Mercer International (MERC) 8-K/A Mercer International Inc. Reports 2006 Second Quarter Results

EXHIBIT 99.1

	FOR:	MERCER INTERNATIONAL INC.
	APPROVED BY:	Jimmy S.H. Lee
		Chairman & President
		(604) 684-1099
		David M. Gandossi
		Executive Vice-President &
		Chief Financial Officer
		(604) 684-1099
For Immediate Release
		Financial Dynamics
		Investors: Eric Boyriven, Alexandra Tramont
		Media: Scot Hoffman
		(212) 850-5600

MERCER INTERNATIONAL INC. REPORTS 2006 SECOND QUARTER RESULTS

     NEW YORK, NY, August 8, 2006 — Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the second quarter of 2006.

Summary Selected Highlights

	Three Months Ended June 30,
	2006			2005
	(in thousands)
	(unaudited)
Results of Operations
Revenues	€	166,705	€	129,609
Income from operations		10,874		9,201
Operating EBITDA(1)		25,742		23,097
Interest expense		23,112		22,200
Unrealized gain (loss) on derivative instruments		44,690		(69,451	)
Unrealized foreign exchange gain (loss) on debt		6,060		(9,806	)
Net income (loss)		18,421		(62,151	)
Income (loss) per share
Basic		0.56		(1.88	)
Diluted		0.45		(1.88	)
Other Data
Total pulp sales volume(2) (ADMTs)		329,265		278,752
Mill net pulp price realizations (per ADMT)(3)		453		403

(1)	For a definition of Operating EBITDA, see page 7 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 10 of the financial tables included in this press release.
(2)	Excluding intercompany sales volumes of 4,871 ADMTs and 4,105 ADMTs of pulp in the three months ended June 30, 2006 and 2005, respectively.
(3)	Excluding revenues from third party transportation activities.

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Mercer Reports 2006 Second Quarter Results Page 2

Certain key factors affecting our 2006 second quarter results include:

• Revenues increased by over 28% to€166.7 million from€129.6 million in the comparative period of 2005, primarily due to higher sales from our Celgar and Stendal pulp mills.

• Pulp markets strengthened quarter over quarter. Average list prices for NBSK pulp in Europe were $665 per ADMT in the second quarter of 2006 and $618 per ADMT in the first quarter of 2006, compared to $613 per ADMT in the second quarter of 2005.

• Mill net pulp realizations increased to€453 per ADMT in the second quarter of 2006 from€425 and€413 per ADMT in the first quarter of 2006 and the fourth quarter of 2005, respectively.

• We took scheduled maintenance and strategic capital expenditure downtime of approximately 30 days at all of our pulp mills, of which 16 days were at our Rosenthal mill and 8 days were at our Celgar mill. The total maintenance costs associated with the shutdowns were approximately€4.3 million and were expensed in the quarter. Further, the Stendal mill underwent testing of various departments and converted some production to TCF pulp pursuant to the terms of its EPC contract which curtailed production during such period. This downtime and testing negatively impacted our production volumes, costs and operating results.

• Operating EBITDA was€25.7 million in the second quarter compared to€23.1 million in the 2005 comparative quarter as our scheduled downtime at our pulp mills offset, in part, improvements in pulp markets. For a definition of Operating EBITDA, see page 7 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 10 of the financial tables included in this press release.

• We recorded an aggregate net unrealized gain of€50.8 million on our outstanding derivatives and foreign exchange gain on our long-term debt in the second quarter of 2006. In the second quarter of 2005, we had an aggregate net unrealized loss of€79.3 million on our outstanding derivatives and foreign exchange loss on long-term debt.

President’s Comments

Mr. Jimmy S.H. Lee, President and Chairman, stated: “During the second quarter of 2006:

• Pulp markets were stronger than the last and comparative quarter of 2005. NBSK list prices in Europe improved to $690 per ADMT at the end of the quarter and in Asian markets improved by approximately $50 per ADMT.

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Mercer Reports 2006 Second Quarter Results Page 3

• The Stendal mill ramp up is proceeding substantially as scheduled. In the quarter, it operated above its initial rated capacity and, despite testing and related matters, production and sales revenues were up by approximately 13% and 49%, respectively, over the same period of 2005. Further, Stendal mill net realizations also improved as a result of higher pulp prices and increased contract sales in Europe.

• During the quarter, we had extensive scheduled downtime at our pulp mills. During this time, the Rosenthal mill installed an additional brownstock washer and the Celgar mill undertook extensive maintenance, with over 1,000 workers involved, which should enhance its operating performance and reliability in the second half of 2006.

