Mercer International Inc. · NASDAQ:MERC
Mercer International — CIBC Whistler Institutional Investor Conference 2013
32 slides from Mercer International's conference presentation, Jan 18, 2013
Slide 1: CIBC Whistler Institutional Investor Conference
CIBC Whistler Institutional Investor ConferenceJanuary 23-26, 2013
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: Introduction to Mercer International Inc.
Introduction to Mercer International Inc.
Slide 4: Mercer - A Snapshot
Mercer - A Snapshot World-class, large, modern mills operations that produce high-quality NBSK pulp Strategically located mills, close to excellent fiber baskets and key markets Strong long-term forecast / supply-demand outlook for NBSK Significant and growing revenue from energy & chemical sales Fi
Slide 5: Corporate Structure
Corporate Structure Pursuant to the terms of its 2017 Senior Notes Mercer conducts operations through three subsidiaries:Rosenthal - GermanyStendal - GermanyCelgar - BC, CanadaThe Corporation is divided into the "Restricted Group" and the "Non-Restricted Group" - a structure created to facilitate th
Slide 6: Significant Capacity with Access to Key Global Markets
Significant Capacity with Access to Key Global Markets Mercer's three mills have a combined annual capacity of 1.51 million tpy of NBSK pulp production and 259 MW of electrical generationThe mills' strategic locations position the company well to serve customers in Europe, North America and AsiaIn p
Slide 7: Growing Energy and Chemical By-Product Revenues
Growing Energy and Chemical By-Product Revenues Mercer has been a leader among paper and forest products companies in embracing the "bio-economy" and in harnessing significant value from the generation of surplus power as well as its production of bio-chemicals Mercer recognized the opportunity to s
Slide 8: The NBSK Market
The NBSK Market NASDAQ: MERC | TSX:MRLU | mercerint.com Me Ae es
Slide 9: Introduction to the Major Themes in NBSK
Introduction to the Major Themes in NBSK The impact of digital media on paper demand ? Current themes surrounding the NBSK market include: The effect of China and other emerging economies' continuing growth ? The net supply impact of mill closures, starts/restarts, and facility conversions ? The pot
Slide 10: NBSK market trending from balanced to tight
After undergoing significant changes over the past 20+ years, the market for NBSK is trending from balanced to tight, with the meaningful substitution of NBSK for other pulps largely completed Putting NBSK's History into Perspective (CHART) Shortage! ? price surge Sources: Factset FOEX PIX Pulp NBSK
Slide 11: Changes to NBSK End Use Markets
Source: Brian McClay 2012 (end use) / Hawkins Wright 2012 (total demand)Source: RISI 2011 Changes to NBSK End Use Markets Changes to Papermakers' Demand for NBSK Changes to End Users' Demand for Paper Impact of Paper / Tissue Expansion on NBSK Demand (2011-2016) (2) Impact of Paper / Tissue Expansio
Slide 12: China's Growing Demand
China's Growing Demand Source: Chinese Customs statsSource: PPPC 2012* 2012E assumes same breakdowns of grade as in 2010, for illustrative purposes (CHART) (CHART) P&W Woodfree:9.9% Paper Board:9.6% Kraft & Spec.:11.0% (CHART) Tissue:14.7% CAGR:2004 - 2012* Region: '95 - '10 CAGR
Slide 13: China's Growing Demand (Continued)
China's Growing Demand (Continued) Source: State Council of China , MIIT, C&D Paper and PulpSource: RISI -- "China mandates mill closures to improve pollution" (22-Nov-11); "China offers further details on this year's pulp and paper capacity closures plan" (11-Jul-12) Reasons China's demand is growi
Slide 14: NBSK Supply / Demand Summary
NBSK Supply / Demand Summary Demand Fundamentals Supply Fundamentals Demand for NBSK is still growing globally Improving economic conditions for emerging countriesDigital substitution Supply growth potential for NBSK is limitedNBSK supply increases are limited due to fiber supply and the economics o
Slide 15: Appendix A Additional Information on Mercer International Inc.
Appendix A Additional Information on Mercer International Inc.
