Good morning, and welcome to Mercer International's First Quarter 2026 Earnings Conference Call. On the call today is Juan Carlos Bueno, President and Chief Executive Officer of Mercer International, and Richard Short, Chief Financial Officer and Secretary. I will now hand the call over to Richard Short. Please go ahead.

Thank you, Carmen. Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights of the first quarter before turning the call to Juan Carlos to provide further colour into the markets, our operations, and our strategic initiatives. Also, for those of you that have joined today's call by telephone, there is presentation material that we have attached to the investor section of our website. But before turning to our results, I would like to remind you that we will make forward-looking statements in this morning's conference call. According to the safe harbour provisions of the Private Securities Litigation Reform Act of 1995, I'd like to call your attention to the risks related to these statements, which are more fully described in our press release and in the company's filings with the Securities and Exchange Commission. Our operating EBITDA for the first quarter was about $8 million, an increase of $28 million when compared with the fourth quarter's results. This improvement was primarily driven by the scheduling of our planned maintenance downtime and the successful implementation of our One Goal 100 program. Despite these gains, overall results were negatively impacted by rising fiber costs in both Germany and Canada, alongside weak demand and pricing for pulp and lumber. The current quarter's EBITDA also includes a non-cash inventory impairment charge of $22 million. In the first quarter, as a result of the high costs and weak markets for our products, we did not meet the leverage ratio covenant under our German revolving credit facility. In response, we successfully obtained a waiver from our lenders for this covenant, covering the current quarter and the subsequent two quarters. Based on our latest forecasts and assumptions, which include expected pricing for our products and estimated production costs, we anticipate being in compliance with the leverage ratio by the fourth quarter. Therefore, the outstanding balance in our German revolving credit facility remains classified as non-current as of March 31st, 2026. In the first quarter, our pulp segment reported quarterly EBITDA of $7 million, and our solid wood segment reported negative quarterly EBITDA of approximately $6 million. Additional segment disclosures are available in our Form 10Q, which can be found on our website and that of the SEC. Softwood pulp markets remain stable through the first quarter despite ongoing global economic headwinds. As a result, our softwood pulp sales realizations were only down slightly to $696 per tonne from $702 per tonne in the fourth quarter. In Q1, the European MBSK list price averaged $1,618 per tonne, a $120 increase from the fourth quarter. However, this gain was offset by a higher discount rate. The MBSK net price in China saw a small increase to $685 per ton, a $14 increase from the fourth quarter. In North America, MBSK list prices remained stable in the first quarter when compared to the fourth quarter, averaging $1,563 per ton. Hardwood markets in China and North America improved in the first quarter due to stronger demand and higher domestic fiber costs in China. As a result, our sales realizations improved to $564 per ton from $528 per ton in the fourth quarter. This quarter, the average price gap in China between softwood and hardwood pulp narrowed to approximately $90 per ton. The average net price for eucalyptus hardwood pulp in China in the first quarter was $595 per ton, which is an increase of $55 per ton in the fourth quarter. In North America, the average list price was $1,338 per ton, up $140 per ton from the fourth quarter. As mentioned previously, the first quarter included a $22 million non-cash inventory impairment, primarily driven by low pulp prices and high fiber costs. Of this amount, approximately $17 million was attributed to softwood inventories, and the remainder was against hardwood inventories. pulp sales volumes in the first quarter were flat when compared to the fourth quarter at about 471,000 tons first quarter pulp production was steady at about 466,000 tons however when normalized for planned maintenance downtime production volume is essentially flat as we strategically reduce production our German mills because of fiber supply limitations did not have any planned maintenance in the first quarter compared to the fourth quarter when we had a total of 21 days of planned maintenance at our Stendhal mill. In the second quarter of 2026, we also do not have any days of planned maintenance downtime. For our solid wood segment, lumber sales realizations in the first quarter were flat in both the U.S. and Europe as weak demand was offset by reduced supply. The random lengths U.S. benchmark price for Western SPF number two and better averaged $463 per thousand board feet in the first quarter, an increase of $41, from $422 per thousand board feet in the fourth quarter. Today, that benchmark price for Western SPF number two and better is around $483 per thousand board feet, an $81 increase from the end of 2025. In the first quarter, lumber production increased by about 7% to 160 million board feet from the fourth quarter. This was primarily due to higher production after the holiday season. Similarly, lumber sales volumes increased to 112 million board feet or 9% in the fourth quarter which mirrored the higher production. Electricity sales for the first quarter totaled 217 gigawatt hours which is about 16 gigawatt hours more than the fourth quarter due to the Stendhal shut in the fourth quarter. Pricing also increased to about $127 per megawatt hour from $105 in the fourth quarter due to higher spot prices in Germany. Fiber costs for both our pulp and solid wood segments increased in the first quarter compared to the fourth quarter. This increase was primarily driven by higher costs in Germany, resulting from supply constraints and strong demand, including seasonal demand for fiber from the biofuel industry. In the second quarter of 2026, we're expecting stable fiber costs for both our German and Canadian mills as improved availability will be offset by continuing strong demand our mass timber operations within the solid wood segment had significantly higher revenues in the first quarter compared to the fourth quarter reflecting our growing order book our current order book is expected to provide stable production for our facilities through 2026 and into 2027. we continue to make progress in our one goal 100 program as a reminder this initiative focuses on cost reduction and operational efficiencies with a target to improve our profitability by 100 million dollars by the end of 2026 using 2024 as a baseline we have realized approximately 41 billion dollars in 41 million dollars in cost and savings and reliability improvements and we are on target to achieve our 100 million dollar savings goal in the first quarter our aggregate liquidity decreased by $201 million to about $229 million, comprising $85 million of cash and $144 million of undrawn revolvers. This decrease in our liquidity is primarily due to the temporary 70 million euro reduction in the availability of our German revolving credit facility, as part of the terms of the recent waiver. In addition, higher working capital, driven by the A seasonal increase in fiber inventory, scheduled senior note interest payments and higher receivables due to the timing of sales also contributed to the decrease. We continue to focus on working capital management and expect a modest reduction in the second In the first quarter, we invested a total of $13 million of maintenance capital across our facilities. We reported a consolidated net loss of $52 million for the first quarter, or $0.78 per share which includes the inventory impairment of 22 million dollars or 33 cents per share in the fourth quarter we reported a net loss of 309 million dollars or four dollars and 61 cents per share which included aggregated non-cash long-lived asset and inventory impairments of roughly 239 million dollars or three dollars and 57 cents per share during the quarter we launched a consent solicitation with our bondholders the purpose of which was to provide flexibility with regards to the types of financing transactions the company may be able to engage in with our bondholders. The solicitation received approval from over 80% of our bondholders. At this time, we do not have any specific amendment or transaction in mind, and we have not engaged in any bondholder or ad hoc groups. That ends my overview of the financial results. I'll now turn the call over to Juan Carlos.

