Mercer International Inc. Reports 2004 Fourth Quarter and Year End Results

Mercer International Inc. Reports 2004 Fourth Quarter and Year
End Results 


NEW YORK, March 11  /PRNewswire-FirstCall/ -- Mercer International Inc.
(NASDAQ:MERCSNASDAQ:TSX:NASDAQ:MRI.U) today reported results for the fourth
quarter and year ended December 31, 2004. Such results do not include the
operations of the Celgar NBSK pulp mill which has an annual production capacity
of approximately 430,000 ADMTs that we acquired in February 2005. In addition,
our new Stendal NBSK pulp mill with an annual production capacity of
approximately 552,000 ADMTs only commenced production in mid-September 2004.

Results of Operations - 2004 Fourth Quarter

Total revenues for the 2004 fourth quarter increased to euro 94.0 million from
euro 50.4 million in the comparative period of 2003, primarily because of
higher pulp sales resulting from the start up of production at our Stendal
mill. Pulp and paper revenues were euro 88.0 million in the current period,
versus euro 47.5 million in the comparative period of 2003. During the fourth
quarter of 2004, the Stendal mill produced approximately 118,775 ADMTs of NBSK
pulp and had sales of euro 41.2 million.

Costs of pulp and paper sales in the fourth quarter of 2004 increased to euro
98.4 million from euro 45.5 million in the comparative period of 2003,
primarily as a result of the inclusion of production from our Stendal mill.

In the 2004 fourth quarter, pulp sales increased to euro 74.8 million from euro
34.2 million in the comparative period of 2003 as a result of the inclusion of
production from our Stendal mill and higher production from our Rosenthal mill.
List prices for NBSK pulp in Europe were approximately euro 446 ($603) per ADMT
in the fourth quarter of 2004, compared to approximately euro 519 ($635) per
ADMT in the prior quarter and euro 444 ($560) per ADMT in the comparative
period of last year. The increase in U.S. list prices for NBSK pulp over the
2003 comparative period was largely offset by the weakness of the U.S. dollar
versus the Euro in the current period. In the fourth quarter of 2004, pulp
sales by volume increased to 192,254 ADMTs from 81,729 ADMTs in the fourth
quarter of 2003.

Pulp sales realizations decreased to euro 389 per ADMT on average in the 2004
fourth quarter, from euro 418 per ADMT in the comparative period of 2003,
primarily as a result of lower price realizations of the Stendal mill
associated with its start up.

Transportation and other revenues for the pulp operations increased to euro 5.3
million in the 2004 fourth quarter from euro 2.6 million in the comparative
period last year, primarily as a result of the start up of our Stendal mill.

Cost of sales and general, administrative and other expenses for the pulp
operations increased to euro 91.8 million in the 2004 fourth quarter from euro
36.6 million in comparative period of 2003, primarily as a result of the
inclusion of euro 57.6 million of operating costs related to the Stendal mill.

On average, fiber costs for pulp production at our Rosenthal mill decreased by
approximately 2.8% compared to the comparative period last year.

Depreciation for the pulp operations was euro 11.8 million in the current
period, versus euro 5.6 million in the comparative period of 2003.

For the 2004 fourth quarter, the pulp operations generated an operating loss of
euro 10.7 million, versus operating income of euro 0.3 million in the 2003
fourth quarter, primarily as a result of an operating loss of approximately
euro 13.3 million from our Stendal mill. The operating loss from our Stendal
mill resulted primarily from the higher production costs and lower price
realizations it incurred during its initial start up.

Paper sales were euro 13.3 million in the fourth quarter of 2004 and 2003.
Sales of specialty papers in the 2004 fourth quarter decreased marginally to
euro 9.5 million from euro 9.9 million in the comparative period of 2003 as a
result of a shift in the product mix. For the fourth quarter of 2004, total
paper sales volumes were 14,781 ADMTs, versus 15,030 ADMTs in the fourth
quarter of 2003. On average, prices for specialty papers realized in the fourth
quarter of 2004 increased by approximately 3.9%, reflecting a shift in the
product mix. Average prices for our printing papers decreased by approximately
1.7% reflecting generally weak demand.

