy includes seeking organic growth through targeted capital expenditures focused on enhancing our existing assets, including diversifying our product offering and revenue sources, and acquiring complementary or additional assets, while maintaining the integrity of our balance sheet and liquidity.

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The maintenance of modern, reliable and energy efficient operations is key to our ability to produce stable returns through the economic cycle. The markets for our principal products are cyclical and subject to global economic influences. Further, our manufacturing operations are capital intensive and complex. Maintaining a high standard of maintenance and strategic capital expenditure programs differentiates us from older, higher cost, lower efficiency competitors. We believe that over time this will reduce our exposure to product price volatility, unexpected downtime and changes in environmental and regulatory conditions.

We seek to have a balance sheet that allows us to advance our objectives through the full economic cycle, while at the same time, gives us the flexibility to take advantage of strategic growth opportunities as they arise. We maintain a foundation of long-term, unsecured, senior notes with expiry dates in 2028 and 2029. In addition to cash on hand, we have a series of revolving credit facilities intended to provide liquidity and flexibility in times of opportunity or economic slowdown.

In furtherance of this strategy, since 2021 we have completed a series of acquisitions that expanded and diversified our product mix in the solid wood segment, including the acquisition of the Spokane facility in 2021, the Torgau facility in 2022 and the Conway facility and the Okanagan facility in 2023. In particular, the acquisition of the Conway facility, along with its glulam production capabilities, positions us to capitalize on the growing market share of CLT and glulam in North American construction as customers seek more carbon-efficient building alternatives.

Pulp Industry

General

Pulp is used in the production of paper, tissues and paper-related products. Pulp is generally classified according to its fiber type, production process and degree of bleaching. Kraft pulp, a type of chemical pulp, is produced through a sulphate chemical process in which lignin, the component of wood which binds individual fibers, is dissolved in a chemical reaction. Chemically prepared pulp allows the wood’s fiber to retain its length and flexibility, resulting in stronger paper products. Kraft pulp can be bleached to increase its brightness. Softwood kraft pulp is noted for its strength, brightness and absorption properties and is used to produce a variety of products, including lightweight publication grades of paper, tissues and other paper-related products.

Bleached kraft pulp is comprised of either softwood kraft made from coniferous trees or hardwood kraft made from deciduous trees. Softwood species generally have long, flexible fibers which add strength to paper while fibers from species of hardwood contain shorter fibers which lend bulk and opacity.

We primarily produce and sell NBSK pulp manufactured using northern softwood, which is considered a premium grade because of its strength. It generally obtains the highest price relative to other kraft pulps. Our Peace River mill produces both NBSK and NBHK pulp.

Most paper users of market kraft pulp use a mix of softwood and hardwood grades to optimize production and product qualities. In 2025, market kraft pulp consumption was approximately 62% hardwood bleached kraft and 34% softwood bleached kraft, with the remainder comprised of unbleached pulp. Over the last several years, production of hardwood pulp, based on fast growing plantation fiber primarily from Asia and South America, has increased much more rapidly than that of softwood grades, because of longer growth cycles. Hardwood kraft generally has a cost advantage over softwood kraft as a result of lower fiber costs, higher wood yields and, for newer hardwood mills, economies of scale. As a result of this growth in supply and lower costs, kraft pulp customers have substituted some of the pulp content in their products to hardwood pulp.

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However, the requirement for strength and formation characteristics in finished goods counters customers’ ability to substitute cheaper hardwood pulp for NBSK. Paper and tissue makers focus on larger paper machines with higher speeds and lower basis weights for certain papers which require the strength characteristics of softwood pulp. Additionally, where paper products are lightweight or specialty papers such as premium tissue or magazine paper, or where strength or absorbency are important, softwood kraft forms a significant proportion of the fiber used. As a result, we believe that the ability of kraft pulp users to further substitute hardwood for softwood pulp is limited by such requirements.

Kraft pulp can be made in different grades, with varying technical specifications, for different end uses. Softwood kraft pulp is an important ingredient for tissue manufacturing and tissue demand tends to increase with living standards in developing countries. Softwood kraft pulp is also valued for its reinforcing role in mechanical printing papers and is sought after by producers of paper for the publishing industry, primarily for magazines and advertising materials.

Markets

We believe that approximately 150 million ADMTs of chemical pulp are converted annually into tissues, printing and writing papers, carton boards and other specialty grades of paper and paperboard around the world. We also believe that approximately 44% of this pulp is sold on the open market as market pulp, while the remainder is produced for internal purposes by integrated paper and paperboard manufacturers.

The pulp business is highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn affect prices. Pulp markets are highly competitive and 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 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 is a commodity that is generally available from other producers. As commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is primarily determined by supply relative to demand.

Between 2016 and 2025, overall worldwide demand for chemical market pulp grew at an average rate of approximately 2% annually, with worldwide demand for bleached softwood kraft market pulp generally flat over the same time period.

NBSK pulp demand is significantly impacted by global macroeconomic trends. Certain of such trends have had a positive effect on pulp demand while others have had a negative impact.

Pulp demand continues to be driven by long-term growth in emerging markets, particularly China, alongside increasing consumption of tissue and hygiene products and the global expansion of online retail packaging. In China alone, tissue production capacity has increased by approximately 9.6 million ADMTs over the last five years. In China, imports of chemical softwood market pulp grew overall by approximately 4% per annum for the period from 2016 to 2025 and it is a key driver of pulp demand and consumption. We believe that emerging markets now account for approximately 61% of total global demand for bleached softwood kraft market pulp and China itself now accounts for approximately 35% of such global demand.

Two macroeconomic trends that have negatively impacted pulp demand are:

•
the decline in graphic and printing and writing paper demand, resulting from the rapid growth in digital media; and

•
paper demand in the historically mature markets of North America, Europe and Japan has been declining or stagnating, which has resulted in Western Europe currently accounting for approximately 19% of global bleached softwood kraft market pulp demand compared to approximately 25% in 2016.

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The trends and changes in NBSK pulp demand by end use are reflected in the following chart which compares worldwide NBSK pulp demand by end use for the periods indicated:

NBSK Pulp Demand by End Use

Oversupply of our products can result from producers introducing new capacity in response to favorable pricing trends. In 2025, there was a net decrease in pulp capacity of approximately 0.8 million ADMTs, primarily of hardwood kraft pulp. Currently, we are aware of approximately 2.6 million ADMTs of announced net capacity increases of hardwood kraft pulp scheduled to come online in 2026.

NBSK Pulp Pricing

Kraft pulp is a globally traded commodity and prices are highly cyclical. Kraft pulp prices are generally quoted in dollars. Pricing is primarily influenced by the balance between supply and demand, as affected by global macroeconomic conditions including the impact of trade policies, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in exchange rates.

As the majority of market NBSK pulp is produced and sold by Canadian and Northern European producers, while the price of NBSK pulp is generally quoted in dollars, pricing is often affected by fluctuations in the currency exchange rates for the dollar versus the euro and the Canadian dollar. As NBSK pulp producers generally incur costs in their local currency, while pulp is quoted in dollars, a dollar strengthening generally benefits producers’ businesses and operating margins. Conversely, a weakening of the dollar versus the local currency of producers generally adversely affects producers’ businesses and operating margins.

As a corollary to changes in exchange rates between the dollar and the euro and Canadian dollar, a stronger dollar generally increases costs to customers of NBSK pulp producers and results in downward pressure on prices. Conversely, a weakening dollar generally supports higher pulp pricing. However, there is invariably a time lag between changes in currency exchange rates and pulp prices. This lag can vary and is not predictable with any certainty.

Although China is now the largest market globally for pulp, Europe has also historically been a significant market and the European market NBSK list price is at times used by the industry as a benchmark reference price. The third-party industry quoted average European list prices for NBSK pulp since 2016 have fluctuated between a low of approximately $790 per ADMT in 2016 and a high of $1,635 per ADMT in 2024.

