Mercer International Inc. · NASDAQ:MERC
Mercer International — Q1 2022 Earnings Presentation
41 slides from Mercer International's earnings presentation, May 14, 2022
Slide 1: Exceptional people creating bioproducts for a more sustainable world
Exceptional people creating bioproducts for a more sustainable world 1
Slide 2: Forward-looking Statements
Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe For more information regarding harbor” for forward-looking statements. these risks and uncertainties, review Mercer’s filings with the Certain information included in this presentation contains statements
Slide 3: Our 4-element strategy for adding value
The world's tolerance of pollution and carbon emissions is rapidly diminishing. Sustainably sourced biomaterials, including wood fiber and derivatives are part of the solution. However, supply is not boundless, and only the most efficient and innovative producers and products will be capable of meeting
Slide 4: Products
Products • NBSK and NBHK from sustainably managed forests are used in the production of tissue, recyclable graphic paper, and packaging alternatives to plastics | One of the largest global producers of market NBSK with deep Pulp expertise and a market reputation as a reliable, efficient and high-quali
Slide 5: Building a Platform for Growth
Building a Platform for Growth 1994: Acquisition of Rosenthal mill 1999: Rebuild of Rosenthal mill 2004: Stendal greenfield construction 2005: Acquisition of Celgar mill 2007: Celgar “Project Blue Goose” 2010: Celgar “Green Energy Project” 2013: Stendal “Blue Mill” expansion and “Green Energy Project
Slide 6: World-class Assets and Innovation
World-class Assets and Innovation ▪ One of the largest producers of market NBSK in the world ▪ Operating among the most modern NBSK mills in the world ▪ Efficient distribution channels to major pulp consuming markets of ▪ Low cost, energy self-sufficient, net exporters of green Asia, Europe, and North A
Slide 7: World-class Assets and Innovation: Mercer Timber Products
World-class Assets and Innovation Mercer Timber Products • Unique flexibility (3) to produce metric and US dimension grades, green, rough and kiln-dried for all major world markets • Competitive shipping channels to Europe, US East and Gulf coasts, and Japan 1) Source: Sawmill capacities as per www.s
Slide 8: World-class Assets and Innovation: Mercer Mass Timber
World-class Assets and Innovation Design Precision: High-precision manufacturing for specific Mercer Mass Timber end-use applications with little to no job site waste – MMT can manufacture more than 140,000 cubic metres of CLT per year – State-of-the-art cross-laminated timber (CLT) more than 1/4 of
Slide 9: World-class Assets and Innovation: Bioenergy & Biomaterials
World-class Assets and Innovation Sustainable, Green Energy: All our mills produce enough sustainable, Bioenergy & green energy to not only heat and power our operations but to provide excess electricity to utilities looking to move away from fossil Biomaterials fuel-based energy. The world is trans
Slide 10: Optimization Through Innovation
Optimization Through Innovation Logistics Construction Continuous 1 Innovation 2 Expertise 3 Improvement ▪ Design and construction ▪ Forest waste material ▪ Greenfield and brownfield of dedicated trains and recovery pulp mills truck fleet for shipping ▪ Pulp and lumber wood yield wood and end-products
Slide 11: Financial Performance
Financial Performance • Operating EBITDA (1)(2) was historically influenced by global NBSK pricing, however: • Green electricity revenues remain relatively fixed • Wood products are a growing source of EBITDA; contributing $123 million in 2021, $136 Net Income (Loss) million LTM ($ millions) (26.4) 11
Slide 12: Prudent, Agile Capital Structure
Prudent, Agile Capital Structure Liquidity is managed to the global economic conditions: Debt composition is optimized when opportunistic: ▪ 2016-2018: Tighter liquidity during stronger economic ▪ Weighted average maturity of senior debt is 2028 conditions and expansion period for Mercer ▪ Weighted