Cost of sales and general, administrative and other expenses for the paper
operations in the fourth quarter of 2004 decreased to euro 12.9 million from
euro 15.3 million in the fourth quarter of 2003, primarily as a result of lower
operating costs.

Depreciation for the paper operations was euro 0.6 million in the fourth
quarter of 2004, compared to euro 0.5 million in the fourth quarter of 2003.

For the 2004 fourth quarter, our paper operations generated operating income of
euro 0.8 million, compared to an operating loss of euro 1.5 million in the
comparative period last year.

In the 2004 fourth quarter, we had a loss from operations of euro 10.3 million,
compared to euro 2.0 million in the comparative period of last year, primarily
as a result of a loss from operations of euro 13.3 million from our Stendal
mill. Interest expense in the 2004 fourth quarter increased to euro 14.2
million from euro 4.6 million in the 2003 fourth quarter, due to the inclusion
of interest expense of euro 10.3 million relating to the Stendal pulp mill
after it was started up in mid-September 2004.

In the 2004 fourth quarter, we realized a gain of approximately euro 29.7
million before minority interests upon the settlement of the currency
derivatives entered into by our Rosenthal and Stendal pulp mills (the "Currency
Derivatives") due to the weakening of the U.S. dollar versus the Euro. In the
comparable period of 2003, we realized a gain of euro 10.1 million before
minority interests on the settlement of our then outstanding currency
derivatives. In the 2004 fourth quarter, we also recorded a net non-cash
holding loss of euro 16.5 million before minority interests on the marked to
market valuation of the interest rate derivative contracts entered into by our
Rosenthal and Stendal pulp mills (the "Interest Rate Contracts") versus a net
gain of euro 9.7 million before minority interests thereon in the 2003 fourth
quarter.

During the fourth quarter of 2004, we completed a reorganization of certain of
our German subsidiary companies and tax field audits for years prior to 2001 of
certain of our German subsidiaries were completed. As a result, we re-evaluated
our income tax provision and deferred income tax asset valuation allowance and
recorded an income tax benefit of euro 44.2 million for the year ended December
31, 2004.

In the 2004 fourth quarter, minority interest, representing the two minority
shareholders' proportionate interest in the Stendal mill, was euro (1.5)
million, compared to euro (2.9) million in the comparative period of 2003.

In the 2004 fourth quarter, net income was euro 32.6 million, or euro 1.87 per
basic share and euro 1.14 per diluted share, which reflected the positive
impact of the net gain on derivative instruments and the income tax benefit,
partially offset by the loss from our Stendal mill resulting from its start up.
In the 2003 fourth quarter, we reported net income of euro 5.6 million, or euro
0.33 per basic and diluted share.

We generated "Operating EBITDA" of euro 1.6 million and euro 3.9 million in the
fourth quarter of 2004 and 2003, respectively. Operating EBITDA is defined as
income (loss) from operations plus depreciation and amortization and
non-recurring capital asset impairment charges. Operating EBITDA is calculated
by adding depreciation and amortization and non-recurring capital asset
impairment charges of euro 11.9 million and euro 6.0 million to the loss from
operations of euro 10.3 million and euro 2.0 million for the three months ended
December 31, 2004 and 2003, respectively.

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. Some of these limitations are: (i) Operating EBITDA
does not reflect our cash expenditures, or future requirements, for capital
expenditures or contractual commitments; (ii) Operating EBITDA does not reflect
changes in, or cash requirements for, working capital needs; (iii) Operating
EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our
outstanding debt; (iv) Operating EBITDA does not reflect minority interests on
our Stendal operations; (v) Operating EBITDA does not reflect the impact of
marked to market changes in our derivative positions, which can be substantial;
and (vi) Operating EBITDA does not reflect the impact of impairment charges
against our investments or assets. Because of these limitations, Operating
EBITDA should only be considered as a supplemental performance measure and
should not be considered as a measure of liquidity or cash available to us to
invest in the growth of our business. Because all companies do not calculate
Operating EBITDA in the same manner, Operating EBITDA as calculated by us may
differ from Operating EBITDA as calculated by other companies. We compensate
for these limitations by using Operating EBITDA as a supplemental measure of
our performance and relying primarily on our GAAP financial statements.

