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 ofSeptember 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 nine months endedSeptember 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
OnSeptember 30, 2022 , we acquired all of the issued and outstanding shares of the parent company ofHolzindustrie Torgau KG ("HIT") for cash consideration of €270.0 million ($263.2 million ). Pursuant to the acquisition, we acquired 100% ownership of a timber processing and value-add pallet production facility inTorgau, Germany and a wood processing facility in Dahlen,Germany that produces garden products. The acquisition of HIT expands our solid wood business and further diversifies our product offerings.
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.• Solid Wood - consists of the manufacture, sale and distribution of
solid wood products, electricity and other wood residuals at the
Friesau sawmill, the HIT facilities and our cross-laminated timber
("CLT") facility.
Each segment offers primarily different products and requires different
manufacturing processes, technology and sales and marketing. Historically the
CLT facility was not included in the solid wood segment, but concurrent with the
acquisition of HIT, we changed how we manage our operations and now include the
CLT facility within our solid wood segment, which has been reflected
retrospectively.
Current Market Environment
In the third quarter of 2022, we had strong pulp sales realizations driven by low customer inventory levels. Our lumber sales realizations significantly decreased in both theU.S. and European markets in the third quarter of 2022 due to higher interest rates, concerns over rising inflation and a weaker economic outlook.
Our energy revenues benefitted from both strong demand and higher prices in
FORM 10-Q QUARTERLY REPORT - PAGE 23 -------------------------------------------------------------------------------- The negative impact of increased key production costs such as fiber, energy and chemicals in the third quarter is expected to continue in the fourth quarter of 2022. In particular fiber costs inGermany increased because of materially higher demand for wood for energy purposes. Our production costs are primarily incurred in euros and Canadian dollars. However, our pulp and a material portion of our lumber sales are priced in dollars. During the third quarter of 2022, the dollar continued to strengthen against the euro and the Canadian dollar. The positive impact of a strengthening dollar on our euro and Canadian dollar denominated costs and expenses partially offset the negative impact of such higher costs. The strengthening of the dollar increased our operating income by approximately$13.8 million when compared to the second quarter of 2022 and increased our operating income by approximately$37.0 million when compared to the third quarter of 2021.
As of
Looking into the fourth quarter, we currently expect modestly declining pulp prices as a result of lower demand from our customers due to inflationary pressures negatively impacting paper demand. We expect lumber prices to be generally consistent with the third quarter due to continued economic uncertainty caused by inflation and higher interest rates.
We currently expect continued strong energy demand and prices inGermany in the fourth quarter of 2022. In response to restricted energy supply and price increases primarily resulting from the war inUkraine , in October, 2022, theCouncil of the EU implemented by regulation temporary measures which include a mandatory cap on market revenues at €180 per MWh for intra-marginal generators such as renewables, nuclear and lignite producers. The cap applies to both electricity traded in the market as well as bilateral trading. This cap will be in effect fromDecember 1, 2022 toJune 30, 2023 . FORM 10-Q QUARTERLY REPORT - PAGE 24 --------------------------------------------------------------------------------
Summary Financial Highlights
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands, other than per share amounts)
Statement of Operations Data
Pulp segment revenues $ 456,657 $ 396,743 $ 1,402,892 $ 1,046,748
Solid wood segment revenues 74,266 70,723 290,048 232,149
Corporate and other revenues 1,891 2,280 4,941 5,401
Total revenues $ 532,814 $ 469,746 $ 1,697,881 $ 1,284,298
Pulp segment operating income $ 109,985 $ 99,918 $ 271,692 $ 138,552
Solid wood segment operating income 2,896 17,949 84,923 88,240
