Mercer International Inc. · NASDAQ:MERC
Mercer International — Investor Presentation (May 2015)
33 slides from Mercer International's investor presentation, May 12, 2015
Slide 1: Mercer International Group Investor Discussion Materials May 2015
MERCER INTERNATIONAL GROUP Investor Discussion Materials May 2015
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. NASDAQ:MERC | TSX:MRI.U | www.mercerint.com MERCER 3
Slide 4: Corporate Structure
Corporate Structure Mercer’s operations have a combined annual capacity of 1.54 million air dried metric tonnes (“ADMT”) of Northern Bleach Softwood (“NBSK”) pulp production and 305 MW of electrical generation Mercer conducts operations through three subsidiaries: Rosenthal – Germany the only two NB
Slide 5: Strategically Located Mills with Access to Global Markets
Strategically Located Mills with Access to Global Markets The mills’ strategic locations position Mercer 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 Stendal (Germany) 66
Slide 6: 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” by harnessing significant value from the generation of surplus power and the production of bio-chemicals Mercer recognized the opportunity to secure new r
Slide 7: Globally Cost Competitive, Modern Mill Operations
Globally Cost Competitive, Modern Mill Operations Mercer’s 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 record of environmental performance All facilities are net energy
Slide 8: Mercer Investment Thesis
Mercer Investment Thesis The NBSK market has transitioned over time to balanced Permanent closure of high cost mills Continued growth from emerging markets Demand for NBSK from high value paper producers continues to grow End uses such as tissues, towels and other speciality products Growth in high
Slide 9: The NBSK Market
The NBSK Market NASDAQ:MERC | TSX:MRI.U | www.mercerint.com MERCER 9
Slide 10: Introduction to the Major Themes in NBSK
Introduction to the Major Themes in NBSK Current themes surrounding the NBSK market include: The impact of digital media on paper demand and end uses The effect of China and other emerging economies’ continuing growth The net supply impact of mill closures, facility conversions, restarts and new mil
Slide 11: Global Pulp Market
Global Pulp Market Components of the Pulp Market (1) Bleached Softwood Kraft Chemical Pulp Demand Pulp Demand Other 14% Bleached Bleached NBSK Hardwood Softwood SBSK 59% Kraft Kraft 27% 52% 44% Sulphite Unbleached 0% Kraft 3% Northern Bleached Softwood Kraft (NBSK) Produced From: Spruce / Pine / Fir
Slide 12: Demand Fundamentals – Changes to NBSK End Use Markets
Demand Fundamentals – Changes to NBSK End Use Markets Changes to Papermakers’ Demand for NBSK The increased NBSK demand for use in tissue / specialty products has more than offset the decreased NBSK demand for printing & writing grades From 2003 to 2013, a period very affected by “digital substituti
Slide 13: Demand Fundamentals – China's Growing Demand
Demand Fundamentals – China’s Growing Demand BSK Deliveries to China (1)(2) 12 Month Rolling (2001 – Present) 6.0 4.8 tonnes 3.6 of millions 2.4 1.2 — 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Global BSK Demand by Region (1) 28.0 40% Region: 1995-2015E CAGR China: 14.5% W. Europe:
Slide 14: Demand Fundamentals – China's Growing Demand (Cont'd)
Demand Fundamentals – China’s Growing Demand (Cont’d) We believe China’s demand is growing rapidly… China’s 12th Five-Year Plan should increase demand for NBSK Growth in Chinese per capita tissue, wood-free, and specialty paper grade consumption is due to: Rising living standards Growing disposable
Slide 15: Demand Fundamentals – The Importance of NBSK Fibers
Demand Fundamentals – The Importance of NBSK Fibers Fiber Characteristics NBSK provides structural integrity for the fiber network due to length and fineness Each NBSK fiber has three times more bonding than a BEK fiber NBSK gives strength and resistance to strain, tear and fracture in both dry and
Slide 16: Demand Fundamentals – Explaining the NBSK-BEK Spread
Demand Fundamentals – Explaining the NBSK-BEK Spread BEK Market Price Developments Some market participants predicted that new hardwood supply coming from Latin America would negatively impact BEK prices; however, the supply increases have been absorbed more smoothly than expected This is believed t
Slide 17: Supply Fundamentals – Net Capacity Change Analysis
Supply Fundamentals – Net Capacity Change Analysis Recent History In the last few years, there have been several notable NBSK mill closures During this time, the Ilim Bratsk mill expanded (490,000 tpa) and Terrace Bay mill restarted (350,000 tpa) Future Expectations There have been several announcem
Slide 18: Resulting Supply Demand Balance