• Improvements in pulp prices and markets were largely offset by the scheduled downtime at our pulp mills, higher fiber costs at our German pulp mills and the impact of the continuing strength of the Canadian dollar versus the U.S. dollar on our Celgar mill.”

     Mr. Lee continued: “Looking forward, we are seeing improvements in pulp prices and demand in all of our markets which we currently believe should result in further price improvement in the upcoming months. In July 2006, list NBSK prices increased to approximately $710 per tonne in Europe and approximately $650 per tonne in Asia.”

     Mr. Lee concluded: “With the extensive scheduled mill downtime completed, we believe we are well-positioned to realize upon the strengthening NBSK pulp market in the second half of 2006.”

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Mercer Reports 2006 Second Quarter Results Page 4

Results of Operations — 2006 Second Quarter

     Selected production and sales data for the three months ended June 30, 2006 and 2005 is as follows:

	Three Months Ended June 30,
	2006		2005
	(ADMTs)
Production by Product Class:
Pulp production by mill:
Rosenthal		67,376		81,443
Stendal		139,715		123,738
Celgar		100,651		111,071
Total pulp production		307,742		316,252
Paper production		16,427		17,979
Total production		324,169		334,231
Sales Volume by Product Class:
Pulp sales volume by mill:
Rosenthal		73,010		75,996
Stendal		136,894		102,915
Celgar		119,361		99,841
Total pulp sales volume(1)		329,265		278,752
Paper sales volume		15,482		17,840
Total sales volume(1)		344,747		296,592

	Three Months Ended June 30,
	2006		2005
	(ADMTs)
	(in thousands)
Revenues by Product Class:
Pulp revenues by mill:
Rosenthal	€	33,776	€	31,115
Stendal		60,741		40,345
Celgar		54,514		40,864
Total pulp revenues(1)		149,031		112,324
Paper revenues		16,097		16,097
Total pulp and paper sales revenues(1)		165,128		128,421
Third party transportation revenues		1,577		1,188
Total sales revenues	€	166,705	€	129,609

(1) Excluding intercompany sales volumes of 4,871 ADMTs and 4,105 ADMTs of pulp and intercompany net sales revenues of approximately€2.3 million and€1.7 million in the three months ended June 30, 2006 and 2005, respectively.

     Revenues for the three months ended June 30, 2006 increased to€166.7 million from€129.6 million in the comparative period of 2005, primarily due to higher sales from our Celgar and Stendal pulp mills. Pulp sales by volume increased to 329,265 ADMTs in the second quarter of 2006 from 278,752 ADMTs in the comparative period of 2005.

     Cost of sales and general, administrative and other expenses in the second quarter of 2006 increased to€155.8 million from€120.4 million in the comparative period of 2005, primarily as a result of the inclusion of higher sales from our Celgar and Stendal mills.

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Mercer Reports 2006 Second Quarter Results Page 5

     For the second quarter of 2006, revenues from our pulp operations increased to€150.6 million from€113.5 million in the same period a year ago. List prices for NBSK pulp in Europe were approximately€529 ($665) per ADMT in the second quarter of 2006 and€514 ($618) per ADMT in the first quarter of 2006, compared to approximately€487 ($613) per ADMT in the comparative period of last year.

     Mill net pulp sales realizations increased to€453 per ADMT on average in the second quarter of 2006 from€403 per ADMT in the second quarter of 2005, primarily as a result of higher pulp prices.

     During the current quarter, we took an aggregate of approximately 30 days scheduled maintenance and strategic capital expenditure downtime at our pulp mills, including 16 days at our Rosenthal mill and 8 days at our Celgar mill. During this period, our Rosenthal mill completed the installation of an additional brownstock washer at a cost of approximately€9.7 million which is expected to further improve pulp quality and lower chemical and effluent costs. The total maintenance costs associated with such shutdown were approximately€4.3 million and were expensed in the current quarter. Total production volume at our Rosenthal and Celgar mills was down by approximately 24,000 tonnes or 13% in the current quarter of 2006 compared to the same quarter of 2005. The Stendal mill also underwent testing of various departments and converted some production to TCF pulp pursuant to the terms of its EPC contract which curtailed production during such period. This downtime and testing negatively impacted our production volumes, costs and operating results. During the same period of 2005, we had 12 days of down time at our pulp mills.

     Cost of sales and general, administrative and other expenses for the pulp operations increased to€141.3 million in the second quarter of 2006 from€102.9 million in the comparative period of 2005, primarily as a result of the inclusion of higher sales from our Celgar and Stendal mills.

