Mercer International Inc. · NASDAQ:MERC
Mercer International — TD Securities Paper and Forest Products Conference 2022
44 slides from Mercer International's conference presentation, Sep 28, 2022
Slide 1: Exceptional people creating bioproducts for a more sustainable world
Exceptional people creating bioproducts for a more sustainable world TD Securities Paper and Forest Products Conference September 28, 2022 1
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 c
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 end-use Mercer Mass applications with little to no job site waste – MMT can manufacture more than 140,000 cubic metres of CLT per year – more than 1/4 of Timber (MMT) total North American capacity. The near-
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: Torgau Acquisition
Torgau Acquisition ▪ Integrated sawmill and value-add pallet production facility in Torgau, Germany ▪ Key products include lumber and wood pallets, biofuels, and energy ▪ €270 million ($~275.4 million) purchase price, inclusive of forecasted net working capital of ~€43 million (~$43.9 million) ▪ Tra
Slide 11: Torgau Product Portfolio
Torgau Product Portfolio Sawn Timber Products: 410 MMfbm capacity Pallets: The largest producer of EPAL pallets in the world; 17 million pallets annually Pellets & Briquettes (“Biofuels”): 150,000 tonnes of pellets, 85,000 tonnes of briquettes Bio-Electricity: 90 GWh of green electricity 11
Slide 12: Torgau Strategic Rationale
Torgau Strategic Rationale Mercer Stendal Grows sawn timber capacity by ~75% to 960 MMfbm and electricity generation capacity by ~15 MW Diversify Mercer's product mix with the HIT Torgau introduction of pallets and biofuels Mercer Timber Products HIT Dahlen Attractive entry point into pallet Mercer
Slide 13: Torgau Financial Highlights
Torgau Financial Highlights • Consideration of €270 million ($~275.4 million), inclusive of forecasted net working capital of ~€43 million (~$43.9 million) • To be funded using our existing cash on hand and/or our revolving credit facilities • HIT generated EBITDA of €68 million in 2021 and €22 mill
Slide 14: 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 15: 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 16: Carbon Considerations
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: Environmental Responsibility
Environmental Responsibility Modern assets and innovation makes our processes sustainable. A continuous improvement culture keeps us advancing. Signatory to Science-based Target Decreased AOX per tonne of pulp by Reduced SO2 emission intensity (kg Completed €300 million Initiative (SBTi) with valida
Slide 18: 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 19: Financial Performance
Financial Performance • Operating EBITDA (1)(2) was historically influenced by global NBSK pricing, however: • Green electricity revenues were, until 2022, relatively fixed • Wood products are a growing source of EBITDA; contributing $123 Net Income (Loss) million in 2021, $139 ($ millions) (26.4) 113
Slide 20: 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 21: 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 22: 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 23: Reconciling Net Income (Loss) to EBITDA
Reconciling Net Income (Loss) to EBITDA Q2 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) 171.0 303.9 Shareholders Add: Income Tax Provision (Benefit) 33.5 48.7 19.2 6.1 89.6 134.6 Add: Interest Exp
Slide 24: Appendix: Market Attributes
Appendix: Market Attributes Sustainable. By Design. 24
Slide 25: 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 26: 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 27: 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) 27 1)
Slide 28: 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 29: Historical Market Conditions
Historical Market Conditions 29
Slide 30: Pulp Capacity Changes
Pulp Capacity Changes NBSK Hardwood SBSK, Fluff, Radiata ▪ After a period of considerable capacity ▪ Eucalyptus capacity is set to grow over 6 ▪ 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 31: US Lumber Market – Demand Drivers
US Lumber Market – Demand Drivers (1) ▪ Housing starts are rising and still well below ▪ Interest (mortgage) rates, while currently rising, historical average prior to the financial crisis remain modest by historical comparison Source: Forest Economic Advisors 31 1)
Slide 32: 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 33: Appendix: Operations Overview
Appendix: Operations Overview Sustainable. By Design. 33
Slide 34: 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 35: 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 Q2 2022 LTM by revenue 35 1) 2) Excludes energy sales from 50% owned Cariboo mill 3) Includes wood residual sales
Slide 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: Mercer Torgau
Mercer Torgau ▪ Location: Torgau, Germany (~115 km south of Berlin) ▪ Lumber production capacity: 410,000 Mfbm ▪ Electricity generating capacity: 15 MW ▪ Pallet production capacity: 17 million ▪ 2021 sales: €227.1 million (1) Key Features: ▪ Integrated sawmill and value-add pallet production facilit
Slide 43: 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 44: 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 44
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