Slide 13: Balanced Capital Allocation
Balanced Capital Allocation Capital allocation is balanced and consistent with the strategy: ▪ Maintenance of Business (1) capital expenditures to maintain modern, efficient and reliable mills. ▪ Growing the Company through acquisitions and high-return capital expenditures. ▪ Commitment to returning c
Slide 14: Environmental Responsibility
Environmental Responsibility Modern assets and innovation makes our processes sustainable. A continuous improvement culture keeps us advancing. Signatory to Science-based Target Over the past 5 years, AOX intensity Climate change scenario analysis 85% of energy comes from Initiative (SBTi) with appr
Slide 15: Social Responsibility
Social Responsibility Embracing social responsibility means consciously upholding our commitments. That’s the Mercer way. Partnered with Business for Social Signatory to Canadian Council of High-potential global candidates Global DE&I council workgroups Responsibility (BSR) to develop Aboriginal Bus
Slide 16: Carbon Considerations: Products, Residuals, Materials
Carbon Considerations vs Lifecycle Products 0 Years 100 Years Sustainably Managed Forests: Lumber & CLT – Solid Wood Products displaces high carbon • Protect against steel and concrete catastrophic carbon alternatives emissions (fire, insects, etc.) Residuals Packaging – displaces plastic alternative
Slide 17: Current Market Conditions
Current Market Conditions Pulp: Near-Term Pulp: Mid-Term No material new near-term NBSK capacity Steady demand growth, principally from the increasing middle class of emerging economies, will support demand for graphics papers, packaging, hygiene, and specialty paper products New hardwood capacity f
Slide 18: Investment Highlights
Investment Highlights Management committed to Compelling growth in spaces where we have core competencies Carbon-forward Products Prudent and agile balance sheet discipline, commitment to the dividend Sustainable, Commitment to sustainability in Long-term our products, operations, and communities Gr
Slide 19: Contact Information
Contact Mercer International Inc. Information P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada www.mercerint.com V6C 1G8 19
Slide 20: Reconciling Net Income (Loss) to EBITDA
Reconciling Net Income (Loss) 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 (los
Slide 21: Reconciling Net Income (Loss) to EBITDA
Reconciling Net Income (Loss) to EBITDA Q1 2022 Consolidated (US$ millions) 2017 2018 (1)(2) 2019 (2) 2020 (2) 2021 (2) LTM (2) Net Income (Loss) Attributable to Common 70.5 128.6 (9.6) (17.2) 171.0 254.0 Shareholders Add: Income Tax Provision (Benefit) 33.5 48.7 19.2 6.1 89.6 111.1 Add: Interest Exp
Slide 22: Appendix: Market Attributes
Appendix: Market Attributes Sustainable. By Design. 22
Slide 23: Global Wood Fiber Market
Global Wood Fiber Market ▪ The global demand for wood fiber is principally met by the recycling of packaging and graphics paper. ▪ Today, NBSK makes up 3.5% of global fiber demand; it has become a highly specialized niche product used for strength and bonding attributes. It is principally produced in
Slide 24: Global Wood Fiber Market
Global Wood Fiber Market (1) Total global wood fiber consumption – 374 million tonnes Recovered paper – 54% Virgin pulp – 46% Total virgin pulp market – 171 million tonnes Integrated pulp – 60% Market pulp – 40% Total market pulp market – 68 million tonnes UBK, Radiata, Hardwood – 52% NBSK – 23% Mech
Slide 25: Global Bleached Kraft Pulp Market
Global Bleached Kraft Pulp Market (1) Global Bleached Kraft Pulp Demand Global Bleached Kraft Pulp Demand (millions of tonnes) (millions of tonnes) Source: Hawkins Wright – Outlook for Market Pulp (April 2022) 25 1)
Slide 26: NBSK Demand Drivers
NBSK Demand Drivers Global BSK Demand by Region (1) NBSK Demand Changes ▪ Increased NBSK demand for tissue and specialty products continues to rise globally ▪ In developing countries, demand for NBSK across all end uses is growing ▪ Increasing income levels, rapid urbanization of populations and ris