     Fiber costs at our German pulp mills increased by approximately 8% in the second quarter of 2006 versus the same quarter of 2005. This resulted from lower availability because of severe winter conditions in Germany and central Europe, which caused sawmillers and log harvesters to curtail operations and increased competition for fiber primarily from renewable energy operations. The increase in worldwide energy prices has made projects generating energy from renewable sources such as wood residuals more viable in Europe. As a result, there has been increased fiber demand and competition in our fiber base. In the second quarter of 2006, average fiber costs at our Celgar mill decreased by

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Mercer Reports 2006 Second Quarter Results Page 6

approximately 23% versus the same quarter of 2005, primarily because of fluctuations in regional woodchip availability.

     In the second quarter of 2006, we recorded a contribution to income from operations of€7.6 million resulting from the sale of emission allowances compared to€6.3 million in the comparative quarter of 2005.

     Depreciation for the pulp operations increased to€14.6 million in the second quarter of 2006, from€13.4 million in the comparative period of 2005, primarily as a result of depreciation associated with the Celgar mill.

     For the second quarter of 2006, our pulp operations generated operating income of€11.5 million, versus operating income of€12.4 million in the comparative quarter of 2005 as scheduled downtime resulted in lower production and weaker performance largely offset improvements in pulp markets and Stendal’s results. As NBSK pulp is generally quoted in U.S. dollars, the overall strength of the Canadian dollar versus the U.S. dollar continued to negatively impact our Celgar mill’s sales realizations and results.

     Revenues from our paper operations were stable at€16.1 million in the current quarter as well as the same quarter of last year.

     Cost of sales and general, administrative and other expenses for the paper operations in the second quarter of 2006 decreased to€15.8 million from€16.9 million in the comparative quarter of 2005.

     For the second quarter of 2006, our paper operations generated operating income of€0.4 million, compared to an operating loss of€0.8 million in the second quarter of 2005.

     In the second quarter of 2006, we had income from operations of€10.9 million, compared to€9.2 million in the same quarter last year. Interest expense in the second quarter of 2006 increased marginally to€23.1 million from€22.2 million in the year ago period, primarily due to higher borrowings relating to the Stendal mill.

     Stendal entered into certain foreign currency derivatives to swap all of its long-term bank indebtedness from Euros to U.S. dollars in 2005 and certain currency forwards. In addition, Stendal

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Mercer Reports 2006 Second Quarter Results Page 7

previously entered into interest rate swaps to fix the interest rate on its outstanding bank indebtedness. Due to the weakening of the U.S. dollar versus the Euro and an increase in long-term interest rates, we recorded a net unrealized non-cash holding gain of€44.7 million before minority interests upon the marked to market valuation of such derivatives that were outstanding at the end of the current quarter, compared to a net non-cash holding loss of€69.5 million before minority interests upon the marked to market valuation of our outstanding derivatives in the comparative quarter of 2005.

     In the second quarter of 2006, minority interest, representing the two minority shareholders’ proportionate interest in the Stendal mill, was€0.4 million, compared to€4.9 million in the second quarter of 2005.

     We reported net income for the second quarter of 2006 of€18.4 million, or€0.56 per basic and€0.45 per diluted share, which included an aggregate of€50.8 million of unrealized gains on our outstanding derivatives and a foreign exchange gain on our long-term debt. In the second quarter of 2005, we reported a net loss of€62.2 million, or€1.88 per basic and diluted share, which reflected the net unrealized non-cash holding losses on our currency and interest rate derivatives of€69.5 million and the unrealized non-cash foreign exchange loss on our long-term debt of€9.8 million, partially offset by the non-cash benefit for income taxes of€24.4 million, and interest expense related to our Stendal mill of€14.5 million.

     We generated “Operating EBITDA” of€25.7 million and€23.1 million in the three months ended June 30, 2006 and 2005, respectively. 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. Management considers it to be a meaningful supplement to operating income 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), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net

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Mercer Reports 2006 Second Quarter Results Page 8

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. For a reconciliation of net income (loss) to Operating EBITDA, see page 10 of the financial tables included in this press release.

Earnings Release Call

     In conjunction with this release, Mercer International will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Wednesday, August 9, 2006 at 10:00 AM EST. Listeners can access the conference call live and archived over the Internet through a link at the company’s web site athttp://www.mercerint.com/en/newsCurrent.cfm, or at http://www.videonewswire.com/event.asp?id=35077. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until August 16, 2006 at 11:59 p.m. (Eastern Standard Time). The replay number is (800) 642-1687, and the passcode is 3961912.

