Mercer International Inc. · NASDAQ:MERC
Mercer International — CIBC Virtual Marketing Conference 2020
36 slides from Mercer International's conference presentation, Jun 4, 2020
Slide 1: Mercer Investor Presentation
Mercer Investor Presentation June 2020
Slide 2: Forward-looking statements safe harbor
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain for forward-looking information included in this presentationstatements. Certain contains statements inf
Slide 3: Building a Platform for Growth
Building a Platform for Growth A history of execution… Stendal minority interest Friesau Rebuild of Acquisition of Celgar “Green buyout and refinancing Santanol sawmill Rosenthal mill Celgar mill Energy Project” Rosenthal tall oil plant acquisition expansion 1994 1999 2004 2005 2007 2010 2013 2014 2
Slide 4: Diverse Products, Global Reach
Diverse Products, Global Reach Strategically Located Facilities with Excellent Access to Key Markets Peace River Rosenthal 475,000 tonnes NBSK/NBHK 360,000 tonnes NBSK Stendal 57 MW energy 660,000 tonnes NBSK 65 MW energy 148 MW energy Cariboo 170,000 tonnes NBSK (1) 28.5 MW energy (1) Celgar Santan
Slide 5: Continuously Improving, Competitive Pulp Mills
Continuously Improving, Competitive Pulp Mills Our pulp operations are some of the largest and most modern facilities in the world • Low production cost • Strong environmental performance • Low maintenance capital requirements • Net energy exporters NBSK Producer Competitiveness (1)(2) Energy & Bio-
Slide 6: Expanding our Pulp Mill Platform
Expanding our Pulp Mill Platform Acquisition of DMI advances our long term strategy of growing in four broad sectors Expands product offering to include NBHK Further solidifies our position as a top global NBSK producer Improves exposure to growing markets in Asia New forest tenures strengthens raw
Slide 7: Friesau Sawmill: Building on Success
Friesau Sawmill: Building on Success Friesau – a strong entry into the global softwood lumber market Comparable size to some of the largest sawmills in North America Capable of producing green, kiln-dried and planed lumber for all global markets Announced expansion and optimization project designed
Slide 8: Core Competencies
Core Competencies Innovation • Wood logistics • Wood merchandising • Waste wood utilization • Energy and bio-extractives growth • Wood costs reduction • Productivity improvements Excellence in Execution Phase II expansion: new Second turbine Tall oil plant Friesau re-start planer and kilns – Friesau
Slide 9: Executing Mercer's 4-Element Strategy
Executing Mercer’s 4-Element Strategy World class assets 1 • Driving Celgar to its full potential • Continued debottlenecking at Stendal, Rosenthal and Peace River • Sawline upgrades, sorter expansion and new planer mill at Friesau Target Growth Areas Seize growth opportunities and diversify EBITDA
Slide 10: A Platform of Sustainability
A Platform of Sustainability Sustainable products for a carbon conscious planet: Solid wood products produced from sustainably sourced, certified, private and public land suppliers – Products used in construction and renovation end uses – Displacing higher carbon footprint concrete and steel alter
Slide 11: Maintain Prudent Balance Sheet
Maintain Prudent Balance Sheet Total liquidity Senior Debt Composition $700 $600 $638 2025 7.375% $550 Senior Notes $600 Credit Ratings: S&P Moody’s Undrawn facilities Corporate: B+ Ba2 $517 Cash $450 Senior notes: B+ Ba3 $500 Outstanding debt ($,millions) Total liquidity ($ millions) $425 $400 $300
Slide 12: Long-Term EBITDA Growth
