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 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Mercer International Inc. |
4 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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) |
5 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 |
6 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 |
7 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 |
8 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com The NBSK Market |
9 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 |
10 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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% |
11 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 |
12 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 |
13 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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) |
14 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com (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) |
15 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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) |
16 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Financial Performance and Recent Developments |
18 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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 $33 (1) For a reconciliation of Net Income to Operating EBITDA, please refer to Appendix C. (2) The company’s reporting currency was the Euro up until October 1, 2013. Figures prior to this date have been converted to US dollars at the average foreign exchange rates in effect during the period Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. It does not reflect the impact of a number of items that affect net income. It is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity |
20 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com We believe there is significant room for further price increases in the current cycle NBSK List Price Increases since Q3 2013 (US$/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 |
21 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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$5 million for severance and other personnel related expenses in 2013 Amortizing loan, supported by guarantees from the German Federal and State governments EBITDA based covenants pinch at the bottom of the pulp cycle |
22 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Mercer Debt Summary At 31-Dec-13 At 30-Jun-14 Term Characteristics US$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 |
23 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com 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$18 million Performance BioFilaments |
24 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Mercer – Summary Globally cost competitive, modern mill operations Strategically located mills with excellent access to key markets Stable and growing revenue from high-margin energy & bio-chemical by-product sales Strong long-term NBSK fundamentals Significant leverage to the NBSK pulp cycle Experienced management team The largest “pure-play” NBSK market pulp producer |
25 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Appendix A Additional Information on Mercer International Inc. |
26 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Mercer Balance Sheet – June 30, 2014 Note: Restricted Group consists of Celgar and Rosenthal; Unrestricted Group consists of Stendal (see Corporate Structure slide for more details) Note: Some numbers may not add due to rounding in US$ 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 |
28 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com Appendix B Detailed Overview of Operations |
29 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 |
30 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 31 NASDAQ:MERC | TSX:MRI.U | www.mercerint.com |
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. |