     Mercer International Inc. is a global pulp and paper manufacturing company. To obtain further information on the company, please visit its web site athttp://www.mercerinternational.com.

     The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause the Company’s actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: market conditions, competition and other risk factors listed from time to time in the company’s SEC reports.

-FINANCIAL TABLES FOLLOW-

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MERCER INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Euros in thousands)

	June 30,			December 31,
	2006			2005
ASSETS
Current Assets
Cash and cash equivalents	€	73,079		€	83,547
Cash restricted		5,892			7,039
Receivables		87,020			74,315
Inventories		69,544			81,147
Prepaid expenses and other		6,240			5,474
Total current assets		241,775			251,522
Long-Term Assets
Cash restricted		66,537			24,573
Property, plant and equipment		1,008,319			1,024,662
Investments		7,695			6,314
Deferred note issuance and other costs		7,674			8,364
Deferred income tax		38,798			78,381
		1,129,023			1,142,294
Total assets	€	1,370,798		€	1,393,816
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses	€	109,113		€	112,726
Debt, current portion		75,375			27,601
Total current liabilities		184,488			140,327
Long-Term Liabilities
Debt, less current portion		898,379			922,619
Unrealized foreign exchange rate derivative loss		11,735			61,979
Unrealized interest rate derivative losses		42,320			78,646
Pension and other post-retirement benefit obligations		16,541			17,113
Capital leases and other		9,980			9,945
Deferred income tax		17,428			14,444
		996,383			1,104,746
Total liabilities		1,180,871			1,245,073
Minority Interest		—			—
SHAREHOLDERS’ EQUITY
Common shares		181,655			181,586
Additional paid-in capital, stock options		87			14
Deficit		(12,961	)		(47,970	)
Accumulated other comprehensive income		21,146			15,113
Total shareholders’ equity		189,927			148,743
Total liabilities and shareholders’ equity	€	1,370,798		€	1,393,816

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MERCER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)

	2006			2005
Revenues	€	325,769		€	227,502
Costs and expenses:
Cost of sales		298,045			210,167
		27,724			17,335
General and administrative expenses		(18,591	)		(15,316	)
Sale (purchase) of emission allowances		13,246			6,288
Income from operations		22,379			8,307
Other income (expense)
Interest expense		(46,037	)		(41,463	)
Investment income		3,011			981
Unrealized foreign exchange gain (loss) on debt		12,173			(7,509	)
Realized loss on derivative instruments		(5,219	)		(295	)
Unrealized gain (loss) on derivative instruments		90,724			(73,015	)
Impairment of investments		—			(1,645	)
Total other income (expense)		54,652			(122,946	)
Income (loss) before income taxes and minority interest		77,031			(114,639	)
Income tax (provision) benefit		(42,920	)		21,412
Income (loss) before minority interest		34,111			(93,227	)
Minority interest		898			11,409
Net income (loss)	€	35,009		€	(81,818	)
(Deficit) retained earnings, beginning of period		(47,970	)		69,176
Deficit, end of period	€	(12,961	)	€	(12,642	)
Income (loss) per share
Basic	€	1.06		€	(2.80	)
Diluted	€	0.86		€	(2.80	)

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MERCER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)

	2006			2005
Revenues	€	166,705		€	129,609
Costs and expenses:
Cost of sales		153,706			119,178
		12,999			10,431
General and administrative expenses		(9,733	)		(7,518	)
Sale (purchase) of emission allowances		7,608			6,288
Income from operations		10,874			9,201
Other income (expense)
Interest expense		(23,112	)		(22,200	)
Investment income		1,267			806
Unrealized foreign exchange gain (loss) on debt		6,060			(9,806	)
Realized loss on derivative instruments		(1,657	)		—
Unrealized gain (loss) on derivative instruments		46,347			(69,451	)
Total other income (expense)		28,905			(100,651	)
Income (loss) before income taxes and minority interest		39,779			(91,450	)
Income tax (provision) benefit		(21,807	)		24,447
Income (loss) before minority interest		17,972			(67,003	)
Minority interest		449			4,852
Net income (loss)	€	18,421		€	(62,151	)
(Deficit) retained earnings, beginning of period		(31,382	)		49,509
Deficit, end of period	€	(12,961	)	€	(12,642	)
Income (loss) per share
Basic	€	0.56		€	(1.88	)
Diluted	€	0.45		€	(1.88	)

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MERCER INTERNATIONAL INC.

