Mercer International (MERC) risk factors, FY2025 10-K

Risks Related to our Business

1. 01Our business is highly cyclical in nature25% rewritten
2. 02Cyclical fluctuations in the price and supply of our raw materials, particularly fiber, could adversely affect our business69% rewritten
3. 03our German mills in recent yearsNew
4. 04The cyclical nature of pricing for fiber represents a potential risk to our profit margins if pulp and lumber producers are unable to pass along price increases to their customers or we cannot offset such costs through higher prices for our surplus energy
5. 05Inflation or a sustained increase in our key production and other costs would lead to higher manufacturing costs, which could reduce our margins36% rewritten
6. 06Our business, financial condition and results of operations could be adversely affected by disruptions in the global and European economies caused by geopolitical conflicts, including Russia's invasion of Ukraine and conflicts in the Middle EastNew
7. 07The impacts of changes in international trade policies, including tariffs, duties or other trade barriers by the United States, or other nations, may adversely impact our business, financial condition and results of operations84% rewritten
8. 08Tariffs, duties and any retaliatory measures could also impact our raw material costs and result in volatility in transportation costs and logistics disruptions and delaysNew
9. 09We face intense competition in the forest products industry
10. 10Our business is subject to risks associated with climate change and social and government responses thereto63% rewritten
11. 11on our business and operationsNew
12. 12regulatory reductions in allowable harvest levels decreasing the supply of harvestable timber and, as a consequence, wood residuals
13. 13Fluctuations in prices and demand for lumber and mass timber products could adversely affect our business
14. 14Our solid wood segment lumber products are vulnerable to declines in demand due to competing technologies or materials
15. 15We may experience material disruptions to our production
16. 16other operational problems
17. 17Our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for such capital requirements
18. 18Trends in non-print media and changes in consumer habits regarding the use of paper have and are expected to continue to adversely affect the demand for market pulp
19. 19We are subject to risks related to our employees
20. 20We are dependent on key personnel
21. 21If our long-lived assets become impaired, we may be required to record non-cash impairment charges that could have a material impact on our results of operations50% rewritten
22. 22Our insurance coverage may not be adequate
23. 23We rely on third parties for transportation services
24. 24If we are unable to offer products certified to globally recognized forestry management and chain of custody standards or meet customers’ product or project specifications, it could adversely affect our ability to compete
25. 25Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business
26. 26Acquisitions may result in additional risks and uncertainties in our business70% rewritten
27. 27We may not be able to ascertain the value or understand the potential liabilities of the acquired businesses and their operations until we assume operating control of the assets and operations of these businessesNew
28. 28Evolving sustainability reporting and environmental, social and governance preferences of customers, investors and other stakeholders may impact our business

Risks Related to our Debt

1. 29Our level of indebtedness could negatively impact our financial condition, results of operations and liquidity
2. 30our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal or interest due in respect of our indebtedness
3. 31Certain of the agreements governing our indebtedness have covenants that require us to maintain prescribed financial ratios and tests. Failure to comply with such covenants could result in events of default and could have a material adverse effect on our liquidity, results of operations and financial condition59% rewritten
4. 32Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities

Risks Related to Macroeconomic Conditions

1. 33A weakening of the global economy, including capital and credit markets, could adversely affect our business and financial results and have a material adverse effect on our liquidity and capital resources20% rewritten
2. 34Political uncertainty, an increase in trade protectionism or geopolitical conflict could have a material adverse effect on global macroeconomic activities and trade and adversely affect our business, results of operations and financial condition
3. 35International security issues and adverse developments in respect thereof such as the war in Ukraine and the conflicts in the Middle East could materially adversely affect global trade and economic activity and cause logistics disruptions or delays
4. 36We are exposed to currency exchange rate fluctuations63% rewritten
5. 37Globally, various central banks raised interest rates in 2022 and 2023 in response to high inflation rates, leading to a relatively high interest rate environment, which could dampen macroeconomic conditions and business activity and reduce demand for our products
6. 38Health epidemics or pandemics could adversely affect our business and financial results
7. 39We may incur losses as a result of unforeseen or catastrophic events, including terrorist attacks or natural disasters

Legal and Regulatory Risks

1. 40We are subject to extensive environmental regulation and we could incur substantial costs as a result of compliance with, violations of or liabilities under applicable environmental laws and regulations83% rewritten
2. 41We have incurred, and we expect to continue to incur, significant capital, operating and other expenditures as a result of complying with applicable environmental laws and regulations
3. 42We sell surplus green energy in Germany and are subject to changing energy legislation in response to high prices and energy shortages93% rewritten
4. 43In October 2022, the Council of the European Union formally adopted emergency measures to address high energy prices resulting from the war in Ukraine. In Germany, this was implemented through the adoption of a levy on surplus revenues in December 2022 on electricity producers which expired in June 2023New
5. 44Our international sales and operations are subject to applicable laws relating to trade, export controls, foreign corrupt practices and competition laws, the violation of which could adversely affect our operations
6. 45Product liability claims could adversely affect our operating results

Risks Related to Ownership of our Shares

1. 46The price of our common stock may be volatile
2. 47changes in laws and regulations
3. 48A small number of our shareholders could significantly influence our business