Mercer International Inc. Reports 2006 Fourth Quarter and Year End Results

NEW YORK, Feb. 26  /PRNewswire-FirstCall/ -- Mercer International Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the fourth quarter and year ended December 31, 2006.  In 2006, we divested our paper mills and, pursuant to SFAS 144, account for this business as discontinued operations and its results are reported separately as discontinued operations.  As a result, previously reported amounts have been reclassified to conform to the current presentation.  Except as otherwise noted, the following discussion relates to our continuing operations.

  Highlights of the 2006 Fourth Quarter

  -- Revenues increased by 30.5% to euro 160.5 million from euro 123.0
     million in the comparative quarter of 2005, primarily due to higher
     pulp prices and sales volumes from our Stendal and Celgar pulp mills.

  -- Operating EBITDA increased to euro 50.2 million in the fourth quarter
     from euro 13.1 million in the comparative quarter of 2005.  For a
     definition of Operating EBITDA, see page 5 of this press release and
     for a reconciliation of net income (loss) to Operating EBITDA, see page
     8 of the financial tables included in this press release.

  -- Pulp markets continued to strengthen.  Average list prices for NBSK
     pulp in Europe were $730 per ADMT in the fourth quarter of 2006, $710
     per ADMT in the third quarter of 2006 and $600 per ADMT in the fourth
     quarter of 2005.

  -- In December 2006, we curtailed production of approximately 20,000 ADMTs
     of pulp at our German pulp mills because of fiber supply imbalances.

  -- We recorded a net gain on our outstanding derivatives of euro 34.8
     million and a loss of euro 1.5 million in the fourth quarter of 2006
     and 2005, respectively.

  -- We had net income of euro 28.6 million, or euro 0.85 per basic and euro
     0.66 per diluted share, in the current quarter, compared to a net loss
     of euro 27.2 million, or euro 0.82 per basic and diluted share, in the
     same period of 2005.

  Highlights of 2006

  -- Revenues in 2006 increased by approximately 38% to euro 624.0 million
     from euro 452.4 million in 2005, primarily as a result of higher pulp
     prices and increased sales volumes at our Stendal and Celgar mills.

  -- Operating EBITDA increased by 112% to euro 148.3 million in 2006 from
     euro 69.8 million in 2005 reflecting higher pulp sales.  For a
     definition of Operating EBITDA, see page 5 of this press release and
     for a reconciliation of net income (loss) to Operating EBITDA, see page
     8 of the financial tables included in this press release.

  -- Pulp markets strengthened throughout 2006.  Average list prices for
     NBSK pulp in Europe were $680 per ADMT in 2006, compared to $610 per
     ADMT in 2005.

  -- Net realized and unrealized non-cash holding gains were euro 105.8
     million on our outstanding foreign currency derivatives at the end of
     2006, compared to a net realized and unrealized non-cash holding loss
     of euro 71.8 million in 2005.

  -- Net income increased to euro 69.2 million, or euro 2.08 per basic and
     euro 1.72 per diluted share, in 2006, compared to a net loss of euro
     112.1 million, or euro 3.59 per basic and diluted share, in 2005.

  President's Comments



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

  -- Our strong results reflect strengthening pulp markets.  Currently, list
     NBSK prices per tonne are approximately $760 to $770 in Europe, $790 in
     the United States and $730 to $760 in Asia, depending upon the country
     of delivery.  These price improvements are being partially offset by
     upward pressure on fiber prices.

  -- Our results were impacted by production curtailments of 20,000 ADMTs at
     our German mills."



Mr. Lee continued:  "The recent storms in central Europe in January 2007 have reportedly caused the downfall of over 40 million cubic meters of wood. This wood will have to be harvested and processed in a timely manner.  We expect this to markedly increase the fiber availability to our German mills and temper or lower fiber prices in central Europe during the second half of 2007."

Mr. Lee added:  "Further to our objective of building a focused and profitable pulp company, in 2006 we increased our exposure to NBSK pulp by acquiring a further approximate 7% interest in the Stendal mill and disposing of all of our paper operations."

Mr. Lee concluded:  "Looking forward to 2007, we expect the current strength in pulp markets to continue.  All of our mills are running well and, in the second quarter, we will complete and tie in the C$28.0 million capital project at the Celgar mill.  Further, we are now currently expecting a better fiber outlook in Germany.  As a result, with our large, modern and efficient pulp mills, we are well positioned to continue providing solid results for our stakeholders."