Results of Operations - 2004

Total revenues for the year ended December 31, 2004 increased to euro 247.9
million from euro 194.6 million in the comparative period of 2003, primarily
because of higher pulp sales resulting from the inclusion of production from
our Stendal mill from mid-September 2004. Pulp and paper revenues were euro
233.1 million in the current period, versus euro 182.5 million in the
comparative period of 2003.

Costs of pulp and paper sales in the year ended December 31, 2004 increased to
euro 232.1 million from euro 179.7 million in the comparative period of 2003,
primarily as a result of the inclusion of production from our Stendal mill.

In the year ended December 31, 2004, pulp sales increased to euro 178.5 million
from euro 126.6 million in 2003 as a result of higher prices and production
from our Rosenthal mill and the inclusion of production from our Stendal mill.
List prices for NBSK pulp in Europe were approximately euro 496 ($616) per ADMT
in 2004, compared to approximately euro 453 ($523) per ADMT last year. The
increase in NBSK pulp prices was partially offset by the weakness of the U.S.
dollar versus the Euro in 2004. In 2004, pulp sales by volume increased to
421,716 ADMTs from 303,655 ADMTs in 2003.

Pulp sales realizations increased to euro 423 per ADMT on average in the year
ended December 31, 2004 from euro 417 per ADMT in 2003, primarily as a result
of higher prices, partially offset by lower price realizations of the Stendal
mill associated with its start up.

Transportation and other revenues for the pulp operations increased to euro
14.2 million in the year ended December 31, 2004 from euro 10.9 million last
year because of the start up of the Stendal mill.

Cost of sales and general, administrative and other expenses for the pulp
operations increased to euro 200.6 million in the year ended December 31, 2004
from euro 141.3 million in 2003, primarily as a result of the inclusion of euro
65.6 million of operating costs related to the Stendal mill.

On average, fiber costs for pulp production at our Rosenthal mill decreased by
approximately 3.9% compared to last year.

Depreciation for the pulp operations was euro 26.8 million in the current
period, versus euro 21.9 million in 2003.

For the year ended December 31, 2004, the pulp operations generated an
operating loss of euro 5.1 million, versus an operating loss of euro 1.5
million last year, primarily as a result of a loss from operations of euro 20.6
million from our Stendal mill. Such loss from our Stendal mill resulted
primarily from expensing certain costs associated with the mill prior to its
start up and the higher production costs and lower price realizations it
incurred during its start up.

Paper sales in the current period were euro 54.6 million, compared with euro
55.9 million in the same period of last year. Sales of specialty papers in the
year ended December 31, 2004 were euro 37.5 million versus euro 40.1 million in
2003, primarily as a result of a shift in the product mix. For the year ended
December 31, 2004, total paper sales volumes were 62,282 ADMTs, versus 62,018
ADMTs in the year ended December 31, 2003. On average, prices for specialty
papers realized in 2004 increased slightly, reflecting a shift in the product
mix. Average prices for our printing papers decreased by approximately 6.4%
reflecting generally weak demand.

Cost of sales and general, administrative and other expenses for the paper
operations in the year ended December 31, 2004 increased to euro 65.2 million
from euro 56.9 million in the year ended December 31, 2003, primarily as a
result of a non-cash euro 6.0 million impairment charge relating to our paper
operations.

Depreciation for the paper operations was euro 2.4 million in the year ended
December 31, 2004, compared to euro 2.0 million last year.

For the year ended December 31, 2004, our paper operations generated an
operating loss of euro 9.8 million, which included the non-cash impairment
charge of euro 6.0 million, compared to operating income of euro 0.1 million in
2003.

