International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q2 2007 Earnings Presentation
40 slides from International Paper's earnings presentation, Aug 2, 2007
Slide 1: International Paper
‘ j ’ 7 ! INTERNATIONAL (A) PAPER
Slide 2: Second Quarter 2007 Review
John V. Faraci Chairman & CEO Marianne M. Parrs EVP & CFO Exhibit 99.2 Second Quarter 2007 Review August 2, 2007 Second Quarter 2007 Review August 2, 2007
Slide 3: Forward-Looking Statements
Slide 2 These slides and statements made during this presentation contain forward-looking statements. These statements reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statement
Slide 4: Statements Relating to Non-GAAP Financial Measures
Slide 3 D uring 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 website at under Investors. www.internationalpaper.com Statements Relating to Non-GAAP Finan
Slide 5: Agenda
Slide 4 Second Quarter 2007 Review Third Quarter 2007 Outlook 2007 Priorities Agenda Agenda
Slide 6: Second Quarter 2007 Summary
Solid Quarter, best quarter since year 2000 Margins Expanding Manufacturing operations performed well Volumes solid Pricing strong Pensacola Conversion Lower tax rate Lower share count Slide 5 Second Quarter 2007 Summary Second Quarter 2007 Summary
Slide 7: Diluted EPS from Continuing Operations and Before Special Items
.63 .60 .44 .25 .04 .03 .06 .14 .10 .27 .26.26 .11 .15 .11 .03 .02 .16 .30 .34 .27 .04 .12 .30 .45 .47 .45 .52 .17 .20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2002 2003 2004 2005 2006 2007 2001 2000 * A reconciliation to GAAP EPS is available at www.
Slide 8: EPS 2Q '07 vs. 1Q '07
Slide 7 .52 .45 .03 .03 .06 .03 .04 (.01) (.06) (.01) (.04) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 1Q '07 Price Volumes Cost/Mix Pensacola / Maint. Outages Input & Distrib.Costs Cash Redeploy- ment Corporate / Other Divest. Tax 2Q '07 EPS $ / Share Corporate (0.02) Other (0.04) Packaging 0.
Slide 9: EPS 6M '07 vs. 6M '06
Slide 8 .97 .42 .36 .05 .02 .21 .41 (.21) (.12) (.11) (.05) (.01) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 6M '06 Price Volume Cost/Mix Pensacola/ Maint. Outages Input & Distrib.Costs Land Sales Cash Redeployment Corporate / Other Divest. Tax 6M '07 EPS $ / Share IPG 0.11 Coated Paperboard 0.
Slide 10: Higher Input & Distribution Costs
Slide 9 (11) (19) (31) 9 (25) (35) (30) (25) (20) (15) (10) (5) 0 5 10 15 Freight Chemicals Wood Non-US Energy $MM All costs include ongoing businesses Higher Input & Distribution Costs Higher Input & Distribution Costs EBIT impact 6M’07 vs. 6M’06 EBIT impact 6M’07 vs. 6M’06 Total of $77 million or
Slide 11: Printing Papers
Slide 10 $ 1,610 249 Sales Earnings 2Q’07 1Q’07 $ Millions Uncoated Pulp Europe (uncoated) Brazil (uncoated) $16 $9 €29 $27 Volume Realizations/ton $ 1,540 231 (3%) (1%) (6%) 38% Average IP realization (includes the impact of mix across all grades) Printing Papers 2Q’07 Change vs 1Q’07:
Slide 12: Improving Business in Brazil
Slide 11 300 100 275 240 25 23 20 3Q 4Q Depreciation & Amort. 2Q Operating Profit $MM EBITDA Run Rate Range ~375 - 400 Improving Business in Brazil Improving Business in Brazil Avg. Monthly Run Rate Avg. Monthly Run Rate Annualized Annualized
Slide 13: Uncoated Freesheet EBIT Growth Outside North America
Slide 12 0 20 40 60 80 100 120 140 160 180 200 220 1Q07 2Q07 North America Brazil & Europe $ EBIT (MM) Uncoated Freesheet EBIT Growth Outside North America Uncoated Freesheet EBIT Growth Outside North America Increasing EBIT Outside North America
Slide 14: Industrial Packaging
