International Paper Company · NYSE:IP
International Paper — Q2 2023 Earnings Presentation
37 slides from International Paper's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Earnings
Second Quarter 2023 Earnings July 27, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation that are not historical in nature may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “believes,” “estimates” and similar
Slide 3: Second Quarter 2023 Highlights
Second Quarter 2023 Highlights Adjusted Operating EPS1 Executed well in a challenging macro environment Strong results from Building a Better IP initiatives $0.59 2Q23 Solid mill operating performance and outage execution Margins in both businesses impacted by low volumes and $0.53 price dec
Slide 4: Second Quarter 2023 Financials
Second Quarter 2023 Financials 2Q22 1Q23 2Q23 Adjusted EBITDA1 ($MM) Sales ($B) $5.4 $5.0 $4.7 1 Adjusted EBIT ($MM) $559 $298 $326 $570 2 2Q23 Adjusted Operating EPS $0.99 $0.53 $0.59 1 Adjusted EBITDA ($MM) $826 $539 $570 1 $539 Adjusted EBITDA Margin 15.3% 10.7% 12.2% 1Q23 3 Free Cash Flow ($MM)
Slide 5: 2Q23 vs 1Q23 Adjusted Operating EPS
2Q23 vs 1Q23 Adjusted Operating EPS1 0.7 .18 (.01) .59 0.6 .53 (.29) 0.5 .19 0.4 0.3 .00 (.01) 0.2 0.1 0 1Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 2Q'23 & Costs Outages & Other Items Second Quarter 2023 Earnings 7/27/2023 5
Slide 6: Industrial Packaging 2Q23 vs 1Q23 Adjusted EBIT
Industrial Packaging 2Q23 vs 1Q23 Adjusted EBIT1 322 (77) Lower price from index movement 66 304 and exports One less shipping day QoQ 6 (67) 54 IP U.S. box shipments -8.3% YoY (daily) June U.S. box shipments -5.9% YoY Export channel demand weak $ Million Operating costs significantly impacted by hi
Slide 7: N.A. Corrugated Packaging Customer Inventory Levels
N.A. Corrugated Packaging Customer Inventory Levels Entering Entering Customer Segment 2Q23 3Q23 IP customer feedback suggests Beverage inventories are near target levels Processed Food Durables At or Below Target Near Target Non-Durables Above Target Shipping & Distribution Second Quarter 2023 Earn
Slide 8: N.A. Corrugated Packaging Inventory Destocking Trends
N.A. Corrugated Packaging Inventory Destocking Trends Retailer Inventory % of Sales US ISM Manufacturing PMI Inventories Index 1.70 60 1.60 55 1.50 1.40 50 1.30 45 1.20 1.10 40 Retail Inventories / Sales Ratio: General Merchandise Stores – FRED US ISM Manufacturing PMI Inventories Index – ISM® Retai
Slide 9: Global Cellulose Fibers 2Q23 vs 1Q23 Adjusted EBIT
Global Cellulose Fibers 2Q23 vs 1Q23 Adjusted EBIT1 17 30 34 Margin improvement from contract (16) restructuring offset by lower price from index movement & unfavorable mix (58) 61 Volume lower due to continued customer inventory destocking Operations benefited from lower supply chain cost, timing o
Slide 10: Capital Allocation: Maximizing Value Creation
Capital Allocation Maximizing Value Creation Investment Highlights Excellence Strong balance sheet Limited medium- and long-term debt maturities Fully funded qualified pension plan Return Returned $200MM to shareowners Maximizing Cash to Value Shareowners Investing to create value Creation Conti
Slide 11: Third Quarter Earnings Outlook
Third Quarter Earnings Outlook Changes from 2Q23 Industrial Packaging Cellulose Fibers Price & Mix Prior index movement Prior index movement & lower export pricing to date & lower pricing to date Volume Improving demand (+) Improving demand N.A. 1 less day (-) Ops & Costs Cost benefits Stable & lowe
Slide 12: 2023 Outlook
2023 Outlook Navigating an Uncertain Macro Environment 5-Year Average $ Billions Prior Updated $1.8 Assumptions (Unless Noted Otherwise) Outlook Outlook Adjusted EBITDA1 $2.3 to $2.5 $2.1 to $2.3 Includes the impact of sales price changes to date Optimizing marginal costs across mill & convertin
