Mercer International Inc. Reports 2007 First Quarter Results

NEW YORK, May 7  /PRNewswire-FirstCall/ -- Mercer International Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the first quarter of 2007.  In 2006, we divested our paper mills and account for this business as discontinued operations and its results are reported separately.  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 2007 First Quarter
  -- Revenues increased by 20% to euro 169.5 million from euro 141.7 million
     in the comparative quarter of 2006, primarily due to higher pulp
     prices.
  -- Operating EBITDA increased to euro 28.3 million in the first quarter
     from euro 24.7 million in the comparative quarter of 2006, primarily as
     a result of higher pulp prices, partially offset by higher fiber costs
     and a weakening U.S. dollar.  For a definition of Operating EBITDA, see
     page 5 of this press release and for a reconciliation of net income to
     Operating EBITDA, see page 6 of the financial tables included in this
     press release.
  -- Pulp markets strengthened quarter over quarter.  Average list prices
     for NBSK pulp in Europe were $757 per ADMT in the first quarter of 2007
     and $730 per ADMT in the fourth quarter of 2006, compared to $618 per
     ADMT in the first quarter of 2006.
  -- Fiber costs increased materially in the current quarter and, on
     average, were up approximately 20% over the prior quarter and over 50%
     from the first quarter of 2006.
  -- Mill net pulp realizations continued to increase in the first quarter
     of 2007 to euro 512 per ADMT on average from euro 425 per ADMT in the
     first quarter of 2006, primarily as a result of higher pulp prices.
  -- We had net income from continuing operations of euro 1.1 million, or
     euro 0.03 per basic and diluted share, in the current quarter which
     included a net gain on our derivatives of euro 6.6 million, compared to
     net income of euro 16.2 million, or euro 0.49 per basic and euro 0.40
     per diluted share, in the same period of 2006 which included a net
     unrealized gain on our derivatives of euro 40.8 million.

  President's Comments
  Mr. Jimmy S.H. Lee, President and Chairman, stated:
  -- "Pulp markets remained strong in the first quarter of 2007.  List
     prices in Europe increased by approximately $27 per ADMT in the
     quarter.  However, much of the price increase was offset by a decline
     in the value of the U.S. dollar versus the Euro during the quarter.
  -- Our mills generally performed well during the quarter, particularly the
     Celgar mill which is benefiting from our Blue Goose capital expenditure
     program.  As part of the program, we expect to complete a dryer
     expansion at the Celgar mill in the second quarter which will further
     improve efficiencies and increase production capacity.

  -- Our first quarter results were negatively impacted by high fiber
     prices.  The severe storms in January in central Europe, which felled
     over 60 million cubic meters of wood, has recently resulted in
     increased fiber availability.  This has already resulted in some price
     relief early in the second quarter and we are anticipating additional
     declines in fiber prices for deliveries throughout the balance of the
     year."

  Mr. Lee added:
  -- "Strong prices and the efficiency of our mills resulted in Operating
     EBITDA increasing by 15% to euro 28.3 million in the current quarter
     from euro 24.7 million in the comparative quarter of 2006, despite
     significantly higher fiber costs, a weaker U.S. dollar and a much
     reduced contribution from the sale of emission allowances.  Operating
     EBITDA in the prior quarter was euro 50.2 million and benefited from a
     euro 13.0 million reversal of accrued wastewater fees.
  -- We had previously put into place currency swaps to partially protect us
     in the event of a weakening U.S. dollar.  In the quarter, we settled
     the balance of our outstanding currency swaps and realized a cash gain
     of euro 6.8 million which is not included in our Operating EBITDA."



Mr. Lee continued:  "We are seeing continued strong demand in all our markets.  This strong demand, coupled with a weak U.S. dollar and higher fiber costs, should result in higher pulp prices in the upcoming months.  We expect the NBSK market to remain strong in 2007 as evidenced by the April NBSK price increase to approximately $770 per tonne in Europe and approximately $810 per tonne in the United States."

Mr. Lee concluded:  "Looking forward, we expect the current strength in pulp markets to continue and to generate solid returns for our stakeholders."

  Summary Selected Highlights

                                      Q1              Q4            Q1
                                     2007            2006          2006
                                            (in millions of Euro,
                                        except where otherwise stated)

  Revenues                     euro 169.5      euro 160.5    euro 141.7
  Sales of emission allowances        0.7             2.4           5.6
  Income from operations             14.5            36.2          11.0
  Operating EBITDA(1)                28.3            50.2          24.7
  Realized gain (loss) on
   derivative instruments             6.8             1.7          (3.6)
  Interest expense                   20.1            23.1          22.8
  Unrealized (loss) gain on
   derivative instruments            (0.2)           33.1          44.4
  Unrealized foreign exchange
   gain on debt                       1.3             3.8           6.1
  Net income from continuing
   operations                         1.1            28.6          16.2
  Income per share from continuing
   operations
    Basic                       euro 0.03       euro 0.85     euro 0.49
    Diluted                     euro 0.03       euro 0.67     euro 0.40

  (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 6 of the financial tables included in this press release.



