About Mercer International

Mercer International Inc. (Mercer) operates as a global forest products company. Segments The company has two reportable operating segments: Pulp – Consists of the manufacture, sale and distribution of pulp, electricity and chemicals at the company’s pulp mills. Solid Wood – Consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals at the company’s sawmills and other facilities in Germany and the company’s mass timber facilities in North America. The company has consolidated annual production capacity of approximately 2.3 million ADMTs of kraft pulp, 960 MMfbm of lumber, 210,000 m3 of CLT, 45,000 m3 of glulam, 17 million pallets, 230,000 tonnes of biofuels (wood pellets and briquettes) and 426.5 MW of electrical generation. Pulp Segment The company is one of the world’s largest producers of ‘market’ NBSK pulp, which is pulp that is sold on the open market. The company’s size provides the company increased presence, better industry information in the company’s markets and close customer relationships with many large pulp consumers. The company operates four modern and highly efficient pulp mills. These include NBSK mills in Eastern Germany and one NBSK mill and one ‘swing’ kraft mill in Western Canada which produces both NBSK and NBHK. The company is the sole NBSK producer, and the only significant market pulp producer in Germany, which is the largest pulp import market in Europe. The company supplies the growing pulp demand in China both through its Canadian mills’ ready access to the Port of Vancouver and through the company’s Stendal mill’s existing logistics arrangements. In addition, as a result of the significant investments made in cogeneration equipment, all of the company’s mills generate and sell a significant amount of surplus ‘green’ energy. The company also produces and sells tall oil from black liquor, a by-product of the company’s production process, which is used as both a chemical additive and as a green energy source. In the second quarter of 2023, the company’s commissioned the lignin pilot production and research and development facility at the company’s Rosenthal mill. This facility can produce approximately 250 tonnes of lignin per year. Lignin has the potential to be a sustainable green alternative to displace fossil fuels and hydrocarbon-based products. Of the company’s consolidated annual production capacity of approximately 2.3 million ADMTs of kraft pulp, approximately 2.0 million ADMTs or 89% is NBSK and the balance is NBHK. Key operating details for each of the company’s pulp mills are as follows: Stendal mill – The company’s Stendal mill is a modern, efficient, single line, ISO 9001, 14001, 38200 and 50001 certified NBSK pulp mill that has an annual production capacity of approximately 740,000 ADMTs and 148 MW of electrical generation. The Stendal mill is located near the town of Arneburg, Germany, approximately 80 miles west of Berlin. Rosenthal mill – The company’s Rosenthal mill is a modern, efficient ISO 9001, 14001, 38200 and 50001 certified NBSK pulp mill that has an annual production capacity of approximately 360,000 ADMTs and 57 MW of electrical generation. The Rosenthal mill is located in the town of Rosenthal am Rennsteig, Germany, approximately 185 miles south of Berlin. Celgar mill – The company’s Celgar mill is a modern, efficient ISO 9001 and 14001 certified NBSK pulp mill that has an annual production capacity of approximately 520,000 ADMTs and 100 MW of electrical generation. The Celgar mill is located near the city of Castlegar, British Columbia, Canada, approximately 375 miles east of Vancouver. Peace River mill – The company’s Peace River mill is a modern, efficient ISO 9001 and 14001 certified mill that produces both NBSK and NBHK pulp and has an annual production capacity of approximately 475,000 ADMTs and 65 MW of electrical generation. The Peace River mill is located near the town of Peace River, Alberta, Canada, approximately 305 miles north of Edmonton. Peace River also holds two 20-year renewable governmental forest management agreements and three deciduous timber allocations in Alberta with an aggregate allowable annual cut of approximately 2.9 million m3 of hardwood and softwood allocations totaling 375,000 m3. Through the company’s Peace River mill, it has a 50% proportionate share of the annual production capacity of the Cariboo mill, with the company’s share of its annual production capacity being approximately 170,000 ADMTs and 28.5 MW of electrical generation. The Cariboo mill is located in Quesnel, British Columbia, Canada. The company’s pulp mills are some of the newest and most modern pulp mills in Europe and North America. The company’s pulp mills generate and sell surplus electricity, providing the company with a stable revenue source unrelated to pulp prices. The company’s German pulp mills also generate tall oil from black liquor, which is sold to third parties for use in numerous applications, including biofuels. All of the company’s mills generate and sell surplus energy to regional utilities