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Mercer International Inc. Message Board

  • autofold34ci autofold34ci Apr 19, 2011 5:52 PM Flag

    lower earnings 2012

    Why is everyone calling for lower earnings in 2012? Anyone have a reason. thanks

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    • peter_norths_proctologist peter_norths_proctologist Apr 19, 2011 10:39 PM Flag

      The FY 2012 EPS estimate is down due to expected share dilution of additonal 11.6 million shares from the convertible notes due January, 2012.

      "As at the date of this prospectus, we had approximately $38.3 million in aggregate principal amount of 2012 Convertible Notes outstanding... The 2012 Convertible Notes mature on January 15, 2012. The 2012 Convertible Notes are redeemable beginning July 15, 2011, at our option in whole or in part, upon not less than 30 and not more than 60 days’ notice at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest up to, but not including, the date of redemption, subject to restrictions in the indenture governing the notes.

      The 2012 Convertible Notes are convertible, at the option of the holders, unless previously redeemed, at any time until the close of business on the last business day prior to maturity or redemption, into shares of our common stock at a conversion price of $3.30 per share, which is equal to a conversion rate of approximately 303 shares per $1,000 principal amount of 2012 Convertible Notes, subject to adjustment."

      • 2 Replies to peter_norths_proctologist
      • peter, I have analyzed whydidIbuy's analysis and he is pretty close to correct with his basic assumptions. I personally would follow why's advice and buy during this hiccup. And regardless, always go with Christ. "The Falcon"

      • The current earnings are fully diluted, meaning they take into consideration the number of additional shares which will be created after the convertible bonds are converted into stocks. From the last quarterly report

        Net income (loss) attributable to common shareholders 35.3 M EURO

        Basic EURO 0.84
        Diluted EURO 0.63

        Common shares outstanding at period end (000s) 43,000

        So there should not be any difference in the EPS from how it is being computed today. The outstanding shares might get slightly increased due to stock options etc, but that would be insignificant.

        Pulp prices are very strong and there is no reason for them to get soft in near future. New capacity is hard to come by and with economy growing the demand will keep growing.

        If you look at a time horizon of earning over next 15 years, most probably the earning will continue to be over $2 every year. It is currently trading at massive discount and will most certainly trade at a P/E of over 15, as most of it's peer are doing. if you are long or plan to be long, just buy it and look at the price after 6 months, you will not regret it.

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