International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2011 Earnings Presentation
49 slides from International Paper's earnings presentation, Apr 28, 2011
Slide 1: First Quarter 2011 Review
First Quarter 2011 Review April 28, 2011 First Quarter 2011 Review April 28, 2011 John V. Faraci Chairman & Chief Executive Officer Tim S. Nicholls Senior Vice President & Chief Financial Officer Exhibit 99.2
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 2011 Strong Global Operations & Free Cash Flow
First Quarter 2011 Strong Global Operations & Free Cash Flow First Quarter 2011 Strong Global Operations & Free Cash Flow Robust Sales Growth Continued Demand Recovery Higher Exit Rates Improving Margins Strong Operations Significant Input Cost Increases Continued Solid Free Cash Flow Increased Ilim
Slide 4: 1Q11 Financial Snapshot
1Q11 Financial Snapshot 1Q10 4Q10 1Q11 1Q11 Financial Snapshot Sales ($B) $5.8 $6.5 $6.4 EBITDA ($MM) $560 $872 $897 EBITDA Margin 10% 13% 14% Free Cash Flow ($MM) $39 $601 $419 Debt ($B) $9.0 $8.7 $8.5 Cash Balance ($B) $1.7 $2.1 $2.0 Earnings from continuing operations before special items 4Q10 ex
Slide 5: Earnings before special items 1Q11 vs. 4Q10 EPS
Earnings before special items 1Q11 vs. 4Q10 EPS 1Q11 vs. 4Q10 EPS .68 .74 (.06) (.08) (.05) .01 .13 .02 .04 .02 .03 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 4Q10 Volume Price Operations & Costs Maintenance Outages Input Costs Corporate & Other Interest Tax Ilim JV 1Q11
Slide 6: Global Input Costs vs. 4Q10
Global Input Costs vs. 4Q10 $48 MM Unfavorable, or $0.08/Share Global Input Costs vs. 4Q10 $48 MM Unfavorable, or $0.08/Share By Business By Input Type Wood Energy Chemicals Freight OCC Outside North America North America
Slide 7: Industrial Packaging Earnings 1Q11 vs. 4Q10
Industrial Packaging Earnings 1Q11 vs. 4Q10 Industrial Packaging Earnings 1Q11 vs. 4Q10 Earnings before special items (14) (17) (9) $0 $50 $100 $150 $200 $250 $300 $350 4Q10 Volume Input Costs Operations & Costs Maintenance Outages 1Q11
Slide 8: N.A. Industrial Packaging Relative EBITDA Margins
N.A. Industrial Packaging Relative EBITDA Margins N.A. Industrial Packaging Relative EBITDA Margins IP EBITDA margins based on North American Industrial Packaging operating profit before special items. Competitor EBITDA margin estimates obtained from public filings and IP analysis Excludes revenue f
Slide 9: North American Industrial Packaging Balanced Global Strategy
North American Industrial Packaging Balanced Global Strategy North American Industrial Packaging Balanced Global Strategy IP’s market access provides choices for maximizing value Source: IP analysis, 1Q11 run rate
Slide 10: North American Industrial Packaging 1Q11
North American Industrial Packaging 1Q11 1Q11 Average Box Price vs. $/Ton North American Industrial Packaging 1Q11 • Continued year-over-year box demand growth • Industry shipments up 2% • IP up 1% • Industry-leading margins • Cost-of-capital ROI Box demand on an FBA reporting basis 1Q10 $91 4Q10 $6
Slide 11: Printing Papers Earnings 1Q11 vs. 4Q10
Printing Papers Earnings 1Q11 vs. 4Q10 Printing Papers Earnings 1Q11 vs. 4Q10 Earnings before special items N.A. Papers 10 N.A. Pulp (20) Europe 16 Price (5) Mix (6)
Slide 12: Consumer Packaging Earnings 1Q11 vs. 4Q10
Consumer Packaging Earnings 1Q11 vs. 4Q10 Consumer Packaging Earnings 1Q11 vs. 4Q10 Earnings before special items
