Mercer International Inc. · NASDAQ:MERC
Mercer International — RBC Capital Markets' Global Industrials Conference 2014
33 slides from Mercer International's conference presentation, Sep 9, 2014
Slide 1: RBC Capital Markets' Global Industrials Conference
Exhibit 99.1 RBC Capital Markets’ Global Industrials Conference September 10, 2014
Slide 2: Forward Looking Statements
Forward Looking Statements The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements.Certaininformation includedin this presentationcontains statements that are forward-looking, such as statements relating to results of operations and financial condit
Slide 3: Mercer International Inc.
Mercer International Inc. NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 3
Slide 4: Corporate Structure
Corporate Structure Mercer conducts operations through three subsidiaries: Rosenthal –Germany the only two NBSK market pulp mills in Germany, which is Europe’s largest market for NBSK pulp Stendal –Germany Celgar –BC, Canada one of the largest, most modern pulp mills in North America The Corporation
Slide 5: Strategically Located Mills with Access to Global Markets
Strategically Located Mills with Access to Global Markets Mercer’s three mills have a combined annual capacity of 1.54 million air dried metric tonnes (“ADMT”) of NBSK pulp production and 305 MW of electrical generation The mills’strategic locations position the company well to serve customers in Eu
Slide 6: Growing Energy and Chemical By-Product Revenues
Growing Energy and Chemical By-Product Revenues Mercerhasbeena leaderamongpaperandforestproductscompaniesin embracingthe “bio-economy”andin harnessing significant value from the generation of surplus power, as well as its production of bio-chemicals Mercer recognized the opportunity to secure new re
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 Strong record of environmental performance Low maintenance capital requirements All facilities are net energy producers High runability / ef
Slide 8: The NBSK Market
The NBSK Market NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 8
Slide 9: Introduction to the Major Themes in NBSK
Introduction to the Major Themes in NBSK Current themes surrounding the NBSK market include: Theeffectof Chinaandotheremergingeconomies’ continuinggrowth The impact of digital media on paper demand Thepotentialsupplyimpactof integratedplayerssellingtheirpulpon the market Thenet supplyimpactof millcl
Slide 10: Global Pulp Market
Global Pulp Market (1) Components of the Pulp Market Northern Bleached Softwood Kraft (NBSK) Bleached Softwood Kraft Produced From: Chemical Pulp Demand Pulp Demand Spruce / Pine / Fir / Cedar Other 14% Bleached Bleached Core Production Areas: SBSK NBSK Hardwood Softwood 26% 60% North America, North
Slide 11: Demand Fundamentals – Changes to NBSK End Use Markets
Demand FundamentalsChanges – to NBSK End Use Markets Changes to Papermakers’ DemandforNBSK TheincreasedNBSKdemandfor usein tissue/ specialtyproductshasoutpacedthe decreasedNBSKdemandfor printing & writing grades From2003to 2013,a periodveryaffectedby “digital substitution”of traditionalpapergrades,t
Slide 12: Demand Fundamentals – China's Growing Demand
Demand FundamentalsChina’s – Growing Demand BSK Deliveries to China (1) 12 Month Rolling (2001 Present) – 6.0 4.8 3.6 2.4 1.2 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Global BSK Demand by Region (1) China’s Chemical Pulp Demand (1) CAGR: 28.0 40% 16.0 2004 –2013 Region: 1995-2015E CA
Slide 13: Demand Fundamentals – China's Growing Demand (Cont'd)
Demand FundamentalsChina’s – Growing Demand (Cont'd) China’s demand is growing rapidly… …and its pulp supply isn’t currently keeping pace th China’s 12 Five-Year Plan should increase Shutting of “Old China” pulp / paper capacity demand for NBSK Significant closures to date, and to come Growth in Chi
Slide 14: Supply Fundamentals – Slowing BSK Capacity Growth
Supply FundamentalsSlowing – BSK Capacity Growth From 1995 to 2013, BSK capacity grew at a steady rate, experiencing a few dips along the way Capacity is forecasted to increase at a more moderate rate in the coming five years Bleached Softwood Kraft Global Market Pulp Capacity (1) 27 2014E-2018E CAG
Slide 15: Supply Fundamentals – Net Capacity Change Analysis
Supply FundamentalsNet – Capacity Change Analysis Recent History In the last few years, there have been several notable 2012–2013 BSK Closures and Conversions BSK mill closures Mill Closure During this time, the Ilim Name Location Company Grade Date kt Bratsk mill expanded Hunan China Yueyang Paper
Slide 16: 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 2017 (1) Printing & writing paper in China: 4% p.a. growth through 2017(1) Strengthening agent Digital substi
Slide 17: Financial Performance and Recent Developments
Financial Performance and Recent Developments NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 17