Our pulp sales realizations in Europe and North America are based on third-party industry quoted list prices, net of customer discounts, rebates and other selling concessions. Our sales to China and Asia are generally based closer to third-party industry quoted prices, which are quoted on a net basis, inclusive of discounts,

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allowances, rebates and other selling concessions. As a result, our net sales realizations in China are generally similar to other markets. The following table sets out the average third-party industry quoted list prices (before discounts, rebates and other selling concessions) for NBSK pulp in Europe and North America and the average net price for NBSK pulp in China for the periods indicated:

For the Year Ended December 31,

2025

2024

($/ADMT)

Europe (List Price)

1,525

1,519

North America (List Price)

1,710

1,646

China (Net Price)

722

774

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These factors are common in the kraft pulp industry. We generally have weaker pulp demand in China in the period relating to the lunar new year and in Europe during the summer holiday months. We typically have a seasonal build-up in raw material inventories in the early winter months as our mills build up their fiber supply for the winter when there is reduced availability.

Competition

The pulp market is highly fragmented and competitive with many producers competing globally. Producers ranging from small independent manufacturers to large integrated companies produce pulp worldwide. In recent years there has been a trend for industry consolidation and the creation of larger competitors. Pulp is generally a commodity product and our pulp competes with similar products manufactured and distributed by many other producers. While many factors influence our competitive position, particularly in weak economic times, a primary factor is price. Other factors include quality, service, access to reasonably priced fiber and convenience of location. Some of our competitors are larger than we are in certain markets and have substantially greater financial resources. These resources may afford those competitors more purchasing power, increased financial flexibility, more capital resources for expansion and improvement and enable them to compete more effectively. Our key NBSK pulp competitors are principally located in Northern Europe and Canada and currently include Metsä Fibre, Södra Cell, Ilim, Domtar, UPM, SCA, Stora Enso and Canfor Pulp.

Solid Wood Industry

General

Our solid wood segment consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals from our sawmills and other facilities in Germany and North America.

Products and Markets

Our Friesau mill has two high-volume Linck sawlines and has the ability to produce both rough and planed products. The sawmill principally manufactures finished sawn lumber milled from spruce and pine, including European metric and specialty lumber, U.S. dimensional lumber and J-grade lumber, in various sizes and grades.

The Torgau facility is an integrated sawmill and value-add pallet production facility. The facility produces, among other products, lumber, wood pallets and biofuels. The lumber produced at the facility is used for, among other things, pallet production and also for dimensional lumber for the European, U.S. and Asian markets.

Demand for lumber is cyclical and influenced by factors that affect consumer confidence and drive demand for residential construction, such as interest rates, disposable income, unemployment rates, perceived job security and other indicators of general economic conditions. Demand is also affected by the availability of

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skilled construction trades and construction finishing products, transportation costs, exchange rates, government tariffs and the competitiveness of substitute products. Demand can vary from region to region within a country and seasonal factors that determine optimal building conditions can also affect demand.

The process for manufacturing lumber results in a significant percentage of each sawlog ending up as by-products or residuals such as wood chips, trim blocks, sawdust shavings and bark. Due to the close proximity of the German pulp mills to the Friesau mill and Torgau facility, we are able to achieve fiber utilization and fiber logistics synergies. By-products at the Friesau mill are typically used as fuel for its cogeneration power plant or sold to a wide variety of customers. In addition, we utilize a significant portion of the chips from the Friesau mill at our Rosenthal mill. At the Torgau facility, residuals are used by our pulp mills or converted into heating pellets and briquettes. Bark is used separately to fuel the Torgau facility’s four cogeneration plants.

The main markets for our lumber products are in the United States, Europe and Asia. Our Friesau mill and Torgau facility lumber sales are to a diverse customer base. Customers include national and regional distributors, large construction firms, secondary manufacturers, retail yards and home centers.

Our Torgau facility also sells pallets and biofuels to a diverse customer base that is primarily located within a 185 mile range of the facility. The facility is one of the world’s largest producers of Euro-pallets, the standard European shipping pallet.

The Spokane facility, Conway facility and Okanagan facility produce CLT, a wood panel product, made from adhering layers of sawn lumber that is used as a more sustainable alternative to steel and concrete in building projects. We believe the facilities currently represent approximately 30% of North American CLT capacity. The facilities’ customers are mainly building contractors or property owners. The Conway facility and Okanagan facility are also able to produce glulam, a stress-rated, engineered wood product comprised of wood laminations that are bonded together. It is commonly used for support structures such as columns, beams, floor-joints and trusses, offering a high degree of customization and pre-fabrication. The Spokane facility, Conway facility and Okanagan facility also produce finger joint lumber, a product which joins short pieces of wood together to form pieces of greater length.

Competition

The markets for our lumber products are highly competitive with many producers competing globally. Producers range from small independent mills to very large global producers, including integrated forest products companies. In recent years, there has been significant consolidation in the solid wood industry that has resulted in the creation of even larger global competitors. Producers compete generally on price, quality and service. With respect to lumber and certain solid wood products, these are commodities with few distinguishing features and producers primarily compete based on delivered price. Factors influencing our competitive position include, among others, the availability, quality and cost of raw materials, including fiber, energy and labor, the efficiency and productivity of our facilities and our ability to utilize or sell by-products from the lumber manufacturing process. The Friesau mill and Torgau facility lumber sales also compete in international markets subject to currency fluctuations and global trade policies and business conditions. Our key competitors in the segment currently include West Fraser, Canfor, Interfor, Domtar, Weyerhaeuser, Binderholz, Stora Enso and Ilim.

The Torgau facility’s pallets compete with other European pallet producers. The German pallet market is dominated by wood pallet producers. Since most pallets are standardized, there is limited room for product differentiation, implying that logistical organization, production capacity, and the ability to meet just-in-time demand form regional competitive advantages.

Our mass timber facilities compete with other producers of CLT, glulam and alternative building materials such as concrete and steel. These building alternatives can be competitive on a cost basis, and have the added benefit of being in wide use for a number of years in North America, as opposed to CLT and glulam which are relatively newer market entrants. These alternatives, however, lack the environmental attributes of CLT and glulam, in addition to their aesthetic appearance.

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Generation and Sales of Green Energy and Chemicals

General

Our pulp mills are large-scale bio-refineries that, in addition to pulp, also produce surplus “carbon neutral” or green energy. As part of the pulp production process, our mills generate green energy using carbon neutral biofuels such as black liquor and wood waste in a cogeneration process. Through the incineration of biofuels in the recovery and power boilers, our mills produce sufficient steam to cover all of our steam requirements and allow us to produce surplus electricity, which we sell to third-party utilities or into the regional electricity market. Our Friesau mill and Torgau facility also generate and sell green energy produced from their biomass cogeneration power plants. As a result, we have benefited from green energy legislation, incentives and commercialization that have developed over the last decades in Europe and Canada along with strong electricity prices. In addition, in recent years we have applied considerable resources to increasing our capacity to produce and sell chemicals, primarily tall oil for use in numerous applications including biofuels.

Our surplus energy and chemical sales provide us with a stable revenue source unrelated to pulp or lumber prices. Since our energy and chemical production are by-products of our production processes, there are minimal incremental costs resulting in our surplus energy and chemical sales being highly profitable. We believe that this revenue source gives our operations a competitive advantage over other older mills or facilities which do not have the equipment or capacity to produce and/or sell surplus power and/or chemicals in a meaningful amount.

The following chart sets out our electricity generation and surplus electricity sales for the periods indicated:

Electricity Generation and Exports(1)

(1)
Does not include our 50% joint venture interest in CPP, which was accounted for using the equity method. In March 2024, we disposed of this interest.

