Attached files
| file | filename |
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| 8-K - 8-K - MERCER INTERNATIONAL INC. | d786371d8k.htm |
 RBC Capital
Markets’ Global Industrials Conference
September 10, 2014
Exhibit 99.1 |
 2
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
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
development
activities,
as
well
as
capital
spending
and
financing
sources.
Such
forward-looking
information
involves
important
risks
and
uncertainties
that
could
significantly
affect
anticipated
results
in
the
future
and,
accordingly,
such
results
may
differ
materially
from
those
expressed
in
any
forward-looking
statements
made
by
or
on
behalf
of
Mercer.
For
more
information
regarding
these
risks
and
uncertainties,
review
Mercer’s
filings
with
the
United
States
Securities
and
Exchange
Commission.
Unless
required
by
law,
we
do
not
assume
any
obligation
to
update
forward-looking
statements
based
on
unanticipated
events
or
changed
expectations. |
 3
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Mercer International Inc. |
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Corporate Structure
(1)
Pursuant to the terms of its 2017 Senior Notes
Mercer conducts operations through three subsidiaries:
100%
Celgar -
BC, Canada
100%
Rosenthal -
Germany
83%
Stendal
-
Germany
Restricted Group
520,000 ADMT + 100 MW
360,000 ADMT + 57 MW
660,000 ADMT + 148 MW
the only two NBSK market pulp mills in Germany, which is Europe’s largest market for
NBSK pulp one of the largest, most modern pulp mills in North America
Debt is 80%
guaranteed by the
German government
Non-recourse to the
Restricted Group
Rosenthal –
Germany
Stendal –
Germany
Celgar –
BC, Canada
The Restricted Group is supported by the Celgar and Rosenthal operations
The Unrestricted Group is supported by the Stendal operation
The Corporation is divided into the “Restricted Group” and the “Unrestricted
Group” – a structure created to facilitate
the
acquisition
of
Celgar
through
the
issue
of
senior
notes
(1) |
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Strategically Located Mills with Access to Global Markets
Celgar
(B.C., Canada)
520,000 ADMT
United
States
Stendal
(Germany)
660,000 ADMT
Rosenthal
(Germany)
360,000 ADMT
Indonesia
China
Thailand
Middle
East
Europe
Japan
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 Europe, North America and
Asia China
–
the
world’s
largest
and
fastest
growing
pulp
import
market
Germany
–
the
largest
European
pulp
import
market
Germany
31%
Italy
7%
China
31%
Other
European
Union
23%
Other Asia
5%
North
America
3%
Mercer 2013 Pulp Sales by Region |
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NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Growing Energy and Chemical By-Product Revenues
Mercer
has
been
a
leader
among
paper
and
forest
products
companies
in
embracing
the
“bio-economy”
and
in
harnessing significant value from the generation of surplus power, as well as its production
of bio-chemicals Mercer recognized the opportunity to secure new revenue streams
from its operations, as the marketplace turned to biomass for carbon-neutral power
and renewable chemical by-products Since
energy
and
chemicals
are
by-products
of
our
pulping
process,
production
is
highly
efficient
and
sales
of
these products are highly profitable
Stendal’s Project Blue Mill was completed in Q4 2013 (46 MW capacity addition)
Green electricity and chemical by-product revenue…
a significant and growing part of Mercer’s business
CAGR:
4.9%
CAGR:
10.7%
CAGR:
10.5%
1.45
1.44
1.64
1.70
1.71
1.79
0.48
0.52
0.65
0.71
0.70
0.76
-
0.4
0.8
1.2
1.6
2.0
2009
2010
2011
2012
2013
Q2-2014
LTM
Mercer’s Electricity Production and Sales
Production
Exports
$63.5
$65.4
$94.8
$93.0
$92.2
$99.6
-
$22.0
$44.0
$66.0
$88.0
$110.0
2009
2010
2011
2012
2013
Q2-2014
LTM
Mercer’s Energy and Chemical Revenue
Chemical
Energy |
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Mercer’s operations are some of the largest and most modern NBSK facilities in the
world Low production costs
Low maintenance capital requirements
High runability / efficiency
Globally Cost Competitive, Modern Mill Operations
Source: FisherSolve Q1 2014 data
