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Mercer International Inc. Reports Record Annual Pulp Production, Pulp Sales Volumes And Energy Sales And 2012 Fourth Quarter And Year End Results

We reported a net loss of €5.2 million, or €0.09 per basic and diluted share, for the fourth quarter of 2012, compared to a net loss of €1.8 million, or €0.03 per basic and diluted share, in the fourth quarter of 2011.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Total revenues for 2012 decreased to €834.1 million ($1,072.7 million) from €899.5 million ($1,252.0 million) in 2011. Pulp revenues for 2012 decreased by approximately 8% to €761.9 million from €831.4 million in 2011, primarily due to lower average pulp sales realizations, partially offset by higher pulp sales volumes and a stronger U.S. dollar relative to the Euro.

Energy and chemical revenues increased by approximately 6% in 2012 to an annual record of €72.3 million from €68.1 million in 2011, primarily as a result of record pulp production.

Pulp sales volumes increased by approximately 3% to a record 1,473,519 ADMTs in 2012 from 1,427,924 ADMTs in 2011, primarily as a result of increased sales to China. Average pulp sales realizations decreased by 11% to €511 per ADMT in 2012, compared to €574 per ADMT in 2011, primarily due to lower pulp prices, only partially offset by a stronger U.S. dollar relative to the Euro.

Costs and expenses in 2012 marginally decreased to €785.1 million, compared to €788.4 million in 2011, primarily due to lower costs for fiber, partially offset by higher pulp sales volumes.

On average, our per unit fiber costs in 2012 decreased by approximately 7% from 2011, primarily due to lower fiber costs in Germany caused by decreased demand from the European particle board industry and other regional residual fiber users. Fiber costs at our Celgar mill were higher, primarily due to the impact of foreign exchange changes more than offsetting improved wood chip availability for the region. We currently expect fiber costs at our German mills to increase slightly in the short- to mid-term, primarily due to higher demand from pellet and board producers which has been compounded by winter weather conditions limiting wood supply, though we expect these costs to be partially offset by price decreases in Canada as a result of strong sawmill activity in British Columbia.

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