Thank you, Rich. Our Q1 results were positively impacted by reduced plant maintenance, but were partially upset by higher fiber costs and reduced production due to European fiber constraints. Overall, I was pleased with how our mills ran in Q1, but at the same time, it was frustrating to have to slow down some of them due to either insufficient or too expensive fiber supply. We continue to effectively manage our costs and continue to make progress on our One Goal 100 program. As Rich mentioned, we didn't meet the leverage ratio covenant of our German operating facility at the end of Q1 due to weak market conditions as commodity prices remained low while fiber costs were high. As a result, we have successfully obtained a waiver for this covenant. Looking ahead, we expect our cost reduction initiatives along with anticipated market improvements to have us back in compliance with this covenant in the fourth quarter. In addition, we're evaluating strategic alternatives and financing options to enhance our liquidity and financial condition and to position Mercer for an eventual market recovery. The board has appointed a special committee for overseeing management's efforts along these lines. Our One Goal 100 program, launched in Q2 2025, yielded about $30 million of concrete results for the full year 25, and another $11 million in Q1. We are on track to achieve our goal of $100 million in improvements by the end of 2026. Now, while achieving this goal is an important milestone, we continue to pursue additional improvements across all our operations to help compensate for the increased macroeconomic headwinds the market is imposing on us, such as those brought forward by the war in the Middle East, which has compounded existing trade uncertainties related to the tariff-driven market volatility. Late in Q1, we saw rising energy costs, primarily in the form of fuel surcharges on our logistics and an inflationary effect on chemical costs. While this impact was minimal on the current quarter, we expect these increases costs to move more meaningfully and impact Q2. We estimate it to be an increase of between $5 to $10 per ton of pulp on freight costs and around $5 per ton for chemicals. It's worth noting that KUSMA is to be renegotiating this summer, which may introduce an additional layer of trade uncertainty. As it stands today, the only direct tariff we're facing is a 10% tariff on our European lumber imports into the U.S. This does, however, compare favorably to Canadian exports to the U.S., which are, to the recently announced duty reductions, who face an average combined tariff and duty rate of about 35%. These higher duty and tariff rates have cost Canadian lumber curtailment announcements, and even with the recent duty reductions, we expect more to come. This is creating a reduced supply for residual chips for pulp mills and is putting pressure on fiber costs in Canada. We believe our sale gun mill is well-positioned given its ability to access the U.S. fiber market and our ability to harvest and process whole logs. Nevertheless, we have experienced some fiber cost inflation but are starting to see some relief on this front in Q2. As mentioned, our main import from the U.S. into Canada is wood chips for Selgar pulp mill, which today amounts for about 45 percent of the fiber consumption of the mill. We feel this is a competitive advantage. Pulp fiber costs were up roughly 10 percent relatively to Q4. In both Germany and Canada, our wood costs were up mainly due to supply constraints and higher costs on volumes available. We felt this fiber caused inflation in our sawmills as well. Overall, NBSK pop markets improved modestly in the first quarter. European prices were up 8% in the quarter, although the increase was offset by higher discounts, while in North America and China, prices were stable. Today, the softwood-hardwood price differential has narrowed to about $70 per ton, an amount small enough that we may see some reverse substitution. This is all against the backdrop of generally weak paper prices, which continues to tamper overall demand. Turning to hardwood, prices in China and North America increased in the first quarter, driven by improving demand and higher domestic fiber costs in China. Looking ahead, we expect to see some modest NBSK price improvements in Q2 across all markets, with NBHK remaining fairly flat. However, trade uncertainty combined with inflationary pressures brought on by high energy prices are an overhang on this business, and until the uncertainty resulting from these macro effects is reduced, the supply-demand dynamic will be heavily influenced by their by the supply side. In total, our pulp production was essentially flat at 465,000 tons compared to Q4. This result reflects overall production being steady after