                                     Q1              Q4             Q1
                                    2007            2006           2006
  Pulp Production
   ('000 tonnes)                    347.3           328.9         318.5

  Pulp Sales Volume
   ('000 tonnes)(1)                 329.1           344.4         327.1

  NBSK list price in Europe
   ($/ADMT)                           757             730           618
  Average pulp price realizations
   (euro/ADMT)                        512             480           425
  Average Spot Currency Exchange
   Rates
  euro / $                         0.7630          0.7962        0.8312
  C$ / $                           1.1716          1.1344        1.1547
  C$ / euro                        1.5354          1.4244        1.3886

  (1) Excluding intercompany pulp sales volumes of nil ADMTs in Q1 2007, 603
      ADMTs in Q4 2006 and 4,986 ADMTs in Q1 2006, respectively.


  Three Months Ended March 31, 2007 Compared to Three Months Ended
   March 31, 2006


Revenues for the three months ended March 31, 2007 increased by 20% to euro 169.5 million from euro 141.7 million in the comparative period of 2006, primarily due to higher pulp prices, partially offset by a weakening of the U.S. dollar versus the Euro. List prices for NBSK pulp in Europe were approximately euro 578 ($757) per ADMT in the first quarter of 2007, euro 553 ($730) per ADMT in the fourth quarter of 2006 and approximately euro 514 ($618) per ADMT in the comparative first quarter of last year. Pulp sales volume increased marginally to 329,135 ADMTs in the first quarter of 2007 from 327,101 ADMTs in the comparative period of 2006.  Mill net pulp sales realizations increased to euro 512 per ADMT on average in the first quarter of 2007 from euro 425 per ADMT in the first quarter of 2006, primarily as a result of higher pulp prices.

Cost of sales and general, administrative and other expenses in the first quarter of 2007 increased to euro 155.8 million from euro 136.3 million in the comparative period of 2006, primarily as a result of higher fiber costs which increased by over 50% from the year ago quarter.

Fiber costs at our German pulp mills increased in the first quarter of 2007, primarily as a result of increased demand for wood residuals and tight supply in the fourth quarter of 2006.  Fiber costs at our Celgar mill increased, primarily because of a weakening U.S. lumber market that has caused a sharp reduction in sawmill residual production.  We expect fiber availability in Europe to increase materially as a result of severe storms in January that felled approximately 60 million cubic meters of timber, primarily in Germany and Scandinavia.  This, coupled with an improving European lumber market, has started to provide some price relief and we expect further downward pressure on fiber prices for deliveries throughout the balance of the year.

We recorded a contribution to income of euro 0.7 million on the sale of emission allowances in the first quarter of 2007, compared to euro 5.6 million in the first quarter of 2006.

For the first quarter of 2007, operating income increased by approximately 32% to euro 14.5 million from euro 11.0 million in the comparative quarter of 2006, primarily as a result of higher pulp prices and improved operating results at our Celgar mill.  Interest expense in the first quarter of 2007 decreased to euro 20.1 million from euro 22.8 million in the 2006 comparative quarter.

Derivative Instruments and Minority Interest

We recorded a net gain of euro 6.6 million on our outstanding foreign currency and interest rate derivatives at the end of the current quarter, including a realized cash gain of euro 6.8 million on the settlement of our currency swaps, compared to a net gain of euro 40.8 million on our derivatives in the comparative quarter of 2006.

In the first quarter of 2007, minority interest, representing the minority shareholder's interest in the Stendal mill, was euro 1.0 million, compared to euro 0.4 million in the comparative quarter of 2006.

Discontinued Operations

We disposed of our paper operations in 2006 and now account for them as discontinued operations.

Earnings Per Share and Operating EBITDA

We generated "Operating EBITDA" of euro 28.3 million and euro 24.7 million in the three months ended March 31, 2007 and 2006, respectively.  Operating EBITDA is defined as operating 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 6 of the financial tables included in this press release.

