Mercer International Inc (MERC)
Return on total capital
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -188,774 | 392,368 | 346,583 | 63,729 | 84,003 |
| Long-term debt | US$ in thousands | 1,609,420 | 1,346,510 | 1,237,540 | 1,186,620 | 1,087,930 |
| Total stockholders’ equity | US$ in thousands | 635,410 | 838,784 | 694,024 | 601,027 | 550,403 |
| Return on total capital | -8.41% | 17.95% | 17.94% | 3.56% | 5.13% |
December 31, 2023 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $-188,774K ÷ ($1,609,420K + $635,410K)
= -8.41%
Return on total capital (ROTC) is a key financial ratio that indicates the efficiency with which a company generates profits from its total invested capital. Mercer International Inc.'s ROTC has displayed fluctuating trends over the past five years. In 2023, the company experienced a negative ROTC of -6.88%, indicating that it incurred losses relative to its total capital. This signifies that the company struggled to generate returns sufficient to cover both its debt and equity investments during that year.
On the other hand, in 2022, Mercer International Inc. performed strongly with a ROTC of 17.89%, demonstrating that it effectively utilized its total capital to generate profits. This was consistent with the ROTC of 17.86% in 2021, suggesting a continuing trend of efficient capital utilization to generate returns for the company.
In 2020 and 2019, the company experienced ROTC of 3.56% and 5.03% respectively, indicating moderate performance in terms of generating returns relative to its total capital investments during those years.
Overall, Mercer International Inc.'s ROTC has exhibited varying performance levels over the years, with significant fluctuations in its ability to generate profits relative to the total capital invested in the company. It is important for the company to assess the factors contributing to these fluctuations and work towards maintaining consistent and positive ROTC figures to ensure sustainable profitability and value creation for its stakeholders.