Slide 13: N.A. Coated Paperboard Consistent Improvement
N.A. Coated Paperboard Consistent Improvement N.A. Coated Paperboard Consistent Improvement
Slide 14: Global Coated Paperboard 3 MM Tons at Cost-of-Capital Returns
Global Coated Paperboard 3 MM Tons at Cost-of-Capital Returns North America 1.7 Million Tons 23% Margin Coated paperboard mill EMEA 345,000 Tons 34% Margin Asia Sun Paper JV 915,000 Tons 11% Margin Global Coated Paperboard 3 MM Tons at Cost-of-Capital Returns Global Coated Paperboard Capacity of 3 M
Slide 15: xpedx 1Q11 vs. 4Q10
$ Million 1Q10 4Q10 1Q11 xpedx 1Q11 vs. 4Q10 Daily Sales Change vs. 1Q10 vs. 4Q10 Sales $1,580 $1,770 $1,640 Earnings $21 $9 $12 xpedx 1Q11 vs. 4Q10 Seasonal demand decline Average daily sales rate up 2% vs. 1Q10 Higher transportation costs Printing (5%) (13%) Packaging 6% (7%) Facility Supplies (17
Slide 16: xpedx Current Situation
xpedx Current Situation ROI xpedx Current Situation 2005 EBIT excludes $20 MM of restructuring and other one-time charges 4% 6% 6% 5% 3% 4% Recession drove 16% decline in revenue and 24% decline in earnings
Slide 17: xpedx Distribution Benchmarks
xpedx Distribution Benchmarks ROS = EBIT / Revenue Asset Turns = Revenue / Assets xpedx Distribution Benchmarks Industrial Industrial Industrial Industrial Industrial Medical Medical Foodservice Technology Automotive Technology Paper Paper * Paper distributor data are xpedx estimates
Slide 18: xpedx Projecting $140 MM Annual Benefit
xpedx Projecting $140 MM Annual Benefit Buy Handle Sell xpedx Projecting $140 MM Annual Benefit Centralize processes and decision-making Establish targeted / consistent product offering Consolidate / rationalize suppliers & SKUs Optimize warehouse network & inventory placement around centers of dema
Slide 19: Ilim Joint Venture
$ Million 1Q10 4Q10 1Q11 Ilim Joint Venture 1Q11 vs. 4Q10 1Q11 vs. 4Q10 1Q11 vs. 1Q10 Business Volume Price / Ton Volume Price / Ton Sales (100%) $395 $490 $515 Earnings (IP Share) ($3) $31 $44 Ilim recorded an asset impairment charge (IP share was $16 million after tax) Ilim’s results are reported
Slide 20: Improving Returns on Invested Capital
Improving Returns on Invested Capital Transformation Driving ROI 8% Global Economic Recession Improving Returns on Invested Capital Transformation Driving ROI 4% 5% 6% 7% 4% 6% 0% 2% 4% 6% 8% 2000 - 2005 Avg 3Q08 Run Rate 1Q11
Slide 21: 1Q11 Summary Momentum Continues
1Q11 Summary Momentum Continues Strong EPS, FCF & ROI • Increasing Demand • Stable-to-Improving Prices • Strong Operations • Strong Ilim JV Earnings • $42 MM Ilim JV Dividend • $140 MM Debt Reduction • Input Cost Escalation 1Q11 Summary Momentum Continues
Slide 22: Second Quarter Outlook
Second Quarter Outlook Changes from 1Q11 North America Europe Brazil Asia Seasonal Increase ~$59 MM Increase Higher Energy, Transportation & Chemicals Increase Second Quarter Outlook Changes from 1Q11 Volume Paper Stable Stable Stable Packaging Stable Stable Pricing Paper Slight Increase Increase Sl
Slide 23: 2Q11 Outlook Momentum Continues
2Q11 Outlook Momentum Continues Strong EPS, FCF & ROI Increasing U.S. Box Demand Stable-to-Improving Prices Strong Ilim JV Earnings Input Cost Escalation Significantly Higher Maintenance Outages 2Q11 Outlook Momentum Continues
Slide 24: Key Financial Statistics