In 2004, we had a loss from operations of euro 18.0 million, compared to a loss
of euro 4.5 million last year, primarily as a result of a loss from operations
of euro 20.6 million from our Stendal mill and the euro 6.0 million non-cash
impairment charge related to our Fahrbrucke paper mill. Interest expense
(excluding capitalized interest of euro 27.2 million relating to the Stendal
pulp mill) in the year ended December 31, 2004 increased to euro 23.7 million
from euro 11.5 million a year ago, due to higher borrowings resulting primarily
from our convertible note issue in October 2003 and the inclusion of interest
expense of euro 12.2 million relating to the Stendal mill after its start up in
mid-September 2004.

In the year ended December 31, 2004, we realized a gain of euro 44.5 million
before minority interests upon the settlement of the Currency Derivatives due
to the weakening of the U.S. dollar versus the Euro in 2004. In 2003, we
realized a gain of euro 29.3 million before minority interests on our then
outstanding currency derivatives. In the year ended December 31, 2004, we also
recorded a non-cash holding loss of euro 32.3 million before minority interests
on the marked to market valuation of the Interest Rate Contracts versus a net
loss thereon of euro 13.2 million before minority interests in 2003.

Our results for 2003 included an adjustment of euro 5.6 million for the
non-cash impact of other-than-temporary impairment losses on our available-
for-sale securities.

In the year ended December 31, 2004, we re-evaluated our income tax provision
and deferred income tax asset valuation allowance and recorded an income tax
benefit of euro 44.2 million.

In the year ended December 31, 2004, minority interest, representing the two
minority shareholders' proportionate interest in the Stendal mill, was euro 2.5
million, compared to euro 5.6 million in 2003.

We reported net income for the year ended December 31, 2004 of euro 20.0
million, or euro 1.15 per basic share and euro 0.89 per diluted share, which
reflected the positive impact of the net gain on derivative instruments and the
income tax benefit, partially offset by the loss from our Stendal mill. In
2003, we reported a net loss of euro 3.6 million, or euro 0.21 per basic and
diluted share.

We generated "Operating EBITDA" of euro 17.2 million and euro 19.6 million in
the years ended December 31, 2004 and 2003, respectively.  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. 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.

At December 31, 2004, our cash and cash equivalents were euro 49.6 million,
compared to euro 52.0 million at the end of 2003. We also had euro 45.3 million
of cash restricted to pay construction costs payable and euro 19.1 million of
cash restricted in a debt service account, both related to the Stendal pulp
mill. In addition, we had euro 28.5 million of cash restricted in a debt
service account relating to the project financing facility at the Rosenthal
mill, which facility was fully repaid in February 2005. At December 31, 2004,
we had a working capital deficit of euro 21.7 million, primarily because we had
Stendal construction costs payable of euro 65.4 million for which we had not
yet drawn down under the Stendal project loan facility and, under our
accounting policies, we do not record certain government grants until they are
received. The Stendal construction costs will be paid pursuant to the Stendal
project loan facility in the ordinary course. At December 31, 2004, we
qualified for investment grants related to the Stendal mill totaling
approximately euro 65.9 million from the federal and state governments of
Germany, which we expect to receive in 2005. These grants, when received, will
be applied to repay the amounts drawn under the dedicated tranche of the
Stendal project loan facility. The grants are not reported in our income and
reduce the cost basis of the assets purchased when they are received.  We
expect to qualify for additional investment grants totaling euro 22.6 million
when such Stendal construction costs have been substantially paid.

Stendal Pulp Mill

Construction of the Stendal mill was completed in the third quarter of 2004 and
the mill is currently in the start-up phase. The mill underwent extensive
testing and evaluation in December 2004 to determine whether certain
performance requirements have been met, referred to as the "Acceptance Test".
The Acceptance Test required that the mill continuously produce pulp at stated
volumes, and within certain product specifications, for a 72-hour period. The
test was generally successful and we were pleased with both the quantitative
and qualitative aspects of the test. We have also reviewed the results of the
test with Stendal's EPC contractor, lenders and certain suppliers. Based on
such review and discussions with the parties to date, we currently anticipate
that Stendal will issue an acceptance certificate for the mill and accept
delivery of the same, subject to the EPC contractor and certain suppliers
implementing certain measures including the installation of two additional
digesters and related equipment, improvements to the NCG boiler and water
treatment plant, reimbursement to Stendal of certain costs and the provision of
certain warranties.  The mill is currently operating well and product sales
continue to be for the benefit of Mercer.