or the regional electrical market. The company’s German mills can sell energy at market prices and the company’s Stendal mill has the option to sell energy pursuant to a special tariff under Germany’s Renewable Energy Sources Act, or the ‘Renewable Energy Act’. The company’s Peace River mill sells surplus energy to its regional electrical market. The company’s Celgar mill is party to a fixed electricity purchase agreement with the regional public utility provider for the sale of surplus power which runs until October 2030. The company serves pulp customers in Europe, Asia, and North America. The company primarily works directly with customers to capitalize on the company’s geographic diversity, coordinate sales and enhance customer relationships. The company’s ability to deliver high-quality pulp on a timely basis and its customer service makes the company a preferred supplier for many customers. Solid Wood segment The company’s Solid Wood segment consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals from the company’s sawmills and other facilities located in Germany and the company’s mass timber facilities in North America, which include the recently acquired U.S. and Canadian facilities of the Structurlam group of companies, referred to as the ‘Structurlam Group’. The company’s solid wood segment has an aggregate capacity of approximately 960 MMfbm of lumber, 210,000 m3 of CLT, 45,000 m3 of glulam, 17 million pallets, 230,000 tonnes of biofuels and 28 MW of electrical generation. The following is a description of the mills and facilities comprising the company’s Solid Wood segment: Friesau mill – The company’s Friesau mill is ISO 50001 and 38200 certified and has an annual production capacity of approximately 550 MMfbm of lumber and 13 MW of electrical generation. The mill is located in Friesau, Germany, approximately 185 miles south of Berlin and 10 miles west of the company’s Rosenthal mill and is one of the Rosenthal mill’s largest fiber suppliers. The mill has a diverse product line ranging from custom rough green and dry lumber for the European market to kiln-dried, dimension lumber for the United States, Japan, United Kingdom and other export markets. Torgau facility – The company’s Torgau facility is ISO 50001 certified and is an integrated sawmill and value-add pallet production facility, with an annual production capacity of approximately 410 MMfbm of lumber, 17 million pallets and 15 MW of electrical generation. The Torgau facility can also produce up to 230,000 tonnes of biofuels, consisting of wood pellets and briquettes, used to generate electricity and thermal energy. The Torgau facility is one of the world’s largest producers of Euro-pallets, the standard European shipping pallet. The Torgau facility is located in Torgau, Germany, approximately 70 miles south of Berlin. Mercer Spokane facility – The Mercer Spokane facility is a 253,000 square foot facility that has an annual production capacity of 140,000 m3 of CLT. The facility is one of the largest CLT facilities in North America and that it represents approximately 20% of North American CLT capacity. CLT is a wood panel product, made from adhering layers of sawn lumber and is used as a more sustainable alternative to steel and concrete in building projects. Mercer Conway facility – The Mercer Conway facility is a modern, state-of-the-art manufacturing facility that was built in 2021 and has an annual combined capacity of approximately 75,000 m3 of CLT and glulam. The Mercer Conway facility includes over 280,000 square feet of manufacturing space, and is strategically located in the Southern United States in proximity to growing construction markets with access to a large high-quality regional wood basket. Mercer Okanagan facility – The Mercer Okanagan facility has an annual capacity of approximately 40,000 m3 of glulam and CLT. As glulam is commonly incorporated into mass timber construction projects, these assets complement the company’s Mercer Spokane facility and enhance its ability to service the growing customer base for the company’s mass timber business. In June 2023, the company’s acquired the Mercer Conway facility and Mercer Okanagan facility from the Structurlam Group. Strategy The company’s strategy is designed to, among other things, grow and expand its assets in its areas of expertise in the forest products industry in a sustainable manner. Pulp Industry The company primarily produces and sells NBSK pulp manufactured using northern softwood. The company’s Peace River mill produces both NBSK and NBHK pulp. Seasonality The company is exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These factors are common in the kraft pulp industry. The company generally has weaker pulp demand in China in the period relating to the lunar new year and in Europe during the summer holiday months. The company typically has a seasonal build-up in raw material inventories in the early winter months as the company’s mills build up their fiber supply for the winter when there is reduced availability. Competition The