Mercer International Inc. · NASDAQ:MERC
Mercer International — Credit Suisse Global Leveraged Finance Conference March 2006
29 slides from Mercer International's conference presentation, Mar 28, 2006
Slide 1: Credit Suisse Global Leveraged Finance Conference March 2006
Credit Suisse Global Leveraged Finance Conference March 2006
Slide 2: 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 conditions and business dev
Slide 3: Investment Highlights
Strategic focus on high quality NBSK pulp Investment Highlights Low cost producer Portfolio of large, modern, state-of-the-art world-class production facilities Low sustaining capital requirements Significant leverage to pulp cycle Ideal geographic locations Access to customers and fiber supply Expe
Slide 4: NBSK Market Pulp Capacity By Producer
NBSK Market Pulp Capacity By Producer Metsa-Botnia Nennah Papers Tembec West Fraser Pope and Talbot Illim Stora Enso Weyerhaeuser Canfor Mercer Sodra 490 550 610 625 645 715 920 1045 1330 1330 1600 Sodra Canfor Weyerhaeuser Stora Enso Ilim Pulp Pope and Talbot West Fraser Tembec Neenah Papers Metsa-
Slide 5: Mercer Operations - Locations
Mercer Operations - Locations Mercer Operations - Locations Dresden Papier
Slide 6: Management Team
Management Team CORPORATE SALES & MARKETING & OPERATIONS SUPPORT OPERATIONS OPERATIONS OPERATIONS OPERATIONS Jimmy Lee President, CEO & Chairman David M. Gandossi EVP, CFO & Secretary Eric Heine VP, Pulp Sales & Marketing NA & Asia Ulf Johansson Managing Director Stendal Leonhard Nossol Managing Dir
Slide 7: Rosenthal Today
Rosenthal Today 1999 conversion to kraft pulp production Invested €361 million (secured €102 million in German government grants) Capacity increased from 160,000 to 280,000 ADMTs Increased to 310,000 ADMTs through capital investments and efficiency improvements One of lowest delivered costs to Europ
Slide 8: Stendal - World's Newest NBSK Mill
Stendal - World's Newest NBSK Mill €1 billion "greenfield" mill completed in Q3 2004 with capacity of 550,000 admt 63.6% Mercer owned Secured €275 million in German government grants 80% of project debt government guaranteed Turnkey, fixed-price contract Economies of scale should allow for lower cos
Slide 9: Celgar
Celgar Acquired in February 2005: US$210 million plus US$16 million acquired working capital Modernization and expansion project completed in 1993 Stone Container led consortium which arranged rebuild and expansion Significant budget overruns, total cost approximately US$650 million (C$850 million)
Slide 10: World Class Assets Analysed
World Class Assets Analysed Producers of BSKP all dried Regions included: North America, Latin America, Europe, Asia, Oceania Comment W,Avg Cap Botnia Size 1 Sodra Size 2 Mercer Size 3 Weyerhaeuser Size 4 Canfor Size 5 Stora Enso Size 6 Ilim Pulp Size 7 West Fraser Size 8 Pope & Talbot Size 9 UPM Si
Slide 11: Market Bleached Softwood Kraft Pulp Consumption - Key End-Uses
Market Bleached Softwood Kraft Pulp Consumption - Key End-Uses NBSK Characteristics Source: Jaakko Poyry Premium product produced primarily in Canada and Northern Europe Over 80% of worldwide NBSK production from these regions Growing demand driven by technical evolution of industry Papers moving to
Slide 12: End Uses of Softwood Market Pulp from North America
End Uses of Softwood Market Pulp from North America By Destination, % Share per End Use Segment Historically Softwood market pulp has had the most widespread use among pulps Small volumes of softwood (NBSK) can be added to virtually any type of paper product to improve strength characteristics. 5.0
Slide 13: Shipments of Canadian Softwood Chemical Market Pulp by End Use
Shipments of Canadian Softwood Chemical Market Pulp by End Use The main end use application consuming a higher percentage of pulp is sanitary papers Between 1980 and 1998 this segment grew by 3 percentage points, between 1998 and 2004 the segment grew by 12%. The rapid growth can partly be explained
Slide 14: Global Demand Growth
Global Demand Growth Mercer positioned to take advantage of substantial demand growth Global demand growth forecast at 3% 2000-2015 demand growth in Eastern Europe almost twice global average Significant investments in paper making capacity in China will require softwood imports Source: Jaakko Poyry
Slide 15: China Softwood Imports 2000 - 2005