Corporate and other operating loss (4,158 ) (4,112 ) (11,510 ) (10,172 )
Total operating income $ 108,723 $ 113,755 $
345,105
Pulp segment depreciation and$ 28,174 $ 29,982 $ 82,859 $ 84,995 amortization Solid wood segment depreciation and 3,733 4,025 11,719 11,496 amortization Corporate and other depreciation and 237 308 710 746
amortization
Total depreciation and amortization
Operating EBITDA(1)$ 140,867 $ 148,070 $ 440,393 $ 313,857 Loss on early extinguishment of debt $ - $ - $ -$ (30,368 ) (2) Income tax provision$ (31,294 ) $ (32,490 ) $ (89,656 ) $ (45,873 ) Net income$ 66,746 $ 69,118 $ 227,015 $ 96,466 Net income per common share Basic$ 1.01 $ 1.05 $ 3.43 $ 1.46 Diluted$ 1.00 $ 1.04 $ 3.41 $ 1.46 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands)
Net income $ 66,746 $ 69,118 $ 227,015 $ 96,466
Income tax provision 31,294 32,490 89,656 45,873
Interest expense 17,935 16,882 52,731 53,031
Loss on early extinguishment of debt - - - 30,368
Other income (7,252 ) (4,735 ) (24,297 ) (9,118 )
Operating income 108,723 113,755 345,105 216,620
Add: Depreciation and amortization 32,144 34,315 95,288 97,237
Operating EBITDA $ 140,867 $ 148,070 $ 440,393 $ 313,857 (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 25 --------------------------------------------------------------------------------
Selected Production, Sales and Other Data
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Pulp Segment
Pulp production ('000 ADMTs)
NBSK 362.9 443.0 1,216.7 1,195.0
NBHK 82.1 57.8 190.4 143.9
Annual maintenance downtime 17.3 42.8 71.5 253.7
('000 ADMTs)
Annual maintenance downtime (days) 17 44 60 188
Pulp sales ('000 ADMTs)
NBSK 356.6 402.2 1,267.4 1,151.3
NBHK 69.3 45.7 185.0 145.1
Average NBSK pulp prices ($/ADMT)(1)
Europe 1,500 1,345 1,422 1,223
China 969 832 959 892
North America 1,800 1,542 1,690 1,481
Average NBHK pulp prices ($/ADMT)(1)
China 855 623 779 694
North America 1,620 1,320 1,483 1,212
Average pulp sales realizations
($/ADMT)(2)
NBSK 911 847 865 777
NBHK 990 684 858 604
Energy production ('000 MWh)(3) 484.2 464.5 1,512.4 1,345.6
Energy sales ('000 MWh)(3) 174.3 185.8 568.3 517.8
Average energy sales realizations 339 114 233 101
($/MWh)(3)
Solid Wood Segment
Lumber production (MMfbm) 97.1 102.1 324.8 336.6
Lumber sales (MMfbm) 89.8 97.7 310.7 315.3
Average lumber sales realizations 605 692 782 702
($/Mfbm)
Energy production and sales ('000 20.6 14.1 70.6 51.4
MWh)
Average energy sales realizations 394 128 260 128
($/MWh)
Average Spot Currency Exchange Rates $ / €(4) 1.0066 1.1784 1.0636 1.1958 $ /C$(4) 0.7659 0.7937 0.7796 0.7996
(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 third quarter of 2022 increased by approximately 13% to$532.8 million from$469.7 million in the same quarter of 2021 primarily due to higher energy and pulp sales realizations partially offset by lower sales volumes and lumber sales realizations. In the third quarter of 2022, energy and chemical revenues increased by approximately 169% to$71.2 million from$26.5 million in the same quarter of 2021 primarily as a result of higher energy prices inGermany , which were more than triple those in the same quarter of 2021. In the third quarter of 2022, our average energy sales realizations inGermany were approximately €388 per MWh compared to about €104 per MWh in the comparative quarter of 2021. FORM 10-Q QUARTERLY REPORT - PAGE 26 -------------------------------------------------------------------------------- Costs and expenses in the third quarter of 2022 increased by approximately 19% to$424.1 million from$356.0 million in the third quarter of 2021 driven by higher key production costs, such as fiber, chemicals and energy, and higher 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 third quarter of 2022, cost of sales depreciation and amortization
decreased to
Selling, general and administrative expenses increased to$24.3 million in the third quarter of 2022 from$19.5 million in the same quarter of 2021 primarily due to costs incurred with respect to the HIT acquisition and higher employee costs. In the third quarter of 2022, operating income decreased by approximately 4% to$108.7 million from$113.8 million in the same quarter of 2021 primarily due to higher per unit fiber costs, higher other production and freight costs and lower sales volumes partially offset by higher energy and pulp sales realizations and the positive impact of a stronger dollar.
