Mercer International Inc. · NASDAQ:MERC
Mercer International — Deutsche Bank Investor Presentation June 2008
24 slides from Mercer International's conference presentation, Jun 16, 2008
Slide 1: Deutsche Bank Investor Presentation June 2008
Deutsche Bank Investor Presentation June 2008
Slide 2: Forward Looking Statements
Forward Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial
Slide 3: Company Overview
Company Overview Mercer is the largest publicly traded NBSK (1) market pulp producer in the world Operates three pulp mills with 1.43 million Admt (2) of capacity Rosenthal Stendal (3) Celgar (Germany) (Germany) (BC, Canada) 325,000 ADMT 620,000 ADMT 480,000 ADMT ___ (1) NBSK = northern bleached sof
Slide 4: Our Strategy
Our Strategy Focus on NBSK market pulp Premium grade kraft pulp that generally obtains the highest price Operate modern, world-class NBSK pulp production facilities Target profitability in all market conditions Limit ongoing capital requirements Improve efficiency and reduce production costs Focus o
Slide 5: Mercer's impressive financial performance
Mercer’s impressive financial performance Quarterly Revenue Growth 200 175 Revenue Growth 20052006 2007 150 125 Revenues (EUR) 452,437 623,977 704,391 100 75 50 Revenues (USD) 1 563,103 783,715 965,720 25 Revenue (Millions of EUR) 0 Q1’04 Q3’04 Q1’05 Q3’05 Q1’06 Q3’06 Q1’07 Q3’07 Q1’08 Mercer has ex
Slide 6: Mercer in Brief — Consolidated Financials
Mercer in Brief — Consolidated Financials As at Dec. 31, 2007 and 1 st Quarter, 2008 In Millions of EUR Restricted Unrestricted Total Total (unless otherwise stated) Dec. 31, 2007 Dec. 31, 2007 Dec. 31, 2007 Q1 2008 Pulp Production 803,081 Admt 601,592 Admt 1,404,673 Admt 360,881 Admt Net Sales 401.
Slide 7: NBSK Market Pulp Capacity By Producer
NBSK Market Pulp Capacity By Producer By capacity, Mercer is the largest publicly traded NBSK market pulp producer in the world Sodra Cell Mercer Capacity Canfor Pulp Trust Pope and Talbot Ilim Pulp Total Weyerhaeuser (1) by Tembec Producers New Domtar (1) Stora Enso West Fraser Metsa-Botnia SFK Pul
Slide 8: World Class Assets
World Class Assets Mercer versus other top 20 NBSK producers as of Q4 2007 (includes integrated capacity) Large, modern facilities — low capital requirements, high runability State-of-the-art environmental compliance Energy — net producers Weighted average PM capacity 4Q07 750 (1,000 t/a) STRONG 600
Slide 9: Mercer's Pulp Production Growth
Mercer’s Pulp Production Growth Annual Pulp Production — by Mill and Cumulative Rosenthal Celgar Stendal Mercer 1,600 1,400 1,200 1,405 Project 1,302 (000’s ADMT) 1,000 “Blue Goose” 1,185 Production Celgar Spring 2006 800 Acquisition Feb. 2005 600 Stendal completed Sept. 2004 400 557 602 485 479 439
Slide 10: World class assets — Celgar
World class assets — Celgar Modern and efficient mill Capacity of 480,000 Admt per year 16.6% reduction in non-fiber conversion costs from 2006 Mercer’s Blue Goose capital project has exceeded expectations, delivering greater savings per tonne of production In 2007, became a net exporter of electric
Slide 11: World class assets — Rosenthal
World class assets — Rosenthal Converted to kraft pulp production in 1999 Capacity has increased from 160,000 to 325,000 Admt Sets new standards for world class mill availability at 98.8% Efficient mill with strong cost position One of the lowest delivered costs to Europe Achieved a 10.1% reduction
Slide 12: World class assets — Stendal
World class assets — Stendal One of the newest and largest NBSK mills in the world 71% Mercer owned Capacity of 620,000 Admt per year Achieved world class mill availability of 94.0% in 2007 Economies of scale have allowed for lower conversion costs than Rosenthal Achieved a 26.4% reduction in non-fi
Slide 13: Premium Pulp Commands Premium Price