  Summary Selected Highlights


                        Q4          Q3         YTD          Q4         YTD
                       2006        2006        2006        2005        2005
                       (in millions of Euro, except where otherwise stated)
  Revenues       euro 160.5  euro 171.2  euro 624.0  euro 123.0  euro 452.4
  Sales of
   emission
   allowances           2.4           -        15.6         4.9        17.3
  Income from
   operations          36.2        34.7        92.5         0.3        18.7
  Operating
   EBITDA(1)           50.2        48.2       148.3        13.1        69.8
  Realized gain
   (loss) on
   derivative
   instruments          1.7           -        (3.5)          -        (2.5)
  Interest expense     23.2        23.1        91.9        23.4        86.3
  Unrealized gain
   (loss) on
   derivative
   instruments         33.1       (14.5)      109.4        (1.5)      (69.3)
  Unrealized foreign
   exchange gain
   (loss) on debt       3.8        (1.6)       15.2        (2.6)       (4.2)
  Net income (loss)
   from continuing
   operations          28.6         6.1        69.2       (27.2)     (112.1)
  Income (loss)
   per share from
   continuing
   operations
     Basic        euro 0.85   euro 0.19   euro 2.08  euro (0.82) euro (3.59)
     Diluted      euro 0.66   euro 0.14   euro 1.72  euro (0.82) euro (3.59)

  (1) For a definition of Operating EBITDA, see page 5 of this press release
      and for a reconciliation of net income (loss) to Operating EBITDA, see
      page 8 of the financial tables included in this press release.

                        Q4          Q3         YTD          Q4         YTD
                       2006        2006        2006        2005        2005
  Production
   ('000 tonnes)
    Total pulp
     production       328.9       347.2     1,302.3       296.3     1,184.6
  Sales
   ('000 tonnes)
    Total pulp
     sales volume(1)  344.4       338.2     1,326.4       291.0     1,101.3
  NBSK list price in
   Europe (US$/ADMT)    730         710         680         600         610
  Mill net pulp
   price realizations
   (euro/ADMT)(2)       480         482         465         458         407

  (1) Excluding intercompany pulp sales volumes of 603 ADMTs in Q4 2006,
      2,774 ADMTs in Q3 2006, 13,234 ADMTs in YTD 2006, 3,638 ADMTs in Q4
      2005 and 14,289 ADMTs in YTD 2005, respectively.
  (2) Excluding revenues from third party transportation activities.

  Results of Operations - 2006 Fourth Quarter


Revenues for the three months ended December 31, 2006 increased to euro 160.5 million from euro 123.0 million in the comparative period of 2005, primarily due to higher pulp prices and sales volumes.

List prices for NBSK pulp in Europe were approximately euro 553 ($730) per ADMT in the fourth quarter of 2006, compared to approximately euro 506 ($600) per ADMT in the comparative period of last year. Mill net pulp sales realizations increased to euro 480 per ADMT on average in the fourth quarter of 2006 from euro 458 per ADMT in the fourth quarter of 2005, primarily as a result of higher prices.

Cost of sales and general, administrative and other operating expenses decreased to euro 126.7 million in the fourth quarter of 2006 from euro 127.7 million in the comparative period of 2005, primarily as a result of a reversal of accruals for wastewater fees of euro 13.0 million.  In 2006, German authorities confirmed that certain initiatives and capital expenditures undertaken by us qualified to offset such fees.

Fiber costs at our German pulp mills increased significantly in the fourth quarter of 2006 versus the same quarter of 2005 as a result of supply imbalances and increased demand for wood residuals from alternative or renewable energy producers.  These factors contributed to upward pressure on fiber prices in the quarter and for fiber deliveries into the start of 2007. Severe winter storms in central Europe in January 2007, which caused significant damage to the forests, are expected to increase fiber supply and to temper and moderate fiber prices in the second half of 2007.  In the fourth quarter of 2006, fiber costs at our Celgar mill increased significantly compared to the same quarter of 2005, primarily because of fluctuations in regional woodchip availability caused by slumping North American lumber markets.

For the fourth quarter of 2006, income from operations increased to euro 36.2 million from euro 0.3 million in the comparative quarter of 2005, primarily as a result of overall higher pulp prices and sales volumes and improved productivity at our Stendal and Celgar mills.

Derivative Instruments

In the fourth quarter of 2006, we recorded a net realized gain before minority interest of euro 1.7 million on the settlement of certain of Stendal's currency swaps and an unrealized non-cash holding gain of euro 33.1 million before minority interest upon the marked to market valuation of Stendal's outstanding derivatives.  In the comparative quarter of 2005, we recorded a net realized and unrealized non-cash holding loss of euro 1.5 million before minority interests upon the marked to market valuation of our outstanding derivatives.