BUSINESS SEGMENT INFORMATION
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

															Corporate,
	Rosenthal			Celgar			Stendal			Total					Other and			Consolidated
	Pulp			Pulp			Pulp			Pulp			Paper		Eliminations			Total
Six Months Ended June 30, 2006
Sales to external customers	€	68,941		€	100,811		€	122,510		€	292,262		€	33,507	€	—		€	325,769
Intersegment net sales		(152	)		23			4,688			4,559			108		(4,667	)		—
		68,789			100,834			127,198			296,821			33,615		(4,667	)		325,769
Operating costs		49,453			98,702			95,571			243,726			29,971		(4,434	)		269,263
Operating depreciation and amortization		7,750			6,291			14,129			28,170			456		156			28,782
General and administrative		3,592			4,939			5,940			14,471			2,276		1,844			18,591
(Sale) purchase of emission allowances		(3,651	)		—			(9,595	)		(13,246	)		—		—			(13,246	)
		57,144			109,932			106,045			273,121			32,703		(2,434	)		303,390
Income (loss) from operations		11,645			(9,098	)		21,153			23,700			912		(2,233	)		22,379
Interest expense																			(46,037	)
Investment income																			3,011
Derivative financial instruments, net																			85,505
Unrealized foreign exchange gain on debt																			12,173
Income before income taxes and minority interest																		€	77,031
Segment assets	€	332,485		€	237,175		€	746,557		€	1,316,217		€	22,020	€	32,561		€	1,370,798

															Corporate,
	Rosenthal			Celgar(1)		Stendal			Total						Other and			Consolidated
	Pulp			Pulp		Pulp			Pulp			Paper			Eliminations			Total
Six Months Ended June 30, 2005
Sales to external customers	€	65,936		€	48,480	€	81,606		€	196,022		€	31,480		€	—		€	227,502
Intersegment net sales		—			—		3,340			3,340			—			(3,340	)		—
		65,936			48,480		84,946			199,362			31,480			(3,340	)		227,502
Operating costs		47,405			40,554		71,546			159,505			29,601			(3,822	)		185,284
Operating depreciation and amortization		6,630			4,097		13,454			24,181			379			323			24,883
General and administrative		3,810			2,837		1,677			8,324			2,562			4,430			15,316
(Sale) purchase of emission allowances		(2,135	)		—		(4,153	)		(6,288	)		—			—			(6,288	)
		55,710			47,488		82,524			185,722			32,542			931			219,195
Income (loss) from operations		10,226			992		2,422			13,640			(1,062	)		(4,271	)		8,307
Interest expense																			(41,463	)
Investment income																			981
Derivative financial instruments, net																			(73,310	)
Unrealized foreign exchange loss on debt																			(7,509	)
Impairment of investments																			(1,645	)
Loss before income taxes and minority interest																		€	(114,639	)
Segment assets	€	347,935		€	244,361	€	906,244		€	1,498,540		€	24,294		€	15,995		€	1,538,829

(1) The results of the Celgar pulp mill are from the date of its acquisition on February 14, 2005.

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MERCER INTERNATIONAL INC.

BUSINESS SEGMENT INFORMATION
For the Three Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

															Corporate,
	Rosenthal			Celgar			Stendal			Total					Other and			Consolidated
	Pulp			Pulp			Pulp			Pulp			Paper		Eliminations			Total
Three Months Ended June 30, 2006
Sales to external customers	€	34,269		€	54,514		€	61,811		€	150,594		€	16,111	€	—		€	166,705
Intersegment net sales		(194	)		23			2,373			2,202			108		(2,310	)		—
		34,075			54,537			64,184			152,796			16,219		(2,310	)		166,705
Operating costs		25,466			53,137			47,446			126,049			14,453		(1,664	)		138,838
Operating depreciation and amortization		4,213			3,277			7,070			14,560			230		78			14,868
General and administrative		2,265			2,815			3,183			8,263			1,135		335			9,733
(Sale) purchase of emission allowances		(1,884	)		—			(5,724	)		(7,608	)		—		—			(7,608	)
		30,060			59,229			51,975			141,264			15,818		(1,251	)		155,831
Income (loss) from operations		4,015			(4,692	)		12,209			11,532			401		(1,059	)		10,874
Interest expense																			(23,112	)
Investment income																			1,267
Derivative financial instruments, net																			44,690
Unrealized foreign exchange gain on debt																			6,060
Income before income taxes and minority interest																		€	39,779