Premium Pulp Commands Premium Price Mercer’s NBSK pulp uses high quality softwood fibers, which are recognized as some of the strongest fibers in the world. The long, slender softwood fibers provide better strength and softness, producing higher quality products that command premium prices Typical F
Slide 14: Softwood Kraft Market Pulp
Softwood Kraft Market Pulp There are three categories of softwood kraft market pulp, as defined by end-use requirements Pulp Category End Uses Premium Lightweight publication papers, premium tissue Heavier weight publication papers, value Standard tissues, lighter uncoated woodfree papers Coarse Unc
Slide 15: NBSK End Uses (2003 versus 2006)
NBSK End Uses (2003 versus 2006) 2003 2006 Specialties Printing and Specialties Printing & Writing Writing Paper 19% 17% Papers 17% 27% 18% Tissues 21% 26% Tissues 15% 23% Coated Mechanical (magazines) Uncoated Coated 17% Mechanical Mechanical (Newspaper (Magazines) Inserts) Uncoated Mechanical Sour
Slide 16: NBSK Experiencing Steady Growth in Demand
NBSK Experiencing Steady Growth in Demand Demand for NBSK pulp is growing at 1-2% per year, and is expected to continue doing so in the medium term Movement towards higher production speeds, lower basis weights, and growing demand in key segments (such as tissues and printing and writing papers) ens
Slide 17: NBSK Capacity Reductions
NBSK Capacity Reductions Recently announced closures and expected shutdowns will reduce supply Approximately 1.2 million mt of NBSK market pulp capacity already shut down with another 1 million mt expected to close in the next year Represents approximately 15% of total global NBSK market pulp capaci
Slide 18: NBSK Capacity Expansions
NBSK Capacity Expansions Recently announced expansions have not offset capacity reductions World NBSK Pulp Expansions Size Market Pulp Company Location Date (000’s mt) (000’s) NBSK Pulp Mill Expansions Mercer - Stendal Germany Q4 2007 20 20 Metsa-Rauma Finland Q2 2007 45 45 Jilin Chenming China Q2 2
Slide 19: Pulp Price History
Pulp Price History Quarterly Average RISI Price Delivered to N. Europe USD CAD EURO 1200 1100 Tonne 1000 Per 900 Price 800 CAD NBSK 700 USD 600 500 EURO 400 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2000 2001 20022003 2004 2005 20062007 Source
Slide 20: Germany Fiber Outlook
Germany Fiber Outlook Sawmill industry - current capacity and Significant capacity enlargement in the growth forecast 2009/2010 German sawmill industry during the last few years Klausner Nordic Timber Total capacity was 38 mill. scm in 2005 Robeta vs. 44 mill. scm in 2007 (+16%) Heggenstaller Stenda
Slide 21: Transition to Bio-energy Economics
Transition to Bio-energy Economics Pulp in a Carbon World Unless there is a change in how customers value forest or wood based products, the industry will not continue in its current state, creating capacity decline which will continue to affect supply and demand fundamentals until prices rise high
Slide 22: Mercer's Consolidated Balance Sheet
Mercer’s Consolidated Balance Sheet As at March 31, 2008 ASSETS LIABILITIES Current Liabilities Current Assets Accounts payable and accrued expenses € 74,331 Cash and cash equivalents € 69,735 Pension and other benefit obligations, current portion 438 Receivables 91,241 Debt, current portion 35,042
Slide 23: Advantageous financial structure
Advantageous financial structure Mercer’s capital structure provides high leverage to pulp cycles German Government provided Mercer € 375 million in grants for the construction of the Rosenthal and Stendal mills. This amount is credited against fixed assets and translates into € 375 million in equit
Slide 24: Mercer's key investment highlights
Mercer’s key investment highlights Future supply/demand outlook for NBSK has never looked better World class mills that have low delivered costs and are located in excellent fiber baskets Insulated from risk of rising energy prices due to excess electricity generating capacity Incremental production
Mercer International — Deutsche Bank Investor Presentation June 2008 on 6ix