Earnings Per Share and Operating EBITDA

We generated "Operating EBITDA" of euro 50.2 million and euro 13.1 million in the three months ended December 31, 2006 and 2005, respectively.  Operating EBITDA is defined as income (loss) from continuing 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 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 8 of the financial tables included in this press release.

We reported net income from continuing operations for the fourth quarter of 2006 of euro 28.6 million, or euro 0.85 per basic and euro 0.66 per diluted share, which included an aggregate of euro 36.9 million of unrealized gains on our outstanding derivatives, a foreign exchange loss on our long-term debt and a contribution to income of euro 13.0 million from reversing accruals for wastewater fees. In the fourth quarter of 2005, we reported a net loss of euro 27.2 million, or euro 0.82 per basic and diluted share, which reflected the inclusion of interest expense of euro 16.1 million related to our Stendal mill and the net realized and unrealized loss of euro 1.5 million on our interest rate and currency derivatives and the unrealized non-cash foreign exchange loss of euro 2.6 million on our long-term debt.

During the fourth quarter of 2006, net income including discontinued operations was euro 21.5 million, or euro 0.63 per basic and euro 0.50 per diluted share.  In 2005, the net loss in the fourth quarter including discontinued operations was euro 29.8 million, or euro 0.90 per basic and diluted share.

Discontinued Operations

Revenues from our discontinued operations in the current quarter decreased to euro 9.0 million from euro 14.5 million in the same period of 2005.  For the fourth quarter of 2006, our discontinued operations generated an operating gain of euro 0.2 million, compared to an operating loss of euro 0.1 million in the fourth quarter of 2005.

Results of Operations - 2006

Revenues for the year ended December 31, 2006 increased by approximately 38% to euro 624.0 million from euro 452.4 million in 2005, primarily as a result of higher pulp prices and sales volumes at our Stendal and Celgar mills. List prices for NBSK pulp in Europe were approximately euro 542 ($680) per ADMT in 2006, compared to approximately euro 490 ($610) per ADMT in 2005. Mill net pulp sales realizations increased to euro 465 per ADMT on average in the year ended December 31, 2006 from euro 407 per ADMT in 2005, primarily as a result of higher pulp prices.

Cost of sales and general, administrative and other expenses for the pulp operations increased to euro 531.5 million in 2006 from euro 433.8 million in 2005, primarily as a result of higher sales volumes, partially offset by a reversal of accruals for wastewater fees of euro 13.0 million.

Beginning in 2005, our German operations became subject to the European Union Emissions Trading Scheme, pursuant to which our German pulp mills were granted emission allowances.  In 2006 and 2005, we recorded a contribution to income from operations of euro 15.6 million and euro 17.3 million, respectively, resulting from the sale of emission allowances.

Fiber costs at our German pulp mills increased by approximately 12% in 2006 versus 2005 as a result of both a supply imbalance from low harvest levels during the severe conditions in the prior winter harvesting seasons and increased demand for wood residuals from alternative or renewable energy producers. In 2006, fiber costs at our Celgar mill increased by approximately 10% versus 2005, primarily because of fluctuations in regional woodchip availability caused by slumping North American lumber markets.

In 2006, our operating income increased almost fourfold to euro 92.5 million from euro 18.7 million in 2005, primarily as a result of overall higher pulp prices and sales volumes and improved productivity at our Stendal and Celgar mills.

Interest expense in 2006 increased to euro 91.9 million from euro 86.3 million in the year ago period because of the inclusion of a full year's interest on our senior notes issued in February 2005 and euro 2.1 million of interest expense recorded on the purchase of $15.2 million principal amount of our convertible notes.

Derivative Instruments and Minority Interest

We recorded a net realized and unrealized non-cash holding gain of euro 105.8 million before minority interests upon the marked to market valuation of our outstanding foreign currency derivatives at the end of 2006, compared to a net realized and unrealized non-cash holding loss of euro 71.8 million before minority interests upon the marked to market valuation of our outstanding derivatives in 2005.

In 2006, minority interest, representing the minority shareholder's proportionate interest in the Stendal mill, was euro 1.1 million of the current year earnings, compared to euro 17.7 million of the loss in 2005.

Earnings Per Share and Operating EBITDA

We generated "Operating EBITDA" of euro 148.3 million and euro 69.8 million in the year ended December 31, 2006 and 2005, respectively. For a definition of Operating EBITDA, see page 5 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 8 of the financial tables included in this press release.

