International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2010 Earnings Presentation
47 slides from International Paper's earnings presentation, Apr 29, 2010
Slide 1: First Quarter 2010 Review
First Quarter 2010 Review April 29, 2010 Exhibit 99.2 First Quarter 2010 Review April 29, 2010 John V. Faraci Chairman & Chief Executive Officer Tim S. Nicholls Senior Vice President & Chief Financial Officer
Slide 2: Statements Relating to Non-GAAP Financial Measures
Statements Relating to Non-GAAP Financial Measures Statements Relating to Non-GAAP Financial Measures During the course of this presentation, certain non-U.S. GAAP financial information will be presented. A reconciliation of those numbers to U.S. GAAP financial measures is available on the company’s
Slide 3: First Quarter 2010 In Line with Expectations
First Quarter 2010 In Line with Expectations First Quarter 2010 In Line with Expectations Cyclical trough earnings quarter Significant N.A. fiber cost inflation & heavy maintenance outages Price only modest benefit Strong results in European Paper & Packaging Reduced operating costs Demand improving
Slide 4: 1Q10 Financial Snapshot
1Q10 Financial Snapshot 1Q09 4Q09 1Q10 1Q10 Financial Snapshot Sales ($B) $5.7 $6.0 $5.8 EBITDA ($MM) $604 $669 $560 Free Cash Flow ($MM) $521 $530 $39 Debt ($B) $11.5 $9.0 $9.0 Cash Balance ($B) $1.0 $1.9 $1.7 Earnings from continuing operations before special items Cash provided by continuing oper
Slide 5: 1Q10 vs. 4Q09 EPS Higher Input Costs, Reduced Operating Costs
1Q10 vs. 4Q09 EPS Higher Input Costs, Reduced Operating Costs Earnings before special items 1Q10 vs. 4Q09 EPS Higher Input Costs, Reduced Operating Costs
Slide 6: Global Input Costs: $100 MM North American Fiber Cost Spike
Global Input Costs $100 MM North American Fiber Cost Spike Global Input Costs $100 MM North American Fiber Cost Spike By Business By Input Type
Slide 7: Business Highlights 1Q10
Business Highlights 1Q10 Business Highlights 1Q10 Solid Earnings Europe & Russia (All Segments) xpedx Sun JV Reduced Fixed Costs Inverurie (UFS) Etienne (Liner) Albany & Pineville (Containerboard) Franklin (Coated Paperboard) xpedx
Slide 8: Industrial Packaging Earnings 1Q10 vs. 4Q09
Industrial Packaging Earnings 1Q10 vs. 4Q09 Industrial Packaging Earnings 1Q10 vs. 4Q09 Earnings before special items 50% of Annual Maintenance Outages in 1Q10
Slide 9: N.A. Industrial Packaging Relative EBITDA Margins
N.A. Industrial Packaging Relative EBITDA Margins IP 1Q10 margin reflects 148,000 tons or 5.9% downtime Competitor A 1Q10 margin reflects 35,000 tons or 5.7% downtime Competitor B 1Q10 margin reflects 36,000 tons or 3.5% downtime N.A. Industrial Packaging Relative EBITDA Margins IP EBITDA margins ba
Slide 10: Printing Papers Earnings 1Q10 vs. 4Q09
Printing Papers Earnings 1Q10 vs. 4Q09 Printing Papers Earnings 1Q10 vs. 4Q09 Earnings before special items
Slide 11: Consumer Packaging Earnings 1Q10 vs. 4Q09
Consumer Packaging Earnings 1Q10 vs. 4Q09 Consumer Packaging Earnings 1Q10 vs. 4Q09 Earnings before special items
Slide 12: xpedx
$ Million 1Q09 4Q09 1Q10 xpedx Sales $1,590 $1,675 $1,580 Earnings ($7) $31 $21 xpedx Seasonal volume decrease Strong year-over-year earnings improvement driven by reduced operating costs Also, strong quarter-over-quarter improvement after 4Q inventory accounting adjustment 9% year-over-year headcou