The installation of the two additional digesters will increase the number of
digesters at the Stendal mill from eight to ten and is planned to be completed
by November 30, 2005.  Once installed and fully operational, we believe the
additional digesters should increase the annual production capacity of the
Stendal mill to in excess of 600,000 ADMTs. We and our consultants believe that
the design and capacity of the rest of the mill and fiber availability will,
over time, permit the Stendal mill to achieve such increased production
volumes. The additional digesters are also expected to enhance the reliability
and overall operating performance of the Stendal mill. The two additional
digesters have a capital cost of approximately euro 8 million, of which we will
only pay euro 2 million and the balance shall be paid by the EPC contractor and
certain suppliers.

The acceptance of the 72-hour test and the mill and the implementation of
certain measures are subject to, among other things, the settlement and
execution of a definitive settlement agreement among the parties.  Although no
assurance can be provided, we currently believe the parties will conclude a
definitive agreement around the end of the first quarter of 2005.

Celgar Pulp Mill Acquisition and Financing

In February 2005, we completed the acquisition of the Celgar pulp mill which is
located near Castlegar, British Columbia, Canada, and has an annual production
capacity of 430,000 ADMTs of NBSK pulp.  The purchase price was $210 million,
of which $170 million was paid in cash and $40 million was paid in our shares,
plus an amount for the defined working capital of the mill on closing of
approximately $16 million.  In conjunction with the acquisition, we sold $310
million in principal amount of 9.25% senior notes maturing in 2013 and
approximately $91 million of our shares of beneficial interest by way of
separate public offerings. The proceeds from such offerings of notes and
shares, along with cash on hand, were utilized to pay the cash portion of the
purchase price and defined working capital of the Celgar mill, transaction
costs, and to repay in full all of the net bank indebtedness of our Rosenthal
mill and for working capital. Effective upon closing of the acquisition, we
also established a new revolving working capital facility for the Rosenthal
mill in the amount of euro 40 million with an initial term of five years and
for the Celgar mill in the amount of $30 million, with an initial term of one
year which, if not renewed, will convert to a one-year term loan.

President's Comments

Mr. Jimmy S.H. Lee, President and Chairman, stated: "Our results for the fourth
quarter and all of 2004 are reflective of generally improved pulp markets, the
weakening of the U.S. dollar versus the Euro, the start up of our Stendal mill
and continuing softness in our paper markets. Although NBSK pulp prices
generally improved overall in 2004, such improvements were partially offset by
the weakening of the U.S. dollar which fell by approximately 7.5% versus the
Euro on a year over year basis. As result of the weakening of the U.S. dollar,
during the fourth quarter, we settled all of the outstanding foreign currency
derivatives we had put in place and realized a gain of euro 44.5 million
thereon." Mr. Lee continued: "In early 2005, NBSK pulp prices have continued to
improve both because of improving customer demand and a weakening U.S. dollar."

Mr. Lee further stated: "We are pleased with the start up of the Stendal mill
which is proceeding substantially as planned. It is producing a good quality of
pulp that has been well accepted by customers.  In the fourth quarter of 2004,
the mill produced pulp at approximately 86% of its rated capacity."

Mr. Lee continued: "We are very excited about the acquisition of the Celgar
pulp mill which was completed in February 2005. We believe there are a number
of opportunities to enhance the performance of the Celgar mill and expect to
invest in certain strategic capital projects at the mill over the next three
years to reduce operating costs, increase production capacity and enhance the
operating efficiency and reliability of the mill. The Celgar mill also
positions us to better service our customers by supplying them on a global
basis and diversifies our revenue and geographic sales mix."

Mr. Lee concluded: "The acquisition of the Celgar mill and the start up of the
Stendal mill makes us one of the largest NBSK pulp producers in the world with
a consolidated annual production capacity of approximately 1.3 million ADMTs.
We believe that our three large, modern NBSK pulp mills provide us the best
platform to be an efficient, low-cost, competitive producer of high quality
NBSK pulp."

