MERCER INTERNATIONAL INC. In this document: (i) unless the context otherwise requires, references to "we", "our", "us", the "Company" or "Mercer" meanMercer International Inc. and its subsidiaries; (ii) references to "Mercer Inc. " mean the Company excluding its subsidiaries; (iii) information is provided as ofJune 30, 2022 , unless otherwise stated; (iv) our reporting currency is dollars and references to "€" mean euros and "C$" mean Canadian dollars; (v) "ADMTs" refers to air-dried metric tonnes; (vi) "NBSK" refers to northern bleached softwood kraft; (vii) "NBHK" refers to northern bleached hardwood kraft; (viii) "MW" refers to megawatts and "MWh" refers to megawatt hours; (ix) "Mfbm" refers to thousand board feet of lumber and "MMfbm" mean million board feet of lumber; and (x) our lumber metrics are converted from cubic meters to Mfbm using a conversion ratio of 1.6 cubic meters to one Mfbm, which is the ratio commonly used in the industry.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figure.
The following discussion and analysis of our results of operations and financial condition for the three and six months endedJune 30, 2022 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year endedDecember 31, 2021 filed with theSecurities and Exchange Commission , referred to as the "SEC".
Results of Operations
General
We have two reportable operating segments:
• Pulp - consists of the manufacture, sale and distribution of pulp,
electricity and other by-products at our pulp mills.• Wood Products - consists of the manufacture, sale and distribution
of lumber, electricity and other wood residuals at the Friesau
sawmill.
Each segment offers primarily different products and requires different manufacturing processes, technology and sales and marketing.
Current Market Environment
In the second quarter of 2022, we had strong pulp sales realizations and record quarterly lumber and energy revenues. Strong pulp sales realizations were primarily driven by low customer inventory levels. Our lumber revenues benefitted from higher sales realizations in the European market which more than offset lower sales realizations in the U.S. market. Energy revenues continued to benefit from both strong demand and higher prices inGermany and in the second quarter of 2022 prices were double those of the comparable quarter of 2021. Our German mills currently sell their surplus energy at applicable market rates and two of them can also elect to sell their surplus power at stipulated rates if circumstances so warrant. As we move into the third quarter, we expect stable pulp prices as a result of low customer inventory levels and supply constraints. We expect lumber prices inthe United States to be generally stable and prices inEurope to decline from the second quarter but remain at historically attractive levels in both markets. Further, we expect continued strong energy demand and prices inGermany in the third quarter of 2022. As ofJune 30, 2022 , third party industry quoted NBSK list prices inEurope andNorth America were approximately$1,485 per ADMT and$1,805 per ADMT, respectively and NBSK net prices inChina were approximately$1,008 per ADMT. Prices forChina are net of discounts, allowances and rebates. FORM 10-Q QUARTERLY REPORT - PAGE 22 -------------------------------------------------------------------------------- Partially offsetting the higher sales realizations was the negative impact of inflationary pressures that increased our key production costs like fiber, energy and chemicals in the second quarter of 2022. We anticipate that the inflationary pressures we experienced in the first half of 2022 will continue to impact our business in the third quarter of 2022. InJuly 2022 our Stendal mill had a fire in its woodyard which did not damage the mill's operations. We have now restarted the mill and are ramping up its production. We have implemented a work around chip in-feed process which is designed to let the mill operate at about 80% of capacity. We expect the planning and installation of replacement equipment will take several months. We maintain property and business interruption insurance for the Stendal pulp mill and we expect the property damage and business interruption will be covered by such insurance, subject to customary deductibles and limits. While many countries globally have eased pandemic restrictions as a result of the global roll-out of vaccines, health risks from COVID-19 variants are ongoing. Consequently, we will maintain the necessary measures and procedures put in place to protect our people and allow us to operate our business safely and efficiently. FORM 10-Q QUARTERLY REPORT - PAGE 23