Slide 13: Ilim Joint Venture
$ Million 1Q09 4Q09 1Q10 Ilim Joint Venture 1Q10 vs. 4Q09 1Q10 vs. 1Q09 Business Volume Price / Ton Volume Price / Ton Sales (100%) $395 $350 $395 Earnings (IP Share) ($26) $6 ($3) Ilim’s results are reported on a one-quarter lag IP’s shares of Ilim’s 1Q09, 4Q09 & 1Q10 earnings includes an after-tax
Slide 14: First Quarter Summary: Cyclical Trough – Worst is Behind Us
First Quarter Summary Cyclical Trough – Worst is Behind Us First Quarter Summary Cyclical Trough – Worst is Behind Us 1Q10 Summary N.A. Fiber Cost Spike High Maintenance Outages Reduced Operational Costs Price Improvement at Quarter-End 2Q10 Outlook Realization of Announced Price Increases Improving
Slide 15: Earnings Runway: Potential Impact of Price Increase Realization
Earnings Runway Potential Impact of Price Increase Realization Earnings Runway Potential Impact of Price Increase Realization
Slide 16: Balanced Capital Allocation to Increase Shareowner Value
Balanced Capital Allocation to Increase Shareowner Value Balanced Capital Allocation to Increase Shareowner Value
Slide 17: Dividend Increase: Returning Cash to Shareowners
Dividend Increase Returning Cash to Shareowners Dividend Increase Returning Cash to Shareowners Improving Global Economy Normal Credit Markets $3.7 B Debt Reduction Annual Dividend: $0.10 to $0.50
Slide 18: Strengthening IP Asia: Acquiring SCA's Asian Packaging Business
Strengthening IP Asia Acquiring SCA’s Asian Packaging Business China Thailand Malaysia India Singapore Agreed to purchase SCA’s Asian packaging business for $200 MM less post-closing adjustments SCA system includes 13 corrugated box plants and two specialty packaging facilities $340 MM Combined 2009
Slide 19: Second Quarter Outlook
Second Quarter Outlook Changes from 1Q10 North America Europe Brazil Asia Increasing Increasing Increasing Increasing Increasing Increasing Increasing Significant Increase ~$8 MM Increase ~$11 MM Increase ~$5 MM Increase Pulp Increasing Increase Second Quarter Outlook Changes from 1Q10 Volume Paper
Slide 20: Key Financial Statistics
$ Million 2008 2009 2010 Estimate Key Financial Statistics Capital Spending $1,002 $534 $800 Depreciation & Amortization $1,347 $1,472 $1,450 Net Interest Expense $492 $669 $600 - $625 Corporate Items $103 $181 $200 - $225 Effective Tax Rate 31.5% 30% 30-32% Before special items and excluding Ilim K
Slide 21: Free Cash Flow
Free Cash Flow $ Million 1Q09 4Q09 1Q10 Free Cash Flow Excluding AFMTC $521 $530 $39 Free Cash Flow Cash from Operations $649 $697 $159 Cash Received from Alternative Fuel Mixture Tax Credits (AFMTC) $145 $388 $0 Cash Provided by Continuing Operations $794 $1,085 $159 Less Capital Investment ($128)
Slide 22: Debt Maturity Profile
Debt Maturity Profile Maturities as of Quarter-End Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt Debt Maturity Profile Maturities as of Quarter-End
Slide 23: North American Downtime
North American Downtime 6% of Capacity in 1Q • North American Downtime 6% of Capacity in 1Q Lack-of-order & maintenance downtime for North American Containerboard, Uncoated Papers, Market Pulp, & Coated Paperboard. See the following slide for detail by business. Lack of order downtime excludes capac
Slide 24: North American Downtime by Business