Slide 13: Building a Better IP
Building a Better IP On Track to Exceed Full Year Target 5-Year Average $1.8 Incremental Annual Earnings Growth Target YoY Achievement $ Millions $55MM 2Q23 / $120MM YTD YTD $150 84% Strategy Acceleration to Value capture $125 Profitable growth $150 to Actual = $250 $125 11% Process Optimization
Slide 14: Industrial Packaging: Taking Actions to Drive Profitable Growth
Industrial Packaging Taking Actions to Drive Profitable Growth Commercial Operations & Cost Investments Excellence • Improving mix • Reducing marginal costs • Improving productivity • Capturing additional value • Leveraging advanced technology • Expanding capabilities • Leveraging data analytics to
Slide 15: Global Cellulose Fibers: Path to Maximizing Value
Global Cellulose Fibers Path to Maximizing Value 5-Year Average Current Environment Actions Opportunities $1.8 • Customer inventory destocking • Differentiated value of fluff • Reduce exposure to – post pandemic vs. commodity commodity grades • Softer demand for Absorbent • Restructured contracts •
Slide 16: CEO Perspective
CEO Perspective IP is Agile and Resilient Through the Cycle 5-Year Average $1.8 Effectively navigating current macro environment Strong financial foundation Taking actions to maximize value Second Quarter 2023 Earnings 7/27/2023 16
Slide 17: Investor Relations
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 18: Appendix & Footnotes
Appendix & Footnotes
Slide 19: Industrial Packaging: Focused on Reducing Highest Marginal Costs
Industrial Packaging Focused on Reducing Highest Marginal Costs Fiber & Energy Supply Chain Supplies & Services • Maximizing lowest cost fiber • Mode optimization • Optimize planned maintenance • Wood vs. OCC • Rail vs. Truck outages and reduce spending • Round wood vs. chips • Reduce premium freigh
Slide 20: N.A. Corrugated Packaging Segment Demand
N.A. Corrugated Packaging Segment Demand IP Trend Customer Segment Industry 2Q YoY Food & Beverage ~45% Processed Food Beverage Protein Consumer spending focused on Fresh Produce non-discretionary and value Other Non-Durables ~30% Chemicals & Pharmaceuticals Manufacturers reducing inventories Paper,
Slide 21: Select Financial Metrics
Select Financial Metrics1 5-Year Average $1.8 $ Million 2021 2022 2023F Maintenance Outage Expense $531 $601 $598 Maintenance & Regulatory $415 $649 Targeting Cost Reduction $10 $50 $1,100 - $1,200 Strategic $124 $232 Depreciation & Amortization $1,097 $1,040 $1,000 Net Interest Expense $337 $267 $2
Slide 22: Free Cash Flow
Free Cash Flow 5-Year Average $1.8 $ Million 2020 2021 2Q22 2022 1Q23 2Q23 Cash Provided by $3,063 $2,0301 $390 $2,174 $3452 $528 Operations Cash Invested in Capital Projects, Net of $(751) $(549) $(186) $(931) $(341) $(267) Insurance Recoveries Free Cash Flow $2,312 $1,481 $204 $1,243 $4 $261 12021
Slide 23: Maintenance Outages Expenses
Maintenance Outages Expenses 2023 Forecast $ Million 1Q23A 2Q23A 3Q23F 4Q23F 2023F Industrial Packaging $161 $107 $79 $60 $407 North America $161 $86 $78 $57 $382 Riverdale Papers - $21 $1 - $22 EMEA - - - $3 $3 Global Cellulose Fibers $68 $34 $22 $67 $191 North America $53 $34 $22 $67 $176 Georgeto
Slide 24: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 421 622 130 532 398 143 36 270 2 191 179 63 59 55 61 127 120 113 102 45 29 36 68 70 15 19 Economic Maintenance Second Quarter 2023 Earnings 7/27/2023 24
Slide 25: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 2Q22 1Q23 2Q23 Industrial Packaging - - - Global Cellulose Fibers - - - Environmental Remediation $(15) Tax Audit Settlement Interest $6 Corporate Timber Monetization Settlement Interest $(3) Sylvamo Investment MTM Gain