We reported net income for the year ended December 31, 2006 of euro 69.2 million, or euro 2.08 per basic and euro 1.72 per diluted share, which reflected higher pulp prices, generally stronger pulp markets and the net gains on our currency and interest rate derivatives of euro 68.5 million and euro 37.3 million. In 2005, we reported a net loss of euro 112.1 million, or euro 3.59 per basic and diluted share, which reflected generally weak pulp markets, the realized and unrealized net losses on our currency and interest rate derivatives of euro 71.8 million, interest expense relating to our Stendal mill of euro 56.8 million, the unrealized non-cash foreign exchange loss on our long-term debt of euro 4.2 million and the non-cash impairment charge of euro 1.7 million relating to investments, partially offset by a non- cash benefit for income taxes of euro 13.1 million.

In 2006, net income including discontinued operations was euro 63.2 million, or euro 1.90 per basic and euro 1.58 per diluted share.  In 2005, the net loss including discontinued operations was euro 117.1 million, or euro 3.75 per basic and diluted share.

Discontinued Operations

Revenues from our discontinued operations were euro 46.4 million in 2006, compared to euro 61.5 million in 2005.  For 2006, there was an operating gain from our discontinued operations of euro 0.3 million, compared to an operating loss of euro 2.3 million in 2005.

Earnings Release Call

In conjunction with this press release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet.  Management will host the call, which is scheduled for Tuesday, February 27, 2007 at 10:00 a.m. (Eastern Standard Time).  Listeners can access the conference call live and archived over the Internet through a link at the Company's website at http://www.mercerint.com/en/newsCurrent.cfm, or at http://www.videonewswire.com/event.asp?id=37956.  Please allow 15 minutes prior to the call to visit the website 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 March 6, 2007 at 11:59 p.m. (Eastern Standard Time).  The replay number is [phone] for domestic callers or [phone] for international callers.  The passcode is 8836168.

Mercer International Inc. is a global pulp manufacturing company.  To obtain further information on the company, please visit its website at http://www.mercerint.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.

                        MERCER INTERNATIONAL INC.

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


                                               December 31,    December 31,
                                                      2006            2005
  ASSETS
  Current Assets
   Cash and cash equivalents                 euro    69,367  euro    82,775
   Cash restricted                                        -           7,039
   Receivables                                       75,022          69,988
   Note receivable, current portion                   7,798               -
   Inventories                                       62,857          73,742
   Prepaid expenses and other                         4,662           5,369
   Current assets of discontinued operations          2,094          12,609
      Total current assets                          221,800         251,522
  Long-Term Assets
   Cash restricted                                   57,000          24,573
   Property, plant and equipment                    972,143       1,015,363
   Investments                                            1           6,314
   Unrealized foreign exchange rate derivative gain   5,933               -
   Deferred note issuance and other costs             6,984           8,364
   Deferred income tax                               29,989          78,381
   Note receivable, less current portion              8,744               -
   Long-term assets of discontinued operations            -           9,299
                                                  1,080,794       1,142,294
       Total assets                          euro 1,302,594  euro 1,393,816

  LIABILITIES
  Current Liabilities
   Accounts payable and accrued expenses     euro    83,810  euro   100,285
   Pension and other post-retirement benefit
    obligations, current portion                        363               -
   Debt, current portion                             33,903          25,550
   Current liabilities of discontinued operations     1,926          14,492
   Total current liabilities                        120,002         140,327
   Long-Term Liabilities
   Debt, less current portion                       873,928         919,423
   Unrealized foreign exchange rate derivative loss       -          61,979
   Unrealized interest rate derivative losses        41,355          78,646
   Pension and other post-retirement benefit
    obligations                                      17,954          17,113
   Capital leases and other                           7,643           9,945
   Deferred income tax                               22,911          14,444
   Long-term liabilities of discontinued operations       -           3,196
                                                    963,791       1,104,746
       Total liabilities                          1,083,793       1,245,073
  Minority Interest                                       -               -
  SHAREHOLDERS' EQUITY
  Common shares                                     195,642         181,586
  Additional paid-in capital, stock options             154              14
  Retained earnings (deficit)                        15,240         (47,970)
  Accumulated other comprehensive income              7,765          15,113
       Total shareholders' equity                   218,801         148,743
       Total liabilities and shareholders'
        equity                               euro 1,302,594  euro 1,393,816



                        MERCER INTERNATIONAL INC.