Resulting Supply Demand Balance In recent history, NBSK markets have been relatively balanced Going forward, NBSK demand is continuing to grow, especially from tissue and specialty products in emerging markets, such that we believe new capacity expansions will be absorbed and markets will generally
Slide 19: Strong Long-Term NBSK Fundamentals
Strong Long-Term NBSK Fundamentals Demand Fundamentals Demand for NBSK is still growing globally Improving economic conditions for emerging countries Tissue in China: 10% p.a. growth through 2018 (1) Printing & writing paper in China: 4% p.a. growth through 2018 (1) Strengthening agent Digital subst
Slide 20: Financial Performance and Recent Developments
Financial Performance and Recent Developments NASDAQ:MERC | TSX:MRI.U | www.mercerint.com MERCER 20
Slide 21: Putting NBSK's History into Perspective
Putting NBSK’s History into Perspective NBSK History: Price & Global Inventory (1) $1,100 64 Days of Global BSK Inventory Supply, Prices: Stocks are low, prices NBSK Price are increasing NBSK $1,000 56 Price $900 48 (US$/t) Global $800 40 BSK Shortage! $700 price 32 surge Inventory (# $600 24 Days)
Slide 22: Significant Earnings Potential
Significant Earnings Potential Annual Consolidated Operating EBITDA (1)(2) EBITDA (US$mm) $360 $180 $270 $90 - Energy & Chemical Revenue (US$mm) $186 23% 2006 $33 $173 17% 2007 $35 $101 10% 2008 $51 $57 7% 2009 $63 $297 25% 2010 $65 $233 19% 2011 $95 $138 13% 2012 $93 $110 10% 2013 $92 $240 20% 2014
Slide 23: Mercer's Recent Developments
Mercer’s Recent Developments Corporate Refinancing On November 26, 2014, Mercer completed a new senior notes debt offering $250 million in 7.00% senior notes due in 2019 $400 million in 7.75% senior notes due in 2022 The proceeds were used to refinance / repay current debt facilities, including: Two
Slide 24: Mercer's Recent Developments (Cont'd)
Mercer’s Recent Developments (Cont’d) Capital Projects Rosenthal’s new 6,000 tonne per year tall oil plant became fully operational in Q4 2014, on schedule and on budget Completed Stendal’s Project Blue Mill on schedule and on budget Enhanced pulp production capacity (30,000 ADMT per year) and added
Slide 25: Mercer's Refinancing Actions
Mercer’s Refinancing Actions Repaid Stendal Loan Facility Lowered coupon rate on senior notes Used cash on balance sheet to lower overall debt levels Impacts Simplified corporate structure Removed Restricted vs. Unrestricted Group Lowered future interest payments Permanently delevered the balance sh
Slide 26: Mercer's Recent Performance
Mercer’s Recent Performance Mercer Share Price Performance in the Last Two Years (1) Share Price (US$/share) $17.00 $15.50 $14.00 $12.50 $11.00 $9.50 $8.00 $6.50 $5.00 Volume 31-Oct-13 Announced Q3 2013 results Price 1-May-14 Announced Q1 2014 results 12-Feb-15 Announced Q4 2014 results 12-Nov-14 An
Slide 27: Mercer - Summary
Mercer - Summary The largest “pure-play” NBSK market pulp producer Globally cost competitive, modern mill operations Strategically located mills with excellent access to key markets Stable and growing revenue from high-margin energy & bio-chemical by-product sales Strong long-term NBSK fundamentals
Slide 28: Appendix A Detailed Overview of Operations
Appendix A Detailed Overview of Operations NASDAQ:MERC | TSX:MRI.U | www.mercerint.com MERCER 28
Slide 29: Rosenthal Mill
Rosenthal Mill Location: Blankenstein, Germany (~300 km south of Berlin) Pulp Production Capacity: 360,000 ADMT per year Electricity Generating Capacity: 57 MW Certification: ISO 9001, 14001, and 50001 2014 Green Electricity Sales: $21.9 million Key Features: Built in 1999 - modern and efficient Str
Slide 30: Celgar Mill
Celgar Mill Location: Castlegar, BC, Canada (~600 km east of Vancouver) Pulp Production Capacity: 520,000 ADMT per year Electricity Generating Capacity: 100 MW Certification: ISO 9001 and 14001 2014 Green Electricity Sales: $10.1 million Key Features: Modern and efficient Abundant and low cost fiber
Slide 31: Stendal Mill
Stendal Mill Location: Stendal, Germany (~130 km west of Berlin) Pulp Production Capacity: 660,000 ADMT per year Electricity Generating Capacity: 148 MW Certification: ISO 9001 and 14001 2014 Green Electricity Sales: $56.8 million 2014 Chemical Sales: $12.5 million Key Features: Completed in 2004, i
Slide 32: Appendix B Reconciliation of Net Income to Operating EBITDA
Appendix B Reconciliation of Net Income to Operating EBITDA NASDAQ:MERC | TSX:MRI.U | www.mercerint.com MERCER 32
Slide 33: Reconciling Net Income to Operating EBITDA
Reconciling Net Income to Operating EBITDA in US$ millions Net Income (Loss) Attributable to Common Shareholders Add: Net Income Attributable to Non-Controlling Interest Add: Income Tax Provision (Benefit) Add: Interest Expense Add: Loss (Gain) on Derivative Instruments Add: Other Expense (Income) O
Mercer International — Investor Presentation (May 2015) on 6ix