Slide 26: Special Items Net of Tax
Special Items Net of Tax 2Q23 $ Million EPS Earnings Before Special Items $204 $0.59 Special Items Net of Taxes: Tax Audit Settlement (Including Interest) $27 Total Special Items Net of Taxes $27 $0.08 Non-Operating Pension (Expense) Income $(9) $(0.03) Discontinued Operations Net of Tax $13 $0.04 N
Slide 27: Operating Profits by Business Segment
Operating Profits by Business Segment $ Million 2Q22 1Q23 2Q23 Earnings (Loss) Before Income Taxes and Equity Earnings $514 $221 $255 Interest Expense, Net $74 $622 $592 Adjustment for Less Than Wholly Owned Subsidiaries $(1) $0 $0 Corporate Expenses, Net $27 $8 $8 Net Special Items $18 $0 $0 Non-Op
Slide 28: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Quarterly 2 Business Segment Sales D&A 1 $ Million Operating Profit 2Q22 1Q23 2Q23 2Q23 2Q22 1Q23 2Q23 Industrial Packaging North America $4,126 $3,724 $3,550 $176 $550 $302 $284 EMEA $413 $391 $351 $15 $10 $20 $20 Global Cellulose Fibers Global Cellulos
Slide 29: 2023 Operating Earnings
2023 Operating Earnings Non- Average Pre-Tax Tax controlling Equity Net Income Shares Diluted EPS1 $MM $MM Interest Earnings $MM MM $MM Net Earnings from Continuing Operations 1Q23 $221 ($48) - ($1) $172 353 $0.49 2Q23 $255 ($33) - - $222 347 $0.64 Net Special Items 1Q23 $3 ($1) - - $2 353 $0.01 2Q2
Slide 30: Debt Maturity Profile
Debt Maturity Profile Maturities as of June 30, 2023 $800 $700 $600 $500 $ Million $400 $300 $200 $100 $0 2045 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2046 2047 2048 Second Quarter 2023 Earnings 7/27/2023
Slide 31: 2Q23 vs 2Q22 Adjusted Operating EPS
2Q23 vs 2Q22 Adjusted Operating EPS1 1.2 .99 (.03) (.24) 1 0.8 (.87) .11 .59 0.6 .61 0.4 0.2 0 .02 -0.2 Volume Operations Maintenance Input Costs Corporate 2Q'23 2Q'22 Price/Mix & Costs Outages & Other Items -0.4 Second Quarter 2023 Earnings 7/27/2023 31
Slide 32: Industrial Packaging 2Q23 vs 2Q22 Adjusted EBIT
Industrial Packaging 2Q23 vs 2Q22 Adjusted EBIT1 700 560 (24) 600 (106) 500 (393) 400 268 304 300 $ Million 200 100 (1) 0 2Q'22 Price/Mix Volume Operations Maintenance Input Costs 2Q'23 & Costs Outages Second Quarter 2023 Earnings 7/27/2023 32
Slide 33: Global Cellulose Fibers 2Q23 vs 2Q22 Adjusted EBIT
Global Cellulose Fibers 2Q23 vs 2Q22 Adjusted EBIT1 11 (13) 30 30 25 (33) $ Million 10 2Q'22 Price/Mix Volume Operations Maintenance Input Costs 2Q'23 & Costs Outages Second Quarter 2023 Earnings 7/27/2023 33
Slide 34: Global Consumption: 2022 Annual Purchases for Key Inputs
Global Consumption 2022 Annual Purchases for Key Inputs Commodity North America EMEA Natural Gas (MMBTUs) 85,000,000 2,200,000 Energy Fuel Oil (Barrels) 252,000 0 Wood (Tons) 46,000,000 0 Fiber Old Corrugated Containers / DLK (Tons) 4,700,000 500,000 Caustic Soda (Tons) 360,000 1,500 Chemicals Starc
Slide 35: Global Input Costs 2Q23 vs 1Q23
Global Input Costs 2Q23 vs 1Q23 $83MM Favorable, $0.18 per share By Business By Input Type U.S Average Cost vs 1Q23 Wood -4% 55 OCC 4% 66 Natural Gas -37% Electricity -6% 17 17 2 9 Chemical Composite -10% Wood OCC Industrial Global Cellulose Fibers Fiber Energy Chemicals Freight Packaging Energy Woo
Slide 36: Footnotes
Footnotes Slide 3 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)) Slide 4 1 Before special items and non-operating pension expen
Slide 37: Footnotes
Footnotes Slide 27 1 Business segment operating profit defined as earnings (loss) before income taxes and equity earnings, but including the impact of less than wholly owned subsidiaries, and excluding interest expense, net, corporate expenses, net, corporate net special items, business net special
International Paper Company — Q2 2023 Earnings Presentation on 6ix