In conjunction with this release, Mercer International will host a conference
call, which will be simultaneously broadcast live over the Internet. 
Management will host the call, which is scheduled for Friday, March 11, 2005 at
10:00 AM EST.  Listeners can access the conference call live and archived over
the Internet through a link at the company's web site at
http://www.mercerinternational.com/, or at
http://phx.corporate-ir.net/playerlink.zhtml?c=62074&s=wm&e=1030083.  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 March 18, 2005 at 11:59
p.m. (Eastern Standard Time).  The replay number is [phone], and the
passcode is 4619545.

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

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

                        MERCER INTERNATIONAL INC.
                       CONSOLIDATED BALANCE SHEETS
                     AS OF DECEMBER 31, 2004 AND 2003
                           (Euros in thousands)

                                                December 31,    December 31,
                                                    2004             2003
          ASSETS
  Current Assets
      Cash and cash equivalents            euro    49,568   euro    51,993
      Cash restricted                              45,295           15,187
      Receivables                                  54,687           33,028
      Inventories                                  52,898           23,909
      Prepaid expenses                              4,961            4,284
          Total current assets                    207,409          128,401
  Long-Term Assets
      Cash restricted                              47,538           44,180
      Property, plant and equipment               936,035          745,178
      Investments                                     983            1,644
      Equity method investments                     4,096            2,309
      Deferred note issuance and acquisition
       costs                                        5,069            4,213
      Deferred income tax                          54,519            9,980
                                                1,048,240          807,504
          Total assets                     euro 1,255,649   euro   935,905

          LIABILITIES
  Current Liabilities
      Accounts payable and accrued
       expenses                            euro    56,542   euro    37,414
      Construction costs payable                   65,436           42,756
      Debt, current portion                       107,090           97,178
          Total current liabilities               229,068          177,348
  Long-Term Liabilities
      Debt, less current portion                  228,488          255,901
      Debt, Stendal                               548,784          324,238
      Unrealized interest rate derivative
       loss                                        75,471           43,151
      Capital leases and other                      9,035            2,412
      Deferred income tax                           2,062                -
                                                  863,840          625,702
          Total liabilities                     1,092,908          803,050
  Minority Interest                                     -                -

          SHAREHOLDERS' EQUITY
  Shares of beneficial interest                    83,397           78,139
  Additional paid-in capital, stock options            14              223
  Retained earnings                                69,176           49,196
  Accumulated other comprehensive income           10,154            5,297
          Total shareholders' equity              162,741          132,855
          Total liabilities and shareholders'
           equity                          euro 1,255,649   euro   935,905


                        MERCER INTERNATIONAL INC.
       CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
              For the Years Ended December 31, 2004 and 2003
               (Euros in thousands, except per share data)

                                                       2004           2003
  Revenues
      Pulp and paper                          euro  233,103  euro  182,456
      Transportation                                  3,299          3,607
      Other                                          11,496          8,493
                                                    247,898        194,556
  Cost of sales
      Pulp and paper                                229,229        176,655
      Transportation                                  2,873          3,035
          Gross profit                               15,796         14,866
  General and administrative expenses               (27,099)       (19,323)
  Impairment of capital assets                       (6,000)             -
  Flooding losses and expenses, less grant
   income                                              (669)           957
  Settlement expenses                                     -         (1,041)
          Loss from operations                      (17,972)        (4,541)

  Other income (expense)
      Interest expense                              (23,749)       (11,523)
      Investment income                               2,948          1,653
      Derivative financial instruments
          Unrealized loss on interest rate
           derivatives                              (32,331)       (13,153)
          Realized gain on foreign exchange
           derivatives                               44,467         29,321
      Impairment of equity method investments             -         (2,255)
      Impairment of available-for-sale
       securities                                         -         (5,570)
          Total other expense                        (8,665)        (1,527)
          Loss before income taxes and
           minority interest                        (26,637)        (6,068)
  Income tax (provision) benefit
      Current                                         1,687         (3,172)
      Deferred                                       42,476              -
          Income (loss) before minority
           interest                                  17,526         (9,240)
  Minority interest                                   2,454          5,647
          Net income (loss)                    euro  19,980   euro  (3,593)

  Income (loss) per share
      Basic                                    euro    1.15   euro   (0.21)
      Diluted                                  euro    0.89   euro   (0.21)

  Weighted average number of shares
   outstanding
      Basic                                      17,426,351     16,940,858
      Diluted                                    28,525,351     16,940,858



                        MERCER INTERNATIONAL INC.

