International Paper Company · NYSE:IP
International Paper — Q1 2024 Earnings Presentation
38 slides from International Paper's earnings presentation, Apr 25, 2024
Slide 1: First Quarter 2024 Earnings
First Quarter 2024 Earnings April 25, 2024
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this press release that are not historical in nature may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking
Slide 3: Additional Information
Additional Information This release may be deemed to be solicitation material in respect of the proposed business combination with DS Smith Plc (the “Business Combination”), including the issuance of new shares of International Paper common stock (“Common Stock”) in connection with the Business Comb
Slide 4: First Quarter 2024 Highlights
First Quarter 2024 Highlights ▪ Stable to improving demand trends offset by Adjusted Operating EPS1 seasonally lower volumes ▪ Flow through of prior price index movements ▪ Higher OCC costs $0.17 1Q24 ▪ Impact from January winter freeze and Ixtac box plant fire ▪ Momentum from strategic initiatives
Slide 5: First Quarter 2024 Financials
First Quarter 2024 Financials Adjusted EBITDA1 ($MM) 1Q23 4Q23 1Q24 Sales ($B) $5.0 $4.6 $4.6 1 $420 Adjusted EBIT ($MM) $298 $268 $147 1Q24 2 Adjusted Operating EPS $0.53 $0.41 $0.17 1 Adjusted EBITDA ($MM) $539 $535 $420 $535 1 4Q23 Adjusted EBITDA Margin 10.7% 11.6% 9.1% 3 Free Cash Flow ($MM) $4
Slide 6: 1Q24 vs 4Q23 Adjusted Operating EPS
1Q24 vs 4Q23 Adjusted Operating EPS1 0.7 0.6 .14 (.08) (.13) 0.5 .41 0.4 (.03) (.07) 0.3 (.07) .17 0.2 0.1 0 4Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 1Q'24 & Costs Outages & Other Items First Quarter 2024 Earnings 4/25/2024 6
Slide 7: Industrial Packaging 1Q24 vs 4Q23 Adjusted EBIT
Industrial Packaging 1Q24 vs 4Q23 Adjusted EBIT1 57 (44) Higher price/mix: $(53)MM Index movement (59) 315 $110MM Box Go-to-Market Strategy Seasonally lower volume vs 4Q; (26) IP U.S. box shipments -4.7% YoY /day, (27) impacted by temporary effects of 216 Box GTM strategy Ops & Costs impacted by cos
Slide 8: N.A. Corrugated Packaging Segment Demand
N.A. Corrugated Packaging Segment Demand Customer Segment Industry Mix IP View of Segment Trends E-commerce, Shipping & Distribution ~20% Strong E-commerce Well above pre-pandemic levels Shipping & Distribution Favorable trend post destocking Food & Beverage ~45% Improving Fresh Produce Continued fo
Slide 9: Global Cellulose Fibers 1Q24 vs 4Q23 Adjusted EBIT
Global Cellulose Fibers 1Q24 vs 4Q23 Adjusted EBIT1 (58) (47) Higher price/mix from index movement and Optimization Strategy Higher fluff volume, offset by reduction in commodity pulp Ops & Costs impacted by timing of spend and cost inflation, including $ Million labor & cost of employee benefits Ma
Slide 10: Second Quarter Earnings Outlook
Second Quarter Earnings Outlook Changes from 1Q24 Industrial Packaging Cellulose Fibers Price & Mix Prior index movement & exports (+) Prior index movement (+) Box Go-to-Market Strategy (+) Volume Seasonality (+) Stable N.A. 1 more day (+) Ops & Costs Non-repeats (+) Non-repeats (+) Inflation & spen
Slide 11: Strategic Initiatives
Strategic Initiatives Focus on Margin Improvement and Profitable Growth Industrial Packaging Global Cellulose Fibers Box Go-to-Market Strategy Optimization Strategy • Offering enhanced capabilities and strong • Aligning resources with strategic fluff pulp segment-based value propositions to improve
Slide 12: CEO Perspective
CEO Perspective IP is Well Positioned for the Future First Quarter 2024 Earnings 4/25/2024 12
Slide 13: Investor Relations and Media
Investor Relations • Mark Nellessen +1-901-419-1731 mark.nellessen@ipaper.com • Michele Vargas +1-901-419-7287 michele.vargas@ipaper.com Media • Amy Simpson +1-901-419-4964 amy.simpson@ipaper.com
Slide 14: Appendix & Footnotes