Slide 13 Average IP realization (includes the impact of mix across all grades) $ 1,315 139 Sales Earnings $ Millions Containerboard U.S. Container $2 ($0.60) Volume Realizations/ton $ 1,235 103 17% 5% U.S. Container volumes and prices are reported in MSF Industrial Packaging 2Q’07 1Q’07 2Q’07 Change
Slide 15: Industrial Packaging Q1 '07 vs. Q2 '07
Slide 14 .17 .23 .02 .02 .05 (.03) $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 1Q '07 Volume Cost / Mix Maint. Outages Pensacola 2Q '07 EPS $ / Share Assumes constant tax rate and shares outstanding Industrial Packaging Q1 ‘07 vs. Q2 ‘07 Industrial Packaging Q1 ‘07 vs. Q2 ‘07 EPS $ / Share
Slide 16: Consumer Packaging
Slide 15 Average IP realization (includes the impact of mix across all grades) $ 790 48 Sales Earnings $ Millions Coated Paperboard $1 Volume Realizations/ton $ 750 61 3% Converting Businesses Sales Revenue 9% Consumer Packaging 2Q’07 1Q’07 2Q’07 Change vs 1Q’07:
Slide 17: Distribution
Slide 16 $ 1,720 38 Sales Earnings $ Millions $ 1,675 29 Record second quarter earnings; up 30% compared to first quarter 2007 Volume and margins up Distribution 2Q’07 1Q’07
Slide 18: Forest Products
Slide 17 $ 90 98 Sales Earnings $ Millions $ 85 100 Forest Products 2Q’07 1Q’07
Slide 19: Special Items & Discontinued Operations – 2Q'07
Slide 18 Special Items (net of tax) $(7) Divestitures (16) Restructuring / Corporate $(0.06) $(23) Total Special Items Discontinued Operations (net of tax) $(3) Beverage Packaging (7) Wood Products $(0.02) $(10) Total Discontinued Operations – – – – $MM $MM $/Share $/Share Special Items & Discontinu
Slide 20: Reconciliation to 2Q'07 Diluted Earnings Per Share
Slide 19 Earnings from Continuing Operations and Before Special Items $0.52 Special Items (0.06) Earnings from Continuing Operations 0.46 Discontinued Operations (0.02) Net Earnings $0.44 Reconciliation to 2Q’07 Diluted Earnings Per Share Diluted EPS Diluted EPS
Slide 21: Highlights Second Quarter 2007
Slide 20 Margin Expansion Record second quarter profit for Europe, xpedx, and Foodservice Conversion of Pensacola Mill Strength of global footprint Transformation plan on track Highlights Highlights Second Quarter 2007 Second Quarter 2007
Slide 22: Earnings Improvement: Transformation Plan on Track
Slide 21 .97 .42 .02 .09 .22 .43 (.21) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 6M '06 Core Business EBIT Divestitures* Interest Shares Tax 6M '07 EPS $ / Share * Includes Forest divestiture, Coated Papers and Arizona Chemical EPS $ / Share Earnings Improvement Transformation Plan on Track Earnings
Slide 23: Third Quarter 2007 Outlook
Slide 22 Volumes steady Prices – modest improvement Continued progress in improving operations Input costs slightly higher Lower maintenance outage expenses Pensacola Conversion Expenses Forest Resources earnings higher than second quarter 2007 Third Quarter 2007 Outlook Third Quarter 2007 Outlook
Slide 24: IP / Ilim JV Update
Slide 23 Ilim’s EBITDA improved significantly Expecting lower EV/EBITDA multiple Expect to make decision soon IP / Ilim JV Update IP / Ilim JV Update
Slide 25: 2007 Priorities
Slide 24 Improve Existing Businesses Deliver value from Selective Reinvestments Luiz Antonio IP/Sun JV Return Value to Shareholders Dutch Tender $1.4 Billion Open market $1.1 Billion G G G 2007 Priorities 2007 Priorities – – – – Building on a Solid Second Quarter 2007
Slide 26: Q & A Investor Relations Contacts
Slide 25 Q & A Investor Relations Contacts Brian McDonald 901-419-4957 Ann-Marie Donaldson 901-419-4967 Media Contact Amy Sawyer 901-419-4312
Slide 27: Appendix
Slide 26 Appendix
Slide 28: Key Financial Statistics