Interest expense in the third quarter of 2022 increased to
In the third quarter of 2022, other income was$7.3 million compared to$4.7 million in the same quarter of 2021. Other income in both periods is primarily due to foreign exchange gains, caused by a stronger dollar, on dollar denominated cash held at our operations.
During the third quarter of 2022, we had an income tax provision of
For the third quarter of 2022, net income was$66.7 million , or$1.01 per basic share and$1.00 per diluted share, compared to net income of$69.1 million , or$1.05 per basic share and$1.04 per diluted share in the same quarter of the prior year. In the third quarter of 2022, Operating EBITDA decreased by approximately 5% to$140.9 million from$148.1 million in the same quarter of 2021 primarily due to higher per unit fiber costs, higher other production and freight costs and lower sales volumes partially offset by higher energy and pulp sales realizations and the positive impact of a stronger dollar.
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 September 30,
2022 2021
(in thousands)
Pulp revenues $ 395,459 $ 374,287 Energy and chemical revenues $ 61,198 $ 22,456 Depreciation and amortization $ 28,174 $ 29,982 Operating income
$ 109,985 $ 99,918
Pulp revenues in the third quarter of 2022 increased by approximately 6% to
FORM 10-Q QUARTERLY REPORT - PAGE 27 -------------------------------------------------------------------------------- Energy and chemical revenues increased to a record$61.2 million in the third quarter of 2022 from$22.5 million in the same quarter of 2021 due to higher sales realizations. During the third quarter of 2022, we benefitted from strong energy demand and higher energy prices inGermany . Total pulp production decreased by approximately 11% to 444,970 ADMTs in the third quarter of 2022 from 500,866 ADMTs in the same quarter of 2021 primarily due to lower production at our Stendal mill which had a fire in its woodyard. The fire resulted in the mill being down for most of July and after its restart it has operated at approximately 90% of its capacity. Total lost production in the third quarter of 2022 due to the fire was approximately 50,800 ADMTs. We currently expect to install replacement equipment at our Stendal mill in the fourth quarter of 2022 and first quarter of 2023. 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. In the third quarter of 2022, our pulp mills had 17 days of annual maintenance downtime (approximately 17,300 ADMTs). In the comparative quarter of 2021, we had 44 days of maintenance downtime (approximately 42,800 ADMTs). In the fourth quarter of 2022, our pulp mills currently have scheduled 14 days of planned annual maintenance downtime (approximately 30,000 ADMTs).
We estimate that annual maintenance downtime in the third quarter of 2022
adversely impacted our operating income by approximately
Total pulp sales volumes decreased by approximately 5% to 425,854 ADMTs in the third quarter of 2022 from 447,960 ADMTs in the same quarter of 2021 primarily due to lower production. In the third 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$1,500 per ADMT and$1,800 per ADMT, respectively, in the third quarter of 2022 compared to approximately$1,345 per ADMT and$1,542 per ADMT, respectively, in the same quarter of 2021. Average third party industry quoted NBSK net prices inChina were approximately$969 per ADMT in the third quarter of 2022 compared to approximately$832 per ADMT in the same quarter of 2021.
Prices quoted for
Our average NBSK pulp sales realizations increased by approximately 8% to$911 per ADMT in the third quarter of 2022 from approximately$847 per ADMT in the same quarter of 2021.
