Mercer International Inc. · NASDAQ:MERC
Mercer International — Whistler CIBC World Markets Investor Conference February 2007
21 slides from Mercer International's conference presentation, Feb 22, 2007
Slide 1: Whistler CIBC World Markets Investor Conference February 2007
Whistler CIBC World Markets Investor Conference February 2007
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: Company Overview
Company Overview Mercer is the largest publicly traded NBSK(1) market pulp producer in the world Operates three pulp mills with 1.38 million ADMT(2) of capacity _________ (1) NBSK = northern bleached softwood kraft. (2) ADMT = air dried metric tonnes. Rosenthal (Germany) Stendal (Germany) Celgar (BC
Slide 4: Largest publicly traded NBSK market pulp producer in the world
Mercer is the largest publicly traded NBSK market pulp producer in the world NBSK Market Pulp Capacity By Producer
Slide 5: Our Strategy
Focus on NBSK market pulp Premium grade kraft pulp that generally obtains the highest price Operate modern, world-class NBSK pulp production facilities Target profitability in all market conditions Limit ongoing capital requirements Improve efficiency and reduce production costs Focused on continuou
Slide 6: World Class Assets
World Class Assets 3Q05 Mercer versus other top 20 NBSK producers (includes integrated capacity) Large, modern facilities - low capital requirements, high runability State-of-the-art environmental compliance Energy - net producers 900 Technical Age, Years UPM Botnia Mercer Sodra Ilim Heinzel SCA Bil
Slide 7: Canadian Mill Size by Capacity - NBSK
Canadian Mill Size by Capacity - NBSK <300K 300-500K >500K Celgar 2007 000s metric tonnes/year
Slide 8: 2006 Milestones
Continued efficiency improvement's at Mercer's modern pulp mills Focused exclusively on Pulp Divested all paper assets Acquired a further 7% interest in the Stendal Mill Total cost was 8.1 million EUR of which 6.7 million EUR was paid by note which at Mercer's election can be satisfied with common s
Slide 9: Mercer in Brief
Mercer in Brief I n M illions of EUR (unless otherwise stated) For 9 m onths Ended 2006 For 9 m onths Ended 2005 For 9 m onths Ended 2004 Pulp Production 973,410 Admt 888,347 Admt 231,231Admt Net Sales 501.0 376.4 148.0 Operating EBITDA 99.1 55.1 15.6 I n M illions of EUR (unless otherwise stated) S
Slide 10: NBSK Characteristics
NBSK pulp is a premium product Longer and stronger fibres Generally obtains highest price Primarily produced in Canada and Western Europe Over 90% of worldwide NBSK production comes from these regions NBSK Characteristics
Slide 11: NBSK pulp adds strength to a wide range of paper products
NBSK pulp adds strength to a wide range of paper products Growing demand driven by technological evolution of industry Papers moving toward lighter weights, more coatings/fillers and recycled content NBSK End Uses (2006) Source: Jaakko Poyry Uncoated Mechanical (catalogs & inserts) Tissues Specialti
Slide 12: Locations
Locations Locations
Slide 13: Mercer is positioned to take advantage of substantial demand growth
Mercer is positioned to take advantage of substantial demand growth Demand growth in Eastern Europe & China higher than global average Significant investments in paper making capacity in China will increase the need for softwood imports China will account for 25% of all market pulp demand by 2020 Gl
Slide 14: China Softwood Imports 2000 - 2006
China Softwood Imports 2000 - 2006 Year over Year growth has been steady albeit volatile on a monthly basis Between Nov 2000 and Oct 2006 growth in softwood imports has increased at an average of 17% This growth correlates with China's capacity increases in virgin pulp consuming paper grades Annual
Slide 15: Pulp Price History
Pulp Price History Quarterly Average RISI Price Delivered to Northern Europe CAD USD EURO 2000 2002 2001 2004 2003 2005 2006
Slide 16: Reduction in Capacity
Recently announced closures and expected shutdowns will reduce supply Approximately 1 million mt of NBSK market pulp capacity Represents approximately 7% of total global NBSK market pulp capacity Reduction in Capacity
Slide 17: Gap between supply and demand may have become negative in 06
Gap between supply and demand may have become negative in 2006 assuming a 1.5% increase in demand coupled with NBSK capacity closures Market is beginning to recognize these fundamentals and the impact on the NBSK commodity should be similar to nickel, steel and copper. Tighter differential will caus
Slide 18: Competitors' Assets are Relatively Old
In North America, almost one-half of all recovery boilers are greater than 30 years old The recovery boiler is the heart of the pulp mill and the largest capital item Competitors' Assets are Relatively Old - - 0 10 20 30 40 50 60 0 % 20 % 40 % 60 % 80 % 100 % North America Years since start up Cumul
Slide 19: Potential for Further Mill Closures in North America
The mills with old recovery boilers are characterized as having low production tonnage and as having high costs as a result of old inefficient equipment. It is expected that when these mills need major capital expenditures such as rebuilding their recovery boiler, companies will be faced with a deci
Slide 20: Wood fiber cost trends by region
Europe: The influence of renewable energy is increasing European producer's wood costs. Residual wood costs have been rising as a result of European demand for pellets and other green energy. With the recent wind storms and a warmer than normal winter prices will moderate as there is an increase in
Slide 21: Renewable & Bio-energy Impact
In the future we believe energy producers will compete over fiber supply with pulp producers and other users of residual (waste wood) In the next ten years gasification technology such as the technology being developed by Choren & Shell will start to compete for fiber both in northern and southern h
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