                       BUSINESS SEGMENT INFORMATION
              For the Year Ended December 31, 2004 and 2003
                           (Euros in thousands)


                                                     Corporate,
                 Rosenthal   Stendal  Total          Other and  Consolidated
                  Pulp        Pulp    Pulp   Paper  Eliminations    Total
  Year Ended
   December 31,
   2004
  Sales to
   external
   customers       137,287    41,225  178,512   54,591       -     233,103
  Transportation
   and other        11,360     2,851   14,211      818    (234)     14,795
  Intersegment net
   sales             1,949       885    2,834        -  (2,834)          -
                   150,596    44,961  195,557   55,409  (3,068)    247,898

  Operating costs  106,557    47,988  154,545   51,444  (3,031)    202,958
  Operating
   depreciation
   and
   amortization     17,751     9,022   26,773    2,356      15      29,144
  General and
   administrative   10,733     8,560   19,293    4,711   3,095      27,099
  Impairment of
   capital assets        -         -        -    6,000       -       6,000
  Flooding grants,
   less losses
   and expenses          -         -        -      669       -         669
                   135,041    65,570  200,611   65,180      79     265,870
  Income (loss)
   from
   operations       15,555   (20,609)  (5,054)  (9,771) (3,147)    (17,972)

  Interest expense  (8,562)  (12,190) (20,752)    (564) (2,433)    (23,749)
  Unrealized loss
   on interest rate
   derivatives         (11)  (32,320) (32,331)       -       -     (32,331)
  Realized gain on
   foreign exchange
   derivatives      13,253    31,214   44,467        -       -      44,467
  Other income
   (expense)         3,067      (414)   2,653      176     119       2,948
  Income (loss)
   before income
   taxes and
   minority
   interest         23,302   (34,319) (11,017) (10,159) (5,461)    (26,637)


  Year Ended
   December 31,
   2003
  Sales to
   external
   customers       126,594        -   126,594   55,862       -     182,456
  Transportation
   and other        10,623      251    10,874    1,226       -      12,100
  Intersegment
   net sales         2,335        -     2,335        -  (2,335)          -
                   139,552      251   139,803   57,088  (2,335)    194,556

  Operating costs  107,409        -   107,409   50,709  (2,335)    155,783
  Operating
   depreciation
   and
   amortization     21,881        -    21,881    2,026       -      23,907
  General and
   administrative    8,332    3,641    11,973    5,168   2,182      19,323
  Settlement expenses    -        -         -        -   1,041       1,041
  Flooding grants,
   less losses
   and expenses          -        -         -     (957)      -        (957)
                   137,622    3,641   141,263   56,946     888     199,097
  Income (loss)
   from operations   1,930   (3,390)   (1,460)     142  (3,223)     (4,541)

  Interest expense (8,445)     (321)   (8,766)    (502) (2,255)    (11,523)
  Realized and
   unrealized loss
   on interest
   rate derivatives  (111)  (13,042)  (13,153)       -       -     (13,153)
  Realized gain on
   foreign exchange
   derivatives     28,578       743    29,321        -       -      29,321
  Impairment of
   investments     (4,480)        -    (4,480)  (1,090) (2,255)     (7,825)
  Other income
   (expense)        1,431    (3,307)   (1,876)      44   3,485       1,653
  Income (loss)
   before income
   taxes and
   minority
   interest        18,903   (19,317)     (414)  (1,406) (4,248)     (6,068)




                        MERCER INTERNATIONAL INC.
                     COMPUTATION OF OPERATING EBITDA
        For the Quarter and Year Ended December 31, 2004 and 2003
               (Euros in thousands, except per share data)