Note: NBSK market pulp only
Mercer
Metsä
Fibre
International
Paper
(Ilim)
Stora
Enso
Södra
Cell
Catalyst
West
Fraser
SCA
Canfor
Resolute
UPM
Domtar
Aditya Birla
Weyer-
haeuser
Average Market Pulp
Capacity per Mill:
306,559 tpa
Average Technical Age:
28.4 years
Metsä
Board
Older,
Smaller
NBSK
Pulp Mills
Nanaimo
Daishowa-
Marubeni
Billerud-
Korsnas
Heinzel
Asia Pulp and Paper
(Paper Excellence)
Newer,
Larger
NBSK Pulp
Mills
Strong record of environmental performance
All facilities are net energy producers |
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The NBSK Market |
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Introduction to the Major Themes in NBSK
The impact of digital media on paper demand
Current themes surrounding the NBSK market include:
The
effect
of
China
and
other
emerging
economies’
continuing
growth
The
net
supply
impact
of
mill
closures,
starts
/
restarts,
and
facility conversions
The
potential
supply
impact
of
integrated
players
selling
their
pulp
on
the
market
The impact of additional hardwood capacity coming online |
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Global Pulp Market
Components of the Pulp Market
(1)
Major Uses for Softwood Pulp
NBSK commands a higher premium relative to other kraft pulps
(1) Source: PPPC (2013A)
Chemical Pulp Demand
Bleached Softwood Kraft
Pulp Demand
Northern Bleached Softwood Kraft (NBSK)
Produced From:
Spruce / Pine / Fir / Cedar
Core Production Areas:
North America, Northern Europe
Characteristics:
Long, slender, thin-walled fibers
Better softness and strength
Better structure
Specialty Paper
Laminates
Tissue
Bleached
Hardwood
Kraft
52%
Bleached
Softwood
Kraft
44%
Unbleached
Kraft
3%
Sulphite
1%
NBSK
60%
SBSK
26%
Other
14% |
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NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Demand Fundamentals –
Changes to NBSK End Use Markets
37.3%
19.5%
37.3%
30.2%
19.9%
39.7%
P&W:
(5%)
Tissue:
+5%
Specialty:
+3%
CAGR 2010 -
2013
Total:
+2%
NBSK’s strength attributes make it a necessary input for tissue and specialty
products Changes
to
Papermakers’
Demand
for
NBSK
The
increased
NBSK
demand
for
use
in
tissue
/
specialty
products
has
outpaced
the
decreased
NBSK
demand
for
printing & writing grades
From
2003
to
2013,
a
period
very
affected
by
“digital
substitution”
of
traditional
paper
grades,
total
NBSK
demand
grew
by
13.8%
(1)
Significant growth in tissue capacity is a major contributing factor and is expected to
continue globally, though some projects have been delayed versus previous tissue
producer announcements (1)
Source: PPPC (2014)
(2)
Source: Brian McClay (June 2014)
Specialty
Specialty
Tissue
Tissue
Printing &
Writing
Printing &
Writing
Others
Others
-
3.0
6.0
9.0
12.0
15.0
2010
2013
NBSK Demand by End Use
(1)
1.4
0.8
1.1
1.0
0.4
0.6
1.0
1.2
1.8
1.4
2.1
2.2
-
0.5
1.0
1.5
2.0
2.5
2012
2013
2014
2015
Annual Tissue Capacity Growth by Region
(2)
Rest of World
China |
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Demand Fundamentals –
China’s Growing Demand
(1) Source: PPPC (2014)
P&W Woodfree:
+7.7%
Paper Board:
+11.4%
Kraft & Spec.:
+11.2%
CAGR:
2004 –
2013
Region: 1995-2015E CAGR
-
1.2
2.4
3.6
4.8
6.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
BSK Deliveries to China
(1)
12 Month Rolling (2001 –
Present)
-
10%
20%
30%
40%
-
7.0
14.0
21.0
28.0
1995
2000
2005
2010
2015E
Global BSK Demand by Region
(1)
China: 14.9%
W. Europe: (0.4%)
N. America: (0.4%)
Other: 2.0%
% China
-
4.0
8.0
12.0
16.0
2004
2007
2010
2013
China’s Chemical Pulp Demand
(1)
P&W: Woodfree
Paper Board
Tissue
Fluff
Kraft & Specialty
P&W: Mechanical |
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Demand Fundamentals –
China’s Growing Demand (Cont'd)
(1)
Source: PPPC
(2014); note: income measured at purchasing power parity in constant 2005 US dollars
(2)
China’s demand is growing rapidly…
…
and its pulp supply isn’t currently keeping pace
Over time, the market will easily
absorb new tissue capacity
10 Year
CAGR: +7.4%
10 Year
CAGR: +8.8%
China’s 12
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 income
Increased demand for hygiene products
Shutting of “Old China”
pulp / paper capacity