considering planned maintenance in Q4, given that we strategically curtailed roughly 20,000 tons at our germop mills due to fiber constraints. Our lumber production was up almost seven percent relatively to Q4, primarily due to reduced production during the holiday season. Overall, we are pleased with our lumber production and are looking forward to the installation of advanced scanning technology at Torgau in Q2, which will allow us to better optimize our sales mix. Our solid wood segment continues to face headwinds from a weak European economy and the dampening impact of high mortgage rates in the U.S. However, the seasonal construction improvements in Q1 created modestly improved pricing in the U.S. lumber market. The stagnation of the European economy continues to dampen the demand for pallets, and the result of this adverse business environment and higher fiber costs are the main reasons behind the $6 million EBITDA loss of our solid wood segment in Q1. Given the many economic forces affecting U.S. construction activity, U.S. lumber pricing will likely be volatile in the short term we're expecting a modest demand increase through the spring in both north america and new york creating a slightly improved pricing environment any meaningful long-term improvement in either the european or u.s markets remains dependent on improved economic conditions and lower long-term interest rates in q1 42 percent of our lumber volume was sold in the u.s looking forward we believe the u.s lumber market will be driven by favorable homeowners demographics, which combined with reduced North American lumber capacity will create supportive supply-demand dynamics in the midterm. European shipping pallets market remain weak, with pricing staying generally flat due to the overhang of the European economy, particularly in Germany. We're experiencing generally stable pricing in the first half of 2026. Biofuel prices were up 15% in Q1 relative to Q4 due to seasonal demand, and as the weather warms up in Germany, we expect biofuel prices to come down but still stay higher relative to historical prices. Looking ahead to Q2, we expect fiber costs to stabilize for both our pub and some businesses. We expect this to be driven by and modestly improve availability of fiber in Germany, along with increased chip volumes from U.S. sources for our Selgar mill. With regards to our mass timber business, revenues were up over 60% compared to Q4, and production was up over 20% as we begin to ramp up to a second shift at our facilities. Despite the increase in sales and production this quarter, both fell short of our expectations due to about a week of unplanned downtime at our Spokane facility, resulting from a mechanical failure. Our first quarter results were also impacted by costs associated with ramping up our facilities as we hire and train new employees. We expect our production and sales to increase significantly in Q2. Today, our mass timber backlog of projects sits about $171 million, and we continue to see a steady volume of incoming project inquiries. including large data center projects sponsored by hyperscalers, which make up roughly 60% of the backlog. We feel our large production capacity and geographic footprint positions us very well for these types of projects. We remain bullish on this business as a growth engine for Mercer. In closing, market weakness is expected to persist in 2026, and as a result, our priority is on maintaining solid liquidity. To do this, our strategy continues to focus on cost reductions beyond our One Go 100 program, reduce capital expenditures, and other working capital measures, along with a commitment to rebalance our portfolio of assets that combined will improve our balance sheet. Above all, we're committed to prudent financial management. And in light of the ongoing economic uncertainties and our focus on liquidity, our planned cap expense is about $60 to $80 million in 2016. This capital budget is focused on maintenance, environmental, and safety projects. The headwinds facing our industry have proven to be both longer and more severe than many anticipated and the impacts of the war in the Middle East only exacerbates global economic challenges. However, I remain confident that our short-term strategy would allow us to weather this storm. And I also believe that the current market conditions validate our long-term strategy that focuses on transforming our pulp mills into biorefineries with additional revenue streams that will balance our product mix but grant us further resilience during pulp down cycles. As 2026 progresses, we will remain focused on those elements of our business that we can control while implementing our short-term strategy. Thanks for listening, and I will now turn the call back to the operator for questions.