Slide 27: Historical Market Conditions
Historical Market Conditions 27
Slide 28: Pulp Capacity Changes
Pulp Capacity Changes NBSK Hardwood SBSK, Fluff, Radiata ▪ After a period of considerable capacity ▪ Eucalyptus capacity is set to grow over 5 ▪ Continuation of a trend by some producers to expansion in Scandinavia from 2016-2018, million tonnes in the next few years exit these softwood grades in fav
Slide 29: US Lumber Market – Demand Drivers
US Lumber Market – Demand Drivers (1) ▪ Housing starts are rising and still well below ▪ Interest (mortgage) rates are currently historical average prior to the financial crisis supporting new homeownership and upgrading Source: Forest Economic Advisors 29 1)
Slide 30: US Lumber Market – Demand Drivers
US Lumber Market – Demand Drivers (1) ▪ The prime first-time home ownership ▪ Production capacity is growing but is demographic (30-35 year olds) is currently experiencing restrictions; particularly from its highest in a generation Canada where allowable cut levels are falling Source: Forest Economic
Slide 31: Appendix: Operations Overview
Appendix: Operations Overview Sustainable. By Design. 31
Slide 32: Strategically Located Assets
Strategically Located Assets Mercer Peace River Mercer Holz 475,000 ADMT NBSK/NBHK Wood purchasing, 70 MW energy harvesting, hauling Cariboo Pulp & Paper (1) Mercer Stendal 170,000 ADMT NBSK 740,000 ADMT NBSK 28.5 MW energy 148 MW energy Mercer Celgar Mercer Rosenthal 520,000 ADMT NBSK 360,000 ADMT
Slide 33: Product Sales Mix
Product Sales Mix (1)(2) Products Pulp Segment Wood Products Segment (3) Pulp Lumber Energy / Bio-extractives US Germany China Other US Germany Other Q1 2022 LTM by revenue 33 1) 2) Excludes energy sales from 50% owned Cariboo mill 3) Includes wood residual sales
Slide 34: Mercer Rosenthal
Mercer Rosenthal ▪ Location: Blankenstein, Germany (~300 km south of Berlin) ▪ Pulp production capacity: 360,000 tonnes per year NBSK ▪ Electricity generating capacity: 57 MW Mercer ▪ Certification: ISO 9001, 14001, and 50001 Rosenthal ▪ 2021 green electricity sales: $5.4 million ▪ 2021 bio-extractiv
Slide 35: Mercer Stendal
Mercer Stendal ▪ Location: Stendal, Germany (~130 km west of Berlin) Mercer ▪ Pulp production capacity: 740,000 tonnes per year NBSK Stendal ▪ Electricity generating capacity: 148 MW ▪ Certification: ISO 9001, 14001, and 50001 ▪ 2021 green electricity sales: $65.4 million ▪ 2021 bio-extractives sales
Slide 36: Mercer Celgar
Mercer Celgar ▪ 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 ▪ 2021 green electricity sales: $4.8 million ▪ 2021 bio-extractives sales: $0.06 million K
Slide 37: Mercer Peace River
Mercer Peace River ▪ Location: Peace River, Alberta (~500 km northwest of Edmonton) ▪ Pulp production capacity: 475,000 tonnes per year NBSK/NBHK ▪ Electricity generating capacity: 70 MW ▪ Certification: ISO 9001 and ISO 14001 ▪ 2021 green electricity sales: $10.7 million Key Features: ▪ Modern, high
Slide 38: Cariboo Pulp & Paper
Cariboo Pulp & Paper ▪ 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 ▪ 2021 green electricity sales: $5.6 million (2) Key Features: ▪
Slide 39: Mercer Timber Products (Friesau)
Mercer Timber Products (Friesau) ▪ Location: Friesau, Germany (~300 km south of Berlin) ▪ Lumber production capacity: 550,000 Mfbm ▪ Energy generating capacity: 49.5 MW (13 MW electricity) ▪ 2021 lumber sales: $293.2 million ▪ 2021 wood residuals sales: $6.4 million ▪ 2021 green electricity sales: $
Slide 40: Mercer Mass Timber
Mercer Mass Timber • Location: Spokane, Washington, United States • CLT production capacity: 140,000 m3 • Factory size: 253,000 ft2 • Product: high-capacity cross-laminated timber Key Features: • Multiple years of CLT experience within the manufacturing team • Highly automated production line • Stru
Slide 41: Contact Information
Contact Mercer International Inc. Information P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada www.mercerint.com V6C 1G8 41