In the third quarter of 2022 compared to the same quarter of 2021, we had a
positive impact of approximately
Costs and expenses in the third quarter of 2022 increased by approximately 17% to$346.7 million from$296.9 million in the third quarter of 2021 primarily due to higher per unit fiber, chemical, energy and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and lower pulp sales volumes. In the third quarter of 2022 per unit fiber costs increased by approximately 32% from the same quarter of 2021 due to higher per unit fiber costs for all of our mills. Our German mills had higher per unit fiber costs as a result of strong demand from other wood consumers such as heating pellet manufacturers. For our Canadian mills, per unit fiber costs increased due to strong demand in the mills' fiber baskets and for our Celgar mill a decrease in the availability of wood chips due to regional sawmill curtailments. We currently expect per unit fiber costs to increase in the fourth quarter of 2022 with an increase inGermany due to continued strong demand for wood for energy purposes and generally flat per unit fiber costs inCanada . FORM 10-Q QUARTERLY REPORT - PAGE 28 -------------------------------------------------------------------------------- Transportation costs increased by approximately 28% to$42.7 million in the third quarter of 2022 from$33.4 million in the same quarter of 2021 primarily as a result of higher freight rates partially offset by the positive impact of a stronger dollar and lower pulp sales volumes.
In the third quarter of 2022, depreciation and amortization decreased to
In the third quarter of 2022, pulp segment operating income increased by approximately 10% to$110.0 million from$99.9 million in the same quarter of 2021 primarily due to higher sales realizations and the positive impact of a stronger dollar, partially offset by higher per unit fiber costs, higher other production and freight costs and lower sales volumes.
Solid Wood Segment - Three Months Ended
Selected Financial Information
Three Months Ended September 30,
2022 2021
(in thousands)
Lumber revenues $ 61,444 $ 67,605
Energy revenues $ 8,111 $ 1,801Wood residual revenues $ 4,711 $ 1,317 Depreciation and amortization $ 3,733 $ 4,025 Operating income
$ 2,896 $ 17,949
In the third quarter of 2022, lumber revenues decreased by approximately 9% to
$61.4 million from $67.6 million in the same quarter of 2021 primarily due to
lower sales volumes and sales realizations. In the third quarter of 2022,
European realized lumber prices were lower due to weaker demand while U.S.
pricing was generally flat compared to the same quarter of 2021. The U.S. market
accounted for approximately 54% of our lumber revenues and approximately 47% of
our lumber sales volumes. The majority of the balance of our lumber sales were
to Europe .
Energy and wood residual revenues in the third quarter of 2022 increased to
$12.8 million from $3.1 million in the same quarter of 2021 primarily due to
higher sales realizations. In the third quarter of 2022, increased energy sales
were driven by strong demand and higher energy prices in Germany and increased
wood residual sales realizations are due to the correlation to the higher per
unit fiber costs.
In the third quarter of 2022, lumber production decreased by approximately 5% to 97.1 MMfbm from 102.1 MMfbm in the same quarter of 2021 due to scheduled maintenance.
Lumber sales volumes decreased by approximately 8% to 89.8 MMfbm in the third quarter of 2022 from 97.7 MMfbm in the same quarter of 2021 primarily due to lower production. Average lumber sales realizations decreased by approximately 13% to$605 per Mfbm in the third quarter of 2022 from approximately$692 per Mfbm in the same quarter of 2021 due to lower demand in the European market. Demand in both the European andU.S. markets is being negatively impacted by concerns over rising interest rates, inflationary pressures and a weaker economic outlook. Fiber costs were approximately 70% of our lumber cash production costs in the third quarter of 2022. In the third quarter of 2022, per unit fiber costs modestly increased compared to the same quarter of 2021. Higher per unit fiber costs in euros due to strong fiber demand inGermany were partially offset by the positive impact of a stronger dollar on our euro denominated fiber costs. We currently expect per unit fiber costs to modestly increase in the fourth quarter of 2022. In the third quarter of 2022, depreciation and amortization decreased to$3.7 million compared to$4.0 million in the same quarter of 2021 due to the positive impact of a stronger dollar. FORM 10-Q QUARTERLY REPORT - PAGE 29
-------------------------------------------------------------------------------- Transportation costs in the third quarter of 2022 increased by approximately 20% to$9.5 million from$7.9 million in the same quarter of 2021 primarily due to higher freight rates. In the third quarter of 2022, operating income decreased by approximately 84% to$2.9 million from$17.9 million in the same quarter of 2021 primarily due to higher per unit fiber costs and other production costs, lower lumber sales realizations and sales volumes partially offset by higher energy and wood residuals sales realizations.