Significant closures to date, and to come
Implementing pollution and water / energy
constraints to stay operating
Modern assets require greater volumes of
NBSK to run machines at optimal rates
Focus on wood-based pulps, but limited domestic
wood fiber supply, means large pulp import
volumes
We believe that there is healthy demand for virgin
fiber as paper recovery is nearing feasible
maximums in most markets
th
-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
-
0.75
1.50
2.25
3.00
3.75
4.50
5.25
6.00
Tissue Demand & Income in China
(1)
Tissue Demand per Capita
Income per Capita
Chinese Government Mandated
Closure of “Old China”
Capacity
(2)
2005-2009:
6.5 mm tonnes per year over 5 years
2011:
8.31 mm tonnes
2012A:
10.57 mm tonnes
2013E:
7.42 mm tonnes (not yet finalized)
2014E:
4.63 mm tonnes
Source: RISI (August 22, 2014 press release; July 24, 2014 press release; May 9, 2014 PPI Asia
Report; and other disclosures) |
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(1) Source: PPPC (May 2014)
Supply Fundamentals –
Slowing BSK Capacity Growth
Forecast
2014E-2018E
CAGR: +0.8%
1995-2013
CAGR: +1.8%
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 16
17
18
19
20
21
22
23
24
25
26
27
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Bleached Softwood Kraft
Global Market Pulp Capacity
(1) |
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Supply Fundamentals –
Net Capacity Change Analysis
2012–2013 BSK Closures and Conversions
Mill
Closure
Name
Location
Company
Grade
Date
kt
Hunan
China
Yueyang Paper
BSK
Q2 2012
(400)
Uimaharju
Finland
Stora Enso
NBSK
Q2 2012
(200)
Ngodwana
South Africa
Ngodwana
BSK
Q4 2012
(215)
Fort Frances
Canada
Resolute
NBSK
Q4 2012
(115)
Kamloops
Canada
Domtar
NBSK
Q1 2013
(120)
Perry
USA
Georgia-Pacific (Buckeye)
Fluff-BSK
Q1 2013
(40)
Jesup
USA
Rayonier
Fluff-BSK
Q2 2013
(260)
Tofte
Norway
Södra Cell
NBSK
Q3 2013
(400)
Total
(1,750)
Recent History
Future Expectations
There have been some
announcements for new
BSK capacity coming
online; however, these
(3)
(1)
In the last few years, there
have been several notable
BSK mill closures
During this time, the Ilim
Bratsk mill expanded
(490,000 tpa) and Terrace
Bay mill restarted (350,000
tpa)
projects are at least 2 or 3 years away from being realized
These
new
capacities,
if
realized,
will
be
somewhat
offset
by
mill
conversions
to
dissolving
pulp
(2)
and
future
integration of current market volumes
(1) For example: an expansion at UPM Kymi of 170,000 tpa in late 2015 / early
2016; an expansion at Södra Cell Värö (Sweden) of 275,000 tpa by 2016; a rebuild of MetsäFibre Äänekoski (Finland)
which would add ~700,000 tpa to the market BSK pulp supply in 2017; and a start-up of
Svetlogorsky (Belarus) swing mill (NBSK, NBHK and DP) with some integrated production (BSK market pulp
supply impact unknown)
(2) For example: conversion of Aditya Birla Terrace Bay (Canada) from NBSK to
dissolving pulp in 2016 to reduce BSK market pulp supply by 350,000 tpa
(3) For example: addition of a new paper machine at Mondi Štetí (Czech
Republic) to reduce BSK market pulp supply as it integrates some of its production (BSK market pulp supply impact unknown) |
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Strong Long-Term NBSK Fundamentals
Demand Fundamentals
Supply Fundamentals
Supply growth potential for NBSK is limited
Minimal NBSK new capacity increases
Only one new mill added globally from 2011 to 2014
Limited new capacity expected in the near-term
Some capacity additions have recently been announced
for 2016 and 2017
Meaningful capacity shutdowns of old, uneconomical mills
With strong demand growth outpacing modest supply increases,
we believe that the NBSK market will be very attractive in the coming years
(1) Source: Hawkins Wright – Defining the China Market (December 2013)
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
Strengthening agent
Digital substitution
through 2017
(1) |
 17
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Financial Performance and Recent Developments |
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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
completed Putting NBSK’s History into Perspective
Shortage!