                  CONSOLIDATED STATEMENTS OF OPERATIONS
          For the Three Months Ended December 31, 2006 and 2005
               (Euros in thousands, except per share data)

                                                       2006            2005

  Revenues                                   euro   160,467  euro   123,002

  Costs and expenses:
   Operating costs                                  105,428         108,964
   Operating depreciation and amortization           14,044          12,890
                                                     40,995           1,148
   General and administrative expenses                7,189           5,832
   (Sale) purchase of emission allowances            (2,363)         (4,939)
  Operating income from continuing operations        36,169             255

  Other income (expense)
   Interest expense                                 (23,162)        (23,365)
   Investment income                                  2,007             863
   Unrealized foreign exchange gain (loss) on debt    3,776          (2,565)
   Realized loss on derivative instruments            1,709               -
   Unrealized gain (loss) on derivative instruments  33,107          (1,504)
  Total other income (expense)                       17,437         (26,571)

  Income (loss) before income taxes and minority
   interest from continuing operations               53,606         (26,316)
  Income tax (provision) benefit                    (17,055)         (1,487)
  Income (loss) before minority interest from
   continuing operations                             36,551         (27,803)
  Minority interest                                  (7,945)            598
  Net income (loss) from continuing operations       28,606         (27,205)
  Net income (loss) from discontinued operations     (7,133)         (2,568)
  Net income (loss)                                  21,473         (29,773)

  Deficit, beginning of period                       (6,233)        (18,197)
  Retained earnings (deficit), end of
   period                                    euro    15,240  euro   (47,970)

  Net income (loss) per share
     Basic                                   euro      0.63  euro     (0.90)
     Diluted                                 euro      0.50  euro     (0.90)

  Income (loss) per share from continuing
   operations
     Basic                                   euro      0.85  euro     (0.82)
     Diluted                                 euro      0.66  euro     (0.82)



                        MERCER INTERNATIONAL INC.

                  CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 2006 and 2005
                               (Unaudited)
               (Euros in thousands, except per share data)


                                                       2006            2005

  Revenues                                   euro   623,977  euro   452,437
  Costs and expenses:
   Operating costs                                  462,543         375,408
   Operating depreciation and amortization           55,834          51,160
                                                    105,600          25,869
   General and administrative expenses               28,705          24,511
   (Sale) purchase of emission allowances           (15,609)        (17,292)
  Operating income from continuing operations        92,504          18,650

  Other income (expense)
   Interest expense                                 (91,931)        (86,326)
   Investment income                                  6,090           2,422
   Unrealized foreign exchange gain (loss)
    on debt                                          15,245          (4,156)
   Realized loss on derivative instruments           (3,510)         (2,455)
   Unrealized gain (loss) on derivative
    instruments                                     109,358         (69,308)
   Impairment of investments                              -          (1,699)
  Total other income (expense)                       35,252        (161,522)
  Income (loss) before income taxes and minority
   interest from continuing operations              127,756        (142,872)
  Income tax (provision) benefit                    (57,443)         13,140
  Income (loss) before minority interest from
   continuing operations                             70,313        (129,732)
  Minority interest                                  (1,071)         17,674
   Net income (loss) from continuing operations      69,242        (112,058)
   Net loss from discontinued operations             (6,032)         (5,088)
   Net income (loss)                         euro    63,210  euro  (117,146)

  Net income (loss) per share from continuing
   operations
    Basic                                    euro      2.08  euro     (3.59)
    Diluted                                  euro      1.72  euro     (3.59)

  Net income (loss) per share
    Basic                                    euro      1.90  euro     (3.75)
    Diluted                                  euro      1.58  euro     (3.75)



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
                     Combined Condensed Balance Sheet
                         As at December 31, 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. and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group".  As at and during the years ended December 31, 2006 and 2005, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill from the date of its acquisition on February 14, 2005.  During the year ended December 31, 2004, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, which was the only member of the Restricted Group with material operations during this period. The Restricted Group excludes the Stendal mill and our discontinued operations.

                                    December 31, 2006
                   Restricted    Unrestricted                  Consolidated
                     Group       Subsidiaries   Eliminations     Group
  ASSETS
  Current
   Cash and cash
    equivalents   euro  39,078  euro   30,289  euro        -   euro   69,367
   Receivables          38,662         36,360              -          75,022
   Note receivable,
   current portion         620          7,178              -           7,798
   Inventories          41,087         21,770              -          62,857
   Prepaid expenses
    and other            2,352          2,310              -           4,662
   Current assets
    from discontinued
    operations               -          2,094              -           2,094
  Total current
   assets              121,799        100,001              -         221,800
  Cash restricted            -         57,000              -          57,000
  Property, plant and
   equipment           408,957        563,186              -         972,143
  Other                  8,155          4,763              -          12,918
  Deferred income tax   14,316         15,673              -          29,989
  Due from unrestricted
   group                51,265              -        (51,265)              -
  Note receivable,
   less current
   portion               5,023          3,721              -           8,744
  Total assets    euro 609,515  euro  744,344  euro  (51,265) euro 1,302,594

