MERCER INTERNATIONAL INC.

Summary of Cash Flows

We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for production costs, such as fiber, chemicals and energy costs, and other material operating costs for maintenance, freight and labor. Historically, we have met our liquidity needs principally from cash on hand, cash flow from operations, and, if needed, external borrowings, including borrowings under revolving credit facilities and issuances of debt securities.

Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and the payment of payables and expenses. Generally, finished goods inventories are increased prior to scheduled maintenance downtime to maintain sales volume while production is stopped. Our fiber inventories exhibit seasonal swings as we increase pulp log, sawlog and wood chip inventories to ensure adequate supply of fiber to our mills during the winter months. Changes in sales volume can affect the level of receivables and influence overall working capital levels. We believe our management practices with respect to working capital conform to common business practices.

Cash Flows from Operating Activities

Cash from (used in) operations includes:

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cash received from customers;

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cash paid to employees and suppliers;

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cash paid for interest on our debt; and

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cash paid or received for taxes.

In 2025, operating activities provided cash of $8.6 million compared to $90.2 million in 2024. A decrease in accounts receivable provided cash of $52.6 million in 2025 and an increase in accounts receivable used cash of $32.1 million in 2024. Adjusting for inventory impairments of $54.4 million, a decrease in inventories provided cash of $0.5 million in 2025 and adjusting for inventory impairments of $9.0 million, a decrease in inventories provided cash of $23.9 million in 2024. An increase in accounts payable and accrued expenses provided cash of $7.2 million in 2025 and a decrease in accounts payable and accrued expenses used cash of $17.7 million in 2024.

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Cash Flows from Investing Activities

Cash from (used in) investing activities includes:

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acquisitions of property, plant and equipment and businesses;

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proceeds from the sale of assets; and

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purchases and sales of short-term investments.

In 2025, investing activities used cash of $81.3 million. In 2025, we incurred $88.6 million of capital expenditures primarily related to completion of the wood room project at our Celgar mill, log yard upgrades at our Torgau facility and Friesau mill, upgrades to the digester evaporator and a new turbine generator at our Rosenthal mill, lime kiln improvements at our Stendal mill, sorting line upgrades and other strategic projects at our mass timber facilities, and maintenance projects across our operating segments. In 2025, we received $3.4 million in government grants for capital projects at our Celgar mill and mass timber facilities and $6.4 million of proceeds from sale of non-core property, plant and equipment primarily related to the sale of land from our sandalwood business.

In 2024, investing activities used cash of $67.0 million. In 2024, we incurred $84.3 million of capital expenditures primarily related to log yard upgrades and other strategic projects at our Torgau facility,

optimization projects at our Peace River mill and mass timber facilities and maintenance projects across all

mills and facilities. In 2024, we received $19.9 million of proceeds from sale of property, plant and equipment primarily related to the sale of land from our sandalwood business.

Cash Flows from Financing Activities

Cash from (used in) financing activities includes:

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issuances and payments of debt;

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borrowings and payments under revolving lines of credit; and

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payments of cash dividends and repurchases of stock.

In 2025, financing activities provided cash of $79.8 million. In 2025, we borrowed approximately $102.9 million under our revolving credit facilities and paid dividends of $10.0 million.

In 2024, financing activities used cash of $152.8 million. In 2024, we redeemed the $300 million 2026 Senior Notes using cash on hand and the proceeds from the issuance of $200.0 million of additional 2028 Senior Notes at a 103.0% premium. In 2024, we repaid approximately $25.1 million under our revolving credit facilities, paid dividends of $20.1 million and incurred aggregate debt issuance costs of $4.5 million related to the issuance of the 2028 Senior Notes.