$ Million (Except as noted) 2009 2010 2011 Estimate Key Financial Statistics Capital Spending $534 $775 $1.2 - $1.3 B Depreciation & Amortization $1,472 $1,456 $1.4 B Net Interest Expense $669 $608 $575 - $600 Corporate Items $181 $226 $175 - $200 Effective Tax Rate 30% 30% 32 - 34% Before special i
Slide 25: Free Cash Flow
Free Cash Flow $ Million 1Q10 4Q10 1Q11 Free Cash Flow Excluding CBTC $39 $601 $419 Free Cash Flow Cash from Operations $159 $919 $600 Cash Received from Cellulosic Biofuel Tax Credits (CBTC) $0 $17 $0 Cash Provided by Continuing Operations $159 $936 $600 Less Capital Investment ($120) ($318) ($181)
Slide 26: Maintenance Outages Expenses
$ Million 1Q11 2Q11E 3Q11E 4Q11E 2011E Maintenance Outages Expenses Industrial Packaging $31 $82 $6 $24 $143 Printing Papers Total $39 $45 $52 $49 $185 North America $39 $30 $20 $49 $138 Europe Brazil Consumer Packaging $0 $17 $0 $27 $44 Total Impact $70 $144 $58 $100 $372 Dollar impact of planned m
Slide 27: Industrial Packaging Volume and Price
1Q11 vs. 4Q10 1Q11 vs. 1Q10 Business Volume Price / Ton Volume Price / Ton Industrial Packaging N.A. Container (1%) $6 1% $91 European Container 2% €15 11% €84 Industrial Packaging Volumes reflect FBA reporting basis, which excludes Display and Bulk products and shipments from facilities in Mexico a
Slide 28: Printing Papers Volume and Price
1Q11 vs. 4Q10 1Q11 vs. 1Q10 Business Volume Price / Ton Volume Price / Ton Printing Papers Average IP price realization (includes the impact of mix across all grades) N.A. Paper 3% ($7) (5%) $60 N.A. Pulp (8%) $8 (8%) $137 European Paper 2% €7 1% €97 Printing Papers
Slide 29: Consumer Packaging Volume and Price
1Q11 vs. 4Q10 1Q11 vs. 1Q10 Volume Price/Ton Volume Price/Ton Revenue Price Revenue Price Consumer Packaging Average IP price realization (includes the impact of mix across all grades) N.A. Coated Paperboard 9% $12 8% $92 Converting Businesses (6%) NA 7% NA Consumer Packaging
Slide 30: Special Items Pre-Tax from Continuing Operations
Special Items Pre-Tax from Continuing Operations Special Items Pre-Tax ($Million) 1Q10 4Q10 1Q11 Special Items Pre-Tax from Continuing Operations Industrial Packaging Facility & Machine Closure Costs ($5) ($10) ($2) Other ($3) $7 Printing Papers Facility Closure Costs ($204) Other ($2) ($8) Consumer
Slide 31: Special Items Net of Taxes from Continuing Operations
Special Items Net of Taxes from Continuing Operations 1Q11 $ Million EPS Special Items Net of Taxes from Continuing Operations Earnings Before Special Items $322 $0.74 Special Items Net of Taxes: Mill & Machine Shutdowns ($2) Debt Extinguishment Costs ($19) Reorganization ($5) Overhead Reduction Ini
Slide 32: 1Q11 EBITDA
1Q11 EBITDA Operating Profit $ Million D & A $ Million Tons Thousand EBITDA per Ton EBITDA Margin 1Q11 EBITDA Industrial Packaging North America $255 $116 2,404 $154 18.9% Europe $17 $7 $88 8.6% Printing Papers North America $88 $50 $201 20.0% Eastern Europe & Russia $57 $19 $244 22.8% Brazil $48 $3
Slide 33: Operating Profits by Industry Segment
Operating Profits by Industry Segment $ Million 1Q10 4Q10 1Q11 Operating Profits by Industry Segment Industrial Packaging $46 $274 $274 Printing Papers $126 $236 $209 Consumer Packaging $31 $64 $101 Distribution $21 $9 $12 Forest Products $8 ($3) $0 Operating Profit $232 $580 $596 Net Interest Expen