(2)
Includes results of the Torgau facility since September 30, 2022.

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The following chart sets out our consolidated revenues from electricity and chemical sales for the periods indicated:

Energy and Chemical Revenue(1)

(1)
Does not include our 50% joint venture interest in CPP, which was accounted for using the equity method. In March 2024, we disposed of this interest.

(2)
Includes results of the Torgau facility since September 30, 2022.

Germany

Our Friesau mill and Torgau facility have the option to sell their surplus electricity at special regulated rates under the Renewable Energy Act. The special regulated rates expire in 2029 for our Friesau mill and between 2029 and 2034 for the four cogeneration power plants at our Torgau facility.

In 2025, our German pulp mills sold energy at market prices while our Friesau mill and Torgau facility primarily sold energy at their special regulated rates which were generally higher than market prices.

In 2025, energy sales at our German mills were approximately $80.5 million or 724,623 MWh.

In connection with our focus on the growing bio-energy market, we sell tall oil, a by-product of our pulp production process, which is used as both a chemical additive and as a green energy source. In 2025, we generated approximately $12.3 million from the sale of tall oil and other chemicals from our pulp segment.

Canada

Our Celgar mill is party to an electricity sales agreement with the provincial energy utility for a ten-year term that expires in October 2030. Pursuant to the agreement, the mill agreed to supply a maximum of approximately 127,000 MWh of surplus electrical energy annually to the utility.

Our Peace River mill sells its surplus electricity into the Alberta market at market prices.

In 2025, energy sales at our Canadian mills were approximately $8.0 million or 131,292 MWh.

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Production Costs

Our major costs of production are fiber, labor, chemicals and energy.

Fiber

General

Fiber, comprised of wood chips and pulp logs, is our most significant operating expense for our pulp segment, representing about 55% of our pulp cash production costs in 2025. Further, fiber, in the form of sawlogs, represented about 75% of lumber cash production costs in 2025.

Given the significance of fiber to our total operating expenses and our limited ability to control its cost compared with our other operating costs, volatility in fiber costs can materially affect our margins and results of operations.

Our mills are situated in regions which generally provide a relatively stable supply of fiber. The fiber consumed by our pulp mills consists of wood chips produced by sawmills as a by-product of the sawmilling process and pulp logs. Wood chips are small pieces of wood used to make pulp and are either wood residuals from the sawmilling process or pulp logs chipped especially for this purpose. Pulp logs consist of lower quality logs not used in the production of lumber.

The Friesau mill and Torgau facility consume sawlogs and waste wood. The Spokane facility, Conway facility and Okanagan facility consume lumber. Sawlogs, waste wood and lumber are all cyclical in both price and supply.

Generally, the cost of wood chips, pulp logs and sawlogs is primarily affected by the supply and demand for lumber. Additionally, regional factors including harvesting levels, weather conditions, insect infestations and increased competition for fiber from biofuel producers can also have a material effect on the supply, demand and price for these raw materials.

While fiber costs and supply are subject to cyclical changes, we generally expect that we will be able to continue to obtain an adequate supply of fiber on reasonably satisfactory terms for our mills due to their locations and our long-term relationships with suppliers.

During the past few years, certain customers have endeavored to purchase products, including pulp, lumber, pallets and mass timber products, that are produced using fiber that meets certain recognized wood certification requirements from forest certification agencies like the Forest Stewardship Council (FSC), the Programme for the Endorsement of Forest Certification (PEFC), the Sustainable Forestry Initiative (SFI) and the Canadian Standards Association (CSA). If the fiber we purchase does not meet certain wood certifications required by customers, it may make it more difficult to, or prevent us from, selling our products to such customers. The chain of custody wood certification process is a voluntary process which allows a company to demonstrate that they use forest resources in accordance with strict principles and standards in the areas of sustainable forest management practices and environmental management. In an effort to procure wood only from sustainably managed sources, we employ an FSC Chain of Custody protocol and PEFC certification, which requires tracking of fiber origins and preparing risk-based assessments regarding the region and operator. In the areas where we operate, we are actively engaged in the further development of certification processes. However, there is competition among private certification systems along with efforts by supporters to further these systems by having customers of forest products require products to be certified to their preferred system. Such wood certification standards continue to evolve and are not consistent from jurisdiction to jurisdiction or in how they are interpreted and applied. We currently do not expect certification requirements to have a material adverse impact on our fiber procurement and sales. However, if sufficient marketplace demand requires fiber to be sourced from standards that are inconsistent with those in our supply base, it could increase the operating costs for our products and/or reduce the available sources of fiber.

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Germany

With approximately 3.7 billion m3, Germany has the largest timber reserves in Europe. The principal species are spruce, pine, beech and oak. Many of the German forest areas have been certified according to PEFC or FSC standards.

We believe we are the largest consumer of wood chips and pulp logs in Germany and often provide the best long-term economic outlet for the sale of wood chips in Germany. We coordinate the wood procurement activities for our German mills to reduce overall personnel and administrative costs, provide greater purchasing power and coordinate buying and trading activities. This coordination and integration of fiber flows also allows us to optimize transportation costs, and the species and fiber mix for our mills. We are also party to joint wood purchasing arrangements with one of the largest wood consumers in Europe.

The core wood supply region for the Stendal mill includes most of Northeastern and Western Germany, primarily within an approximate 400 kilometer radius of the mill. We also purchase wood chips from Southwestern and Southern Germany as well as the Baltic Sea region. The fiber consumed by the Stendal mill consisted of approximately 49% spruce, 49% pine and 2% other species in 2025. The Stendal mill has sufficient chipping capacity to almost fully operate solely using pulp logs, if required. We source pulp logs from private and municipal forest owners and from state forest agencies. Our Stendal mill has historically also imported fiber from Poland and the Baltic Sea region.

Our Rosenthal mill sources wood chips from approximately 29 sawmills located primarily in the German states of Bavaria, Baden-Württemberg and Thuringia and primarily within a 300 kilometer radius of the Rosenthal mill. Within this radius, the Rosenthal mill is the largest consumer of wood chips. Given its location and size, the Rosenthal mill is often the best economic outlet for the sale of wood chips in the area. In 2025, approximately 89% of the fiber consumed by the Rosenthal mill was spruce and the remainder was pine. Wood chips for the Rosenthal mill are normally sourced from sawmills under one-year contracts with quarterly adjustments for market pricing. Substantially all of our chip supply is sourced from suppliers with which we have long-standing relationships. Pulp logs are sourced from the state forest agencies in Thuringia, Saxony and Bavaria and from private and municipal forest owners. In addition, the Rosenthal mill buys relevant volumes via imports from Czechia.

In 2025, our German pulp mills consumed an aggregate of approximately 5.1 million m3 of fiber. Approximately 64% was in the form of pulp logs and approximately 36% was in the form of sawmill wood chips.

Our Friesau mill and Torgau facility are each dependent on the consistent supply of sawlog fiber. Our Friesau mill is located in an area where there is a significant amount of high-quality fiber within economic reach. The wood fiber requirements of the Friesau mill and Torgau facility are met primarily through open market purchases and contract purchases from state forestry agencies and private and municipal forest owners.

In Germany, over the last several years, the price and supply of wood chips has been affected from time to time by increasing demand from alternative or renewable energy producers and government initiatives for carbon neutral energy.

Additionally, for several years leading to the first half of 2023, there was a material increase in the availability of harvestable wood as a result of beetle infestation of German forests. Generally, beetle-infested wood is harvested more rapidly so as to be useable before deterioration makes the wood unsuitable for its intended purposes.

While such beetle-infested wood increased fiber supply and was available at lower prices in the short-term, such increased harvest levels present challenges in maintaining sustainability over the long-term and result in periods of reduced harvest levels.

