Mercer International Inc. · NASDAQ:MERC

Mercer International — Q3 2021 Earnings Presentation

39 slides from Mercer International's earnings presentation, Nov 3, 2021

  1. Slide 1: Sustainable. By Design.

    Sustainable. By Design. 11/03/2021 1

  2. Slide 2: Forward-looking Statements

    Forward-looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe For more information regarding these risks and uncertainties, review Mercer’s harbor” for forward-looking statements. filings with the United States Securities and Exchange Commission. Certain informatio

  3. Slide 3: Building a Platform for Growth

    Building a Platform for Growth 1994 1999 2004 2005 2007 2010 2013 Acquisition of Rebuild of Mercer Stendal Acquisition of Mercer Celgar Mercer Celgar Mercer Stendal Mercer Mercer greenfield Mercer Celgar “Project Blue “Green Energy “Project Blue Mill” Rosenthal mill Rosenthal mill construction mill

  4. Slide 4: Strategically Located Assets

    Strategically Located Assets Mercer Peace River Mercer Holz 475,000 ADMT NBSK/NBHK Wood purchasing, 70 MW energy harvesting, hauling Cariboo Pulp & Paper (1) Mercer Stendal 170,000 ADMT NBSK 740,000 ADMT NBSK 28.5 MW energy 148 MW energy Mercer Celgar Mercer Rosenthal 520,000 ADMT NBSK 360,000 ADMT

  5. Slide 5: Product Sales Mix

    Product Sales Mix (1) (2) 27% 21% 78% 16% 30% 25% 30% 54% 6% 13% Products Pulp Segment Wood Products Segment(3) Pulp Lumber Energy / Bio-extractives US Germany China Other US Germany Other 1) Q3 2021 LTM by revenue 2) 3) Excludes energy sales from 50% owned Cariboo mill Includes wood residual sales

  6. Slide 6: 8 Core Values + 5 Strategic Pillars = Fit for Future

    8 Core Values + 5 Strategic Pillars = Fit for Future Develop our Advance World- Grow and Manage a Prudent, Strengthen our Talent class Operations Diversify in our but Agile, Balance Sustainability Core Sheet Platform Competencies Value 1: Health & Safety Value 5: Accountability Value 2: Trust, Integ

  7. Slide 7: Advance World-class Operations

    Advance World-class Operations  The largest producer of market NBSK in the world  Operating among the most modern NBSK mills in the world  Efficient distribution channels to major pulp consuming markets of  Low cost, energy self sufficient, net exporters of green Asia, Europe, and North America

  8. Slide 8: Advance World-class Operations

    Advance World-class Operations Top 20 Softwood Sawmills (Mfbm)(1)(2) North American Mass Timber Panel Ilim Wismar Capacity 2020(3) Canfor Plateau Total = 685,000 m3 Canfor Houston 23.8 million ft3 Vaagen West Fraser Quesnel Kalesnikoff 4% Mercer Friesau 4% Binderholz Kösching  Unique flexibility Me

  9. Slide 9: Optimization Through Innovation

    Optimization Through Innovation 1 Logistics Innovation 2 Construction Expertise 3 Continuous Improvement  Design and  Greenfield and  Forest waste material construction of brownfield pulp mill, recovery dedicated trains and sawmill, power plant,  Pulp and lumber wood truck fleet for and extracti

  10. Slide 10: Grow and Diversify in our Core Competencies

    Grow and Diversify in our Core Competencies Consolidated Revenue ($ millions)(1)(2) 1,800 Bio-extractives/other 1,600 Wood products Over 15 years of steady growth 1,400 Green electricity and diversification into adjacent 1,200 Specialty Paper businesses with expected 1,000 Pulp market demand growth

  11. Slide 11: Manage a Prudent, but Agile Balance Sheet

    Manage a Prudent, but Agile Balance Sheet Liquidity is managed to the global economic conditions: Debt composition is optimized when opportunistic:  2016-2018: Tighter liquidity during stronger economic  Weighted average maturity of senior debt is 2028 conditions and expansion period for Mercer 

  12. Slide 12: Balanced Capital Allocation

    Balanced Capital Allocation Capital allocation is balanced and consistent with the strategy:  Maintenance of Business(1) capital expenditures to maintain modern, efficient and reliable mills.  Growing the Company through acquisitions and high-return capital expenditures.  Commitment to returning

  13. Slide 13: Sustainable, Biodegradable, Recyclable Products for a Carbon-conscious World

    Sustainable, Biodegradable, Recyclable Products for a Carbon-conscious World Kraft pulp from wood residuals and forest waste for the production of recyclable paper, containers, and specialty products Solid wood products from certified forests for home construction and renovation; carbon capturing pr