Slide 18: Putting NBSK's History into Perspective
Putting NBSK’s History into Perspective Supply, Prices: Stocks are low, prices increasing Shortage! price surge 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 compl
Slide 19: Significant Earnings Potential
Significant Earnings Potential Energy & Chemical Revenue (US$mm) $33 $35 $51 $63 $65 $95 $93 $92 $100 2010 2011 2012 2013 2014 Pulp pricing recently rising currently – under some pressure in China due to market uncertainty regarding new hardwood capacity but is expected to further improve in 2014 of
Slide 20: Recent NBSK Pricing Momentum
Recent NBSK Pricing Momentum NBSK List Price Increases since Q3 2013 Historical “Upcycle” NBSK Price (US$/tonne) Increase Trends (1) Date US Europe China 150% Aug-13 $945 $860 $680 129% Sep-13 $945 $880 $695 120% Oct-13 $970 $895 $720 104% Nov-13 $990 $905 $740 90% Dec-13 $990 $905 $750 Jan-14 $1,01
Slide 21: Mercer's Recent Developments
Mercer’s Recent Developments Capital Projects Completed Stendal’s Project Blue Mill on schedule and on budget Enhanced pulp production capacity (30,000 ADMT per year) and added new electrical generating capacity (46 MW) Celgar Workforce Reduction Expected annual cost savings of US$8 to US$10 million
Slide 22: Mercer's Recent Developments (Cont'd)
Mercer’s Recent Developments (Cont’d) Capital Raises Issued US$50 million in “tack-on”Senior Notes at a 104.5% premium to face value in July 2013 Equity offering of 8.05 million shares at US$7.15/share for net proceeds of ~US$53.6 million in April 2014 The over-allotment was exercised in full Mercer
Slide 23: Mercer's Recent Developments (Cont'd)
Mercer’s Recent Developments (Cont’d) Performance BioFilaments In June2014,MercerandResoluteForestProductslauncheda new50/50 joint venture company called Performance BioFilaments The joint venture is set to commercialize novel product applications for cellulosefilaments,aninnovativebiomaterialderive
Slide 24: Mercer – Summary
Mercer –Summary The largest “pure-play” NBSK market pulp producer Globally cost competitive, modern mill operations Strategically located mills with excellent access to key markets Stable and growing revenue from high-margin energy & bio-chemical by-product sales Strong long-term NBSK fundamentals S
Slide 25: Appendix A: Additional Information on Mercer International Inc.
Appendix A Additional Information on Mercer International Inc. NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 25
Slide 26: Mercer Balance Sheet – June 30, 2014
Mercer Balance SheetJune – 30, 2014 in US$ millions Restricted Unrestricted Adjustments Consolidated ASSETS Cash,CashEquivalents $157.4 $83.6 - $241.0 Receivables $69.8 $64.9 - $134.7 Inventories $104.1 $60.9 - $165.1 OtherCurrentAssets $11.4 $5.7 - $17.1 TotalCurrentAssets $342.8 $215.2 - $558.0 Pr
Slide 27: Mercer Selected Historical Financial Data (Consolidated)
Mercer Selected Historical Financial Data (Consolidated) in US$ millions, except for per share data 2011 2012 2013 Q2 2013 Q2 2014 Pulp Revenue $1,157.2 $979.8 $996.2 $491.0 $538.0 Energy and Chemical Revenue $94.8 $93.0 $92.2 $45.5 $52.9 Total Revenue $1,252.0 $1,072.7 $1,088.4 $536.5 $590.9 Operat
Slide 28: Appendix B: Detailed Overview of Operations
Appendix B Detailed Overview of Operations NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 28
Slide 29: Rosenthal Mill
Rosenthal Mill MercerInternationalGroup:RestrictedGroup Location:Blankenstein,Germany(~300km southof Berlin) PulpProduction Capacity:360,000ADMTper year ElectricityGeneratingCapacity: 57 MW Certification: ISO9001,14001,and50001 2013GreenElectricitySales:US$21.5million Key Features: Builtin 1999– mod
Slide 30: Celgar Mill
Celgar Mill MercerInternationalGroup:RestrictedGroup Location:Castlegar,BC,Canada(~600km eastof Vancouver) PulpProduction Capacity: 520,000ADMTper year ElectricityGeneratingCapacity: 100MW Certification: ISO9001andISO14001 2013GreenElectricitySales:US$12.3million Key Features: Modern and efficient A
Slide 31: Stendal Mill
Stendal Mill MercerInternationalGroup:UnrestrictedGroup Location:Stendal,Germany(~130km westof Berlin) PulpProduction Capacity: 660,000ADMTper year ElectricityGeneratingCapacity: 148MW Certification: ISO9001andISO14001certified 2013GreenElectricitySales:US$45.6million 2013ChemicalSales:US$12.8millio
Slide 32: Appendix C: Reconciliation of Net Income to Operating EBITDA
Appendix C Reconciliation of Net Income to Operating EBITDA NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 32
Slide 33: Reconciling Net Income (Loss) to Operating EBITDA
Reconciling Net Income (Loss) to Operating EBITDA in US $ millions 2012 2013 Q2 2013 Q2 2014 Net Income (Loss) Attributable to Common Shareholders ($15.7) ($26.4) ($13.6) $21.6 Add: Net Income Attributable to Non-Controlling Interest $2.2 $0.6 $1.7 $4.3 Add: Income Tax Provision (Benefit) $9.4 $9.2
Mercer International — RBC Capital Markets' Global Industrials Conference 2014 on 6ix