In 2025, our per unit fiber costs in Germany increased across our pulp and solid wood segments compared to 2024, primarily due to constrained supply driven by reduced harvest levels caused by lower availability of beetle-infested wood.

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North America

In 2025, our Celgar and Peace River mills consumed approximately 4.5 million m3 of fiber. Approximately 71% of such fiber was in the form of sawmill wood chips and the remaining 29% came from pulp logs processed through their wood rooms or chipped by a third party. Our Canadian mills’ wood rooms are able to process about 44% of their fiber needs. The source of fiber at the mills is characterized by a mixture of species (aspen, spruce, douglas fir, hemlock, pine and cedar) and they source fiber from a number of Canadian and U.S. suppliers.

In British Columbia, a combination of high harvesting rates during a past beetle endemic, subsequent governmental initiatives to reduce harvest levels and weaker lumber prices in recent years resulted in lower sawlog availability and sawmill activity. This resulted in lower wood chip availability which increased fiber costs in British Columbia.

The availability of fiber for our mills is in large part influenced by the strength of the lumber market. Lumber markets are primarily driven by U.S. housing starts, home renovation activities and, to a lesser degree, demand from China.

In 2025, our Canadian mills had access to approximately 30 different chip suppliers, most of whom are in Canada and, in the case of the Celgar mill, are also in the United States. Chips are purchased in Canada and the United States in accordance with chip purchase agreements. Generally, pricing is reviewed and adjusted periodically to reflect market conditions. The contracts for the Celgar mill are generally for one-year terms with quarterly adjustments or on three-month terms. The chip contracts for the Peace River mill are generally for three- to five-year terms with monthly adjustments indexed to the average pulp price.

To secure the volume of pulp logs required by its wood room and field chippers, the Celgar mill has entered into pulp log supply agreements. Such agreements can range from one-month to one-year terms, with a number of different suppliers, many of whom are also contract chip suppliers for the mill. All of the pulp log agreements can be terminated by the Celgar mill upon seven days’ written notice. The Celgar mill also bids on British Columbia timber sales from time to time.

Peace River holds two 20-year renewable governmental forest management agreements and three deciduous timber allocations in Alberta with an aggregate allowable annual cut of approximately 2.9 million m3 of hardwood, of which it currently harvests approximately 44%, and 375,000 m3 of softwood, which it sells or trades to sawmills surrounding the Peace River mill in exchange for wood chips. The forest management agreements were last renewed for a 20-year term expiring in 2029. While our Peace River mill can satisfy all of its hardwood fiber requirements from its forest management agreements and timber allocations, in order to optimize its fiber flow, it satisfies a small portion of its needs from third-party owned timberlands. Softwood fiber supply is from residual sawmill chips from local surrounding sawmills.

In 2025, our Canadian pulp mills’ per unit fiber costs increased compared to 2024. This increase was primarily driven by reduced wood chip supply as weak lumber market conditions and incremental government duties and tariffs resulted in sawmill curtailments and permanent closures.

The Spokane facility, Conway facility and Okanagan facility primarily source lumber through open market purchases or short-term contracts with regional producers in the U.S. Pacific Northwest, Western Canada and the U.S. South.

Labor

Our labor costs have increased over time due to inflation in wages and health care costs.

Energy

Our energy is primarily generated from renewable carbon neutral sources, such as black liquor and wood waste. Our mills produce all of our electrical energy requirements and generate excess energy which we sell to third-party utilities and to regional electrical markets. We utilize fossil fuels, such as natural gas, primarily

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in our lime kilns and we use a limited amount for start-up and shut-down operations. Additionally, from time to time, mill process disruptions occur and we consume small quantities of purchased electricity and fossil fuels to maintain operations. As a result, all of our mills are subject to fluctuations in the prices for electricity and fossil fuels. Our per unit energy costs decreased in 2025.

Chemicals

Our pulp mills use certain chemicals which are generally available from several suppliers and sourcing is primarily based upon pricing and location. Our per unit chemical costs were relatively steady in 2025.

Sales, Marketing and Distribution

Our pulp segment sales are handled by our global sales and marketing group, which currently has approximately 20 employees. This group largely handles all European and North American sales directly. Sales to Asia are made directly or through commission agents overseen by our sales group. The global sales and marketing group handles sales to approximately 260 customers. We coordinate and integrate the sales and marketing activities of our German mills to realize on a number of synergies between them. These include reduced overall administrative and personnel costs and coordinated selling, marketing and transportation activities. We also coordinate pulp sales across our mills on a global basis, thereby providing our larger customers with seamless service across all major geographies. In marketing our pulp, we seek to establish long-term relationships by providing a competitively priced, high-quality, consistent product and excellent service. In accordance with customary practice, we maintain long-standing relationships with our customers, pursuant to which we periodically reach agreements on specific volumes and prices.

Our solid wood segment sales are handled by our sales teams in Germany and North America, which currently have approximately 41 employees. We also sell lumber through commissioned agents in certain markets.

The following table sets out our pulp segment revenues by geographic area for the periods indicated:

Year Ended December 31,

2025

2024

(in thousands)

United States

$

141,946

$

151,053

Germany

280,460

334,361

China

547,697

574,264

Other countries

416,577

488,878

Total(1)

$

1,386,680

$

1,548,556

(1)
Excludes intercompany sales.

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The following charts set out the geographic distribution of our pulp segment revenues as a percentage of our total pulp segment revenues for the periods indicated:

(1)
Excludes intercompany sales.

The following table sets out the distribution of our pulp sales volumes by end use for the periods indicated:

Year Ended December 31,

2025

2024

(in thousands of ADMTs)

Tissue

736

821

Specialty

297

328

Printing & Writing

693

708

Other

104

43

Total

1,830

1,900

The following table sets out our solid wood segment revenues by geographic area for the periods indicated:

Year Ended December 31,

2025

2024

(in thousands)

United States

$

155,311

$

194,880

Germany

193,693

195,867

Other countries

118,434

95,244

Total(1)

$

467,438

$

485,991

(1)
Excludes intercompany sales.

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The following charts set out the geographic distribution of our solid wood segment revenues as a percentage of our total solid wood segment revenues for the periods indicated:

(1)
Excludes intercompany sales.

Our pulp segment and solid wood segment sales are on customary industry terms. As of December 31, 2025, we had no material payment delinquencies. In 2025 and 2024, no customer accounted for 10% or more of our revenues. We do not believe our pulp segment or solid wood segment sales are dependent upon the activities of any single customer and the loss of any single customer would not have a material adverse effect on us.

Transportation

We transport our pulp and solid wood products generally by rail, ocean carrier and truck through third-party carriers. We have a small fleet of trucks in Germany that deliver some of our German mills’ pulp. In Germany, we also lease a significant number of railcars for inbound transport of fiber and outbound shipping of products.

Our German pulp mills are currently the only market kraft pulp producers in Germany, which is the largest import market for kraft pulp in Europe. We therefore have a competitive transportation cost advantage compared to Canadian and Northern European pulp producers when shipping to customers in Europe. Due to the location of our German mills, we are able to deliver pulp to many of our customers by rail and truck.

Our Canadian mills’ pulp is transported to customers by truck, rail and ocean carrier through third-party carriers. The majority of our Canadian mills’ pulp for overseas markets is initially delivered by rail to the Port of Vancouver for shipment overseas by ocean carrier. Based in Western Canada, our Canadian mills are well positioned to service Asian customers. The majority of our Canadian mills’ pulp for domestic markets is shipped by rail directly to the customer or to third-party warehouses in the United States. We also operate a logistics and reload center near Trail, British Columbia to provide us with additional warehouse space and greater transportation flexibility in terms of access to rail and trucking options.

The Friesau mill’s lumber is transported to customers by rail, ocean carrier and truck through third-party carriers.

The Torgau and mass timber facilities’ products are primarily transported by truck.