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Summary Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands, other than per share amounts)
Statement of Operations Data
Pulp segment revenues $ 460,304 $ 310,249 $ 946,235 $ 650,005
Wood products segment revenues 104,690 90,439 205,723 161,426
Corporate and other revenues 7,332 1,144 13,109 3,121
Total revenues $ 572,326 $ 401,832 $
1,165,067
Pulp segment operating income
45,853 42,314 86,332 70,291
income
Corporate and other operating loss (7,293 ) (3,816 ) (11,657 ) (6,060 )
Total operating income $ 114,031 $ 51,836 $
236,382
Pulp segment depreciation and$ 27,001 $ 27,967 $ 54,685 $ 55,013 amortization Wood products segment depreciation 3,234 3,748 6,871 7,471 and amortization Corporate and other depreciation and 793 240 1,588 438
amortization
Total depreciation and amortization
Operating EBITDA(1)$ 145,059 $ 83,791 $ 299,526 $ 165,787 Loss on early extinguishment of debt $ - $ - $ -$ (30,368 ) (2) Income tax provision$ (34,126 ) $ (10,685 ) $ (58,362 ) $ (13,383 ) Net income$ 71,372 $ 21,415 $ 160,269 $ 27,348 Net income per common share Basic$ 1.08 $ 0.32 $ 2.43 $ 0.41 Diluted$ 1.07 $ 0.32 $ 2.41 $ 0.41 Common shares outstanding at period 66,167 66,037 66,167 66,037 end
(1) The following table provides a reconciliation of net income to operating
income and Operating EBITDA for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Net income $ 71,372 $ 21,415 $ 160,269 $ 27,348
Income tax provision 34,126 10,685 58,362 13,383
Interest expense 17,332 17,130 34,796 36,149
Loss on early extinguishment of debt - - - 30,368
Other expense (income) (8,799 ) 2,606 (17,045 ) (4,383 )
Operating income 114,031 51,836 236,382 102,865
Add: Depreciation and amortization 31,028 31,955 63,144 62,922
Operating EBITDA $ 145,059 $ 83,791 $ 299,526 $ 165,787 (2) Redemption of 6.5% senior notes due 2024 (the "2024 Senior Notes") and 7.375%
senior notes due 2025 (the "2025 Senior Notes").
FORM 10-Q QUARTERLY REPORT - PAGE 24 --------------------------------------------------------------------------------
Selected Production, Sales and Other Data
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Pulp Segment
Pulp production ('000 ADMTs)
NBSK 418.3 355.1 853.8 752.0
NBHK 51.6 4.5 108.4 86.1
Annual maintenance downtime 54.2 173.1 54.2 210.9
('000 ADMTs)
Annual maintenance downtime (days) 43 117 43 144
Pulp sales ('000 ADMTs)
NBSK 405.7 330.4 910.8 749.1
NBHK 65.8 30.3 115.8 99.4
Average NBSK pulp prices ($/ADMT)(1)
Europe 1,437 1,288 1,383 1,163
China 1,008 962 954 922
North America 1,743 1,598 1,635 1,450
Average NBHK pulp prices ($/ADMT)(1)
China 815 767 742 729
North America 1,517 1,297 1,414 1,158
Average pulp sales realizations
($/ADMT)(2)
NBSK 890 830 847 739
NBHK 843 672 780 566
Energy production ('000 MWh)(3) 496.6 362.0 1,028.1 881.1
Energy sales ('000 MWh)(3) 199.3 130.9 394.0 332.0
Average energy sales realizations 186 90 186 94
($/MWh)(3)
Wood Products Segment
Lumber production (MMfbm) 112.2 116.7 227.8 234.5
Lumber sales (MMfbm) 111.0 109.3 220.9 217.5
Average lumber sales realizations 867 789 854 706
($/Mfbm)
Energy production and sales ('000 25.5 21.0 50.0 37.3
MWh)
Average energy sales realizations 198 128 205 129
($/MWh)
Average Spot Currency Exchange Rates $ / €(4) 1.0646 1.2050 1.0929 1.2048 $ /C$(4) 0.7836 0.8142 0.7866 0.8026
(1) Source: RISI pricing report.
are net prices which include discounts, allowances and rebates.
(2) Sales realizations after customer discounts, rebates and other selling
concessions. Incorporates the effect of pulp price variations occurring
between the order and shipment dates.
(3) Does not include our 50% joint venture interest in the Cariboo mill, which is
accounted for using the equity method.
(4)
period.