  LIABILITIES
  Current
   Accounts payable
    and accrued
    expenses      euro  46,475  euro   37,335  euro        -  euro    83,810
   Pension and other
    post-retirement
    benefit obligations,
    current portion        363              -              -             363
   Debt, current portion     -         33,903              -          33,903
   Current liabilities
    from discontinued
    operations               -          1,926              -           1,926
  Total current
   liabilities          46,838         73,164              -         120,002
  Debt, less current
   portion             293,781        571,840              -         865,621
  Due to restricted
   group                     -         51,265        (51,265)              -
  Unrealized derivative
   loss                      -         41,355              -          41,355
  Capital leases and
   other                 22,115        11,789              -          33,904
  Deferred income tax     2,832        20,079              -          22,911
  Total liabilities     365,566       769,492        (51,265)      1,083,793

  SHAREHOLDERS' EQUITY
  Total shareholders'
   equity (deficit)     243,949       (25,148)(1)          -         218,801
  Total liabilities
   and shareholders'
   equity         euro  609,515  euro 744,344  euro  (51,265) euro 1,302,594

  (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.



                        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   euro   48,790  euro  33,985  euro        -  euro    82,775
   Cash restricted            -         7,039              -           7,039
   Receivables           41,349        28,655              -          70,004
   Inventories           47,100        26,642              -          73,742
   Prepaid expenses
    and other             2,940         2,429              -           5,369
   Current assets
    from discontinued
    operations                -        12,593              -          12,593
  Total current assets  140,179       111,343              -         251,522
  Cash restricted             -        24,573              -          24,573
  Property, plant and
   equipment            404,151       611,212              -       1,015,363
  Other                  10,533         4,145              -          14,678
  Deferred income tax    24,303        54,078              -          78,381
  Due from unrestricted
   group                 46,412             -        (46,412)              -
  Long-term assets
   from discontinued
   operations                 -         9,299              -           9,299
  Total assets    euro  625,578  euro 814,650  euro  (46,412) euro 1,393,816

  LIABILITIES
  Current
   Accounts payable
    and accrued
    expenses      euro   46,867  euro  53,418  euro        -  euro   100,285
   Debt, current
    portion                   -        25,550              -          25,550
   Current liabilities
    from discontinued
    operations                -        14,492              -          14,492
  Total current
   liabilities           46,867        93,460              -         140,327

  Debt, less current
   portion              342,023       577,400              -         919,423
  Due to restricted
   group                      -        46,412        (46,412)              -
  Unrealized derivatives
   loss                       -       140,625              -         140,625
  Other                  20,722         6,336              -          27,058
  Deferred income tax     1,851        12,593              -          14,444
  Long-term liabilities
   from discontinued
   operations                 -         3,196              -           3,196
  Total liabilities     411,463       880,022        (46,412)      1,245,073

  SHAREHOLDERS' EQUITY
  Total shareholders'
   equity               214,115       (65,372)(1)          -         148,743
  Total liabilities and
   shareholders'
   equity         euro  625,578  euro 814,650  euro  (46,412) euro 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.



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
               Combined Condensed Statements of Operations
          For the Three Months Ended December 31, 2006 and 2005
                               (Unaudited)
                           (Euros in thousands)

                           Three Months Ended December 31, 2006
                 Restricted    Unrestricted                  Consolidated
                   Group       Subsidiaries   Eliminations     Group

  Revenues       euro  95,456  euro  65,151   euro    (140)  euro   160,467
  Operating costs      71,994        33,432              -          105,426
  Operating
   depreciation and
   amortization         7,239         6,807              -           14,046
  General and
   administrative
   expenses             3,947         3,242              -            7,189
  (Sale) purchase of
   emission allowances (1,282)       (1,081)             -           (2,363)
    Operating income
     from continuing
     operations        13,558        22,751           (140)          36,169
  Other income
   (expense)
   Interest expense    (9,752)      (14,315)           905          (23,162)
   Investment income    2,056           856           (905)           2,007
   Unrealized foreign
    exchange gain on
    debt                3,776             -              -            3,776
   Derivative financial
    instruments, net        -        34,816              -           34,816
   Total other (expense)
    income             (3,920)       21,357              -           17,437
   Income (loss) before
    income taxes and
    minority interest
    from continuing
    operations          9,638        44,108           (140)          53,606
  Income tax
   provision           (2,972)      (14,083)             -          (17,055)
  Income (loss) before
   minority interest from
   continuing
   operations           6,666        30,025           (140)          36,551
  Minority interest         -        (7,945)             -           (7,945)
   Net income (loss)
    from continuing
    operations   euro   6,666  euro  22,080   euro    (140)  euro    28,606
   Net income (loss)
    from discontinued
    operations   euro       -  euro  (7,133)  euro      -    euro    (7,133)
   Net income
   (loss)        euro   6,666  euro  14,947   euro   (140)   euro    21,743