In 2025 and 2024, outbound transportation costs comprised approximately 9% and 10% of each year’s total

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consolidated costs and expenses, respectively.

Capital Expenditures

We have continued to make capital investments designed to increase pulp, green energy and chemical production, reduce costs and improve efficiency and environmental performance at our pulp mills. The improvements made over the years have increased the competitive position of our pulp mills. Since the acquisitions, we have also made capital investments to optimize sawmill production at the Friesau mill and Torgau facility.

The following table sets out the total capital expenditures by segment (excluding any related governmental grants) for the periods indicated:

Year Ended December 31,

2025

2024

(in thousands)

Pulp segment

$

63,059

$

46,400

Solid wood segment

25,417

37,732

Total

$

88,476

$

84,132

For our pulp segment, in addition to maintenance projects, capital investments in 2025 at the Stendal mill were primarily related to improvements to the lime kiln. For the Rosenthal mill, capital investments in 2025 were primarily related to upgrades to the digester evaporator and a new turbine generator. For our Canadian mills, capital investments in 2025 were primarily related to completion of the wood room at the Celgar mill. In 2024, in addition to maintenance projects, capital investments at the Stendal mill were primarily related to completing the rebuild of the wood chip conveying system that was damaged by a fire in 2022. For the Rosenthal mill, capital investments in 2024 were primarily related to the purchase of a digester evaporator. For our Canadian mills, capital investments in 2024 were primarily related to enhancements to soot blowers at the Peace River mill, and for both mills, improvements to the wood rooms.

For our solid wood segment, in addition to maintenance projects, capital investments at the Torgau facility and Friesau mill in 2025 were primarily related to log yard improvements. For our mass timber facilities, capital investments in 2025 were primarily related to sorting line upgrades and other strategic projects. In 2024, in addition to maintenance projects, capital investments at the Torgau facility were primarily related to log yard improvements and sawing and planer machine upgrades. For the Friesau mill, capital investments in 2024 were primarily related to sorter line upgrades. For our mass timber facilities, capital investments in 2024 were primarily related to production and sorter line upgrades.

Qualifying capital investments at industrial facilities in Germany that reduce pollutants in the effluent discharge can be used to offset wastewater fees that would otherwise be required to be paid. For more information about our environmental capital expenditures, see “– Environmental”.

In 2026, excluding amounts being financed through government grants, we currently expect our total capital expenditures to be approximately $60.0 million to $80.0 million, principally comprised of maintenance projects.

Innovation

We utilize our expertise with wood, its processing and by-products to expand our product mix. As a result, we seek to develop new products based on our expertise in wood processing and working with derivatives of the kraft pulping process. Currently these processes are focused on:

•
the production and sale of CLT and glulam at our Spokane facility, Conway facility and Okanagan facility;

•
the further refinement of materials contained in black liquor, the extractive chemical and lignin containing compounds that are a result of the kraft pulping process; and

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•
preliminary evaluation and development of a potential carbon capture project at our Peace River mill.

We are working on some of these initiatives on our own, with others and in conjunction with industry associations or joint venture partners.

In an effort to further grow our chemical sales and bring additional value to our by-product stream, we invested in a pilot lignin plant at our Rosenthal mill. This plant allows us to research the commercial opportunities of this product. Lignin has many potential uses in the manufacture of green alternative products such as adhesives and carbon black.

As part of a previously announced joint development project with Svante, our Peace River mill commissioned a carbon capture demonstration unit in the fourth quarter of 2025. The demonstration unit is an initial and preliminary step to evaluate the technology through generated technical and operational data and to support the proposed next phase of the project, which is front-end engineering design, expected to commence in the second quarter of 2026. This project presents an opportunity to reduce the mill's carbon emissions via permanent storage and enhance long-term economic viability through carbon credit sales.

Environmental

Our operations are subject to a wide range of environmental laws and regulations, dealing primarily with:

•
air, water and land;

•
solid and hazardous waste management;

•
waste disposal;

•
remediation and contaminated sites; and

•
chemical usage.

Compliance with these laws and regulations generally involves capital expenditures as well as additional operating costs. We cannot easily quantify the future amounts of capital expenditures we might have to make to comply with these laws and regulations or the effects on our operating costs because in some instances compliance standards have not been developed, have not become final or definitive or may be amended in the future. In addition, it is difficult to isolate the environmental component of most manufacturing capital projects.

We devote significant management and financial resources to comply with all applicable environmental laws and regulations. In particular, the operation of our plants is subject to permits, authorizations and approvals and we must comply with prescribed emission limits. Compliance with these requirements is monitored by local authorities and non-compliance may result in administrative orders, fines or closures of the non-compliant mill. Our total capital expenditures on environmental projects at our mills were approximately $3.9 million in 2025 and 2024. In 2026, capital expenditures for environmental projects are expected to be approximately $2.7 million.

Environmental responsibility is a priority for our operations. To ensure compliance with environmental laws and regulations, we regularly monitor emissions at our mills and periodically perform environmental audits of operational sites and procedures both with our internal personnel and outside consultants. These audits identify opportunities for improvement and allow us to take proactive measures at the mills as considered appropriate.

We believe we have obtained all required environmental permits, authorizations and approvals for our operations. We believe our operations are currently in material compliance with the requirements of all applicable environmental laws and regulations and our respective operating permits.

Under German state environmental rules relating to effluent discharges, industrial users are required to pay wastewater fees based upon the amount of pollutants they discharge in their effluent. These rules also provide

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that an industrial user who undertakes environmental capital expenditures and lowers certain effluent pollutants to prescribed levels may offset the amount of these expenditures against the wastewater fees that they would otherwise be required to pay. We expect capital investment programs and other environmental initiatives at our German mills will offset the wastewater fees that are payable if we demonstrate the reduced wastewater emissions and we believe they will ensure that our operations continue in substantial compliance with prescribed standards.

In Canada, in addition to existing provincial air quality regulations, an air quality management system, referred to as “AQMS”, outlines a comprehensive national approach for improving air quality in Canada. Under the AQMS, all levels of government are to work collaboratively to respond to different air quality challenges across the country. The AQMS includes four elements:

•
Canadian Ambient Air Quality Standards (CAAQS), meant to drive local air quality improvements. They provide the basis for provincial and territorial governments to determine the level of action needed.

•
A framework for regional and local air quality management through air zones and regional airsheds.

•
Base-level Industrial Emissions Requirements (BLIERs) for certain major industries, including for pulp and paper industries.

•
Improved intergovernmental collaboration to reduce emissions from the transportation sector.

In 2016, Environment Canada released the Pan-Canadian Framework on Clean Growth and Climate Change. The framework put in place a national, sector-based greenhouse gas reduction program applicable to a number of industries. In addition, various provincial governments, including British Columbia and Alberta, have introduced legislation and standards with the intention of reducing greenhouse gas emissions by, among other things, implementing greenhouse gas emissions benchmarks and reporting regulations, carbon taxes and carbon offsets.

The Canadian carbon pricing system, initiated in 2019, featured two components: a regulatory charge on fossil fuels like gasoline and natural gas (the “fuel charge”) and a performance-based system for industries (the output-based pricing system or “OBPS”). Effective April 1, 2025, the federal fuel charge and corresponding provincial obligations were removed. However, the OBPS remains in effect. Under the OBPS, industrial emitters are taxed on emissions exceeding a performance standard or earn carbon credits if their emissions are below such performance standard. The federal OBPS applies to Manitoba, Prince Edward Island, Nunavut and the Yukon. All other provinces, as well as the Northwest Territories, have implemented their own distinct, federally compliant industrial pricing systems that displace the federal OBPS.

We believe that these water and air emission measures in Germany and Canada have not had, and in 2026 will not have, a significant effect on our operations. Although these measures could have a material adverse effect on our operations in the future, we expect that we will not be disproportionately affected by these measures as compared with owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations.