Consolidated - Three Months Ended
Total revenues in the second quarter of 2022 increased by approximately 42% to$572.3 million from$401.8 million in the same quarter of 2021 primarily due to higher pulp sales volumes and higher pulp, energy and lumber sales realizations. In the second quarter of 2022, our energy and chemical revenues increased to$47.8 million from$16.9 million in the same quarter of 2021 primarily as a result of higher energy prices inGermany , which were double those in the same quarter of 2021. FORM 10-Q QUARTERLY REPORT - PAGE 25
-------------------------------------------------------------------------------- Costs and expenses in the second quarter of 2022 increased by approximately 31% to$458.3 million from$350.0 million in the second quarter of 2021 primarily due to higher pulp sales volumes and driven by inflationary pressure on our key production costs such as fiber, energy and chemicals and also freight costs. Such cost increases were partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.
In the second quarter of 2022, cost of sales depreciation and amortization
decreased to
Selling, general and administrative expenses increased to$23.6 million in the second quarter of 2022 from$20.2 million in the same quarter of 2021 primarily due to higher employee compensation. In the second quarter of 2022, our operating income increased to$114.0 million from$51.8 million in the same quarter of 2021 primarily due to higher sales realizations, the positive impact of a stronger dollar and higher pulp sales volumes partially offset by higher per unit fiber and other production costs.
Interest expense in the second quarter of 2022 modestly increased to
In the second quarter of 2022, other income was$8.8 million compared to an expense of$2.6 million in the same quarter of 2021. Other income in the second quarter of 2022 is primarily due to foreign exchange gains, caused by a stronger dollar, on dollar denominated cash balances held at our operations. Other expense in the same quarter of the prior year is primarily due to foreign exchange losses, caused by a weaker dollar, on dollar denominated cash balances held at our operations.
During the second quarter of 2022, we had an income tax provision of
For the second quarter of 2022, our net income was
In the second quarter of 2022, Operating EBITDA increased by approximately 73% to$145.1 million from$83.8 million in the same quarter of 2021 primarily due to higher sales realizations and pulp sales volumes and the positive impact of a stronger dollar partially offset by higher per unit fiber costs and other production costs.
Operating Results by Business Segment
None of the income or loss items following operating income in our Interim Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management.
Pulp Segment - Three Months Ended
Selected Financial Information
Three Months Ended June 30,
2022 2021
(in thousands)
Pulp revenues $ 418,579 $ 297,191 Energy and chemical revenues
$ 75,471 $ 13,338
Pulp revenues in the second quarter of 2022 increased by approximately 41% to
FORM 10-Q QUARTERLY REPORT - PAGE 26 -------------------------------------------------------------------------------- Energy and chemical revenues increased to a record$41.7 million in the second quarter of 2022 from$13.1 million in the same quarter of 2021 primarily due to higher sales realizations. During the second quarter of 2022, we benefitted from strong energy demand and higher energy prices inGermany . Total pulp production increased by approximately 31% to 469,845 ADMTs in the second quarter of 2022 from 359,553 ADMTs in the same quarter of 2021 primarily due to lower annual maintenance downtime. In the second quarter of 2022, our pulp mills had 43 days of annual maintenance downtime (approximately 54,200 ADMTs) and an additional six days (approximately 8,400 ADMTs) at our Celgar mill due to a slower than planned start up. In the comparative quarter of 2021, we had 117 days of maintenance downtime (approximately 173,100 ADMTs). In the third quarter of 2022, our pulp mills currently have scheduled 14 days of planned annual maintenance downtime (approximately 14,300 ADMTs).
We estimate that annual maintenance downtime in the current quarter of 2022
adversely impacted our operating income by approximately
Total pulp sales volumes increased by approximately 31% to 471,537 ADMTs in the second quarter of 2022 from 360,768 ADMTs in the same quarter of 2021 primarily due to higher production. In the second quarter of 2022, third party industry quoted average list prices for NBSK pulp increased from the same quarter of 2021 primarily as a result of low customer inventory levels. Average third party industry quoted list prices for NBSK pulp inEurope andNorth America were approximately$1,437 per ADMT and$1,743 per ADMT, respectively, in the second quarter of 2022 compared to approximately$1,288 per ADMT and$1,598 per ADMT, respectively, in the same quarter of 2021. Average third party industry quoted NBSK net prices inChina were approximately$1,008 per ADMT in the second quarter of 2022 compared to approximately$962 per ADMT in the same quarter of 2021.