Long-Term EBITDA Growth • Weakness in pulp markets, high North American fibre prices, and an ambitious planned maintenance period impacted 2019 results • Despite uncertainty regarding the long term impact of the coronavirus on our markets, steady demand, combined with the absence of new capacity and
Slide 13: Long-Term Market Opportunities
Long-Term Market Opportunities Pulp Lumber • Current pressure on printing and writing sector not • We expect US lumber prices to rise modestly over the expected to settle until post pandemic; tissue grades next year, supporting medium and long term performing well fundamentals Demand • Steady mid-te
Slide 14: Mercer: Sustainable, Profitable Growth
Mercer: Sustainable, Profitable Growth Attractive long-term fundamentals in key markets Management committed to growth, in spaces where we have clear competencies Effective balance sheet discipline, commitment to the dividend Commitment to sustainability and operational excellence, a strong
Slide 15: Appendix A: Market Primer
DM Appendix A Market Primer
Slide 16: NBSK, NBHK Market Primer Overview
NBSK, NBHK Market Primer Overview Northern Bleached Hardwood Kraft Chemical Pulp Demand (1) Northern Bleached Softwood Kraft (“NBHK”) is produced from aspen, (58.5 million tonnes) (“NBSK”) is produced from spruce, maple, balsam and beech grown pine, fir and cedar grown primarily in primarily in Cana
Slide 17: Global Bleached Kraft Pulp Market
Global Bleached Kraft Pulp Market (1) • From 2018, global BKP demand is forecast to grow by 4.5 million tonnes through 2023, at an average growth rate of 1.5% per year • China is expected to account for the majority of entire global demand growth between 2018 and 2023, increasing demand by 4.7 milli
Slide 18: Pulp Capacity Changes
Pulp Capacity Changes NBSK Market Pulp Net Capacity Changes (1) Price Impact of New Capacity (2) 1,500 $1,400 2.1 1,010 915 910 Market pulp capacity 1,000 000's tonnes $1,200 NBSK cif Europe (gross) 1.8 (3) BEKP cif China (net) 500 215 $1,000 1.5 105 100 130 - Pulp Price ($/tonne) - $800 1.2 (15) (5
Slide 19: NBSK – Demand Drivers
NBSK – Demand Drivers NBSK Demand Changes Global BSK Demand by Region (1) Region 2000 – 2023E CAGR • Increased NBSK demand for tissue and 28.0 40% specialty products continues to rise globally China 9.7% % China of Total millions of tonnes 21.0 30% • In developing countries, demand for NBSK W. Europ
Slide 20: NBSK – The Chinese Market
NBSK – The Chinese Market China is the leader of demand growth in China’s BSK Pulp Demand by End Use (4) 9.0 developing economies End Use 2007 – • In China, demand for NBSK grew on average by 7.5 2017 CAGR millions on tonnes Other – 7.5% (5) 2.7% between 2013 and 2018 on a compounded 6.0 basis (1) P
Slide 21: NBSK – Pricing Trend
NBSK – Pricing Trend NBSK Price & BSK Global Inventory $1,650 45 $1,500 40 NBSK Price (noted currency / tonne) Global NBSK Inventory (# Days) $1,350 35 $1,200 30 $1,050 25 $900 20 $750 15 $600 10 $450 5 $300 - 2003 2005 2007 2009 2011 2013 2015 2017 2019 (1) (2) (2)(3) (2)(3) BSK Global Inventory NB
Slide 22: NBHK – Demand
NBHK – Demand Overview Forecast BHK Demand - Supply Gap 39.0 • The BHK market has grown on average 3.0% per year 38.0 since 2008, in contrast to NBSK which has grown by 1.4% 37.0 millions of tonnes during the same period 36.0 • BHK consists of many species with unique attributes 35.0 34.0 suitable f
Slide 23: NBHK – Pricing Trend
NBHK – Pricing Trend NBHK Price & BHK Global Inventory $1,650 90 $1,500 80 NBSK Price (noted currency / tonne) $1,350 70 $1,200 60 $1,050 50 $900 40 $750 30 $600 20 $450 10 $300 - 2005 2007 2009 2011 2013 2015 2017 2019 BHK Global Inventory (1) NBHK List Price (in US$) (2) NBHK List Price (in CAD) (
Slide 24: Appendix B: Overview of Operations
Appendix B Overview of Operations