Future regulations or permits may place lower limits on allowable types of emissions, including air, water, waste and hazardous materials, and may increase the financial consequences of maintaining compliance with environmental laws and regulations or conducting remediation. Our ongoing monitoring and policies have enabled us to develop and implement effective measures to maintain emissions in substantial compliance with environmental laws and regulations to date in a cost-effective manner. However, there can be no assurance that this will be the case in the future.

Climate Change

Changing weather patterns and climatic conditions due to natural and man-made causes have added to the unpredictability and frequency of natural disasters, such as hurricanes, wildfires and wind, rain, hail, snow and ice storms. Such changes and resulting conditions can adversely affect our operations, including as a

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result of variations in the cost and availability of raw materials, such as fiber, unplanned downtime, changes in operating rates and disruptions in transportation and logistics.

As there is uncertainty about the severity, extent and speed at which climate change is occurring, we are unable to identify and predict all of the consequences of climate change and the timing of the same on our business and operations.

The actual and perceived effects of climate change and social and governmental responses have created both opportunities and negative consequences for our business.

The focus on climate change has generated a substantial increase in demand and in legislative requirements for carbon neutral or green energy. Pulp mills consume wood residuals, being wood chips and pulp logs, as the base raw material for their production process. Wood chips are residuals left over from lumber production and pulp logs are generally lower quality logs left over from logging that are unsuitable for the production of lumber. Sawmills consume sawlogs and produce residuals, like wood chips, which are generally sold to other industrial consumers like pulp and pellet producers.

As part of their production process, our pulp mills take wood residuals and process them through a digester where cellulose is separated from the wood to be used in pulp production and the remaining residuals, called black liquor, are used for green energy production. As a result of their use of wood residuals and because our mills generate combined heat and power in a process known as cogeneration, they are efficient producers of energy. Our Friesau mill and Torgau facility utilize residual bark and shavings from consumed logs to produce energy. This energy is carbon neutral and produced from a renewable source. Our relatively modern mills generate a substantial amount of energy that is surplus to their operational requirements.

These factors, along with governmental initiatives in respect of renewable or green energy legislation, have provided business opportunities for us to enhance our generation and sales of green energy to regional utilities.

We are constantly exploring other initiatives to enhance our generation and sales of surplus green energy and chemical by-products. Other potential opportunities that may result from climate change include:

•
greater demand for sustainable energy;

•
the expansion of softwood forests and increased growth rates for such forests;

•
more intensive forestry practices and timber salvaging versus harvesting standing timber;

•
additional governmental incentives or requirements to enhance biomass energy production; and

•
additional social or investor focus or demand for biomass, green energy or sustainability initiatives.

Additionally, increased focus on climate change at the governmental level has generally led to increased demand in alternative building solutions such as CLT and glulam.

Historically, the principal driver behind reducing the effects of climate change and moving to a carbon neutral economy primarily resulted from initiatives from governmental or international bodies, including the United Nations and international treaties amongst various countries. However, over the last few years, there has been a significant push and focus on climate change and carbon reduction by private institutions including, among others, institutional investors, ratings agencies, shareholders, communities, other stakeholders and the public generally. This has resulted in, among other things, a significant amount of capital being provided for green or carbon neutral initiatives, on favorable terms, some of which are referred to as “green bonds”. The demand for renewable energy services has been further increased as a result of the war in Ukraine.

We cannot currently predict which, if any, of these potential opportunities will be realized by us or their economic effect on our business.

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While not all of the specific consequences to our business from climate change are predictable, one of the most significant adverse consequences is that the focus on renewable energy has created greater demand and competition for wood residuals or fiber from renewable energy producers like the pellet industry in Germany.

In Europe, the price and supply of wood residuals has been periodically affected by an increasing demand from alternative or renewable energy producers and governmental initiatives for carbon neutral energy. In recent years, demand for wood residuals and lower quality industrial logs has increased from energy and heating pellet manufacturers as a result of energy shortages caused by the war in Ukraine and governmental initiatives for carbon neutral energy.

Additionally, the growing interest and focus in British Columbia on renewable green energy has created additional competition for such fiber. Such additional demand for wood residuals may increase the competition and prices for wood residuals used by our mills over time.

In response to climate change risks, there have been governmental initiatives and legislation on the international, national, state and local levels. Such governmental action or legislation can have an important effect on the demand and prices for fiber. As governments pursue green energy initiatives, they risk creating incentives and demand for wood residuals from renewable energy producers that “cannibalizes” or adversely affects traditional users, such as lumber and pulp and paper producers. We are continually engaged in dialogue with governments to educate and try to ensure potential initiatives recognize the traditional and continuing role of our mills in the overall usage of forestry resources and the economies of local communities.

Other potential negative consequences from climate change that can affect our business include:

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

•
the disruption of transportation systems and power supply lines due to more severe storms;

•
the loss of freshwater transportation for logs and pulp due to lower water levels;

•
decreases in the quantity and quality of processed water for our mills’ operations;

•
the loss of northern forests in areas in sufficient proximity to our mills to competitively acquire fiber; and

•
regulatory reductions in allowable harvest levels decreasing the supply of harvestable timber and, as a consequence, wood residuals.

Well-publicized events have been attributed at least in part to climate change, including a beetle infestation that has damaged significant amounts of forest lands and harvestable timber in Western Canada and Germany. Beetle infestation of forest lands has both short-term and long-term consequences for our business. In the short-term, there is often a material increase in harvest levels of infested forests as parties seek to utilize such wood before it deteriorates too much to be useable for its intended purposes. As a result, there can be a material increase in fiber availability and lower fiber prices resulting both from such increased supply and the lower quality of such infested fiber. However, infestation and increased harvest levels resulting therefrom can create over-harvesting and challenges for maintaining sustainable harvest levels over the long-term and can result in lower harvest levels in future periods.

Changes in climate conditions have also been attributed at least in part to increasingly frequent and severe wildfires in Canada, the United States and Europe. We cannot currently predict whether such climate-affected conditions will continue, or the frequency or severity of the same in the future.

Human Capital

We believe the strength of our workforce is one of the significant contributors to our success as a global company. All our employees contribute to our success and help us drive strong financial performance. Attracting, developing and retaining global talent with the right skills to drive our business is central to our purpose, mission and long-term growth strategy.

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As of December 31, 2025, we employ approximately 3,545 people, of which approximately 2,310 work at our German locations, approximately 1,070 work at our Canadian locations and approximately 145 work at our U.S. locations. Our pulp segment employs approximately 1,900 people and our solid wood segment employs approximately 1,520 people. The majority of our employees in both segments are bound by collective agreements. We consider the relationships with our employees and the unions and works councils which represent them to be good. Collaborative labor management relations are fundamental to our operations. Accordingly, we recognize and work cooperatively with the unions and works councils to ensure we build and maintain safe and superior working conditions, a supportive work environment, training and growth opportunities and fair compensation and benefits packages.

We employ a collaborative group of skilled, dedicated, resourceful and innovative individuals who support our core purpose and reflect our values every day. Investment in our people drives our excellence and accordingly, we are committed to attracting, retaining and developing quality personnel. By the nature of the industries in which we operate, many of our employees are professionals who require specialized knowledge and skills and include various categories of engineers and licensed trade persons and equipment operators. Our senior managers and directors have extensive experience in the forest products industry, and we have experienced managers at all of our mills. Our management has a proven track record of implementing new initiatives and capital projects in order to optimize production and reliability, improve safety, reduce costs and harness new revenue opportunities.

We aim to support our employees with a competitive compensation package, fulfilling career opportunities and a balanced and secure future accompanied by time away from work. All of our employees receive competitive benefits packages that provide pension, medical, dental, and vision care benefits. Employees are also able to access specialized assistance such as physiotherapy and counseling services. We offer a diversity of training activities and programs to help our people grow and be more effective in their current and future roles.