We reported net income from continuing operations for the first quarter of 2007 of euro 1.1 million, or euro 0.03 per basic and diluted share, which included an aggregate of euro 7.8 million of net gains on our outstanding derivatives and foreign currency denominated long-term debt. In the first quarter of 2006, we reported net income from continuing operations of euro 16.2 million, or euro 0.49 per basic and euro 0.40 per diluted share, which reflected a net gain of euro 46.9 million on our outstanding derivatives and foreign currency denominated long-term debt.

Earnings Release Call

In conjunction with this 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, May 8, 2007 at 10:00 AM EDT.  Listeners can access the conference call live and archived over the Internet through a link at the Company's web site at http://www.mercerint.com/en/newsCurrent.cfm, or at http://www.videonewswire.com/event.asp?id=39577.  Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.  A replay of this call will be available approximately two hours after the live call ends until May 15, 2007 at 11:59 p.m. (Eastern Daylight Time).  The replay number is [phone] for domestic callers or [phone] for international callers, and the passcode is 7956375.

Mercer International Inc. is a global pulp manufacturing company.  To obtain further information on the company, please visit its web site 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
                   March 31, 2007 and December 31, 2006
                           (Euros in thousands)

                                                 March 31,     December 31,
                                                   2007            2006
  ASSETS
  Current Assets
    Cash and cash equivalents                euro 44,970     euro 69,367
    Receivables                                   97,454          75,022
    Note receivable, current portion               5,814           7,798
    Inventories                                   82,702          62,857
    Prepaid expenses and other                     5,800           4,662
    Current assets of discontinued operations      1,261           2,094
      Total current assets                       238,001         221,800
  Long-Term Assets
    Cash restricted                               45,000          57,000
    Property, plant and equipment                965,709         972,143
    Investments                                        3               1
    Unrealized foreign exchange rate
     derivative gain                                   -           5,933
    Deferred note issuance and other costs         6,639           6,984
    Deferred income tax                           27,026          29,989
    Note receivable, less current portion          8,408           8,744
                                               1,052,785       1,080,794
      Total assets                        euro 1,290,786  euro 1,302,594

  LIABILITIES
  Current Liabilities
    Accounts payable and accrued expenses    euro 88,918     euro 84,173
    Debt, current portion                         33,364          33,903
    Current liabilities of discontinued
     operations                                    1,074           1,926
      Total current liabilities                  123,356         120,002
  Long-Term Liabilities
    Debt, less current portion                   850,955         873,928
    Unrealized interest rate derivative
     loss                                         35,670          41,355
    Pension and other post-retirement
     benefit obligations                          17,605          17,954
    Capital leases                                 7,432           6,202
    Deferred income tax                           23,200          22,911
    Other long-term liabilities                    4,643           1,441
                                                 939,505         963,791
      Total liabilities                        1,062,861       1,083,793
  Minority Interest                                    -               -
  SHAREHOLDERS' EQUITY
  Common shares                                  202,626         195,642
  Additional paid-in capital                         102             154
  Retained earnings                               15,526          15,240
  Accumulated other comprehensive income           9,671           7,765
      Total shareholders' equity                 227,925         218,801
      Total liabilities and shareholders'
       equity                             euro 1,290,786  euro 1,302,594



                        MERCER INTERNATIONAL INC.

                  CONSOLIDATED STATEMENTS OF OPERATIONS
            For the Three Months Ended March 31, 2007 and 2006
                               (Unaudited)
               (Euros in thousands, except per share data)

                                                   2007            2006

  Revenues                                  euro 169,531    euro 141,668

  Costs and expenses:
    Operating costs                              134,747         114,907
    Operating depreciation and amortization       13,729          13,688
                                                  21,055          13,073
    General and administrative expenses            7,305           7,717
    (Sale) purchase of emission allowances          (727)         (5,638)
  Operating income from continuing operations     14,477          10,994

  Other income (expense)
    Interest expense                             (20,068)        (22,814)
    Investment income                              1,611           1,740
    Unrealized foreign exchange gain on debt       1,254           6,113
    Realized gain (loss) on derivative
     instruments                                   6,820          (3,562)
    Unrealized (loss) gain on derivative
     instruments                                    (248)         44,377
  Total other (expense) income                   (10,631)         25,854

  Income before income taxes and minority
   interest from continuing operations             3,846          36,848
  Income tax provision                            (3,801)        (21,113)
  Income before minority interest from
   continuing operations                              45          15,735
  Minority interest                                1,048             449
  Net income from continuing operations            1,093          16,184
  Net (loss) income from discontinued
   operations                                         (7)            404
  Net income                                       1,086          16,588

  Retained earnings (deficit), beginning
   of period                                      14,440         (47,970)
  Retained earnings (deficit), end
   of period                                 euro 15,526    euro (31,382)

  Net income per share from continuing
   operations
    Basic                                      euro 0.03       euro 0.49
    Diluted                                    euro 0.03       euro 0.40
  Income per share
    Basic                                      euro 0.03       euro 0.50
    Diluted                                    euro 0.03       euro 0.41



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
                     Combined Condensed Balance Sheet
                           As at March 31, 2007
                           (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. ("Mercer Inc.") and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the three months ended March 31, 2007 and 2006, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill. The Restricted Group excludes the Stendal mill and the discontinued paper business.