															Corporate,
	Rosenthal			Celgar		Stendal			Total						Other and			Consolidated
	Pulp			Pulp		Pulp			Pulp			Paper			Eliminations			Total
Three Months Ended June 30, 2005
Sales to external customers	€	31,840		€	40,864	€	40,808		€	113,512		€	16,097		€	—		€	129,609
Intersegment net sales		—			—		1,786			1,786			—			(1,786	)		—
		31,840			40,864		42,594			115,298			16,097			(1,786	)		129,609
Operating costs		22,217			35,419		34,411			92,047			15,370			(2,135	)		105,282
Operating depreciation and amortization		3,362			3,274		6,773			13,409			198			289			13,896
General and administrative		1,909			1,162		702			3,773			1,326			2,419			7,518
(Sale) purchase of emission allowances		(2,135	)		—		(4,153	)		(6,288	)		—			—			(6,288	)
		25,353			39,855		37,733			102,941			16,894			573			120,408
Income (loss) from operations		6,487			1,009		4,861			12,357			(797	)		(2,359	)		9,201
Interest expense																			(22,200	)
Investment income																			806
Derivative financial instruments, net																			(69,451	)
Unrealized foreign exchange loss on debt																			(9,806	)
Loss before income taxes and minority interest																		€	(91,450	)

(5)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at June 30, 2006
(Euros in thousands)

The terms of the indenture governing our 9.25% senior unsecured notes requires that we provide the results of operations and financial condition of Mercer International Inc. excluding its subsidiaries (“Mercer Inc.”) and our restricted subsidiaries under the indenture, collectively referred to as the “Restricted Group”. From February 14, 2005, the Restricted Group includes Mercer Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill. The Restricted Group excludes our paper operations and the Stendal mill.

	June 30, 2006
	Restricted		Unrestricted						Consolidated
	Group		Subsidiaries			Eliminations			Group
ASSETS
Current assets
Cash and cash equivalents	€	37,018	€	36,061		€	—		€	73,079
Cash restricted		—		5,892			—			5,892
Receivables		47,468		39,552			—			87,020
Inventories		36,653		32,891			—			69,544
Prepaid expenses and other		3,620		2,620			—			6,240
Total current assets		124,759		117,016			—			241,775
Cash restricted		—		66,537			—			66,537
Property, plant and equipment		400,046		608,273			—			1,008,319
Other		10,048		5,321			—			15,369
Deferred income tax		18,149		20,649			—			38,798
Due from unrestricted group		49,302		—			(49,302	)		—
Total assets	€	602,304	€	817,796		€	(49,302	)	€	1,370,798
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	€	43,851	€	65,262		€	—		€	109,113
Debt, current portion		—		75,375			—			75,375
Total current liabilities		43,851		140,637			—			184,488
Debt, less current portion		322,732		575,647			—			898,379
Due to restricted group		—		49,302			(49,302	)		—
Unrealized derivative loss		—		54,055			—			54,055
Other		21,160		5,361			—			26,521
Deferred income tax		2,379		15,049			—			17,428
Total liabilities		390,122		840,051			(49,302	)		1,180,871
SHAREHOLDERS’ EQUITY
Total shareholders’ equity (deficit)		212,182		(22,255	)(1)		—			189,927
Total liabilities and shareholders’ equity	€	602,304	€	817,796		€	(49,302	)	€	1,370,798

(1) Shareholders’ equity does not include government grants received or receivable related to the Stendal mill. Shareholders’ equity is impacted by the unrealized non-cash marked to market valuation losses on derivative financial instruments.

(6)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at December 31, 2005
(Euros in thousands)

	December 31, 2005
	Restricted		Unrestricted						Consolidated
	Group		Subsidiaries			Eliminations			Group
ASSETS
Current
Cash and cash equivalents	€	48,790	€	34,757		€	—		€	83,547
Cash restricted		—		7,039			—			7,039
Receivables		41,349		32,966			—			74,315
Inventories		47,100		34,047			—			81,147
Prepaid expenses and other		2,940		2,534			—			5,474
Total current assets		140,179		111,343			—			251,522
Cash restricted		—		24,573			—			24,573
Property, plant and equipment		404,151		620,511			—			1,024,662
Other		10,533		4,145			—			14,678
Deferred income tax		24,303		54,078			—			78,381
Due from unrestricted group		46,412		—			(46,412	)		—
Total assets	€	625,578	€	814,650		€	(46,412	)	€	1,393,816
LIABILITIES
Current
Accounts payable and accrued expenses	€	46,867	€	64,646		€	—		€	111,513
Construction costs payable		—		1,213			—			1,213
Debt, current portion		—		27,601			—			27,601
Total current liabilities		46,867		93,460			—			140,327
Debt, less current portion		342,023		580,596			—			922,619
Due to restricted group		—		46,412			(46,412	)		—
Unrealized derivative loss		—		140,625			—			140,625
Other		20,722		6,336			—			27,058
Deferred income tax		1,851		12,593			—			14,444
Total liabilities		411,463		880,022			(46,412	)		1,245,073
SHAREHOLDERS’ EQUITY
Total shareholders’ equity (deficit)		214,115		(65,372	)(1)		—			148,743
Total liabilities and shareholders’ equity	€	625,578	€	814,650		€	(46,412	)	€	1,393,816