                               For the Quarter Ended   For the Quarter Ended
                                December 31, 2004       December 31, 2003
                                                (unaudited)

  Net income                     euro   32,584          euro    5,580
  Minority interest                      1,482                  2,852
  Income taxes (benefit)               (44,126)                 2,946
  Interest expense                      14,195                  4,636
  Investment income                     (1,269)                  (598)
  Derivative financial instruments     (13,213)               (19,772)
  Other                                      -                  2,275
  Impairment of investments                  -                     59
  Loss from operations                 (10,347)                (2,022)
  Add:  Depreciation and amortization   11,927                  5,970
        Impairment charge                    -                      -
  Operating EBITDA(1)            euro    1,580          euro    3,948

                               For the Quarter Ended   For the Quarter Ended
                                December 31, 2004       December 31, 2003
                                                (unaudited)

  Net income (loss)              euro   19,980          euro   (3,593)
  Minority interest                     (2,454)                (5,647)
  Income taxes (benefit)               (44,163)                 3,172
  Interest expense                      23,749                 11,523
  Investment income                     (2,948)                (1,653)
  Derivative financial instruments     (12,136)               (16,168)
  Other                                      -                  2,255
  Impairment of investments                  -                  5,570
  Loss from operations                 (17,972)                (4,541)
  Add:  Depreciation and amortization   29,144                 24,105
        Impairment charge                6,000                      -
  Operating EBITDA               euro   17,172          euro   19,564

   (1) Operating EBITDA does not reflect the impact of a number of items
       that affect the Company's 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
       the Company's results as reported under GAAP.


                        MERCER INTERNATIONAL INC.
                COMPANY SALES BY PRODUCT CLASS AND VOLUME
                               (Unaudited)

                                                  Quarter Ended December 31,
                                                     2004               2003
                                                       (Euros in thousands)
  Sales by Product Class
  Pulp(1)                                  euro    74,769     euro    34,176
  Specialty Papers                                  9,458              9,897
  Printing Papers                                   3,792              3,448
  Total(1)                                 euro    88,019     euro    47,521

                                                        (Amount in tonnes)
  Sales by Volume
  Pulp(1)                                         192,254             81,729
  Specialty Papers                                  9,381             10,201
  Printing Papers                                   5,400              4,829
  Total(1)                                        207,035             96,759

   (1) Excluding intercompany sales of 2,859 and 361 tonnes of pulp and
       intercompany net sales revenues of approximately euro 1.0 and euro
       0.1 million in the three months ended December 31, 2004 and 2003,
       respectively.

   NOTE: One tonne = 1.0160 of one ton.


                COMPANY SALES BY PRODUCT CLASS AND VOLUME

                                                     Year Ended December 31,
                                                     2004               2003
                                                       (Euros in thousands)
  Sales by Product Class
  Pulp(1)                                  euro   178,512     euro   126,594
  Specialty Papers                                 37,497             40,082
  Printing Papers                                  17,094             15,780
  Total(1)                                 euro   233,103     euro   182,456

                                                       (Amount in tonnes)
  Sales by Volume
  Pulp(1)                                         421,716            303,655
  Specialty Papers                                 37,525             40,621
  Printing Papers                                  24,757             21,397
  Total(1)                                        483,998            365,673

   (1) Excluding intercompany sales of 6,756 and 5,527 tonnes of pulp and
       intercompany net sales revenues of approximately euro 2.8 and euro
       2.3 million in the years ended December 31, 2004 and 2003,
       respectively.

   (2) Not including Germany or Italy; includes new entrant countries to the
       European Union from their time of admission.

   NOTE:  One tonne = 1.0160 of one ton.

   David M. Gandossi
   Executive Vice-President &
   Chief Financial Officer
   [phone]

   Financial Dynamics
   Investors: Eric Boyriven
   Media: Scot Hoffman
   [phone]


DATASOURCE: Mercer International Inc.



CONTACT:  David M. Gandossi, Executive Vice-President & Chief Financial

Officer of Mercer International Inc., [phone]; Investors - Eric

Boyriven, Media - Scot Hoffman, both of Financial Dynamics, [phone],

for Mercer International Inc.



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

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