                                     March 31, 2007

                      Restricted  Unrestricted                 Consolidated
                        Group     Subsidiaries    Eliminations    Group
  ASSETS
  Current assets
    Cash and cash
     equivalents    euro 32,540  euro 12,430        euro -     euro 44,970
    Receivables          51,392       46,062             -          97,454
    Note receivable,
     current portion        618        5,196             -           5,814
    Inventories          55,186       27,516             -          82,702
    Prepaid expenses
     and other            2,726        3,074             -           5,800
    Current assets of
     discontinued
     operations               -        1,261             -           1,261
  Total current assets  142,462       95,539             -         238,001
  Cash restricted             -       45,000             -          45,000
  Property, plant and
   equipment            387,639      578,070             -         965,709
  Other                   7,837       (1,195)            -           6,642
  Deferred income tax    13,286       13,740             -          27,026
  Due from
   unrestricted
   group                 53,881            -       (53,881)              -
  Note receivable,
   less current
   portion                4,798        3,610             -           8,408
  Total assets     euro 609,903 euro 734,764  euro (53,881) euro 1,290,786

  LIABILITIES
  Current liabilities
    Accounts payable
     and
     accrued
     expenses       euro 48,050  euro 40,868        euro -     euro 88,918
    Debt,
     current
     portion                  -       33,364             -          33,364
    Current
     liabilities of
     discontinued
     operations               -        1,074             -           1,074
  Total current
   liabilities           48,050       75,306             -         123,356
  Debt, less current
   portion              295,053      555,902             -         850,955
  Due to restricted
   group                      -       53,881       (53,881)              -
  Unrealized derivative
   loss                       -       35,670             -          35,670
  Capital leases          4,422        3,010             -           7,432
  Deferred income tax     4,097       19,103             -          23,200
  Other long-term
   liabilities           22,234           14             -          22,248
  Total liabilities     373,856      742,886       (53,881)      1,062,861
  SHAREHOLDERS' EQUITY
  Total shareholders'
   equity (deficit)     236,047       (8,122)            -         227,925
  Total liabilities
   and shareholders'
   equity          euro 609,903 euro 734,764  euro (53,881) euro 1,290,786



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
                     Combined Condensed Balance Sheet
                         As at December 31, 2006
                           (Euros in thousands)

                                      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
     of 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 46,838  euro 37,335         euro -      euro 84,173
    Debt, current
     portion                 -       33,903              -           33,903
    Current
     liabilities of
     discontinued
     operations              -        1,926              -            1,926
  Total current
   liabilities          46,838       73,164              -          120,002
  Debt, less current
   portion             293,781      580,147              -          873,928
  Due to restricted
   group                     -       51,265        (51,265)               -
  Unrealized derivative
   loss                      -       41,355              -           41,355
  Capital leases         2,720        3,482              -            6,202
  Deferred income tax    2,832       20,079              -           22,911
  Other long-term
   liabilities          19,395            -              -           19,395
  Total liabilities    365,566      769,492        (51,265)       1,083,793
  SHAREHOLDERS' EQUITY
  Total shareholders'
   equity (deficit)    243,949      (25,148)             -          218,801
  Total liabilities
   and shareholders'
   equity         euro 609,515 euro 744,344   euro (51,265)  euro 1,302,594



                        MERCER INTERNATIONAL INC.

                 RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
               Combined Condensed Statements of Operations
            For the Three Months Ended March 31, 2007 and 2006
                               (Unaudited)
                           (Euros in thousands)

                                 Three Months Ended March 31, 2007

                      Restricted     Unrestricted               Consolidated
                         Group       Subsidiaries  Eliminations    Group

