Mercer International Inc. · NASDAQ:MERC
Mercer International — Investor Presentation (November 2016)
34 slides from Mercer International's investor presentation, Nov 14, 2016
Slide 1: Investor Discussion Materials November 2016
Investor Discussion Materials November 2016 Exhibit 99.1
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
Slide 3: Mercer International Inc.
Mercer International Inc.
Slide 4: Operations at a Glance
Operations at a Glance Combined annual capacity of: 1.54 million air dried metric tonnes (“ADMTs”) of Northern Bleached Softwood Kraft (“NBSK”) pulp 305 MW of electrical generation 100% (1) 100% 100% Celgar - BC, Canada 520,000 ADMTs + 100 MW Rosenthal - Germany 360,000 ADMTs + 57 MW Stendal - Germa
Slide 5: Strategically Located Mills with Access to Global Markets
Our mills’ strategic locations position us well to serve customers in Europe, North America and Asia China – the world’s largest and fastest growing pulp import market Germany – the largest European pulp import market Strategically Located Mills with Access to Global Markets (1) Not including German
Slide 6: Globally Cost Competitive and Modern Operations
Globally Cost Competitive and Modern Operations Our operations are some of the largest and most modern NBSK facilities in the world Low production costs Low maintenance capital requirements High runnability / efficiency Strong environmental performance record Net energy exporters Mercer Metsä Fibre
Slide 7: Rising up the Value Chain through Bio-Refinery Strategy
Rising up the Value Chain through Bio-Refinery Strategy We are a leader among paper and forest products manufacturers in pursuing a full bio-refinery strategy We harness value from all aspects of the biomass we process by generating electricity and chemicals The market continues to turn to carbon-ne
Slide 8: Value Creation through Deep Focus on Wood Markets
Value Creation through Deep Focus on Wood Markets We have deep competence in wood procurement We are market leaders in our local markets for industrial wood, particularly in Germany We are innovators in the design and implementation of new wood procurement methods New roundwood railcar fleet 200 new
Slide 9: Our Growing Import Reach for Wood
Our Growing Import Reach for Wood Baltic port expansion Our log port at Rostock Germany was recently expanded; enables greater imports from Baltic states, Scandinavia and UK Rail logistics expansion Acquisition of rail sidings Construction of new railway unloading facility at Rosenthal Construction
Slide 10: Small log / waste wood utilization project in British Columbia
Small log / waste wood utilization project in British Columbia BC wood harvest process historically plagued with wood utilization inefficiencies - “Waste” that has the potential to become pulp mill quality wood chips Timber harvest typically managed by lumber-focused sawmillers which creates a tende
Slide 11: Steady Focus on Cost Reduction
Steady Focus on Cost Reduction Fibre costs are consolidated for Celgar, Rosenthal and Stendal and converted using quarterly average FX rates Transportation costs are gross for all mills
Slide 12: The NBSK Market
IMERC The NBSK Market
Slide 13: NBSK in the Global Pulp Market
NBSK in the Global Pulp Market NBSK generally attracts a price premium relative to other kraft pulps (1) Source: PPPC (2014A); some numbers may not add due to rounding Tissue NBSK End Uses Northern Bleached Softwood Kraft (“NBSK”) is produced from spruce, pine, fir and cedar grown primarily in the f
Slide 14: Demand Fundamentals – NBSK Fiber Importance
Fiber Characteristics Long, slender, thin-walled fibers Better softness compared to SBSK and Radiata Better strength Fiber Advantages Provides structural integrity for the fiber network due to length and fineness Each NBSK fiber has three times more bonding strength than a Bleached Eucalyptus Kraft
Slide 15: Demand Fundamentals – NBSK Fiber Importance (Cont’d)
Demand Fundamentals – NBSK Fiber Importance (Cont’d) Tissues / Towels Printing & Writing Grades Conclusions NBSK is a key component for products requiring strength Proportionally more NBSK is used in tissues, towels and specialities than in printing & writing papers (1) Source: FPInnovations (Novemb
Slide 16: Demand Fundamentals – Changes to NBSK End Uses
Demand Fundamentals – Changes to NBSK End Uses NBSK Demand Changes Increased NBSK demand for tissue / specialty products has more than offset decreased NBSK demand for traditional printing & writing grades (digital substitution) Significant growth in global tissue demand is a major contributing fact
Slide 17: Demand Fundamentals – China’s Growing Demand
Demand Fundamentals – China’s Growing Demand (1) Source: PPPC (October 2016) Region … 2000-2020E CAGR China has been driving overall BSK demand growth globally
Slide 18: Demand Fundamentals – China’s Growing Demand (Cont’d)