(1) Shareholders’ equity does not include government grants received or receivable related to the Stendal mill. Shareholders’ equity is impacted by the unrealized non-cash marked to market valuation losses on derivative financial instruments.

(7)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

	Six Months Ended June 30, 2006
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues	€	169,623		€	160,813		€	(4,667	)	€	325,769
Operating costs		148,388			125,309			(4,434	)		269,263
Operating depreciation and amortization		14,197			14,585			—			28,782
General and administrative expenses		10,375			8,216			—			18,591
(Sale) purchase of emission allowances		(3,651	)		(9,595	)		—			(13,246	)
		169,309			138,515			(4,434	)		303,390
Income from operations		314			22,298			(233	)		22,379
Other income (expense)
Interest expense		(16,442	)		(31,355	)		1,760			(46,037	)
Investment income		2,119			2,652			(1,760	)		3,011
Derivative financial instruments, net		—			85,505			—			85,505
Unrealized foreign exchange gain on debt		12,173			—			—			12,173
Total other (expense) income		(2,150	)		56,802			—			54,652
Income (loss) before income taxes and minority interest		(1,836	)		79,100			(233	)		77,031
Income tax provision		(6,905	)		(36,015	)		—			(42,920	)
Income (loss) before minority interest		(8,741	)		43,085			(233	)		34,111
Minority interest		—			898			—			898
Net income (loss)	€	(8,741	)	€	43,983		€	(233	)	€	35,009

	Six Months Ended June 30, 2005
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues	€	114,416		€	113,086		€	—		€	227,502
Operating costs		87,260			98,024			—			185,284
Operating depreciation and amortization		10,829			13,616			438			24,883
General and administrative		11,077			4,239			—			15,316
(Sale) purchase of emission allowances		(2,135	)		(4,153	)		—			(6,288	)
		107,031			111,726			438			219,195
Income (loss) from operations		7,385			1,360			(438	)		8,307
Other income (expense)
Interest expense		(15,985	)		(26,571	)		1,093			(41,463	)
Investment income		1,297			777			(1,093	)		981
Derivative financial instruments, net		(463	)		(72,847	)		—			(73,310	)
Unrealized foreign exchange loss on debt		(7,509	)		—			—			(7,509	)
Impairment of investments		(1,645	)		—			—			(1,645	)
Total other expense		(24,305	)		(98,641	)		—			(122,946	)
Loss before income taxes and minority interest		(16,920	)		(97,281	)		(438	)		(114,639	)
Income tax (provision) benefit		(4,776	)		26,188			—			21,412
Loss before minority interest		(21,696	)		(71,093	)		(438	)		(93,227	)
Minority interest		—			11,409			—			11,409
Net loss	€	(21,696	)	€	(59,684	)	€	(438	)	€	(81,818	)

(8)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Three Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

	Three Months Ended June 30, 2006
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues	€	88,612		€	80,403		€	(2,310	)	€	166,705
Operating costs		79,249			61,253			(1,664	)		138,838
Operating depreciation and amortization		7,568			7,300			—			14,868
General and administrative expenses		5,415			4,318			—			9,733
(Sale) purchase of emission allowances		(1,884	)		(5,724	)		—			(7,608	)
		90,348			67,147			(1,664	)		155,831
Income (loss) from operations		(1,736	)		13,256			(646	)		10,874
Other income (expense)
Interest expense		(7,979	)		(16,018	)		885			(23,112	)
Investment income		(142	)		2,294			(885	)		1,267
Derivative financial instruments, net		79			44,611			—			44,690
Unrealized foreign exchange gain on debt		6,060			—			—			6,060
Total other (expense) income		(1,982	)		30,887			—			28,905
Income (loss) before income taxes and minority interest		(3,718	)		44,143			(646	)		39,779
Income tax provision		(3,872	)		(17,935	)		—			(21,807	)
Income (loss) before minority interest		(7,590	)		26,208			(646	)		17,972
Minority interest		—			449			—			449
Net income (loss)	€	(7,590	)	€	26,657		€	(646	)	€	18,421