  14. Slide 14: Sustainable Processes

    Sustainable Processes Modern assets and pulping innovation makes our processes sustainable; a continuous improvement culture keeps us advancing. Signatory to Science-based 100% electricity self sufficiency Replaced German rail car fleet Target Initiative (SBTI) from renewable energy (380 rail cars)

  15. Slide 15: Supporting Our Communities and Providing Inclusive Opportunities for Our People

    Supporting Our Communities and Providing Inclusive and Challenging Opportunities for Our People Provide diverse and Reduced safety incidents Shared revenues through equitable working by 40% since 2015 Indigenous partnerships environment Development and deep 2021 CEO of the Year 1/3 of Board engageme

  16. Slide 16: Financial Performance

    Financial Performance Annual Operating EBITDA(1)(2) $400 $1,600 1,170 1,340 • Operating EBITDA (1)(2) is $350 Operating EBITDA NBSK Prices $1,400 highly influenced by NBSK Price ($/ADMT) $300 1,030 $1,200 global NBSK pricing, 910 933 910 ($ millions) $250 798 $1,000 810 810 820 however: $200 $800 36

  17. Slide 17: Current Market Conditions

    Current Market Conditions Pulp Wood Products  Steady demand and falling inventories will improve markets over  We expect US lumber prices to remain at elevated levels over the next year, time supported by rising housing starts, low interest rates and low housing stock  Steady mid-term growth from

  18. Slide 18: Sustainable, Long-term Growth

    Management committed to Sustainable, growth, in spaces where we have Long-term clear competencies Growth Prudent and agile balance sheet discipline, commitment to the dividend A growing Commitment to sustainability, company that is our products, operations, and communities fit for the future Attract

  19. Slide 19: Contact Information

    Contact Mercer International inc. Information P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada www.mercerint.com V6C 1G8 19

  20. Slide 20: Reconciling Net Income (Loss) to EBITDA

    Reconciling Net Income (Loss) to EBITDA Note: For other reconciliations of Net Income (Loss) to Operating EBITDA in periods not shown, please refer to that period’s respective Form 10-Q or 10-K, which can be found on our website (www.mercerint.com) Operating EBITDA is defined as operating income (lo

  21. Slide 21: Reconciling Net Income (Loss) to EBITDA

    Reconciling Net Income (Loss) to EBITDA Q3 2021 Consolidated (US$ millions) 2016 2017 2018(1)(2) 2019(2) 2020(2) LTM(2) Net Income (Loss) Attributable to Common 34.9 70.5 128.6 (9.6) (17.2) 83.5 Shareholders Add: Income Tax Provision (Benefit) 24.5 33.5 48.7 19.2 6.1 47.5 Add: Interest Expense 51.6

  22. Slide 22: Appendix: Market Attributes

    Appendix: Market Attributes Sustainable. By Design. 22

  23. Slide 23: Global Wood Fiber Market

    Global Wood Fiber Market ▪ The global demand for wood fiber is principally met by the recycling of packaging and graphics paper ▪ Today, NBSK makes up 3.5% of global fiber demand; it has become a highly specialized niche product used for strength and bonding attributes. It is principally produced in

  24. Slide 24: Global Wood Fiber Market

    Global Wood Fiber Market(1) Total global wood fiber consumption – 374 million tonnes Recovered paper – 54% Virgin pulp – 46% Total virgin pulp market – 171 million tonnes Integrated pulp – 60% Market pulp – 40% Total market pulp market – 68 million tonnes UBK, Radiata, Hardwood – 52% NBSK – 23% Mech

  25. Slide 25: Global Bleached Kraft Pulp Market

    Global Bleached Kraft Pulp Market (1) Global Bleached Kraft Pulp Demand (millions of tonnes) Global Bleached Kraft Pulp Demand (millions of tonnes) 75.0 37.5 66.1 67.4 64.7 37.4 61.5 61.9 63.3 35.7 36.2 60.0 30.0 45.0 25.8 25.7 25.9 China China China 22.5 China China China 30.0 15.0 15.0 7.5 - - 202

  26. Slide 26: NBSK Demand Drivers

    NBSK Demand Drivers Global BSK Demand by Region(1) 28.0 40% Region 2000 – 2025E CAGR China 9.5% NBSK Demand Changes 21.0 30% millions of tonnes % China of Total  Increased NBSK demand for tissue and specialty W. Europe (1.8%) products continues to rise globally 14.0 20% N. America  In developing c