Consolidated Nine Months Ended
Total revenues for the nine months endedSeptember 30, 2022 increased by approximately 32% to$1,697.9 million from$1,284.3 million in the nine months endedSeptember 30, 2021 primarily due to higher sales realizations and higher pulp sales volumes. In the nine months endedSeptember 30, 2022 , energy and chemical revenues increased by approximately 137% to$165.2 million from$69.7 million in the same period of 2021 primarily as a result of higher energy prices inGermany , which were more than double those in the same period of 2021. In the nine months endedSeptember 30, 2022 , our average energy sales realizations inGermany were approximately €241 per MWh compared to about €89 per MWh in the comparative period of 2021. Costs and expenses in the nine months endedSeptember 30, 2022 increased by approximately 27% to$1,352.8 million from$1,067.7 million in the nine months endedSeptember 30, 2021 primarily due to higher per unit fiber, freight, energy and chemical costs and a higher pulp sales volume partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.
In the nine months ended
Selling, general and administrative expenses increased by approximately 16% to$70.1 million in the nine months endedSeptember 30, 2022 from$60.3 million in the nine months endedSeptember 30, 2021 primarily due to higher employee costs and costs related to the HIT acquisition. In the nine months endedSeptember 30, 2022 , operating income increased by approximately 59% to$345.1 million from$216.6 million in the nine months endedSeptember 30, 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 costs and higher other production and freight 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 used 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 nine months endedSeptember 30, 2022 modestly decreased to$52.7 million from$53.0 million in the nine months endedSeptember 30, 2021 primarily as a result of a lower interest rate for our 2029 Senior Notes partially offset by interest costs on higher borrowings from our revolving credit facilities. In the nine months endedSeptember 30, 2022 , other income increased to$24.3 million from$9.1 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 held at our operations. During the nine months endedSeptember 30, 2022 , the provision for income taxes was$89.7 million or an effective tax rate of 28%. In the same period of 2021, the provision for income taxes was$45.9 million or an effective tax rate of 32%. For the nine months endedSeptember 30, 2022 , net income was$227.0 million , or$3.43 per basic share and$3.41 per diluted share compared to$96.5 million , or$1.46 per share, in the same period of 2021. FORM 10-Q QUARTERLY REPORT - PAGE 30 -------------------------------------------------------------------------------- In the nine months endedSeptember 30, 2022 , Operating EBITDA increased by approximately 40% to$440.4 million from$313.9 million in the same period 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 costs and higher other production and freight 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 Nine Months Ended
Selected Financial Information
Nine Months Ended September 30,
2022 2021
(in thousands)
Pulp revenues $ 1,260,949 $ 989,060 Energy and chemical revenues $ 141,943
$ 271,692 $ 138,552 Pulp revenues in the nine months ended
Energy and chemical revenues increased by approximately 146% to
Pulp production increased by approximately 5% to 1,407,103 ADMTs in the nine months endedSeptember 30, 2022 from 1,338,918 ADMTs in the same period of 2021 primarily due to lower annual maintenance downtime at our pulp mills. In the nine months endedSeptember 30, 2022 , our pulp mills had 60 days of annual maintenance downtime (approximately 71,500 ADMTs) and an additional six days (approximately 8,400 ADMTs) at our Celgar mill due to a slower than planned start up. InJuly 2022 , our Stendal mill had a fire in its woodyard that resulted in the mill being down for most of July and after its restart has operated at approximately 90% of its capacity. Total lost production due to the fire in the nine months endedSeptember 30, 2022 was approximately 50,800 ADMTs. In the nine months endedSeptember 30, 2021 , our pulp mills had 188 days of annual maintenance downtime (approximately 253,700 ADMTs). We estimate that annual maintenance downtime in the nine months endedSeptember 30, 2022 adversely impacted our operating income by approximately$63.6 million , comprised of approximately$43.7 million in direct out-of-pocket expenses and the balance in reduced production. Pulp sales volumes increased by approximately 12% to 1,452,426 ADMTs