	Three Months Ended June 30, 2005
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues	€	72,704		€	56,905		€	—		€	129,609
Operating costs		57,287			47,995			—			105,282
Operating depreciation and amortization		6,704			6,971			221			13,896
General and administrative		5,490			2,028			—			7,518
(Sale) purchase of emission allowances		(2,135	)		(4,153	)		—			(6,288	)
		67,346			52,841			221			120,408
Income from operations		5,358			4,064			(221	)		9,201
Other income (expense) Interest expense		(8,314	)		(14,585	)		699			(22,200	)
Investment income		970			467			(631	)		806
Derivative financial instruments, net		(358	)		(69,093	)		—			(69,451	)
Unrealized foreign exchange loss on debt		(9,806	)		—			—			(9,806	)
Impairment of investments		(467	)		—			467			—
Total other income (expense)		(17,975	)		(83,211	)		535			(100,651	)
Income (loss) before income taxes and minority interest		(12,617	)		(79,147	)		314			(91,450	)
Income tax (provision) benefit		(1,661	)		26,108			—			24,447
Income (loss) before minority interest		(14,278	)		(53,039	)		314			(67,003	)
Minority interest		—			4,852			—			4,852
Net income (loss)	€	(14,278	)	€	(48,187	)	€	314		€	(62,151	)

(9)

MERCER INTERNATIONAL INC.

COMPUTATION OF OPERATING EBITDA
For the Six Months and Three Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

	Six Months Ended
	June 30,
	2006			2005(1)
	(in thousands)
Net income (loss)	€	35,009		€	(81,818	)
Minority interest		(898	)		(11,409	)
Income taxes (benefit)		42,920			(21,412	)
Interest expense		46,037			41,463
Investment income		(3,011	)		(981	)
Derivative financial instruments, net (gain) loss		(85,505	)		73,310
Foreign exchange (gain) loss on debt		(12,173	)		7,509
Impairment of investments		—			1,645
Income from operations		22,379			8,307
Add: Depreciation and amortization		28,782			24,883
Operating EBITDA(2)	€	51,161		€	33,190

	Three Months Ended
	June 30,
	2006			2005(1)
	(in thousands)
Net income (loss)	€	18,421		€	(62,151	)
Minority interest		(449	)		(4,852	)
Income taxes (benefit)		21,807			(24,447	)
Interest expense		23,112			22,200
Investment income		(1,267	)		(806	)
Derivative financial instruments, net (gain) loss		(44,690	)		69,451
Foreign exchange (gain) loss on debt		(6,060	)		9,806
Income from operations		10,874			9,201
Add: Depreciation and amortization		14,868			13,896
Operating EBITDA(2)	€	25,742		€	23,097

(1)

The results of the Celgar pulp mill are included from the date of its acquisition on February 14, 2005.

(2)

Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, 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.

(10)

MERCER INTERNATIONAL INC.

COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Six and Three Months Ended June 30, 2006 and 2005
(Unaudited)
(Euros in thousands)

	Six Months Ended
	June 30,
	2006			2005(1)
	(in thousands)
Restricted Group
Net loss	€	(8,741	)	€	(21,696	)
Income taxes		6,905			4,776
Interest expense		16,442			15,985
Investment and other income		(2,119	)		(1,297	)
Derivative financial instruments, net loss		—			463
Foreign exchange gain on debt		(12,173	)		7,509
Impairment of investments		—			1,645
Income from operations		314			7,385
Add: Depreciation and amortization		14,197			10,829
Operating EBITDA(2)	€	14,511		€	18,214

	Three Months Ended
	June 30,
	2006			2005(1)
	(in thousands)
Restricted Group
Net loss	€	(7,590	)	€	(14,278	)
Income taxes		3,872			1,661
Interest expense		7,979			8,314
Investment and other income		142			(970	)
Derivative financial instruments, net loss		(79	)		358
Foreign exchange gain on debt		(6,060	)		9,806
Impairment of investments		—			467
(Loss) income from operations		(1,736	)		5,358
Add: Depreciation and amortization		7,568			6,704
Operating EBITDA(2)	€	5,832		€	12,062

(1)

The results of the Celgar pulp mill are included from the date of its acquisition on February 14, 2005.

(2)

Operating EBITDA does not reflect the impact of a number of items that affect net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, 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.

# # #

(11)