                           Three Months Ended December 31, 2005
                 Restricted    Unrestricted                  Consolidated
                   Group       Subsidiaries   Eliminations     Group
  Revenues       euro  75,890  euro  47,112   euro      -    euro   123,002
  Operating costs      71,655        38,914        (1,605)          108,964
  Operating
   depreciation
   and amortization     6,467         7,083          (660)           12,890
  General and
   administrative
   expenses             3,466         2,366             -             5,832
  (Sale) purchase of
    emission
    allowances         (2,869)       (2,070)            -            (4,939)
  Operating income
   (loss) from
   continuing
   operations          (2,829)          819         2,265               255
  Other income
   (expense)
   Interest expense    (8,434)      (15,762)          831           (23,365)
   Investment income    1,429           265          (831)              863
   Derivative financial
    instruments, net      199        (1,703)            -            (1,504)
   Unrealized foreign
    exchange loss on
    debt               (2,565)            -             -            (2,565)
    Total other
     expense           (9,371)      (17,200)            -           (26,571)
   Income (loss) before
    income taxes and
    minority interest
    from continuing
    operations        (12,200)      (16,381)         2,265          (26,316)
   Income tax
    (provision)
    benefit             6,706        (8,193)             -           (1,487)
   Income (loss) before
    minority interest
    from continuing
    operations         (5,494)      (24,574)         2,265          (27,803)
   Minority interest        -           598              -              598
   Net income (loss)
    from continuing
    operations   euro  (5,494) euro (23,976)  euro   2,265  euro    (27,205)
   Net income (loss)
    from discontinued
    operations   euro       -  euro  (2,568)  euro       -  euro     (2,568)
   Net income
    (loss)       euro  (5,494) euro (26,544)  euro   2,265  euro    (29,773)



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
               Combined Condensed Statements of Operations
              For the Years Ended December 31, 2006 and 2005
                           (Euros in thousands)

                                   Year Ended December 31, 2006
                 Restricted    Unrestricted                  Consolidated
                   Group       Subsidiaries   Eliminations     Group

  Revenues       euro 360,986  euro 262,991   euro       -  euro    623,977
  Operating costs     286,087       176,456              -          462,543
  Operating
   depreciation
   and amortization    27,819        28,015              -           55,834
  General and
   administrative
   expenses            17,611        11,094              -           28,705
  (Sale) purchase of
    emission
    allowances         (4,933)      (10,676)             -          (15,609)
     Operating income
      from continuing
      operations       34,402        58,102              -           92,504
  Other income (expense)
   Interest expense   (34,354)      (61,137)         3,560          (91,931)
   Investment income    5,316         4,334         (3,560)           6,090
   Derivative financial
    instruments, net        -       105,848              -          105,848
   Unrealized foreign
    exchange gain on
    debt               15,245             -              -           15,245
   Total other
    (expense)
     income           (13,793)       49,045              -           35,252
   Income (loss)
    before income
    taxes and
    minority interest
    from continuing
    operations         20,609       107,147              -         127,756
   Income tax
    provision         (11,258)      (46,185)             -         (57,443)
   Income (loss)
    before minority
    interest from
    continuing
    operations          9,351        60,962              -          70,313
   Minority interest        -        (1,071)             -          (1,071)
    Net income from
     continuing
     operations  euro   9,351  euro  59,891  euro        -  euro    69,242
    Net loss from
     discontinued
     operations  euro       -  euro  (6,032) euro        -  euro    (6,032)
    Net income   euro   9,351  euro  53,859  euro        -  euro    63,210


                                   Year Ended December 31, 2005
                 Restricted    Unrestricted                  Consolidated
                   Group       Subsidiaries   Eliminations     Group

  Revenues       euro 276,406  euro 176,031   euro       -  euro   452,437
  Operating costs     230,039       146,974         (1,605)        375,408
  Operating
   depreciation
   and amortization    23,898        27,262              -          51,160
  General and
   administrative
   expenses            19,025         5,486              -          24,511
  (Sale) purchase of
    emission
    allowances         (7,271)      (10,021)             -         (17,292)
  Operating income
   from continuing
   operations          10,715         6,330          1,605          18,650
  Other income
  (expense)
   Interest expense   (32,352)      (56,789)         2,815         (86,326)
   Investment income    3,742         1,495         (2,815)          2,422
   Derivative
    financial
    instruments, net     (295)      (71,468)             -         (71,763)
   Unrealized foreign
    exchange loss
    on debt            (4,156)            -              -          (4,156)
   Impairment of
    investments        (1,699)            -              -          (1,699)
   Total other
    expense           (34,760)     (126,762)             -        (161,522)
   Income (loss)
    before income
    taxes and
    minority interest
    from continuing
    operations        (24,045)     (120,432)          1,605       (142,872)
  Income tax (provision)
   benefit             (1,161)       14,301               -         13,140
   Loss before minority
    interest from
    continuing
    operations        (25,206)     (106,131)          1,605       (129,732)
   Minority interest        -        17,674               -         17,674
   Net loss from
   continuing
   operations    euro (25,206) euro (88,457)  euro    1,605  euro (112,058)
   Net loss from
    discontinued
    operations   euro       -  euro  (5,088)  euro        -  euro   (5,088)
   Net loss      euro (25,206) euro (93,545)  euro    1,605  euro (117,146)