Appendix & Footnotes | 44% vvw vw. International Paper
Slide 15: IP View 2024
IP View 2024 Positive Momentum through the Year ~2% to 3% • Demand recovery across portfolio continues Market Industry Momentum Growth • IP realization of favorable prior price index movements • Commercial strategies focused on margin & mix improvement $400MM+ • Operations & supply chain initiatives
Slide 16: Industrial Packaging
Industrial Packaging Taking Actions to Improve Profitability and Returns Commercial Operational Investment Excellence Excellence Excellence • Improving customer & segment mix • Reducing fixed & marginal costs • Strengthening box system • Capturing additional value • Leveraging advanced technology •
Slide 17: Global Cellulose Fibers
Global Cellulose Fibers Optimization Strategy 2023 Target Commercial & Operational Excellence ▪ Targeting 70% absorbents & specialty in ’24 ▪ Aligning with strategic fluff customers and capturing value ▪ Focusing on innovation and improving mix ▪ Serving NBSK customers from advantaged mill ▪ Optimiz
Slide 18: Operational Excellence
Operational Excellence Leveraging Advanced Technology Mill & Box ▪ New technologies and tools at operator level Operations ▪ Data dashboards for real-time cost and process visibility Transportation Production Planning Planning ✓ 22 newly developed dashboards in use ✓ Additional dashboards in develop
Slide 19: Capital Allocation
Capital Allocation Maximizing Value Creation Highlights Investment Excellence Solid balance sheet ▪ Debt / EBITDA1 at 2.6x (Moody’s basis) YE 2023 ▪ Limited short & medium-term debt maturities ▪ Liquidity & cash = $3B YE 2023 Maximizing Return Qualified pension plan fully funded Cash to Value Shareo
Slide 20: Mill / PM Closure Impact
Mill / PM Closure Impact ~70% of benefits achieved in 2024 $ Million Industrial Packaging Global Cellulose Fiber Orange Mill Pensacola PM4 & Riegelwood PM20 Amount Amount Total Cost $4331 $1171 Non-Cash $3821 $801 Cash Cost $511 $371 Adjusted EBIT Benefit2 ~$140 ~$90 300k Fluff Capacity Reduction (t
Slide 21: Select Financial Metrics
Select Financial Metrics1 5-Year Average $1.8 $ Million 2022 2023 2024F Maintenance Outage Expense $601 $593 $549 Maintenance & Regulatory $649 $815 Capex Targeting Cost Reduction $50 $85 $800 - $1,000 Strategic $232 $241 Depreciation & Amortization2 $1,040 $1,010 $1,050 Net Interest Expense3 $267 $
Slide 22: Free Cash Flow
Free Cash Flow $ Million 2021 2022 1Q23 4Q23 2023 1Q24 Cash Provided by $2,0301 $2,174 $3452 $492 $1,833 $395 Operations Cash Invested in $(549) $(931) $(341) $(305) $(1,141) $(251) Capital Projects Free Cash Flow $1,481 $1,243 $4 $187 $692 $144 12021 cash provided by operations includes tax payment
Slide 23: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Quarterly 2 Business Segment Sales D&A 1 $ Million Operating Profit 1Q23 4Q23 1Q24 1Q24 1Q23 4Q23 1Q24 Industrial Packaging North America $3,724 $3,528 $3,486 $203 $302 $287 $192 EMEA $391 $340 $348 $16 $20 $28 $24 Global Cellulose Fibers Global Cellulos
Slide 24: Operating Profits by Business Segment
Operating Profits by Business Segment $ Million 1Q23 4Q23 1Q24 Net Earnings (Loss) From Continuing Operations $172 $(284) $56 Income Tax Provision (Benefit) $48 $(61) $27 Equity (Earnings) Loss, net of taxes $1 $19 $2 Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings
Slide 25: 2024 Operating Earnings
2024 Operating Earnings Non- Equity Average Pre-Tax Tax controlling Net Income Earnings Shares Diluted EPS1 $MM $MM Interest $MM $MM MM $MM Net Earnings from Continuing Operations 1Q24 $85 ($27) - ($2) $56 349 $0.16 Net Special Items 1Q24 $18 $(4) - - $14 349 $0.04 Non-Operating Pension Expense 1Q24
Slide 26: Maintenance Outages Expenses