North American Downtime • North American Downtime Lack of order downtime excludes capacity from mills or machines that have been permanently shutdown Containerboard Uncoated Papers Market Pulp Coated Paperboard
Slide 25: Maintenance Outages Expenses
$ Million 1Q10 2Q10E 3Q10E 4Q10E Maintenance Outages Expenses Industrial Packaging $70 $45 $6 $25 North America $27 $48 $18 $37 Europe Brazil Printing Papers Total $27 $64 $33 $52 Consumer Packaging $6 $19 $0 $16 Total Impact $103 $128 $39 $93 Dollar impact of planned maintenance outages are estimat
Slide 26: Forest Products
Forest Products 1Q09 4Q09 1Q10 Forest Products Sales ($ MM) $5 $25 $10 Earnings ($ MM) $2 $18 $8 Acres Sold 2,000 7,700 3,300 Price / Acre $2,108 $2,655 $2,418 4Q09 figures exclude a 17,000-acre sale of a partnership interest at $369 per acre. At the end of 1Q10, our land portfolio has ~200,000 acre
Slide 27: Industrial Packaging Volume and Price
1Q10 vs. 4Q09 1Q10 vs. 1Q09 Business Volume Price / Ton Volume Price / Ton Industrial Packaging N.A. Price Improvement per Ton vs. 12/31/09 1Q10 Exit Price 4/28/10 Price N.A. Container 2% $1 2% ($74) European Container 1% €7 (4%) (€53) Industrial Packaging Domestic Containerboard $27 $49 Boxes $27 $
Slide 28: Printing Papers Volume and Price
1Q10 vs. 4Q09 1Q10 vs. 1Q09 Business Volume Price / Ton Volume Price / Ton Printing Papers Average IP price realization (includes the impact of mix across all grades) N.A. Paper (4%) $23 2% ($49) N.A. Pulp (15%) $83 7% $94 European Paper (7%) €5 (17%) (€44) Printing Papers
Slide 29: Consumer Packaging Volume and Price
1Q10 vs. 4Q09 1Q10 vs. 1Q09 Volume Price/Ton Volume Price/Ton Revenue Price Revenue Price Consumer Packaging Average IP price realization (includes the impact of mix across all grades) U.S. Coated Paperboard 10% ($3) 19% ($44) Converting Businesses (6%) NA (5%) NA Consumer Packaging
Slide 30: Special Items Pre-Tax from Continuing Operations
Special Items Pre-Tax from Continuing Operations Special Items Pre-Tax ($Million) 1Q09 4Q09 1Q10 Special Items Pre-Tax from Continuing Operations Industrial Packaging Alternative Fuel Mixture Credits $208 $212 Facility & Machine Closure Costs ($670) ($5) Integration Costs ($36) ($15) Other ($2) Prin
Slide 31: Special Items Net of Taxes from Continuing Operations
Special Items Net of Taxes from Continuing Operations 1Q10 $ Million EPS Special Items Net of Taxes from Continuing Operations Earnings Before Special Items $16 $0.04 Special Items Net of Taxes: Franklin Mill Shutdown ($124) Tax Adjustments ($46)* Other Facility Closures ($6) Other Corporate ($2) To
Slide 32: 1Q10 EBITDA before Special Items
1Q10 EBITDA before Special Items Operating Profit $ Million D & A $ Million Tons Thousand EBITDA per Ton EBITDA Margin 1Q10 EBITDA before Special Items Industrial Packaging North America $18 $143 2,481 $65 9.1% Europe $24 $7 $120 12.6% Printing Papers North America $70 $58 $177 18.7% Western Europe
Slide 33: Operating Profits by Industry Segment
Operating Profits by Industry Segment from Continuing Operations $ Million 1Q09 4Q09 1Q10 Operating Profits by Industry Segment from Continuing Operations Industrial Packaging $188 $84 $46 Printing Papers $101 $139 $126 Consumer Packaging $22 $49 $31 Distribution ($7) $31 $21 Forest Products $2 $18