Demand Fundamentals – China’s Growing Demand (Cont’d) (1) Source: PPPC End Use Study (2014), PPPC Chemical Market Pulp Forecast Reports (November 2014 and September 2015) (2) Growth rates calculated on a compound annual basis between 2004 and 2013; percentages comprised of NBSK are as at 2013 (3) In
Slide 19: Demand Fundamentals – China’s Growing Demand (Cont’d)
Demand Fundamentals – China’s Growing Demand (Cont’d) (1) Source: PPPC (July 25, 2016, prepared for Mercer International); Income measured at purchasing power parity in constant 2011 US dollars (2) Source: The World Bank – World Development Indicators (3) Source: PPPC (September 2015) Income per Cap
Slide 20: Supply Fundamentals – China’s Decreasing Pulp Supply
Supply Fundamentals – China’s Decreasing Pulp Supply Source: RISI (press releases from December 2, 2015, June 26, 2015, January 9, 2015, November 26, 2014, August 22, 2014 and July 24, 2014; PPI Asia Report dated May 9, 2014; and other disclosures) Source: RISI World Pulp Monthly reports Shutdown of
Slide 21: Supply Fundamentals – Net Capacity Change Analysis
Softwood Markets We believe that new NBSK capacity announcements are being motivated by: Demand growth expectations Capacity decreases Capacity decreases could be coming from: Old, high cost mills approaching end of life conditions Mill conversions to dissolving pulp Integration of market pulp (new
Slide 22: Perspectives on NBSK Pricing Trends
Perspectives on NBSK Pricing Trends (1) Source: PPPC monthly World Chemical Market Pulp Flash reports (2) Source: Brian McClay (September 19, 2016, prepared for Mercer International) (3) Source: FactSet Prices have recently been affected by: Discounts and Rebates: net prices show a smoother trend th
Slide 23: Financial Performance and Recent Developments
Financial Performance and Recent Developments
Slide 24: Significant Earnings Potential
Significant Earnings Potential Note: Some numbers may not add due to rounding For a Reconciliation of Net Income to Operating EBITDA, please refer to Appendix B. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charg
Slide 25: Recent Corporate Developments
Recent Corporate Developments Stendal Acquisition In September 2014, we acquired the remaining minority interest of the Stendal mill Corporate Refinancing On November 26, 2014, we completed a new senior notes debt offering $650 million in 7.00% and 7.75% senior notes due in 2019 and 2022 The proceed
Slide 26: Recent Corporate Developments (Cont’d)
Recent Corporate Developments (Cont’d) Capital Projects Evaporation plant upgrades at Rosenthal and Stendal completed during Q4 2015 Fiber infeed project at Rosenthal completed during Q3 2015 6,000 tonne per year tall oil plant at Rosenthal became fully operational in Q4 2014, on schedule and on bud
Slide 27: Our Capital Structure Flexibility
Our Capital Structure Flexibility US$mm, unless otherwise noted 30-Sep-14 Pre-Refinancing 30-Sep-16 Post-Refinancing Cash Balance $240 $141 Stendal Revolving Credit Facility $499 - 2017 Senior Notes (9.50%) $329 - 2019 Senior Notes (7.00%) - $224 2022 Senior Notes (7.75%) - $393 Other Secured Debt $
Slide 28: Mercer – Summary
Mercer – Summary Strong long-term NBSK fundamentals Globally cost competitive, modern mill operations Strategically located mills with excellent access to key markets Stable revenue from high-margin energy and chemical sales De-levered and flexible capital structure Experienced management team The l
Slide 29: Appendix A Detailed Overview of Operations
Appendix A Detailed Overview of Operations
Slide 30: Rosenthal Mill
Rosenthal Mill Location: Blankenstein, Germany (~300 km south of Berlin) Pulp Production Capacity: 360,000 ADMTs per year Electricity Generating Capacity: 57 MW Certification: ISO 9001, 14001, and 50001 2015 Green Electricity Sales: $16.8 million 2015 Chemical Sales: $2.3 million Key Features: Built
Slide 31: Stendal Mill
Stendal Mill Location: Stendal, Germany (~130 km west of Berlin) Pulp Production Capacity: 660,000 ADMTs per year Electricity Generating Capacity: 148 MW Certification: ISO 9001 and 14001 2015 Green Electricity Sales: $46.7 million 2015 Chemical Sales: $9.9 million Key Features: Completed in 2004, i
Slide 32: Celgar Mill
Celgar Mill Location: Castlegar, BC, Canada (~600 km east of Vancouver) Pulp Production Capacity: 520,000 ADMTs per year Electricity Generating Capacity: 100 MW Certification: ISO 9001 and 14001 2015 Green Electricity Sales: $11.2 million Key Features: Modern and efficient Abundant and low cost fibe
Slide 33: Appendix B Reconciliation of Net Income to Operating EBITDA
Appendix B Reconciliation of Net Income to Operating EBITDA
Slide 34: Reconciling Net Income to Operating EBITDA
Reconciling Net Income to Operating EBITDA in US$ millions 2013 2014 2015 Q3 2015 Q3 2016 Net Income (Loss) Attributable to Common Shareholders ($26.4)$113.2$75.5 $23.8$11.9 Add: Net Income Attributable to Non-Controlling Interest$0.6$7.8--- Add: Income Tax Provision (Benefit) $9.2($16.8)$29.4 $6.6$
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