We conduct confidential engagement surveys of our workforce that are administered and analyzed by an independent third party. The aggregate survey results are reviewed by executive officers and the board of directors. We create action plans at global, operational and managerial levels. By acting on results both at an aggregate enterprise level and an operational level, we believe we have been able to enhance our culture and improve our overall engagement.

Maintaining a robust pipeline of talent is crucial to our ongoing success and is a key aspect of succession planning efforts across the organization. Our leadership and human resources teams are responsible for attracting and retaining top talent by facilitating an environment where employees feel supported and encouraged in their professional and personal development. Specifically, we promote employee development by reviewing strategic positions regularly and identifying potential internal candidates to fill those roles, evaluating job skill sets to identify competency gaps and creating developmental plans to facilitate employee professional growth. We invest in our employees through training and development programs, on the job experiences and coaching. We provide technical, managerial and leadership programs across the organization that enable colleagues to grow skills and capabilities to become more successful. We also have dedicated talent development programs that support and accelerate leadership readiness and strengthen our succession plans. Additionally, we understand the importance of maintaining competitive compensation, benefits and appropriate training that provides growth opportunities and multiple career paths for our employees.

Health and Safety

Safety is a core value of our company. The industries in which we operate have their own particular set of risks including hazards from our complex industrial manufacturing facilities such as manufacturing processes, mobile equipment, heavy and complex equipment, high-pressure boilers, energy production, and the use and recovery of chemicals. Accordingly, there is no initiative that attracts a higher degree of focus for our management team than our “Road to Zero” health and safety program, which is a company-wide initiative designed to create healthy, safe and productive work environments with a goal of zero workplace injuries.

We continue to prioritize incident prevention over reactive measures by advancing our “Serious Injury or

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Fatality (SIF) Potential” reporting initiative. Any risk identified with SIF potential triggers a comprehensive investigation to determine root causes and evaluate process safety management factors, strengthening our ability to prevent future incidents. These insights allow us to model responses to eliminate the risk, where possible, by using the “hierarchy of controls” adopted by many of the world’s leading health and safety organizations. Under this framework, our primary objective is the elimination of hazards, followed by substitution to a safer method and appropriate personal protective equipment and other controls. Ultimately, we leverage a data-driven approach to identify, monitor, and educate our workforce to drive continuous workplace safety improvements. Many of our programs revolve around education, hazard identification, and risk mitigation strategies. These proactive initiatives bring safety to the forefront of our work practices. Our teams of safety professionals are dedicated to finding and utilizing the right tools to prevent all workplace injuries. The Senior Safety Leadership Committee, referred to as the “SSLC”, provides governance and high-level support to the programs. The SSLC meets on a regular basis to review performance, learn from experience and share best practices. Our team of safety professionals are dedicated to supporting line management and embedded safety committees who lead safety on a daily basis. We analyze all incidents carefully and adjust our prevention efforts accordingly.

Diversity, Equity and Inclusion

As outlined in our Human Rights Policy and our Code of Business Conduct and Ethics, our long-standing policy is to offer fair and equal employment opportunity to every person regardless of age, race, color, creed, religion, disability, marital status, sex, sexual orientation, national origin, or other legally protected status. We strive to provide a work environment that is free from intimidation and harassment based on any of these characteristics. We believe we can promote respect for diversity and inclusion by example of our actions and promotion of our values.

We have adopted an enterprise-wide diversity management program. One of the first objectives of the program has been to enhance equal opportunities for women in our business. This is a key goal, not just to improve diversity but importantly to address demographic changes and potential shortages of skilled workers in the future by inspiring more women to take up technical positions in our industry. In addition to increasing the potential pool of qualified candidates over time, we also believe it will provide us with unique perspectives, a better understanding of issues, and enhance our decision making and oversight of risk, environmental, social and governance matters and our long-term strategy.

Our goal is to continue to develop a culture of diversity and inclusivity within our workplace. From a business standpoint, we believe this can be a competitive advantage and we believe that making our workplace more equal and inclusive will make us a stronger, more resilient and a more sustainable business over the long-term.

In Canada, our operations work closely and partner with regional First Nations groups to foster mutually beneficial economic activities and relationships. Additionally, we have programs to provide training and job skills to regional First Nations groups.

We have an extensive apprenticeship program and outreach events for prospective employees. We believe that these programs and events, among other things, help us to reach out and attract new employees, including more female employees who perhaps in the past had not considered technical or operating employment opportunities at our mills or the forest products industry generally.

We do not employ nor do we contract with any parties that employ people who are subjected to unsafe conditions. The majority of our employees are part of a union or are represented by a works council with whom we have worked to design conditions that are safe from harassment and discrimination. In addition, as a supportive workplace, we do our best to accommodate the distinct circumstances of our employees that may require modified workplaces. We have also adopted a written Code of Business Conduct and Ethics and other corporate policies to support a corporate culture which, among other things, promotes a work environment that prohibits intimidation and harassment and encourages and promotes diversity and inclusion.

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Community Involvement

We make donations to community groups and charitable organizations in the communities in which we operate and live. We believe this commitment and engagement with local communities helps us to attract and retain employees and enhances our social license in such communities.

Commitment to Sustainability

We manage and operate our business, including the natural resources under our care or direction, with a long-term view and focus on sustainability. We believe by doing so we will be able to deliver value to our customers, employees, shareholders, communities and other stakeholders. We strive to maintain the highest environmental, social and governance standards. We believe that by caring for the health and safety of our workers, maintaining the environmental quality of our operations and being part of and actively engaged in the communities in which we operate, we enhance the value for all of our various stakeholders and our social license to operate. We work to build all of these values and goals into our corporate culture or what we refer to as the “Mercer Way”. We believe that focusing on sustainability as a key driver in all of our operations and business will enhance our decision-making, our success and our relationships with our various stakeholders and communities in which we operate. We believe all of the foregoing elements are inter-connected and are vital to our long-term future, success and sustainability.

We focus significant attention on minimizing our environmental impact with the goal of reducing the environmental footprint of our existing operations to make them sustainable over the long-term, to ensure we have a social license to operate and to offset or reduce the impact of our operations. We endeavor to adapt to emerging trends, support new technologies and foster environmental stewardship in the areas in which we operate. We are signatory to the United Nations Global Compact that helps align our endeavors with the United Nations Sustainable Development Goals, internationally recognized Responsible Business Principles, and other key environmental standards in the areas of low carbon transition, water stewardship, waste management, sustainable forestry and biodiversity, air emissions, circularity and responsible sourcing.

As part of our commitment and focus on sustainability, we have, among other things:

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focused on implementation of our Climate Transition Plan and working towards achievement of our 50% scope 1 greenhouse gas emissions reduction target;

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incorporated key learnings from our third climate change scenario analysis that identified and assessed the potential impacts of climate change-related risks and opportunities on the Company;

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commenced quantification of the biogenic carbon cycle of our products, including direct and indirect land management emissions and removals, and the carbon stored in our products. This project aims to show the full carbon benefit of the circular bioeconomy while identifying continuous improvement practices related to forest management and fiber sourcing;

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further developed relevant life cycle assessments, including product carbon footprints, to evaluate the environmental impact for our portfolio of diverse bioproducts;

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joined the International Sustainable Forestry Coalition to facilitate collaboration with global forestry leaders to seek to address nature-based solutions to climate change;

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continued close engagement and collaboration with suppliers and customers to improve data sharing and advance low-carbon transition initiatives across our value chain;

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further advanced research and development related to the refinement of black liquor into value-add products that replace traditional fossil fuel-based materials;

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published our inaugural Taskforce on Nature-related Financial Disclosures report outlining our nature-related impacts and dependencies and how we seek to manage biodiversity risks and opportunities; and

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closely engaged with our stakeholders including governments and First Nations to strengthen our relationships in all areas of our business.