Prices quoted for
Our average NBSK pulp sales realizations increased by approximately 7% to$890 per ADMT in the second quarter of 2022 from approximately$830 per ADMT in the same quarter of 2021. In the second quarter of 2022 compared to the same quarter of 2021, primarily as a result of the effect of the stronger dollar on our euro and Canadian dollar denominated costs and expenses, we had a positive impact of approximately$34.9 million in operating income due to foreign exchange. Costs and expenses in the second quarter of 2022 increased by approximately 30% to$384.8 million from$297.0 million in the second quarter of 2021 primarily due to higher pulp sales volumes, per unit fiber costs and energy, chemical and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and in the second quarter of 2022, we received German regulatory approval to reverse a wastewater fee accrual of$13.3 million as a result of completing certain capital projects. In the second quarter of 2022 per unit fiber costs increased by approximately 32% from the same quarter of 2021 primarily due to higher per unit fiber costs for our German mills as a result of higher demand from other wood consumers such as heating pellet manufacturers. For our Canadian mills, per unit fiber costs were flat as demand remained strong in the mills' fiber baskets. We currently expect per unit fiber costs to be flat in the third quarter of 2022 with a modest increase inGermany and a modest decrease inCanada .
Transportation costs increased by approximately 73% to
In the second quarter of 2022, depreciation and amortization decreased to
FORM 10-Q QUARTERLY REPORT - PAGE 27 -------------------------------------------------------------------------------- In the second quarter of 2022, pulp segment operating income increased to$75.5 million from$13.3 million in the same quarter of 2021 primarily due to higher sales realizations and sales volumes and the positive impact of a stronger dollar, partially offset by higher per unit fiber costs and other production costs.
Wood Products Segment - Three Months Ended
Selected Financial Information
Three Months Ended June 30,
2022 2021
(in thousands)
Lumber revenues $ 96,268 $ 86,285
Energy revenues $ 5,055 $ 2,692
Wood residual revenues
$ 45,853 $ 42,314 In the second quarter of 2022, lumber revenues increased by approximately 12% to a record$96.3 million from$86.3 million in the same quarter of 2021 primarily due to higher sales realizations. In the second quarter of 2022, both European andU.S. demand was strong. The U.S. market accounted for approximately 58% of our lumber revenues and approximately 46% of our lumber sales volumes. The majority of the balance of our lumber sales were toEurope . Energy and wood residual revenues in the second quarter of 2022 increased to$8.4 million from$4.2 million in the same quarter of 2021 primarily due to higher sales realizations. In the second quarter of 2022, increased wood residual revenues were due to higher per unit fiber prices and increased energy sales were driven by strong demand and higher energy prices inGermany .
Lumber production decreased marginally to 112.2 MMfbm in the second quarter of 2022 from 116.7 MMfbm in the same quarter of 2021.
Lumber sales volumes were generally flat at 111.0 MMfbm in the second quarter of 2022 compared to 109.3 MMfbm in the same quarter of 2021.
Average lumber sales realizations increased by approximately 10% to$867 per Mfbm in the second quarter of 2022 from approximately$789 per Mfbm in the same quarter of 2021 as we benefitted from strong sales to the U.S. market and its high prices in the first part of the quarter. AlthoughU.S. lumber pricing decreased in the later part of the current quarter due to concerns of rising interest rates and inflationary pressures, prices were still at historically attractive levels. European lumber pricing increased in the current quarter due to steady demand with limited supply. Fiber costs were approximately 80% of our lumber cash production costs in the second quarter of 2022. In the second quarter of 2022 per unit fiber costs increased by approximately 37% from the same quarter of 2021 as a result of both strong demand for sawlogs and the use of more green logs as producers have largely worked through the availability of lower cost beetle damaged timber. We currently expect per unit fiber costs to increase in the third quarter of 2022 due to continued strong demand. In the second quarter of 2022, depreciation and amortization decreased to$3.2 million compared to$3.7 million in the same quarter of 2021 due to the positive impact of a stronger dollar. Transportation costs in the second quarter of 2022 increased by approximately 45% to$12.0 million from$8.3 million in the same quarter of 2021 primarily due to higher freight rates and a higher proportion of sales to the U.S. market. In the second quarter of 2022, our wood products segment operating income increased approximately 9% to a record$45.9 million from$42.3 million in the same quarter of 2021 primarily due to higher sales realizations partially offset by higher per unit fiber costs. FORM 10-Q QUARTERLY REPORT - PAGE 28 --------------------------------------------------------------------------------
Consolidated Six Months Ended
Total revenues for the first half of 2022 increased by approximately 43% to
Costs and expenses in the first half of 2022 increased by approximately 30% to$928.7 million from$711.7 million in the first half of 2021 primarily due to higher pulp sales volumes, per unit fiber costs and energy, freight and chemical costs partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.