Slide 16: Mercer - Corporate Overview
Mercer - Corporate Overview Mercer owns three large, modern pulp mills - one located in BC and two in GermanyThe assets have a combined capacity of approximately 1.5 million tpy of NBSK, a premium grade of pulp with excellent strength propertiesA significant and growing portion of revenue is from th
Slide 17: Significant Earning Potential
Significant Earning Potential China's fiscal tightening in 2011 combined with weakness in Europe create NBSK trough pricing conditions Currently at a pulp pricing cycle bottom, but expected to improve in 2013 Annual Consolidated Operating EBITDA (1) (CHART) (CHART) 2008 2009 2010 2011 2012 Quarterly
Slide 18: Balance Sheet - September 30, 2012
Balance Sheet - September 30, 2012 in millions Restricted Unrestricted Adjustments ConsolidatedASSETS Cash, Cash Equivalents & Marketable Securities € 55.0 € 71.1 - € 126.2 Receivables € 62.3 € 56.3 - € 118.6 Inventories € 69.8 € 43.5 - € 113.4 Other Current Assets € 13.0 € 6.2 - € 19.2Total Current
Slide 19: Selected Historical Financial Data (Consolidated)
Selected Historical Financial Data (Consolidated) in millions, except for per share data 2009 2010 2011 3Q's 2011 3Q's 2012 Pulp Revenue €577.3 €856.3 €831.4 €618.2 €590.6 Energy Revenue €42.5 €44.2 €58.0 €42.0 €46.2 Other Revenue €3.0 €5.1 €10.1 €7.8 €8.9Total Revenue €622.8 €905.6 €899.5 €667.9 €6
Slide 20: History of Mercer's Debt Structure
History of Mercer's Debt Structure The "Restricted Group" structure was created to facilitate the acquisition of Celgar through the issue of senior notesThe Restricted GroupSupported by the Celgar and Rosenthal millsTogether produces ~865,000 admt of pulp annually With Celgar's Green Energy Project
Slide 21: Appendix B Detail on NBSK Supply and Demand
Appendix B Detail on NBSK Supply and Demand
Slide 22: Introduction to the Major Themes in NBSK
Introduction to the Major Themes in NBSK The impact of digital media on paper demandThe proliferation of digital media on tablets / smart-phones has displaced demand for newsprint and other news type magazine grade papers; however, newsprint and many of these low-grade magazine papers use mostly mec
Slide 23: Putting NBSK's History into Perspective
Putting NBSK's History into Perspective (CHART) After undergoing significant changes over the past 20+ years, we believe the market for NBSK is trending from balanced to tight, with the substitution of NBSK for other pulps largely completed The Beginning:NBSK used in everything - no recycling, limit
Slide 24: Changes to NBSK End Use Markets
Changes to NBSK End Use Markets Changes to Papermakers' Demand for NBSK Changes to End Users' Demand for Paper We believe pulp users are reaching the limit of substituting cheaper HW / recycled pulps in place of NBSKNBSK, a premium pulp grade, has key strength attributes that make it a required inpu
Slide 25: China's Growing Demand
China's Growing Demand Chinese demand for softwood kraft pulp has grown 16% per year between 1995 and 2010China is forecasted to make up over 30% of global BSK demand by 2015 (approx. 24% in 2011)More BSK pulp was imported in the first 8 months of 2012 (~4.43 million tonnes) than all of 2010 (~3.99
Slide 26: China's Growing Demand (Continued)
China's Growing Demand (Continued) Source: State Council of China , MIIT, C&D Paper and PulpSource: PPPC - Trends in P&W Papers and Tissues (Emanuele Bono, Nov. 2012) Reasons China's demand is growing rapidly... ... and its pulp supply isn't currently keeping pace (CHART) Over time , the market will
Slide 27: Appendix C Detailed Overview of Operations
Appendix C Detailed Overview of Operations
Slide 28: Rosenthal Mill
Rosenthal Mill (1) 2011 average EUR:USD fx of 1.3919 Mercer International Group: RestrictedLocation: Blankenstein, Germany (~300 km south of Berlin)Pulp Production Capacity: 345,000 ADMT / yearElectricity Generating Capacity: 57 MWCertification: ISO 9001 and ISO 14001 2011 Green Electricity Sales: €
Slide 29: Celgar Mill
Celgar Mill Mercer International Group: RestrictedLocation: Castlegar, BC, Canada (~600 km east of Vancouver)Pulp Production Capacity: 520,000 ADMT / yearElectricity Generating Capacity: 100 MWCertification: ISO 9001 and ISO 14001 2011 Green Electricity Sales: €10.6 million (US$14.7 million) (1)Key
Slide 30: Stendal Mill
Stendal Mill Mercer International Group: UnrestrictedLocation: Stendal, Germany (~130 km west of Berlin)Pulp Production Capacity: 645,000 ADMT / yearElectricity Generating Capacity: 102 MWCertification: ISO 9001 and ISO 14001 certified2011 Green Electricity Sales: €32.5 million (US$45.2 million) (1)
Slide 31: Appendix D Reconciliation of Net Income to Operating EBITDA
Appendix D Reconciliation of Net Income to Operating EBITDA
Slide 32: Reconciling Net Income (Loss) to Operating EBITDA
Reconciling Net Income (Loss) to Operating EBITDA Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark
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