  27. Slide 27: Historical Market Conditions

    Historical Market Conditions NBSK Price & BSK Global Inventory $1,650 49 Global NBSK Inventory (# Days) $1,500 42 NBSK Price (USD / tonne) $1,350 35 $1,200 $1,050 28 $900 21 $750 14 $600 $450 7 $300 - 2004 2006 2008 2010 2012 2014 2016 2018 2020 BSK Global Inventory NBSK List Price to N. Europe NBSK

  28. Slide 28: Pulp Capacity Changes

    Pulp Capacity Changes NBSK Hardwood SBSK, Fluff, Radiata  After a period of considerable capacity  Eucalyptus capacity is set to grow over 4  Continuation of a trend by some producers to expansion in Scandinavia from 2016-2018, million tonnes in the next few years exit these softwood grades in fa

  29. Slide 29: US Lumber Market – Demand Drivers

    US Lumber Market – Demand Drivers(1)  Housing starts are rising and still well below  Interest (mortgage) rates are currently historical average prior to the financial crisis supporting new home ownership and upgrading US Housing Starts (million units) Interest Rates (%) 2.0 18 Single Multi Mobile

  30. Slide 30: US Lumber Market – Demand Drivers

    US Lumber Market – Demand Drivers(1)  The prime first-time home ownership  Production capacity is growing but is demographic (30-35 year olds) is currently experiencing restrictions; particularly from its highest in a generation Canada where allowable cut levels are falling US Population by Age (i

  31. Slide 31: Appendix: Operations Overview

    Appendix: Operations Overview Sustainable. By Design. 31

  32. Slide 32: Mercer Rosenthal

    Mercer Rosenthal  Location: Blankenstein, Germany (~300 km south of Berlin)  Pulp production capacity: 360,000 tonnes per year NBSK  Electricity generating capacity: 57 MW Mercer Rosenthal  Certification: ISO 9001, 14001, and 50001  2020 green electricity sales: $16.1 million  2020 bio-extract

  33. Slide 33: Mercer Stendal

    Mercer Stendal  Location: Stendal, Germany (~130 km west of Berlin) Mercer Stendal  Pulp production capacity: 740,000 tonnes per year NBSK  Electricity generating capacity: 148 MW  Certification: ISO 9001, 14001, and 50001  2020 green electricity sales: $51.3 million  2020 bio-extractives sale

  34. Slide 34: Mercer Celgar

    Mercer Celgar  Location: Castlegar, BC, Canada (~600 km east of Vancouver)  Pulp production capacity: 520,000 tonnes per year NBSK  Electricity generating capacity: 100 MW  Certification: ISO 9001 and 14001  2020 green electricity sales: $10.9 million  2020 bio-extractives sales: $0.06 million

  35. Slide 35: Mercer Peace River

    Mercer Peace River  Location: Peace River, Alberta (~500 km northwest of Edmonton)  Pulp production capacity: 475,000 tonnes per year NBSK/NBHK  Electricity generating capacity: 65 MW  Certification: ISO 9001 and ISO 14001  2020 green electricity sales: $5.2 million Key Features:  Modern, high

  36. Slide 36: Cariboo Pulp & Paper

    Cariboo Pulp & Paper  Location: Quesnel, British Columbia (~650 km north of Vancouver)  Pulp production capacity: 170,000 tonnes per year(1) NBSK  Electricity generating capacity: 28.5 MW(1)  Certification: ISO 9001 and ISO 14001  2020 green electricity sales: $5.4 million(2) Key Features:  50

  37. Slide 37: Mercer Timber Products (Friesau)

    Mercer Timber Products (Friesau)  Location: Friesau, Germany (~300 km south of Berlin)  Lumber production capacity: 550,000 Mfbm  Energy generating capacity: 49.5 MW (13 MW electricity)  2020 lumber sales: $180.8 million  2020 wood residuals sales: $6.3 million  2020 green electricity sales: $

  38. Slide 38: Mercer Mass Timber

    Mercer Mass Timber • Location: Spokane, Washington, United States • CLT production capacity: 140,000 m3 • Factory size: 253,000 ft2 • Product: high-capacity cross-laminated timber Key Features: • Multiple years of CLT experience within the manufacturing team • Highly automated production line Mercer

  39. Slide 39: Contact Information

    Contact Mercer International inc. Information P: +1 (604) 684 1099 info@mercerint.com Suite 1120, 700 West Pender St Vancouver, B.C. Canada www.mercerint.com V6C 1G8 39

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