Thank you so much. and as a reminder to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. One moment. First question is from Sean Stewart with TD Cowan. Please proceed.

Thanks. Good morning, everyone. Juan Carlos, as the committee forms to to look at options for bolstering liquidity hoping you can provide some updated thoughts around your core assets that you want to build around and white what might be considered non-core and with respect to pulp capacity rationalization does does that need to wait for uh this process to play out and and and maybe look once the balance sheet's re-bolstered you could look at permanent or indefinite closures as those, I imagine, are quite expensive. Any perspective there?

Yeah, Sean, thank you. Yes, obviously the committee is considering all alternatives possible. So we're not looking only at whether it's reduction of assets, but we're looking at the entire picture, our entire capital structure. So we'll be looking, and that was the reason why we put out this consent solicitation. We were very pleased with the outcome. We've got more than 80% consent, and the purpose is obviously to provide flexibility by broadening the types of transactions that we can undertake with bondholders. So that's part of the analysis that the special committee is going to be looking at, not only focusing on the assets, as you asked, but going beyond that, looking at every aspect of our capital structure. So that is the focus that we are having in recent times. And it is too premature to say whether it's this asset or that asset that we have in one or another category. Obviously, we've done the work, but as I mentioned, and I think I addressed this in the previous call last quarter, when we were asked about asset sales, and my comment at the time, which still remains, is given the current conditions of the market, asset sales are obviously a very difficult task. The valuation of the assets is very impacted by the current economic conditions. So it would be very difficult to claim a proper value from any asset sale that we could entertain at this point in time. Now, that may change as time progresses and the market recovers as we expect it to recover over time. But that obviously puts a damp on what are the options that you have immediate with immediate impact. So, again, that's why it's important that we look at everything and not only at asset sales per se.

Okay. Thanks for that detail. The fiber supply constraints in Germany, Can you give a perspective on how that's persisting into the second quarter and expectations through the year and beyond the maintenance schedule in the back half of the year? Does this suggest further curtailments might be necessary?

Yeah, I mean, fiber cost in Germany is one of the major concerns that we've experienced so far. And it's been happening. It carried out through 2025, and it continues to be present in 2026. When you look at fiber increase overall for our German assets, it was on the high single digits, let's put it on average, on Q4 versus Q1. And when you look at what we expect in Q2, it's going to be probably on average a little bit lower, but still some increase quarter on quarter. Now, this will be helped somehow because we're expecting lower cost of fiber for pulp mills in Canada. So one thing may wash out the other. But it is clearly one of the issues that we are facing is the situation of high-range Germany. Now, why this happened is associated with, at least in 2025, there was expectations of calamity harvesting that was going to be necessary, which did not happen by the time this happened already late in the summer, that everybody was evidenced that there was no need. It was already too late to harvest in the summer months, so that created kind of a vacuum of much lower levels of inventory than normal in the amount of wood that was available. That put some pressure upwards, obviously, in terms of price, and that's what we see in the combination of less availability and higher prices. Nowadays, we're combating those higher prices, and we've looked for other alternatives. We're buying further out. We're not just buying in Germany. 90% of our wood comes from Germany. We're buying further out. We're buying from Scandinavia, from the backrooms. We're buying from different countries and importing into our mills. That is helping with the availability, but that doesn't mean that the costs necessarily go down. We're exploring alternatives to keep increasing the amount of imports as a way to balance the market a bit in Germany. But, again, that doesn't mean necessarily the costs are going down. So that's the situation that we're in, and we will continue working around it. We'll see how the harvest progresses later down this year.