in the nine months endedSeptember 30, 2022 from 1,296,406 ADMTs in the same period of 2021 primarily due to higher production and strong demand. In the nine months endedSeptember 30, 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$1,422 per ADMT and$1,690 per ADMT, respectively in the nine months endedSeptember 30, 2022 compared to approximately$1,223 per ADMT and$1,481 per ADMT, respectively, in the same period of 2021. Average NBSK net prices inChina were approximately$959 per ADMT in the nine months endedSeptember 30, 2022 compared to approximately$892 per ADMT in the nine months endedSeptember 30, 2021 . Average NBSK pulp sales realizations increased by approximately 11% to$865 per ADMT in the nine months endedSeptember 30, 2022 from approximately$777 per ADMT in the same period of 2021. FORM 10-Q QUARTERLY REPORT - PAGE 31 -------------------------------------------------------------------------------- In the nine months endedSeptember 30, 2022 , we recorded a positive impact of approximately$78.4 million in operating income due to foreign exchange compared to the same period of 2021, primarily as a result of the effect of the strongerU.S. dollar on costs and expenses. Costs and expenses in the nine months endedSeptember 30, 2022 increased by approximately 25% to$1,131.2 million from$908.4 million in the nine months endedSeptember 30, 2021 primarily due to higher per unit fiber, energy, chemical and freight costs and a higher pulp sales volume. The higher costs were partially offset by the positive impact of a stronger dollar and in the nine months endedSeptember 30, 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 nine months endedSeptember 30, 2022 overall per unit fiber costs increased by approximately 29% from the same period of 2021 due to strong demand in our mills' fiber baskets. Transportation costs for our pulp segment increased by approximately 42% to$133.8 million in the nine months endedSeptember 30, 2022 from$94.5 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.
In the nine months ended
In the nine months endedSeptember 30, 2022 , pulp segment operating income increased to$271.7 million from$138.6 million in the same period of 2021 primarily due to higher sales realizations, the positive impact of a stronger dollar and higher sales volumes being only partially offset by higher per unit fiber costs and higher other production and freight costs.
Solid Wood Segment Nine Months Ended
Selected Financial Information
Nine Months Ended September 30,
2022 2021
(in thousands)
Lumber revenues $ 260,137 $ 221,201
Energy revenues $ 18,343 $ 6,607Wood residual revenues $ 11,568 $ 4,341 Depreciation and amortization $ 11,719 $ 11,496 Operating income
$ 84,923 $ 88,240
In the nine months ended September 30, 2022 , lumber revenues increased by
approximately 18% to $260.1 million from $221.2 million in the same period of
2021 primarily due to higher sales realizations. Lumber markets in both the U.S.
and Europe were strong in the first half of 2022 but weakened materially later
in the period due to concerns over higher interest rates and inflation. The U.S.
market accounted for approximately 58% of our lumber revenues and approximately
45% of our lumber sales volumes, while the majority of remaining sales were to
Europe .
Energy and wood residual revenues increased to $29.9 million in the nine months
ended September 30, 2022 from $10.9 million in the same period of 2021 primarily
due to higher sales realizations.
Lumber production decreased by approximately 4% to 324.8 MMfbm in the nine
months ended
Average lumber sales realizations increased by approximately 11% to$782 per Mfbm in the nine months endedSeptember 30, 2022 from approximately$702 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 FORM 10-Q QUARTERLY REPORT - PAGE 32
--------------------------------------------------------------------------------
with limited supply.
Fiber costs were approximately 75% of our lumber cash production costs in the nine months endedSeptember 30, 2022 . In the nine months endedSeptember 30, 2022 per unit fiber costs increased by approximately 28% from the same period of 2021 as a result of using more green wood and strong demand for sawlogs. In the comparative period of 2021, per unit fiber costs were lower primarily as a result of a large supply of beetle damaged wood. Transportation costs for our solid wood segment in the nine months endedSeptember 30, 2022 increased by approximately 39% to$33.4 million from$24.0 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 nine months ended
In the nine months ended
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