Slide 34: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results from Continuing Operations before Special Items $ Million Sales Operating Profit 1Q09 4Q09 1Q10 1Q09 4Q09 1Q10 Geographic Business Segment Operating Results from Continuing Operations before Special Items Industrial Packaging North American $1,885 $1,855
Slide 35: Earnings from Continuing Operations 2010
Pre-Tax $MM Tax $MM Non- controlling Interest $MM Equity Earnings Net Income $MM Estimated Tax Rate Average Shares 1 MM Diluted EPS ² Before Special Items Special Items Earnings 2010 Earnings from Continuing Operations 1Q10 $40 ($13) ($9) ($2) $16 32% $0.04 1Q10 ($215) $37 $0 $0 ($178) 17% ($0.42) 1
Slide 36: 1Q10 vs. 1Q09 EPS
1Q10 vs. 1Q09 EPS Earnings from continuing operations before special items 1Q10 vs. 1Q09 EPS
Slide 37: Industrial Packaging Earnings 1Q10 vs. 1Q09
Industrial Packaging Earnings 1Q10 vs. 1Q09 Industrial Packaging Earnings 1Q10 vs. 1Q09 Earnings before special items
Slide 38: Printing Papers Earnings 1Q10 vs. 1Q09
Printing Papers Earnings 1Q10 vs. 1Q09 Printing Papers Earnings 1Q10 vs. 1Q09 Earnings before special items
Slide 39: IP Brazil
$ Million 1Q09 4Q09 1Q10 IP Brazil 1Q10 vs. 4Q09 1Q10 vs. 1Q09 Business Volume Price / Ton Volume Price / Ton Sales $170 $300 $225 Earnings $20 $33 $11 EBITDA Margin 26% 23% 20% IP Brazil results are reported in the Printing Papers segment IP Brazil Uncoated Freesheet (22%) $6 35% ($84) Domestic (23
Slide 40: Consumer Packaging Earnings 1Q10 vs. 1Q09
Consumer Packaging Earnings 1Q10 vs. 1Q09 Consumer Packaging Earnings 1Q10 vs. 1Q09 Earnings before special items
Slide 41: Total Cash Cost Components 1Q10
Total Cash Cost Components 1Q10 Total Cash Cost Components 1Q10 North American Mills Only
Slide 42: Global Input & Freight Costs by Input
Global Input & Freight Costs by Input $88 MM, or $0.14/Share Unfavorable vs. 1Q09 Global Input & Freight Costs by Input $88 MM, or $0.14/Share Unfavorable vs. 1Q09 Input costs for continuing businesses
Slide 43: Natural Gas Costs
Natural Gas Costs 27% Increase vs. 4Q09 Average Cost NYMEX Natural Gas closing prices Index: Jan 2005 Natural Gas Costs = 100 Natural Gas Costs 27% Increase vs. 4Q09 Average Cost
Slide 44: U.S. Mill Wood Costs
U.S. Mill Wood Costs 14% Increase vs. 4Q09 Average Cost Index: Jan 2005 Wood Costs = 100 U.S. Mill Wood Costs 14% Increase vs. 4Q09 Average Cost Delivered cost to U.S. facilities
Slide 45: U.S. Old Corrugated Containers Costs
U.S. Old Corrugated Containers Costs 62% Increase vs. 4Q09 Average Cost U.S. Old Corrugated Containers Costs 62% Increase vs. 4Q09 Average Cost Index: Jan 2005 OCC Costs = 100 2005-2007 represents WY PKG delivered costs; 2008-2009 represents delivered costs to the integrated system
Slide 46: U.S. Fuel Oil
U.S. Fuel Oil Flat vs. 4Q09 Average Cost U.S. Fuel Oil Flat vs. 4Q09 Average Cost Index: Jan 2006 Fuel Oil Costs = 100 WTI Crude prices
Slide 47: 2010 Global Consumption: Annual Purchase Estimates for Key Inputs
2010 Global Consumption Annual Purchase Estimates for Key Inputs Commodity U. S. Non – U. S. 2010 Global Consumption Annual Purchase Estimates for Key Inputs Does not include Asian or Ilim consumption Estimates are based on normal operations and may be impacted by downtime Energy Natural Gas (MM BTU
International Paper Co /New/ — Q1 2010 Earnings Presentation on 6ix