Thanks very much for that detail. That's all I have for now.

Thank you. And, ladies and gentlemen, as a reminder, if you do have a question, simply press star 11 to get in the queue. We have a question from the line of Cole Harthorn with Jeffries. Please proceed.

Good morning. Thanks for taking my question. I'd just like a follow-up on the outlook for softwood pulp. I mean, if we think about the diverging markets at the moment, we've still got a lot of softwood inventory levels in China, whereas Europe and North America look slightly different. So I'd just like to hear your thoughts about, firstly, what's needed to kind of normalize those Chinese softwood inventories? Do we ultimately need capacity rationalization in Europe and Canada to sort that out? And then secondly, on Europe and North America, just how you see the softwood markets there?

Thank you. Yeah, Cole, very good question. I think when you look at what the different analysts that are following these pulp markets say, everybody would tend to indicate that there should be additional curtailments happening. We know of some that are already obviously announced and in place, but they are clearly not enough. We know that Jotsono is down since end of March, and basically that's about a 700,000 ton mill, and who knows until when that mill is going to be down. We know that fiber excellence shut down Milvins, France, and that's 280,000 tons that seem permanent, and in addition to what Canada did already late in the year, beginning of this year. So, there are closures, and very rightfully so. We expect more curtailments to happen. We believe that the situation, especially in Canada with mills running at very low, if any, profitability at all is just a recipe for additional retirements. So, yeah, I think that's the biggest lever that we see as an alternative to a significant shift would be a reduction in supply because demand continues to be relatively lackluster. There's nothing special about demand. China is producing a lot of integrated capacity. They've done a lot of the substitution that they were able to do. With the differential now between hardwood and softwood, maybe some of that substitution comes back. But again, it doesn't happen overnight. It will take a while for that to see the impact on the inventories that are in the channel. I think there's still a ways to go before we see those inventories reduced to a level that would allow a significant price increase. So I think those are the things that we're clinging on at this point in time.

Then maybe just as a follow-up on the wood cost dynamics specifically in Germany, could you give a little bit of differentiation between kind of the pulpwood side versus the saw log and the dynamics at play there? I know you mentioned availability is an issue, but going into the second quarter, one of the reasons for the cost inflation in Q1 was competition on the energy side. And I'm just wondering, when do we get to a point where your prices have gone too far and the forest owners are doing a little bit of eye gouging because no saw mills are really making money, as far as I can tell, across Europe at the current saw log prices? I'm just wondering how you see it.

Absolutely. Yeah, the policy that Germany has in place right now to incentivize the burning of wood for energy purposes is having an important impact in the price of wood chips, no doubt. We compete with those mills that are producing pellets, biofuels. We see that ourselves in Torgal. We are producers of pellets. We've seen, and I reported earlier in the call, our prices went up 15% of Q&Q. So, yeah, well, and everybody's seeing that benefit. Now, we don't expect that high prices to continue into the year. They should be tapering off but may still be elevated as pellet producers are expected to build inventory over the summer. So, while the margins might not be as high as they were in the last part of the year and the beginning of the year, they're still pretty good margins, and that will keep being an issue in terms of the wood that is available for the pulp mills as such. So that is a factor and will continue to be a factor. And obviously, the other things that keep driving things up are the situations that that have been prevalent already for the previous quarters. Now, in terms of the difference between how much it's impacting our pulp mills versus our sawmills, I would say it's more or less even. I would say it's probably a little bit higher, the impact, the negative impact that we expect on Q2 on the sawmills, that is on the pulp mills, but it's marginal. So it's a margin of error, nothing dramatic in that regard.

And then just following up on the working capsule, there was a kind of a bigger outflow in Q1. I know you're doing your best to manage that, but just thinking about that into the second quarter, should we be assuming kind of neutral working capital from a cash flow or kind of positive, just wondering what actions you're taking? Because I imagine a lot of the increase was fiber-related.

Yeah, a lot of the increase is seasonal harvesting. As you all know, obviously during the winter, that's seasonal harvesting at its best. And even though we kept it very tight, it is obviously impacting our inventory levels. As we've gone through that peak of the cycle, what we expect in Q2 is a reduction in working capital. So not that it would remain at that level, but that it would succeed to more rational levels. And we're obviously putting a lot of pressure on keeping that as tight as possible. We're running our mills, our pulp mills, with very, very low inventory ahead of the mill, very low fiber inventory, and we're probably going to keep it running that way for the foreseeable future and make sure that we keep our working capital inventories at slower as possible.

