Mercer International Inc. · NASDAQ:MERC
Mercer International — Investor Presentation (March 2004)
33 slides from Mercer International's investor presentation, Mar 1, 2004
Slide 1: Mercer International Inc.
Mercer International Inc.
Slide 2: Safe Harbour Statement
Safe Harbour Statement 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 cond
Slide 3: Mercer International — Investment Merits
Mercer International — Investrnent Merits > Low Cost NBSK Producer with World Class Assets * Ideal Geographic Location Creates Unique Market Dynamics » Positioned Strategically Relative to Emerging Markets » Access to Stable, Low-Cost Fiber Sources Significant Leverage to Pulp Cycle > Rapid Organic
Slide 4: Corporate History and Facilities
Corporaite History and Facilities 4,000 Stendal 552,000 tpy NBSK pulp (63.6% owned) - Greenfield construction on iy track 1993: Acquired 1998-2000: Divested Dresden Papier ‘4non-core paper : = i Rosenthal Aa 300,000 tpy NBSK pulp SE | 994 acquired 41999 - Conversion & - Low cost, high quality Be sep
Slide 5: Industry Overview
INDUSTRY OVERVIEW
Slide 6: Global Market Pulp
Global Market Pulp Global Pulp Demand by Grade Global NBSK Pulp Demand Suir agnneia at Source: PPE “> Pulp Market at Approximately 44 Million Tonnes » Total Pulp Demand Growth Averaging Approximately 3% Per Year » 28% is NBSK (Northern Bleached Softwood Kraft) w
Slide 7: Market Pulp Trade Flows
Market Pulp Trade Flows Source: CEP! (2002) “> Europe is a Significant Pulp Importer “> Best Markets are in the Center: Germany, Italy
Slide 8: EU Accession Countries
EU Accession Countries “ Consumption Growth within these Countries should be Significant *» According to Jaakko Péyry: > 2000-2015 Demand Growth in Eastern Europe Almost Twice Global Average |" » Consumption Exceeds Production in Eastern European Accession Countries > Per Capita Consumption is Curre
Slide 9: Forecast
Forecast ou Source! RISL 1990 1992 1994 1996 1998 2000 2002 2004 * Steady Price Improvements Throughout 2003 with an Optimistic Outlook for 2004 and 2005
Slide 10: Business Details
BUSINESS DETAILS
Slide 11: Mercer — A Global Scale NBSK Producer
Mercer —A Global Scale NBSK Producer «> Rosenthal and Stendal » Total Tonnes (NBSK) » Total Investment (millions) Grants Project Debt at Completion Total Construction and Conversion Costs » Number of Employees » Annual Wood Consumption (millions) Roundwood Residual Chips » Average Mill Production Co
Slide 12: Rosenthal — An Unparalleled Success
Rosenthal — An Unparalleled Success “> In 1999, Conversion of Rosenthal Mill to Kraft es Pulp Production Created Unique Asset » Approximately €361 Million Invested {€101 million from grants) » Fastest Ever Start-up of an NBSK Facility » Capacity Increased From 160,000 Tonnes to 300,000 Tonnes “> Str
Slide 13: Stendal Project — Near Term Growth Driver
Stendal Project — Near Term Growth Driver > €1 billion “Greenfield” Project is the Largest Industrial Project Investment in Eastern Germany » Qualifies for €274 Million of Grants » Capacity of 552,000 tla » Production of Saleable Pulp Scheduled for Q3, 2004 “> Strong Cost Position (approx. €293/tonn
Slide 14: Stendal Project — On Budget and On Time
Stendal Project — On Budget and On Tire = Percent Complete at December 31/03 Average Stage of Completion 92% | Engineering 99.2% | Procurement & Equipment 99.4% | Delivery Civil Works 92.8% Mechanical Erection 70% Start-up Q3 2004
Slide 15: Competitive Strengths
COMPETITIVE STRENGTHS
Slide 16: Competitive Strengths
ive Strengths * One of Lowest Cost NBSK Producers in Industry * World Class Assets + Ideal Geographic Location » Unique End Market Dynamics » Shipping Cost and Customer Service Advantage » Strong Fibre Supply * Significant Leverage to Pulp Cycle ** Hedging Activities Protect Against Interest Rate an
Slide 17: Low Cost NBSK Pulp Producer
Low Gost NBSK Pulp Producer DELIVERED CASH COST OF BSKP TO WESTERN EUROPE ROSENTHAL vs. ALL MARKET PULP PRODUCERS: Estimate based on 596 COST LEVEL OF 2002 incresee of EUR v2 CAD EUR/ADE 7007 — TE USHEUR / Depreciation es and Interest soo + 400 [Distribution to Western Europe, intand| 00 200 JALL NB
Slide 18: World Class Assets
World Glass Assets “> Highly efficient - Low Production Costs * New facilities - Reduced Capital Requirements, Runability industry Structure of NBSK Producers bss ‘Weyerhaeuser 4 aL eee g é 2 s00 BE 20 a ns “ cs . 0 30 2B a 5 0 6 0 Technical Age (years) wD Source: saahle Pigry, duly 2002 18