In the first half of 2022, cost of sales depreciation and amortization modestly
increased to
Selling, general and administrative expenses increased by approximately 12% to$45.8 million in the first half of 2022 from$40.8 million in the first half of 2021 primarily due to higher employee compensation. In the first half of 2022, our operating income increased to$236.4 million from$102.9 million in the same period of 2021 primarily due to higher sales realizations and pulp sales volumes and the positive impact of a stronger dollar partially offset by higher per unit fiber costs and other production costs. InJanuary 2021 , we refinanced (the "Refinancing") a significant portion of our debt by issuing$875.0 million of 5.125% senior notes due 2029 (the "2029 Senior Notes") and using the proceeds to redeem and/or repurchase all of our 6.5% 2024 Senior Notes and our 7.375% 2025 Senior Notes at a cost including premium of$824.6 million (the "Redemption"). We recorded a loss on such Redemption of$30.4 million (being$0.46 per share). Interest expense in the first half of 2022 decreased to$34.8 million from$36.1 million in the same period of 2021 primarily as a result of a lower interest rate for our 2029 Senior Notes. In the first half of 2022, other income increased to$17.0 million from$4.4 million in the same period of 2021. Other income in both periods is primarily due to foreign exchange gains, caused by a stronger dollar, on dollar denominated cash balances held at our operations. During the first half of 2022, the provision for income taxes was$58.4 million or an effective tax rate of 27%. In the same period of 2021, the provision for income taxes was$13.4 million or an effective tax rate of 33%.
For the first half of 2022, our net income was
In the first half of 2022, Operating EBITDA increased by approximately 81% to$299.5 million from$165.8 million in the same period of 2021 primarily due to higher sales realizations and pulp sales volumes and the positive impact of a stronger dollar partially offset by higher per unit fiber costs and other production costs.
Operating Results by Business Segment
None of the income or loss items following operating income in our Interim Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management.
FORM 10-Q QUARTERLY REPORT - PAGE 29 --------------------------------------------------------------------------------
Pulp Segment Six Months Ended
Selected Financial Information
Six Months Ended June 30,
2022 2021
(in thousands)
Pulp revenues $ 865,490 $ 614,773 Energy and chemical revenues
$ 161,707 $ 38,634 Pulp revenues in the first half of 2022 increased by approximately 41% to$865.5 million from$614.8 million in the same period of 2021 due to a higher sales volume and higher sales realizations. Energy and chemical revenues increased to$80.7 million in the first half of 2022 from$35.2 million in the same period of 2021 primarily due to higher sales realizations and sales volumes. Pulp production increased by approximately 15% to 962,133 ADMTs in the first half of 2022 from 838,052 ADMTs in the same period of 2021 primarily due to lower annual maintenance downtime at our pulp mills. In the first half of 2022, our pulp mills had 43 days of annual maintenance downtime (approximately 54,200 ADMTs) and an additional six days (approximately 8,400 ADMTs) at our Celgar mill due to a slower than planned start up. In the first half of 2021, our pulp mills had 144 days of annual maintenance downtime (approximately 210,900 ADMTs). We estimate that annual maintenance downtime in the first half of 2022 adversely impacted our operating income by approximately$47.7 million , comprised of approximately$35.4 million in direct out-of-pocket expenses and the balance in reduced production.