  Revenues           euro 99,933      euro 69,598    euro -   euro 169,531
  Operating costs         77,116           57,631         -        134,747
  Operating
   depreciation and
   amortization            6,686            7,043         -         13,729
  General and
   administrative
   expenses                4,359            2,946         -          7,305
  (Sale) of
   emission
   allowances               (264)            (463)        -           (727)
                          87,897           67,157         -        155,054
    Operating
     income from
     continuing
     operations           12,036            2,441         -         14,477
  Other income (expense)
    Interest expense      (7,458)         (13,525)      915        (20,068)
    Investment income      1,305            1,221      (915)         1,611
    Derivative financial
     instruments, net          -            6,572         -          6,572
    Unrealized foreign
     exchange loss
     on debt               1,254                -         -          1,254
    Total other
     expense              (4,899)          (5,732)        -        (10,631)
  Income (loss) before
   income taxes and
   minority interest
   from continuing
   operations              7,137           (3,291)        -          3,846
      Income tax
       provision          (2,738)          (1,063)        -         (3,801)
      Income (loss)
       before minority
       interest from
       continuing
       operations          4,399           (4,354)        -             45
  Minority interest            -            1,048         -          1,048
      Net income (loss)
       from
       continuing
       operations          4,399           (3,306)        -          1,093

      Net loss from
       discontinued
       operations              -               (7)        -             (7)
      Net income
      (loss)          euro 4,399      euro (3,313)   euro -     euro 1,086



                                  Three Months Ended March 31, 2006

                      Restricted    Unrestricted                Consolidated
                        Group       Subsidiaries  Eliminations     Group

  Revenues           euro 81,011     euro 60,657   euro -     euro 141,668
  Operating costs         69,139          45,768        -          114,907
  Operating
   depreciation
   and
   amortization            6,629           7,059        -           13,688
  General and
   administrative          4,960           2,757        -            7,717
  (Sale) of
   emission
   allowances             (1,767)         (3,871)       -           (5,638)
                          78,961          51,713        -          130,674
    Operating income
     from continuing
     operations            2,050           8,944        -           10,994
  Other income (expense)
    Interest expense      (8,463)        (15,226)     875          (22,814)
    Investment income      2,261             354     (875)           1,740
    Derivative financial
     instruments, net        (79)         40,894        -           40,815
    Unrealized foreign
     exchange gain
     on debt               6,113               -        -            6,113
    Total other
     income (expense)       (168)         26,022        -           25,854
      Income before
       income taxes and
       minority interest
       from continuing
       operations          1,882          34,966        -           36,848
  Income tax provision    (3,033)        (18,080)       -          (21,113)
      Income (loss)
       before
       minority
       interest from
       continuing
       operations         (1,151)         16,886        -           15,735
  Minority interest            -             449        -              449
      Net income
       (loss) from
       continuing
       operations         (1,151)         17,335        -           16,184
      Net income
       from
       discontinued
       operations              -             404        -              404
      Net (loss)
       income        euro (1,151)    euro 17,739   euro -      euro 16,588



                        MERCER INTERNATIONAL INC.

                     COMPUTATION OF OPERATING EBITDA
              For the Quarters Ended March 31, 2007 and 2006
                               (Unaudited)
                           (Euros in thousands)

                                                    Three Months Ended
                                                         March 31,
                                                    2007           2006
                                                       (in thousands)

  Net income from continuing
   operations                                 euro 1,093     euro 16,184
  Minority interest                               (1,048)           (449)
  Income taxes                                     3,801          21,113
  Interest expense                                20,068          22,814
  Investment income                               (1,611)         (1,740)
  Derivative financial instruments, net gain      (6,572)        (40,815)
  Unrealized foreign exchange gain on debt        (1,254)         (6,113)
  Operating income from continuing operations     14,477          10,994
  Add: Depreciation and amortization              13,792          13,688
  Operating EBITDA(1)                        euro 28,269     euro 24,682


  (1) 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.



             COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
              For the Quarters Ended March 31, 2007 and 2006
                               (Unaudited)
                           (Euros in thousands)

                                                    Three Months Ended
                                                         March 31,
                                                   2007            2006
                                                      (in thousands)
   Restricted Group
  Net income (loss) from continuing
   operations(1)                              euro 4,399     euro (1,151)
  Income taxes                                     2,738           3,033
  Interest expense                                 7,458           8,463
  Investment and other income                     (1,305)         (2,261)
  Derivative financial instruments, net loss           -              79
  Unrealized foreign exchange gain on debt        (1,254)         (6,113)
  Operating income from continuing operations     12,036           2,050
  Add: Depreciation and amortization               6,749           6,629
  Operating EBITDA(2)                        euro 18,785      euro 8,679

  (1) For the Restricted Group, net income (loss) from continuing operations
      and net income (loss) are the same.
  (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, 604-684-1099, or David M.

Gandossi, Executive Vice-President & Chief Financial Officer, 604-684-1099,

both of Mercer International; or Investors, Eric Boyriven, Alexandra Tramont,

Media, Scot Hoffman, all of FD, for Mercer International, 212-850-5600



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

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