Description of Certain Indebtedness

The following summarizes certain material provisions of our senior notes and revolving credit facilities. The summaries are not complete and are qualified by reference to the applicable documents and the applicable amendments to such documents on file with the SEC, and incorporated by reference herein.

Senior Notes

In September 2023, we issued $200.0 million in aggregate principal amount of 12.875% senior notes due October 1, 2028, referred to as the “2028 Senior Notes”. In October 2024, we completed a $200.0 million add-on offering of the 2028 Senior Notes at a 103.000% premium to their principal amount, for a yield to worst of 11.624%. The proceeds and cash on hand were used to redeem $300.0 million in aggregate principal amount of 5.500% senior notes due 2026, referred to as the “2026 Senior Notes”. After giving effect to the foregoing transactions, we now have outstanding the following issues of senior notes, collectively referred to as the “Senior Notes”:

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$400.0 million in aggregate principal amount of 2028 Senior Notes; and

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$875.0 million in aggregate principal amount of 5.125% senior notes due 2029, referred to as the “2029 Senior Notes”.

The 2028 Senior Notes mature on October 1, 2028 and interest on the 2028 Senior Notes is payable semi-annually in arrears on each April 1 and October 1. Commencing April 1, 2024, interest is payable to holders of record of the 2028 Senior Notes on the immediately preceding March 15 and September 15 and is computed on the basis of a 360-day year consisting of twelve 30-day months. Commencing October 1, 2025, the 2028 Senior Notes became redeemable at our option at a price equal to 106.438% of the principal amount redeemed and declining ratably on October 1 of each year thereafter to 100.000% on or after October 1, 2027.

The 2029 Senior Notes mature on February 1, 2029 and interest on the 2029 Senior Notes is payable semi-annually in arrears on each February 1 and August 1. Commencing August 1, 2021, interest is payable to holders of record of the 2029 Senior Notes on the immediately preceding January 15 and July 15 and is computed on the basis of a 360-day year consisting of twelve 30-day months. Commencing February 1, 2026, the 2029 Senior Notes became redeemable at our option at a price equal to 100.000% of the principal amount.

The indentures governing the Senior Notes contain covenants limiting, among other things, our ability and the ability of our restricted subsidiaries to: incur additional indebtedness or issue preferred stock; pay dividends or make other distributions to our shareholders; purchase or redeem capital stock or subordinated indebtedness; make investments; create liens; incur restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; sell assets; consolidate or merge with or into other companies or transfer all or substantially all of our assets; and engage in transactions with affiliates. As of December 31, 2025, all of our subsidiaries were restricted subsidiaries.

The Senior Notes are unsecured and are not guaranteed by any of our operating subsidiaries, most of which are located outside the United States. Our obligations under the Senior Notes rank: effectively junior in right of payment to all of our existing and future secured indebtedness, to the extent of the assets securing such indebtedness, and all indebtedness and liabilities of our subsidiaries; equal in right of payment with all of our existing and future unsecured senior indebtedness; and senior in right of payment to any of our future subordinated indebtedness.

Pan-German Revolving Credit Facility

Our German subsidiaries have a joint revolving credit facility with a syndicate of bank lenders, referred to as the “German Revolving Facility”.

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The principal terms of the facility include:

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The total availability under the facility is €370.1 million.

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The facility matures in September 2027.

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The facility is unsecured and is jointly and severally guaranteed by our principal German subsidiaries.

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Interest under the facility is payable on loans of Euribor plus a variable margin ranging from 1.40% to 2.35% dependent on conditions including but not limited to a prescribed leverage ratio.

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The facility is sustainability linked, whereby the interest rate margin is subject to upward or downward adjustments of up to 0.05% per annum depending on achievement of certain specified sustainability targets.

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A commitment fee equal to 35% of the applicable margin on the unused and uncancelled amount of the German Revolving Facility is payable quarterly in arrears.

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The facility contains financial maintenance covenants which are tested on a quarterly basis which require: (i) our German subsidiaries that are party thereto to maintain a leverage ratio of “net debt” (excluding shareholder loans) to EBITDA of not greater than 3.50:1.00; and (ii) defined capital of not less than €500.0 million.

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The facility contains other customary restrictive covenants which, among other things, govern the ability of our German subsidiaries to incur liens, sell assets, incur indebtedness, make acquisitions with proceeds from the facility, enter into joint ventures or repurchase or redeem shares. The facility also contains customary events of default.

The German Revolving Facility is available to all of the borrowers, subject to maximum borrowing sub-limits for certain of the borrowers.

As of December 31, 2025, approximately €171.0 million ($200.9 million) of this facility was drawn and accruing interest at a rate of 3.310% per annum, approximately €14.4 million ($17.0 million) was supporting bank guarantees and approximately €184.7 million ($217.0 million) was available.

Canadian Revolving Credit Facility

Our Canadian subsidiaries have a joint revolving credit facility with a syndicate of three North American banks, referred to as the “Canadian Revolving Facility”.

The principal terms of the Canadian Revolving Facility include:

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The total availability under the facility is C$160.0 million.

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The facility matures in January 2027.

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The facility is available by way of: (i) Canadian dollar denominated advances, which bear interest at a designated prime rate per annum; (ii) Canadian dollar denominated advances, which bear interest at the applicable Adjusted Term Canadian Overnight Repo Rate Average (CORRA) plus 1.20% to 1.45% per annum; (iii) dollar denominated base rate advances at the greater of the federal funds rate plus 0.50%, an Adjusted Term Secured Overnight Financing Rate (SOFR) for a one-month tenor plus 1.00% and the bank’s applicable reference rate for dollar denominated loans; and (iv) dollar denominated SOFR advances, which bear interest at Adjusted Term SOFR plus 1.20% to 1.45% per annum.

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The facility includes a C$15.0 million sub-limit for letters of credit for all borrowers, at rates of 1.20% to 1.45% per annum, plus a 0.125% annual fee where there is more than one lender under the facility, on issued letters of credit.

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The availability of the facility is subject to a borrowing base limit that is based on the borrowers’ combined eligible inventory levels and accounts and certain eligible equipment from time to time.

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The facility is secured by, among other things, a first priority charge on substantially all of the assets of the borrowers.

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The facility includes a springing financial covenant, which is measured when either excess availability under the facility is less than the greater of 10% of the line cap thereunder and C$14.0 million, in either case, for five consecutive days or less than the greater of 7.5% of the line cap and C$10.0 million, at any time, and which requires the borrowers to comply, on a combined basis, with a 1.00:1.00 fixed charge coverage ratio.

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The facility also contains restrictive covenants which, among other things, restrict the ability of the borrowers to declare and pay dividends, incur indebtedness, incur liens, make investments, including in its existing joint ventures, and make payments on subordinated debt. The facility contains customary events of default.

As of December 31, 2025, approximately C$129.9 million ($94.8 million) of this facility was drawn and accruing interest at a rate of 4.270% per annum, approximately C$0.6 million ($0.5 million) was supporting letters of credit and approximately C$17.5 million ($12.8 million) was available.

Standby Letters of Credit Facility

In October 2025, our Celgar mill and Peace River mill entered into a C$20.0 million revolving credit facility with a North American bank that matures in August 2027, referred to as the “Standby Letters of Credit Facility”. This facility is available through letters of credit denominated in Canadian dollars and dollars, which incur fees at the greater of 0.50% per annum of the face amount of the letter of credit or C$300. The facility and all letters of credit issued under the facility are guaranteed by Export Development Canada until August 2026.

As of December 31, 2025, approximately C$1.1 million ($0.8 million) of this facility was supporting letters of credit and approximately C$18.9 million ($13.8 million) was available.