Pulp sales volumes increased by approximately 21% to 1,026,572 ADMTs in the first half of 2022 from 848,446 ADMTs in the same period of 2021 primarily due to higher production.
In the first half of 2022, prices for NBSK pulp increased from the same period of 2021, largely as a result of low customer inventory levels. Average list prices for NBSK pulp inEurope andNorth America were approximately$1,383 per ADMT and$1,635 per ADMT, respectively in the first half of 2022 compared to approximately$1,163 per ADMT and$1,450 per ADMT, respectively, in the same period of 2021. Average NBSK net prices inChina were approximately$954 per ADMT in the first half of 2022 compared to approximately$922 per ADMT in the first half of 2021.
Average NBSK pulp sales realizations increased by approximately 15% to
In the first half of 2022, primarily as a result of the effect of the
strengthening dollar on our euro and Canadian dollar denominated costs and
expenses, we recorded a positive impact of approximately
Costs and expenses in the first half of 2022 increased by approximately 28% to$784.5 million from$611.5 million in the first half of 2021 primarily due to higher pulp sales volumes, per unit fiber costs and energy, chemical and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and in the first half of 2022, we received German regulatory approval to reverse a wastewater fee accrual of$13.3 million as a result of completing certain capital projects.
On average, in the first half of 2022 overall per unit fiber costs increased by approximately 28% from the same period of 2021 due to strong demand in our mills' fiber baskets.
Transportation costs for our pulp segment increased by approximately 49% to$91.1 million in the first half of 2022 from$61.1 million in the same period of 2021 primarily as a result of the increased use of higher cost trucking, higher freight rates and higher sales volumes. FORM 10-Q QUARTERLY REPORT - PAGE 30 --------------------------------------------------------------------------------
In the first half of 2022, depreciation and amortization modestly decreased to
In the first half of 2022, pulp segment operating income increased to$161.7 million from$38.6 million in the same period of 2021 as higher sales realizations, higher sales volumes and the positive impact of a stronger dollar were partially offset by higher per unit fiber costs and other production costs.
Wood Products Segment Six Months Ended
Selected Financial Information
Six Months Ended June 30,
2022 2021
(in thousands)
Lumber revenues $ 188,634 $ 153,596
Energy revenues $ 10,232 $ 4,806
Wood residual revenues
$ 86,332 $ 70,291 In the first half of 2022, lumber revenues increased to$188.6 million from$153.6 million in the same period of 2021 primarily due to higher sales realizations. In the first half of 2022, both theU.S. and European markets were strong. The U.S. market accounted for approximately 59% of our lumber revenues and approximately 44% of our lumber sales volumes, while the majority of remaining sales were toEurope . Energy and wood residual revenues increased to$17.1 million in the first half of 2022 from$7.8 million in the same period of 2021 primarily due to higher sales realizations.
Lumber production modestly decreased by approximately 3% to 227.8 MMfbm in the first half of 2022 from 234.5 MMfbm in the same period of 2021.
Average lumber sales realizations increased to$854 per Mfbm in the first half of 2022 from approximately$706 per Mfbm in the same period of 2021 primarily due to overall higher average pricing in both the European andU.S. markets. European lumber pricing increased due to steady demand with limited supply.U.S. lumber pricing increased due to strong demand at the start of the year from the housing and renovation markets before declining in the later part of the second quarter of 2022. Fiber costs were approximately 80% of our lumber cash production costs in the first half of 2022. In the comparative period of 2021, per unit fiber costs were lower as a result of a large supply of beetle damaged wood. As producers have worked through such wood, more green wood is being harvested. In the first half of 2022 per unit fiber costs increased by approximately 46% from the same period of 2021 as a result of using more green wood and strong demand for sawlogs.
In the first half of 2022, depreciation and amortization decreased to
Transportation costs for our wood products segment in the first half of 2022 increased by approximately 42% to$22.9 million from$16.1 million in the same period of 2021 primarily due to higher freight rates and a higher proportion of sales to the U.S. market. In the first half of 2022, our wood products segment operating income increased approximately 23% to$86.3 million compared to$70.3 million in the same period of 2021 primarily due to higher sales realizations partially offset by higher per unit fiber costs and higher transportation costs.
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