Slide 19: Ideal Geographic Location
Ideal Geographic Location “> Only Manufacturer in Europe’s Largest Pulp Import Market * Bordering on Emerging Markets in Central and Eastern Europe » “Westernization” Will Drive Above Average Growth in Per Capita Consumption “Access to Substantial, High Quality Fibre Supply » Needs for Stendal Alrea
Slide 20: Strong Fibre Supply
Strong Fibre Supply » High Quality Fibre Supply » Rosenthal - Spruce » Stendal — Pine Largest Consumer of Wood Chips in Germany » Typically 1 Year Contracts » Numerous Suppliers Fibre Costs (pertonne) 7a 10090 Low Historical Volatility in Wood Chip Pricing Sy a ey ee » No Contracts Tied to Pulp = Me
Slide 21: Wood Procurement
Slide 22: Significant Leverage to Pulp Cycle
Significant Leverage to Pulp Cycle Impact on Operating Earnings (effect of a $20/tonne change in pulp pricing per $100 invested) $12.00 seisecieecee $10.00 $9.67 $8.00 $6.03 $6.00 4------ $6.54 ° $553 $4.00 $2.56 $2.00 4-----$1.93 : | --- $4.50: $0.00 ‘Aracruz ‘Canfor Tembec Pope& SFK Mercer Talbot
Slide 23: Long Term, Low Cost Debt Financing
Long Term, Low Cost Debt Financing “> Project Financings Benefit Our Equity Holders » Reduced Dilution » NoCashSweep » Ring Fenced Structure “> Government Guarantees, of 80% of Debt, is Maxi » Resulting in Low Cost Financing Structure Rosenthal Stendal Size €191.7ma) €668mQ) Tem 15 years amortizing
Slide 24: Hedging Benefits
Hedging Benefits * Protect Against Currency Movements >» Monetized Currency Hedges in 2003 Fourth Quarter » Have Opportunity to Enter into New Contracts ~ Fix Interest Costs » Interest Rates Fixed at Favorable Levels 24
Slide 25: Financial Highlights & Valuation
FINANCIAL HIGHLIGHTS & VALUATION
Slide 26: Historical Financial Performance
Historical Financial Performance Years Ended December 31, € millions) 2000 2001 2002 2003 Revenue €258.9 €216.4 €239.1 €194.6 Operating EBITDA 73.7 36.3 24.5 19.6 Operating Income 49.7 13.3 (1.1) (4.5) (loss) Net Income (loss) 32.0 (2.8) (6.3) (3.6)? per share 1.90 (0.17) (0.38) (0.21) Operating Cas
Slide 27: Valuation
Valuation e to book multiples 20%7- a ue a aa Bese 20% 19% 15x p- a fae 2s PEE a 10x p> i 5 eats ues ee O7 x 06 x Osx t- 0.0 x Aracruz Canfor Tembec Pope &Tabot —_SFK Pulp Mercer (Adjust'd) ‘aurea ach 48.2 mlon of Sona none h mar-p-makstunnaid deat Hoang fae ‘Souree Company, Reports 27
Slide 28: Mercer International Inc.
Ww Mercer International Inc. $1200 $10.00 t2.00 tee AZ $4.00 ee tao fb : hes 0.00 $800 meveneenny £250 gro fa amy Eom ere SE topean MOSK LET Poe § ssn sano $900 fan oe Pi of Rosenthal pub mil $200 — 450
Slide 29: Mercer International — Investment Merits
Mercer International — Investrnent Merits > Low Cost NBSK Producer with World Class Assets * Ideal Geographic Location Creates Unique Market Dynamics » Positioned Strategically Relative to Emerging Markets » Access to Stable, Low-Cost Fiber Sources Significant Leverage to Pulp Cycle > Rapid Organic
Slide 30: Appendix: Significant Leverage to Pulp Cycle
Appendix 4 Significant Leve to Pull le Impact on Operating Earnings fect of a $20/tonne change in pulp pricing per $100 invested) Pope & Aractuz Canfor_ Tembec _Talbot_ __SFK current_ _2005e() Capacity (000 ta) 2400 Tvs 228 oa 8 Shares Outstanding (mil) 1/9507 13 858 66 «3 74 Leverage per share $010
Slide 31: Appendix: Relative Book Valuation
Appendix 2 Relative Book Valuation “> Price to Book Multiples (Ut tions) Arar, Cantor) _Tembec() Pope &Tahot SAK Pulpit) Mercer) (Adjust’d)i2) Market Cop. api2 78 eB 25 a8 1 1 Book Equity 160 7B Ent 18 8 @ DQ Priceto Book 201 age oe 189 089 a6 aug tie 4. Fandatto UScllrstardon te Doster, 20Reretage
Slide 32: EBITDA
EBITDA EBITDA as presented herein refers to Operating EBITDA, defined as income from operations plus depreciation and amortization. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Operating EBITDA is not a meas
Slide 33: Searchable text section of graphics
Searchable text section of graphics shown above EXH IBIT 99.1 [LOGO] Mercer International Inc. MERCER Saf e Harbour Statement The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this presentation contains state
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