price
surge
(1) Sources: Factset FOEX PIX Pulp NBSK for prices; PPPC for inventories
Supply, Prices:
Stocks are low,
prices increasing |
 19
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Significant Earnings Potential
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
2010
2011
2012
2013
Energy & Chemical
Revenue (US$mm)
$63
$65
$95
$93
$100
$51
2014
$92
$35
$33
(1)
For
a
reconciliation
of
Net
Income
to
Operating
EBITDA,
please
refer
to
Appendix
C.
(2)
The company’s reporting currency was the Euro up until October 1, 2013. Figures prior to
this date have been converted to US dollars at the average foreign exchange rates in effect during the period
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and
non-recurring capital asset impairment charges. It does not reflect the
impact of a number of items that affect net income. It is not a measure of financial performance under GAAP, and should not be considered as an alternative
to net income or income from operations as a measure of performance, nor as an alternative to
net cash from operating activities as a measure of liquidity |
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We
believe
there
is
significant
room
for
further
price
increases
in
the
current
cycle
NBSK List Price Increases since Q3 2013
(US$/tonne)
Date
US
Europe
China
Aug-13
$945
$860
$680
Sep-13
$945
$880
$695
Oct-13
$970
$895
$720
Nov-13
$990
$905
$740
Dec-13
$990
$905
$750
Jan-14
$1,010
$915
$750
Feb-14
$1,010
$920
$750
Mar-14
$1,030
$925
$770
Apr-14
$1,030
$925
$750
May-14
$1,030
$925
$720
Jun-14
$1,030
$925
$720
Jul-14
$1,030
$930
$725
Aug-14
$1,030
$930
$730
Sept-14
(2)
n/a
$950
n/a
Change since
Aug-13
+$85
+9%
+$90
+10%
+$50
+7%
Recent NBSK Pricing Momentum
Source: RISI, unless otherwise noted
104%
129%
45%
43%
64%
24%
Median 54%
60%
90%
120%
150%
Mar-99
to
Jan-01
Sep-05
to
Aug-08
-
May-09
to
Jul-11
Sep-12
to
Aug 14
(Current)
Historical “Upcycle”
NBSK Price
Increase Trends
(1)
30%
-
Jan-86
to
Jun-90
Dec-93
to
Oct-95
Note: Producer realized prices are net of discounts, rebates and commissions
(1)
Calculations based on North American NBSK list prices (2)
Based on announced list price as of September 1, 2014 |
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Mercer’s Recent Developments
Capital Projects
Enhanced pulp production capacity (30,000 ADMT per year)
and added new electrical generating capacity (46 MW)
Celgar Workforce Reduction
Stendal Credit Facilities
The credit facilities were amended in August 2014 to provide
greater flexibility by reducing scheduled principal payments
by 50% and improving covenants
Stendal received a waiver under its credit facility in March
2014
US$20 million of the proceeds from the 2014 equity
offering (described next) will be contributed to Stendal
Completed Stendal’s Project Blue Mill on schedule and on budget
Expected annual cost savings of US$8 to US$10 million; 80% of which
are expected to be realized in 2014
Incurred pre-tax charges of ~US$5 million for severance and other
personnel related expenses in 2013
Amortizing loan, supported by guarantees from the German
Federal and State governments
EBITDA based covenants pinch at the bottom of the pulp cycle |
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Mercer Debt Summary
At 31-Dec-13
At 30-Jun-14
Term
Characteristics
US$mm
US$mm
Month-Year
Long-Term Debt Facilities
Stendal Loan Facility
$568.9
$537.9
Sept-17
Amortizing bank facility, 80% German government guaranteed and
non-recourse to Mercer, floating rate but partially hedged to 5.28%
Senior Notes
$336.4
$336.1
Dec-17
9.5% senior unsecured, redeemable beginning Dec 1, 2014 at 104.75%
Project Facilities
$21.9
$18.8
Sept-17
Various floating rate amortizing bank project facilities
Short-Term Debt Facilities
Celgar Revolver
-
-
May-16
Floating rate, revolving credit facility, ~US$36 million available
Rosenthal Revolver
-
-
Oct-16
Floating rate, revolving credit facility, ~US$39 million available