China Softwood Imports 2000 - 2005 Year over Year growth has been steady albeit volatile on a monthly basis Between 2000 and 2005 growth in softwood imports has increased at an average of 23%. This growth correlates with China's capacity increases in virgin pulp consuming paper grades. Growth in NBS
Slide 16: Global NBSK Shipment-to-Capacity Ratios, 2004-2008
Global NBSK Shipment-to-Capacity Ratios, 2004-2008 Worldwide NBSK Market Pulp Demand estimated to be 13.6 million ADMTs in 2005 Lack of new NBSK investment and North American mill closures will keep shipment and capacity ratios at 94% While large eucalyptus influx of capacity will depress the hardwo
Slide 17: Pulp Price History
Pulp Price History Quarterly Average RISI Price Delivered to Northern Europe CAD USD EURO 2000 2002 2001 2004 2003 2005
Slide 18: 353.1195516 353.1195516 378.091747 378.091747 384.7603468 0.03 384.7603468 0.03 397.634376 0.04 397.634376 0.04 399.4…
0 353.1195516 0 353.1195516 0 378.091747 0 378.091747 0 384.7603468 0.03 384.7603468 0.03 397.634376 0.04 397.634376 0.04 399.4131794 0.04 399.4131794 0.04 404.8164206 0.05 404.8164206 404.8164206 0.07 404.8164206 0.07 406.670799 0.11 406.670799 0.11 409.1573559 0.14 409.1573559 0.14 414.2663292 0.1
Slide 19: Worldwide Total Market Pulp Demand
Source: Jaakko Poyry Worldwide Total Market Pulp Demand 700 600 500 400 300 200 100 0 0% Cumulative Share of Global Capacity 100% Cost in US$ / ADMT Average 92.6% BSKP Delivered to Natural Markets $90-100/ADMT spread 4Q03 Cost Level and Prices W. average $409/ADMT W. average $316/ADMT BHKP Softwood
Slide 20: Cost of Production Curve
Cost of Production Curve (current trends compared to Rosenthal historical) Stendal (Euro) Rosenthal (Euro) Celgar (Euro) Celgar (CAD) Stendal will continue to reduce per tonne production costs as mill operations continue to stabilize and production increases with additional digester capacity. Celgar
Slide 21: Strong Fiber Supply - Germany
Strong Fiber Supply - Germany High quality, well-managed fiber supply Sustainable harvest rates > consumption levels Largest consumer of wood chips in Germany Diversified supply Stable pricing Contracts not tied to pulp prices Contracts not tied to pulp prices Contracts not tied to pulp prices Contr
Slide 22: Strong Fiber Supply - Celgar
2.4 million m3 (at full capacity) 90% wood chips; 10% pulp logs Cedar, Spruce/Pine/Balsam/Fir ("SPF") and Hemlock 40 sawmills in fiber basket Majority of fiber supply agreements range from two to six years; several are evergreen Third Party Chain of Custody Certified (KPMG) Strong Fiber Supply - Cel
Slide 23: BC Mountain Pine Beetle Epidemic
Year 2006 The situation is dynamic and evolving Modelling predicts 50% of the BC Lodgepole pine inventory will be dead by 2008 with 80% dead by 2013. 20-30% of BC timber base and up to 50% of the Central Interior timber base is Lodgepole pine. The next 10-15 years will see a 10% increase in the BC h
Slide 24: Consolidated Balance Sheet
Consolidated Balance Sheet As at December 31 As at December 31 As at December 31 (€ 000's) 2005 2004 Cash and equivalents 83,547 49,568 Restricted Cash 31,612 92,833 Total Cash 115,159 142,401 Other Current Assets 160,936 112,546 Other Long-term Assets 1,117,721 1,000,702 Total Assets 1,393,816 1,25
Slide 25: Consolidated Income Statement
Consolidated Income Statement (€ 000's) 2005 2004 Revenues 513,908 237,212 Operating EBITDA (1) 68,385 17,172 % Margin 13.3% 7.2% Income (loss) from operations 16,344 (17,972) Net Income (loss) (117,146) 19,980 Avg. NBSK Price Realized (€ /tonne) 407 423 Operating EBITDA: Rosenthal 37,447 32,538 Ste
Slide 26: Corporate Structure
Corporate Structure Restricted Group Rosenthal Celgar Stendal Dresden US$310 million senior unsecured notes
Slide 27: Balance Sheet
Balance Sheet As at December 31, 2005 As at December 31, 2005 As at December 31, 2005 As at December 31, 2005 As at December 31, 2005 As at December 31, 2005 As at December 31, 2005 Restricted Group Unrestricted Group Eliminations Consolidated (€ 000's) Cash and equivalents 48,790 34,757 83,547 Rest
Slide 28: Income Statement
Income Statement Period Ended December 31, 2005 Period Ended December 31, 2005 Period Ended December 31, 2005 Period Ended December 31, 2005 Period Ended December 31, 2005 Period Ended December 31, 2005 Period Ended December 31, 2005 Restricted Group Unrestricted Group Eliminations Consolidated Grou
Slide 29: Schedule A
Schedule A 1. Operating EBITDA is defined as income (loss) from operations 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 relative to its competitors.
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