Maintenance Outages Expenses 2024 Forecast $ Million 1Q24A 2Q24F 3Q24F 4Q24F 2024F Industrial Packaging $77 $81 $125 $106 $389 North America $77 $59 $125 $104 $365 Riverdale Papers - $19 - - $19 EMEA - $3 - $2 $5 Global Cellulose Fibers $57 $38 $13 $50 $158 North America $33 $38 $13 $50 $134 Georget
Slide 27: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 622 532 421 130 105 398 458 143 137 243 36 132 191 68 12 179 59 55 61 127 120 113 102 106 102 36 35 75 29 19 25 Economic Maintenance First Quarter 2024 Earnings 4/25/2024 27
Slide 28: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 1Q23 4Q23 1Q24 Building a Better IP $8 Industrial Packaging Mill Closure $(428) $(4) Building a Better IP $3 Global Cellulose Fibers Machine Closures $(112) $(4) Legal Reserve Adjustments $(10) Net Loss on Miscellaneous
Slide 29: Special Items Net of Tax
Special Items Net of Tax 1Q24 $ Million EPS Earnings Before Special Items $61 $0.17 Special Items Net of Taxes: Legal Reserve Adjustments $(7) Net Loss on Miscellaneous Land Sales $(4) Interest Related to Settlement of Tax Audits $7 Mill and Machine Closures $(6) DS Smith Combination Costs $(4) Tota
Slide 30: Debt Maturity Profile
Debt Maturity Profile Maturities as of March 31, 2024 $800 $700 $600 $500 $ Million $400 $300 $200 $100 $0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 First Quarter 2024 Earnings 4/25/2024 30
Slide 31: 1Q24 vs 1Q23 Adjusted Operating EPS
1Q24 vs 1Q23 Adjusted Operating EPS1 0.7 .53 0.6 (.68) 0.5 0.4 0.3 .13 (.05) .17 0.2 .21 0.1 0 .04 (.01) -0.1 -0.2 -0.3 1Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 1Q'24 & Costs Outages & Other Items First Quarter 2024 Earnings 4/25/2024 31
Slide 32: Industrial Packaging 1Q24 vs 1Q23 Adjusted EBIT
Industrial Packaging 1Q24 vs 1Q23 Adjusted EBIT1 400 322 (176) 350 300 33 216 250 84 200 (8) (39) 150 $ Million 100 50 0 1Q'23 Price/Mix Volume Operations Maintenance Input Costs 1Q'24 & Costs Outages First Quarter 2024 Earnings 4/25/2024 32
Slide 33: Global Cellulose Fibers 1Q24 vs 1Q23 Adjusted EBIT
Global Cellulose Fibers 1Q24 vs 1Q23 Adjusted EBIT1 (131) (16) 28 (47) $ Million 11 58 3 Operations Maintenance 1Q'23 Price/Mix Volume Input Costs 1Q'24 & Costs Outages First Quarter 2024 Earnings 4/25/2024 33
Slide 34: Global Consumption: 2023 Annual Purchases for Key Inputs
Global Consumption 2023 Annual Purchases for Key Inputs Commodity North America EMEA Natural Gas (MMBTUs) 87,000,000 2,200,000 Energy Fuel Oil (Barrels) 190,000 70,000 Wood (Tons) 44,000,000 0 Fiber Old Corrugated Containers / DLK (Tons) 4,500,000 540,000 Caustic Soda (Tons) 330,000 900 Chemicals St
Slide 35: Global Input Costs 1Q24 vs 4Q23
Global Input Costs 1Q24 vs 4Q23 $(34)MM Unfavorable, $(0.07) per share By Business By Input Type 7 U.S Average Cost vs 4Q23 Wood Flat Wood 1% (3) OCC 13% (7) (6) Natural Gas -7% OCC (7) Electricity -0.02% (25) Chemical Composite -1% (27) Industrial Global Cellulose Fibers Packaging Fiber Energy Chem
Slide 36: Footnotes
Footnotes Slide 4 1 Adjusted operating EPS, a non-GAAP financial measure based on Adjusted Operating Earnings (defined as Net Earnings from Continuing Operations (GAAP) before net special items and non operating pension expense (income)). All periods have been adjusted to reflect the Ilim JV as disc
Slide 37: Footnotes
Footnotes Slide 20 2 Adjusted EBIT at a segment level is Business Segment Operating Profit for such segment defined as earnings (loss) from continuing operations before income taxes and equity earnings, but including the impact of less than wholly owned subsidiaries, and excluding interest expense,
Slide 38: Footnotes
Footnotes Slide 31 1 Adjusted operating EPS, a non-GAAP financial measure based on Adjusted Operating Earnings (defined as Net Earnings from Continuing Operations (GAAP) before net special items and non operating pension expense (income)). All periods have been adjusted to reflect the Ilim JV as dis
International Paper Company — Q1 2024 Earnings Presentation on 6ix