Total Debt
$927.3
$892.8
Less: Cash
($147.7)
($241.0)
Net Debt
$779.5
$651.8
LTM EBITDA
$110.3
$160.9
Net Debt to EBITDA
7.1x
4.1x
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
Note: Excludes loans payable to the noncontrolling shareholder of the Stendal mill
Note: Some numbers may not add due to rounding |
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Mercer’s Recent Developments (Cont’d)
Annual Maintenance Shuts
In
June
2014,
Mercer
and
Resolute
Forest
Products
launched
a
new
50/50
joint venture company called Performance BioFilaments
The joint venture is set to commercialize novel product applications for
cellulose
filaments,
an
innovative
biomaterial
derived
from
wood
fiber
Completed the most extensive of our 2014 scheduled annual maintenance shuts during Q2 at
Celgar
While the shut was completed largely as planned, difficulties were encountered in returning to
full production Q2 shuts (including a short 2-day shut at Stendal), along with delays in reaching
full production at Celgar, impacted EBITDA during the quarter by about US$18 million
Performance BioFilaments |
 24
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Mercer –
Summary
Globally cost competitive, modern mill operations
Strategically located mills with excellent access to key markets
Stable and growing revenue from high-margin energy & bio-chemical by-product
sales Strong long-term NBSK fundamentals
Significant leverage to the NBSK pulp cycle
Experienced management team
The largest “pure-play”
NBSK market pulp producer |
 25
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Appendix A
Additional Information on Mercer International Inc. |
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Mercer Balance Sheet –
June 30, 2014
Note: Restricted Group consists of Celgar and Rosenthal; Unrestricted Group consists of
Stendal (see Corporate Structure slide for more details) Note: Some numbers may not add
due to rounding in US$ millions
Restricted
Unrestricted
Adjustments
Consolidated
ASSETS
Cash,
Cash
Equivalents
$157.4
$83.6
-
$241.0
Receivables
$69.8
$64.9
-
$134.7
Inventories
$104.1
$60.9
-
$165.1
Other
Current
Assets
$11.4
$5.7
-
$17.1
Total
Current
Assets
$342.8
$215.2
-
$558.0
Property,
Plant
and
Equipment
$410.1
$596.8
-
$1,006.9
Due
from
Unrestricted
Group
$155.5
-
($155.5)
-
Other
Long-Term
Assets
$27.7
$16.3
-
$44.0
Total
Long-Term
Assets
$593.2
$613.1
($155.5)
$1,050.9
TOTAL
ASSETS
$936.0
$828.3
($155.5)
$1,608.8
LIABILITIES
&
EQUITY
Payables
$63.5
$52.2
-
$115.7
Current
Debt
-
$62.2
-
$62.2
Other
Current
Liabilities
$1.3
-
-
$1.3
Total
Current
Liabilities
$64.8
$114.4
-
$179.2
Debt
$336.1
$546.3
-
$882.4
Due
to
Restricted
Group
-
$155.5
($155.5)
-
Other
Liabilities
$70.5
$51.1
-
$121.6
Total
Long-Term
Liabilities
$406.7
$752.9
($155.5)
$1,004.1
Total
Shareholders'
Equity
(Deficit)
$464.5
($32.5)
-
$432.0
Non-Controlling
Interest
(Deficit)
-
($6.4)
-
($6.4)
Total
Equity
$464.5
($38.9)
-
$425.6
TOTAL
LIABILITIES
AND
EQUITY
$936.0
$828.3
($155.5)
$1,608.8 |
 27
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Mercer Selected Historical Financial Data (Consolidated)
in US$ 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
Operating Income (Loss)
$154.7
$63.0
$31.7
$11.4
$61.3
Interest Expense
$82.1
$71.8
$69.2
$34.5
$34.6
Gain
(Loss)
on
Derivative
Instruments
(1)
($2.0)
$4.8
$19.7
$13.3
$5.8
Other Income (Expense)
$3.6
($0.2)
$1.2
($0.1)
($0.1)
Net Income (Loss) Attributable to Common
Shareholders
$69.7
($15.7)
($26.4)
($13.6)
$21.6
Operating EBITDA
(2)
$232.6
$137.7
$110.3
$50.3
$100.9
Earnings Per Share (Basic)
$1.39
($0.28)
($0.47)
($0.24)
$0.36
Note: Quarterly data represents 6 months ended June 30
Note: Some numbers may not add due to rounding
(1) Gains (losses) on Stendal’s interest rate swap and pulp price swaps (subject to
quarterly non-cash mark-to-market valuation adjustments)
(2) Refer to Appendix C for Reconciliation of Net Income to Operating EBITDA.