Slide 25: Rosenthal Mill
Rosenthal Mill • Location: Blankenstein, Germany (~300 km south of Berlin) • Pulp production capacity: 360,000 tonnes per year NBSK • Electricity generating capacity: 57 MW • Certification: ISO 9001, 14001, and 50001 • 2019 green electricity sales: $15.9 million • 2019 bio-extractives sales: $0.3 mi
Slide 26: Stendal Mill
Stendal Mill • Location: Stendal, Germany (~130 km west of Berlin) • Pulp production capacity: 660,000 tonnes per year NBSK • Electricity generating capacity: 148 MW • Certification: ISO 9001, 14001, and 50001 • 2019 green electricity sales: $46.7 million • 2019 bio-extractives sales: $11.1 million
Slide 27: Celgar Mill
Celgar Mill • Location: Castlegar, BC, Canada (~600 km east of Vancouver) • Pulp production capacity: 520,000 tonnes per year NBSK • Electricity generating capacity: 100 MW • Certification: ISO 9001 and 14001 • 2019 green electricity sales: $7.4 million Key Features: • Modern and efficient • Abundan
Slide 28: Peace River Mill
Peace River Mill • Location: Peace River, Alberta (~500 km northwest of Edmonton) • Pulp production capacity: 475,000 tonnes per year NBSK/NBHK • Electricity generating capacity: 65 MW • Certification: ISO 9001 and ISO 14001 • 2019 green electricity sales: $5.0 million Key Features: • Modern, high p
Slide 29: Cariboo Mill (50% JV Owned)
Cariboo Mill (50% JV Owned) • Location: Quesnel, British Columbia (~650 km north of Vancouver) • Pulp production capacity: 170,000 tonnes per year (1) NBSK • Electricity generating capacity: 28.5 MW (1) • Certification: ISO 9001 and ISO 14001 • 2019 green electricity sales: $4.6 million (2) Key Feat
Slide 30: Friesau Sawmill & Power Plant
Friesau Sawmill & Power Plant • Location: Friesau, Germany (~300 km south of Berlin) • Lumber production capacity: 550,000 Mfbm • Energy generating capacity: 49.5 MW (13 MW electricity) • 2019 lumber sales: $142.2 million • 2019 wood residuals sales: $8.0 million • 2019 green electricity sales: $9.7
Slide 31: Appendix C: Financial Highlights
Appendix C Financial Highlights
Slide 32: Stabilizing EBITDA
Stabilizing EBITDA Annual Operating EBITDA (1)(2) $500 Operating EBITDA ($,millions) $400 $365 $300 $233 $254 $241 $235 $187 $210 $200 $138 $144 $113 $100 - 2011 2012 2013 2014 2015 2016 2017 2018 (3)(4) 2019 (4) LTM Q1'20 (4) Annual Operating EBITDA Margin (1)(2)(4) 40% Operating EBITDA Margin 30%
Slide 33: Credit Profile
Credit Profile Restructured balance sheet 2014 Acquired the minority interest in Stendal Restricted / unrestricted group structure eliminated Senior Debt Composition Debt reduction $600 2025 7.375% Balance sheet recapitalized with lower cost debt Senior Notes Outstanding debt ($million) 2015 Commenc
Slide 34: Reconciling Net Income to EBITDA
Reconciling Net Income to EBITDA in US$ millions 2016 2017 2018 (1)(2) 2019 (2) LTM Q1’20 (2) Net Income Attributable to Common Shareholders 34.9 70.5 128.6 (9.6) (64.6) Add: Income Tax Provision 24.5 33.5 48.7 19.2 0.1 Add: Interest Expense 51.6 54.8 51.5 75.8 77.3 Add: Other Expense 4.1 (3) 9.8 (4
Slide 35: Reconciling Net Income to EBITDA
Reconciling Net Income to EBITDA Note: For other reconciliations of Net Income (Loss) to Operating EBITDA in periods not shown, please refer to that period’s respective Form 10-Q or 10-K, which can be found on our website (www.mercerint.com) Operating EBITDA is defined as operating income (loss) plu
Slide 36: Mercer International Inc.
Mercer International Inc. www.mercerint.com Phone: (1) 604 684 1099 | Fax: (1) 604 684 1094 Suite 1120, 700 West Pender Street, Vancouver, BC, V6C 1G8, Canada Copyright© 2018 Mercer International Inc.
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