Slide 27 29% $746 MM $156 MM $521 MM $1.1 B $1.1 B 2006 1 Effective Tax Rate ² Corporate Items Supply Chain Expense Net Interest Expense Depreciation & Amort. Capital Spending 20% $607 MM $135 MM $595 MM $1.2 B $1.1 B 2005 1 30-31% $675–725 MM $200 MM $310 MM $1.1-1.2 B $1.1-1.2 B 2007 Est. 1 Exclud
Slide 29: Lack of Order Downtime
Slide 28 *Includes indefinitely closed uncoated papers capacity at Pensacola, FL, Bastrop, LA and Jay, ME in 2Q05 (72,000 tons), 3Q05 (108,000 tons) and 4Q’05 (108,000 tons) which we permanently closed at end of 4Q’05. 59 90 236 173 5 10 5 35 95 M Short Tons 2003 2004 2005 274* 270* 180* 25 2006 25
Slide 30: Raw Material & Distribution Costs
Slide 29 8 (1) (11) 5 (9) (15) (10) (5) 0 5 10 Chemicals Energy Non-US Wood Freight $MM All costs include ongoing businesses Total of $8 million or $0.01 per share negative impact in 2Q ’ 07 versus 1Q ’ 07 Raw Material & Distribution Costs Raw Material & Distribution Costs EBIT impact 2Q’07 vs. 1Q’0
Slide 31: Q3'07 Maintenance Outages
Slide 30 30 7 10 13 3Q’07 Forecast vs. 2Q’07 Actual $(MM) Total Impact Consumer Packaging Industrial Packaging Printing Papers 80,000 6,000 22,000 52,000 Maintenance Outage (tons) Maintenance outages and dollar impacts are estimated and are subject to change. Q3’07 Maintenance Outages Q3’07 Maintena
Slide 32: Earnings by Industry Segment
Slide 31 Earnings by Industry Segment Printing Papers $249 $231 $209 Industrial Packaging 139 103 86 Consumer Packaging 48 61 44 Distribution 38 29 36 Forest Products 98 100 160 Other Businesses - 6 17 Operating Profit 572 530 552 Interest Expense, net (80) (63) (148) Minority Interest 6 5 2 Corpora
Slide 33: 2007 Earnings from Continuing Operations
Slide 32 Before Special Items Q1 308 (99) (6) 203 32% 448.4 0.45 Q2 319 (91) (5) 223 29% 431.2 0.52 Special Items Q1 298 (44) 0 254 15% 448.4 0.57 Q2 (25) 2 0 (23) 8% 431.2 (0.06) Earnings from Continuing Operations Q1 606 (143) (6) 457 24% 448.4 1.02 Q2 294 (89) (5) 200 30% 431.2 0.46 $ MM MM Share
Slide 34: Average Sales Realizations
Slide 33 * U.S. only Average IP realization (includes the impact of mix across all grades) 62 511 577 888 60 489 525 862 61 514 593 912 Corrugated boxes Containerboard Pulp Uncoated 61 513 586 904 61 454 510 817 Average Sales Realizations Packaging Printing Papers ($/ton) Segments* 1Q’07 Average Sal
Slide 35: Natural Gas Costs
Slide 34 0 50 100 150 200 250 Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr 2004 2005 2006 2007 * NYMEX Natural Gas closing prices Index: Jan 2004 Natural Gas Costs = 100 Natural Gas Costs
Slide 36: U.S. Mill Wood Costs
Slide 35 90 95 100 105 Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr Index: Jan 2004 Wood Costs = 100 2004 2005 * Delivered cost to U.S. pulp & paper ongoing mills 2006 2007 U.S. Mill Wood Costs U.S. Mill Wood Costs
Slide 37: Caustic Soda Costs
Slide 36 0 50 100 150 200 250 300 350 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2004 2005 2006 2007 Index: Jan 2004 Caustic Soda Costs = 100 * Delivered cost to U.S. facilities Caustic Soda Costs
Slide 38: Corn Starch Costs
Slide 37 50 100 150 200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2006 2007 Index: Jan 2006 Corn Starch Costs = 100 * Delivered cost to U.S. facilities Corn Starch Costs
Slide 39: Global Consumption
Slide 38 Natural Gas MMbtu 28,000,000 14,000,000 # 6 Fuel Oil BBL 4,100,000 400,000 Coal Tons 1,300,000 230,000 Wood Tons 40,000,000 8,200,000 OCC ³ Tons 600,000 313,000 Caustic Soda Tons 340,000 55,000 Sodium Chlorate Tons 215,000 49,000 LD Polyethylene Tons 40,000 - Latex Tons 24,000 4,000 Units U
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