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset
impairment charges. It does not reflect the impact of a number of items that affect net
income. It is not a measure of financial performance under GAAP, and should not be considered as an alternative to
net income or income from operations as a measure of performance, nor as an alternative to net
cash from operating activities as a measure of liquidity |
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NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Appendix B
Detailed Overview of Operations |
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NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Rosenthal Mill
Mercer
International
Group:
Restricted
Group
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
2013
Green
Electricity
Sales:
US$21.5
million
Key Features:
Built
in
1999
–
modern
and
efficient
Strategically located in central Europe
Close proximity to stable fiber supply and nearby
sawmills
Allows customers to operate using just in time inventory
process, lowering their costs and making Rosenthal a
preferred supplier
In 2013, the mill sold nearly 180,000 MWh of green electricity
One of the largest biomass power plants in Germany
Regularly setting new pulp and energy production records
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
29 |
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NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Celgar Mill
Mercer
International
Group:
Restricted
Group
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
ISO
14001
2013
Green
Electricity
Sales:
US$12.3
million
Key Features:
Modern and efficient
Abundant and low fiber costs by global standards
Green Energy Project was completed in September 2010
In 2013, the mill sold over 127,000 MWh of green electricity
Secured C$57.7 million in non-repayable capital funding from
government of Canada for green capital investments
Majority used to fund Green Energy Project
Continues to demonstrate significant upside potential
Regularly setting production records and increasing the
amount of bio-energy generated
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
30 |
 31
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Stendal Mill
Mercer
International
Group:
Unrestricted
Group
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
ISO
14001
certified
2013
Green
Electricity
Sales:
US$45.6
million
2013
Chemical
Sales:
US$12.8
million
Key Features:
Completed in 2004, it’s one of the newest and largest pulp
mills in the world
83% Mercer owned
Debt is 80% government guaranteed, low interest and
non-recourse to Mercer
One of the largest biomass power plants in Germany
In 2013, exported over 390,000 MWh
Project Blue Mill was completed in Q4 2013 (on time and on
budget) and has increased this mill’s annual pulp production
capacity by 30,000 ADMT and electricity generation by
109,000 MWh
Regularly setting new performance records
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 32
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Appendix C
Reconciliation of Net Income to Operating EBITDA |
 33
NASDAQ:MERC | TSX:MRI.U | www.mercerint.com
Reconciling Net Income (Loss) to Operating EBITDA
Note: For other reconciliations of Net Income (Loss) to Operating EBITDA in periods not shown
here, please refer to that period’s respective Form 10-Q or 10-K, which can be found on our
website (www.mercerint.com)
Note: Some numbers may not add due to rounding
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
$2.0
$6.4
Add: Interest Expense
$71.8
$69.2
$34.5
$34.6
Add: Loss (Gain) on Derivative Instruments
($4.8)
($19.7)
($13.3)
($5.8)
Add: Other Expense (Income)
$0.2
($1.2)
$0.1
$0.1
Operating Income (Loss)
$63.0
$31.7
$11.4
$61.3
Add: Depreciation and Amortization
$74.7
$78.6
$38.9
$39.6
Operating EBITDA
$137.7
$110.3
$50.3
$100.9
Operating EBITDA is defined as operating income (loss) 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. Management
considers it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation
expense and non-recurring capital asset impairment charges are not an actual cash cost,
and depreciation expense varies widely from company to company in a manner that management considers largely
independent of the underlying cost efficiency of their operating facilities. In addition, we
believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our
financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income
(loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating
EBITDA is not a measure of financial performance under the accounting principles generally
accepted in the United States of America (“GAAP”), and should not be considered as an alternative to net income (loss) or
income (loss) from operations as a measure of performance, nor as an alternative to net cash
from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be
considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Operating EBITDA should only be
considered as a supplemental performance measure and should not be considered as a measure of
liquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate
Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from
Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating
EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP
financial statements. |