                        MERCER INTERNATIONAL INC.

                     COMPUTATION OF OPERATING EBITDA
     For the Three Months and Years Ended December 31, 2006 and 2005
                               (Unaudited)
                           (Euros in thousands)

                                                       Three Months Ended
                                                          December 31,
                                                      2006           2005(1)
                                                         (in thousands)
  Net income (loss)                          euro   21,473  euro  (29,773)
  Net loss from discontinued operations              7,133          2,568
  Net income (loss) from continuing operations      28,606        (27,205)
  Minority interest                                  7,945           (598)
  Income taxes (benefit)                            17,055          1,487
  Interest expense                                  23,162         23,365
  Investment income                                 (2,007)          (863)
  Foreign exchange (gain) loss on debt              (3,776)         2,565
  Derivative financial instruments,
   net (gain) loss                                 (34,816)         1,504
  Income from continuing operations                 36,169            255
  Add: Depreciation and amortization                14,044         12,890
  Operating EBITDA(2)                        euro   50,213  euro   13,145


                                                          Year Ended
                                                          December 31,
                                                      2006           2005(1)
                                                         (in thousands)
  Net income (loss)                          euro  63,210   euro (117,146)
  Net loss from discontinued operations             6,032           5,088
  Net income (loss) from continuing operations     69,242        (112,058)
  Minority interest                                 1,071         (17,674)
  Income taxes (benefit)                           57,443         (13,140)
  Interest expense                                 91,931          86,326
  Investment income                                (6,090)         (2,422)
  Foreign exchange (gain ) loss on debt           (15,245)          4,156
  Derivative financial instruments,
   net (gain) loss                               (105,848)         71,763
  Impairment of investments                             -           1,699
  Income from continuing operations                92,504          18,650
  Add: Depreciation and amortization               55,834          51,160
  Operating EBITDA(2)                        euro 148,338   euro   69,810

  (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.



                        MERCER INTERNATIONAL INC.

             COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
     For the Three Months and Years Ended December 31, 2006 and 2005
                               (Unaudited)
                           (Euros in thousands)


                                                      Three Months Ended
                                                          December 31,
                                                     2006            2005
                                                        (in thousands)
  Restricted Group(2)
  Net income (loss)                          euro   6,666    euro  (5,494)
  Income taxes (benefit)                            2,972          (6,706)
  Interest expense                                  9,752           8,434
  Investment and other income                      (2,056)         (1,429)
  Derivative financial instruments, net                 -            (199)
  Foreign exchange (gain) loss on debt             (3,776)          2,565
  Income from operations                           13,558          (2,829)
  Add: Depreciation and amortization                7,239           6,467
  Operating EBITDA(2)                        euro  20,797    euro   3,638


                                                          Year Ended
                                                          December 31,
                                                     2006            2005
                                                        (in thousands)
  Restricted Group(1)
  Net income (loss)                          euro   9,351    euro (25,206)
  Income taxes                                     11,258           1,161
  Interest expense                                 34,354          32,352
  Investment and other expense (income)            (5,316)         (3,742)
  Derivative financial instruments, net                 -             295
  Foreign exchange (gain) loss on debt            (15,245)          4,156
  Impairment of investments                             -           1,699
  Income from operations                           34,402          10,715
  Add: Depreciation and amortization               27,819          23,898
  Operating EBITDA(2)                        euro  62,221    euro  34,613

  (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.


DATASOURCE: Mercer International Inc.



CONTACT:  Jimmy S.H. Lee, Chairman & President, [phone], or David

M. Gandossi, Executive Vice-President & Chief Financial Officer,

[phone], both of Mercer International Inc.; or Investors: Eric

Boyriven, Alexandra Tramont, or Media: Scot Hoffman, all of Financial

Dynamics, [phone], for Mercer International Inc.



Web site:  http://www.mercerint.com/ 

Copyright