Slide 34: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Before Special Items $ Million Sales Operating Profit 1Q10 4Q10 1Q11 1Q10 4Q10 1Q11 Geographic Business Segment Operating Results Before Special Items Industrial Packaging North American $1,890 $2,135 $2,115 $23 $261 $256 European $245 $275 $280 $24 $16
Slide 35: Earnings from Continuing Operations Reconciliation
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 2011 Earnings from Continuing Operations Assuming dilution A reconciliation to GAAP EPS is available at www.internationalp
Slide 36: 1Q11 Operating Business EPS Transformation
1Q11 Operating Business EPS Transformation 1Q11 Operating Business EPS Impact of Mineral Rights Gain Earnings from continuing operations before special items as reported at the time .84
Slide 37: Earnings before special items 1Q11 vs. 1Q10 EPS
Earnings before special items 1Q11 vs. 1Q10 EPS 1Q11 vs. 1Q10 EPS
Slide 38: Industrial Packaging Earnings 1Q11 vs. 1Q10
Industrial Packaging Earnings 1Q11 vs. 1Q10 Industrial Packaging Earnings 1Q11 vs. 1Q10 Earnings before special items (2) (13) (3) $0 $50 $100 $150 $200 $250 $300 1Q10 Volume Price & Mix Input Costs Operations & Costs Maintenance Outages 1Q11
Slide 39: Printing Papers Earnings 1Q11 vs. 1Q10
Printing Papers Earnings 1Q11 vs. 1Q10 Printing Papers Earnings 1Q11 vs. 1Q10 Earnings before special items
Slide 40: IP Brazil
$ Million 1Q10 4Q10 1Q11 IP Brazil 1Q11 vs. 4Q10 1Q11 vs. 1Q10 Business Volume Price / Ton Volume Price / Ton Sales $225 $315 $285 Earnings $11 $63 $48 EBITDA Margin 20% 32% 30% IP Brazil results are reported in the Printing Papers segment IP Brazil Uncoated Freesheet (5%) ($8) 13% $92 Domestic (19%
Slide 41: Consumer Packaging Earnings 1Q11 vs. 1Q10
Consumer Packaging Earnings 1Q11 vs. 1Q10 Consumer Packaging Earnings 1Q11 vs. 1Q10 Earnings before special items
Slide 42: 1Q11 Total North American Mills Cash Cost Components
1Q11 Total North American Mills Cash Cost Components 1Q11 Total North American Mills Cash Cost Components
Slide 43: Global Input & Freight Costs vs. 1Q10
Global Input & Freight Costs vs. 1Q10 $80 MM Unfavorable, or $0.13/Share Global Input & Freight Costs vs. 1Q10 $80 MM Unfavorable, or $0.13/Share Input costs for continuing businesses
Slide 44: U.S. Mill Wood Delivered Cost Trends
U.S. Mill Wood Delivered Cost Trends 2% Increase vs. 4Q10 Average Cost U.S. Mill Wood Delivered Cost Trends 2% Increase vs. 4Q10 Average Cost
Slide 45: U.S. OCC Delivered Cost Trends
U.S. OCC Delivered Cost Trends Flat vs. 4Q10 Average Cost U.S. OCC Delivered Cost Trends Flat vs. 4Q10 Average Cost 2005-2007 represents WY PKG delivered costs; 2008-2010 represents delivered costs to the integrated system
Slide 46: Natural Gas Costs
Natural Gas Costs 8% Increase vs. 4Q10 Average Cost NYMEX Natural Gas closing prices Natural Gas Costs 8% Increase vs. 4Q10 Average Cost
Slide 47: U.S. Fuel Oil
U.S. Fuel Oil 19% Increase vs. 4Q10 Average Cost U.S. Fuel Oil 19% Increase vs. 4Q10 Average Cost WTI Crude prices
Slide 48: U.S. Chemical Composite Index
U.S. Chemical Composite Index 5% Increase vs. 4Q10 Average Cost U.S. Chemical Composite Index 5% Increase vs. 4Q10 Average Cost Delivered cost to U.S. facilities; includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2005 - 2008 excludes WY PKG
Slide 49: 2011 Global Consumption Annual Purchase Estimates for Key Inputs
2011 Global Consumption Annual Purchase Estimates for Key Inputs Commodity U. S. Non – U. S. 2011 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 2011 Earnings Presentation on 6ix