And then if you'll just allow me one more, you've talked about data centers and demand on the CLT side. And I'm just wondering, you know, when do we start getting the first kind of cash inflows or kind of these projects actually progressing and you starting to make improved sequential deliveries and starting to get the cash from those is the first one. And then the second one is we've seen Essity announce strategic review of its tissue business in Europe. They've got a lot of tissue capacity in Germany. I'm just wondering if there's any color you can give on supply to their business.

Absolutely. Yes, first on mass timber. As I said at the beginning of the call, we're very excited with how that business is progressing, growing 60% quarter-on-quarter was fantastic. That business is a business that, from a cash perspective, it handles itself pretty well because when we sign a contract, we get already down payment for the majority of the projects before we start putting it up or building or manufacturing it. So that provides kind of a positive cash flow cycle for that business. It's different from what we do in the other businesses where it's basically out-of-pocket totally, and then you recover only after you have sold your inventory. That's not the case in mass timber. So it is a cash. For example, last year we lost our EBITDA was negative, but cash was almost neutral. Right now, we're looking into a second half of the year where the bulk of the projects, or about 60% of the projects, will be hyperscalers. Those will provide us higher margins, and therefore we see a second half of the year with better margins than the first half. From a cash flow perspective, I think we'll be positive throughout the year, but it will obviously be much better in the second half just from a pure EBITDA perspective. So that's in terms of mass timber. Back to your question on SET, we read the news earlier about their decision to do a strategic analysis of the tissue and what they're going to do with it and what that will mean, if they're going to rationalize or consolidate or sell, or I don't know what they're going to do. It's too early for us to anticipate anything. SED is a customer that we serve, and we obviously look forward to continue serving them or serving those mills, whoever they end up being the owners, if it wasn't to be SED going forward. But it's too early to say anything on that regard.

Thank you. Thank you. One moment for our next question. It comes from Amit Prasad with RBC Capital Markets. Please proceed.

Hey, it's Amit on for Matt. Thanks for taking my questions. Appreciate the quantification on chemical and freight costs, but you also called out a substitution opportunity for cellulose-based products given the energy shock. Which specific end markets are you seeing this demand emerge, and is it a 2026 revenue contributor or more of a medium-term structural shift?

The substitution that we're seeing was basically linked to the fact that the price gap between hardwood and softwood, which used to be $200, $250 in 2025, has now shrunk to about $70. And with that kind of differential between the two fibers, if you're running your paper machines at high speeds or with a decent level of utilization, then it justifies the use again of softwood over hardwood. So that's where we see the potential substitution kicking back. I'm not thinking or we're not planning for that to be reversing entirely what was lost, but there is clearly some space where for particular customers that will be interesting for them to go back to the higher usage of softwood because it would be better for them financially at the end of the day. So it is not necessarily so much linked to some of the other factors. Yes, obviously there's freight costs and things that would make certain fiber more expensive than others, but even without the impact of the Iran war, we were already seeing that gap being reduced between the two fibers we have some advantages depending on where the freight is coming depending on the distance obviously we have we may have some advantages from that point of view but again that's that's the icing on the cake that's not the main reason why the main reason is fundamentally that gap has shrunk already perfect thanks for

the color. And I guess one follow-up for me. Can you quantify the incremental profit from the new scanning technology at TORGAO once it's operational? And how does capturing the value uplift translate to incremental EBITDA? Thank you.

Absolutely. In the case of TORGAO, the scanning technology, what it allows us to do is to make sure that we can participate in the U.S. market that we're very actively participating on with Reza. Right now, because it's a non-grade stamp, then the market that we have access to is limited. And the value might be high, but the volumes are not high, so you have to scramble to move that product around. The moment that we have access to being able to produce and sell number twos for the U.S., and complementing what we already have in FreeSail. In Toga, we produce a lot of pine. Then that is, again, a complement to our portfolio, and it adds to the picture and the capacity that we can sell higher volumes than what we're able to move with a non-grade stamp.

Perfect. Thank you. That's all I had. I'll turn it over.

Thank you, and this will conclude our Q&A session. and I will pass it back to Juan Carlos Bueno for closing comments.

Okay, thank you, Carmen, and thank you all for joining our call. Rich and I are available to talk more at any time, so don't hesitate to call one of us. Otherwise, we look forward to speaking to you again on our next earnings call in July. Bye for now.

This concludes our conference. Thank you for participating, and you may now disconnect.