company’s key NBSK pulp competitors include Metsä Fibre, Södra Cell, Ilim, Paper Excellence, UPM, Stora Enso, SCA and Canfor Pulp. Solid Wood Industry The company’s Solid Wood segment consists of the manufacture, sale and distribution of lumber, manufactured products (including CLT, glulam and finger joint lumber), wood pallets, electricity, biofuels and wood residuals from the company’s sawmills and other facilities in Germany and North America. Products and Markets The company’s Friesau mill has two high-volume Linck sawlines and has the ability to produce both rough and planed products. The sawmill principally manufactures finished sawn lumber milled from spruce and pine, including European metric and specialty lumber, the U.S. dimensional lumber and J-grade lumber, in various sizes and grades. The Torgau facility is an integrated sawmill and value-add pallet production facility. The facility produces, among other products, lumber, wood pallets and biofuels. Due to the close proximity of the German pulp mills to the Friesau mill and Torgau facility, the company is able to achieve fiber utilization and fiber logistics synergies. By-products at the Friesau mill are typically used as fuel for the company’s cogeneration power plant or sold to a wide variety of customers. In addition, the company utilizes a significant portion of the chips from the Friesau mill at the company’s Rosenthal mill. At the Torgau facility sawmill residuals are used by the company’s pulp mills or used to produce heating pellets and briquettes. Bark is used to generate electricity and thermal energy. The main markets for the company’s lumber products are in the United States and Europe. The company’s Friesau mill and Torgau facility lumber sales are to a diverse customer base. Customers include national and regional distributors, large construction firms, secondary manufacturers, retail yards and home centers. The company’s Torgau facility also sells pallets and biofuels to a diverse customer base that is primarily located within a 185 mile range of the facility. The facility is one of the world’s largest producers of Euro-pallets, the standard European shipping pallet. The Mercer Spokane facility, Mercer Conway facility and Mercer Okanagan facility produce CLT, a wood panel product, made from adhering layers of sawn lumber that is used as a more sustainable alternative to steel and concrete in building projects. The facilities represent approximately 35% of North American CLT capacity. The facilities' customers are mainly building contractors or property owners. The Mercer Conway facility and Mercer Okanagan facility are also able to produce glulam, a stress-rated, engineered wood product consisted of wood laminations that are bonded together. It is commonly used for support structures, such as columns, beams, floor-joints and trusses, offering a high degree of customization and pre-fabrication. The Mercer Spokane facility, Mercer Conway facility and Mercer Okanagan facility also produce finger joint lumber, a product, which joins short pieces of wood together to form pieces of greater length. Competition The company’s key competitors in the segment include West Fraser, Canfor, Interfor, Resolute Forest Products, Weyerhaeuser, Binderholz, Stora Enso and Ilim. Generation and Sales of Green Energy and Chemicals The company’s pulp mills are large scale bio-refineries that, in addition to pulp, also produce surplus ‘carbon neutral’ or green energy. As part of the pulp production process, the company’s mills generate green energy using carbon neutral biofuels, such as black liquor and wood waste in a cogeneration process. Through the incineration of biofuels in the recovery and power boilers, the company’s mills produce sufficient steam to cover all of the company’s steam requirements and allow the company to produce surplus electricity, which the company sells to third-party utilities or into the regional electricity market. The company’s Friesau mill and Torgau facility also generate and sell green energy produced from their biomass cogeneration power plants. Sales, Marketing and Distribution The company’s global sales and marketing group is responsible for conducting all sales and marketing of the pulp produced at the company’s mills. This group largely handles all European and North American sales directly. Sales to Asia are made directly or through commission agents overseen by the company’s sales group. The global sales and marketing group handles sales to over 270 customers. The company coordinates and integrates the sales and marketing activities of its German mills to realize on a number of synergies between them. The company also coordinates pulp sales across its mills on a global basis, thereby providing the company’s larger customers with seamless service across all major geographies. The company’s Solid Wood segment sales are handled by its sales teams in Germany and Vancouver. The company also sells lumber through commissioned agents in certain markets. History Mercer International Inc. was founded in 1968.