International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — 9th Annual Smith Barney Global Paper, Forest Products and Packaging Conference 2004
40 slides from International Paper's conference presentation, Dec 2, 2004
Slide 1: 9th Annual Smith Barney Global Paper, Forest Products and Packaging Conference
9 th Annual Smith Barney Global Paper, Forest Products and Packaging Conference December 2, 2004 Robert M. Amen President
Slide 2: Forward Looking Statement
Forward Looking Statement tatements on these slides or in this presentation that are not historical are forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including but not limited to, uncertainty as to whether the sale of W
Slide 3: Statements Relating to the Use of Non-GAAP Financial Measures
Statements Relating to the Use of Non-GAAP Financial Measures uring the course of this presentation, certain non- U.S. GAAP financial information will be presented. Reconciliations of those numbers to U.S. GAAP financial measures is available on the company’s website at www.internationalpaper.com un
Slide 4: Agenda
Agenda Who We Are Current Priorities Deliver Non-Price Improvement Maintain Financial Discipline Optimize Capital Allocation Strengthen the Balance Sheet Build Stronger Businesses Divest Non-Strategic Assets Invest in Best Performing Businesses Expand in High Return, Growth Markets
Slide 5: Who We Are
Who We Are Paper Packaging Forest Products Focus on Three Core Businesses
Slide 6: Focus on Three Core Businesses
Uncoated & Coated paper xpedx Containerboard Corrugated containers Consumer packaging Harvest trees Lumber & Plywood Carter Holt Harvey Focus on Three Core Businesses Paper Packaging Forest Products 52% 23% 20% % of Revenue
Slide 7: Global Scope: Revenues by geographic region
Revenues by geographic region Global Scope 2003 Total $25 billion Europe 12% Pacific Rim 10% North America 75% Latin America 3%
Slide 8: ROI Target: To Be Among BEST Industrials
ROI Target: To Be Among BEST Industrials Increase ROI by 500 basis points to 9% at trend line prices $1.5 B non-price improvement IP Goal 4% ROI 9% ROI
Slide 9: Earnings and ROI Improving
Earnings and ROI Improving 3Q’04 $3.6 5.0 2Q’04 $3.2 4.2 $2.9 3.8 EBITDA ($B) ROI (%) Annualized
Slide 10: 9M'04 vs. 9M'03 EPS from continuing operations before special items
9M’04 vs. 9M’03 EPS from cont. ops before special items $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 9M'03 Price Volume Cost/Mix Raw Material Hurricane Land Sales Interest Tax Pension Other 9M'04 ($.14) EPS $ / Share $.56 $.28 $.13 ($.05) ($.03) $.19 Wood Costs ($0.0
Slide 11: Non-price improvement status
Lower Costs & Create Efficiencies Improve Mix Grow Volumes Internal Initiatives Non price improvement status Manufacturing Excellence Supply Chain Lower S&A/Other Segmenting Solutions New Product Targeted Segments Market Recovery $1.6 $0.7 ($0.8) Higher Costs/Inflation $1.5 Non-Price Improvement Tar
Slide 12: Financial Discipline: Optimize Capital Allocation
Financial Discipline Optimize capital allocation Capital Spending Maintain capex at 75-85% of depreciation for 2004/2005 ($1.3 - $1.4 billion per year) Allocate capital to those businesses with best returns in North America & elsewhere
Slide 13: Financial Discipline: Reduce Debt 2005-2006
Financial Discipline Reduce debt 2005-2006 Reduce debt Committed to maintaining investment grade ratings Facilitates access to capital & attractive cost of capital Reinforces IP as a bellwether bond issuer Targeting $3 billion reduction to $12 billion debt level (gross) within 24 months
Slide 14: Building Stronger Businesses
Building Stronger Businesses
Slide 15: Building Stronger Businesses
Building Stronger Businesses Divest non-strategic assets Invest in best performing strategic businesses North America Emerging economies Expand in fast growing, low cost markets Eastern Europe Latin America – focus on Brazil Asia – focus on China
Slide 16: Divest Non-Strategic Assets
Divest Non-Strategic Assets Proceeds ($MM) Sold CHH Tissue - May 2004 (Cash to IP $150MM) Sold minor W. European assets Selling Weldwood of Canada Selling 1.1 million acres N.E. Timberlands Exploring sale of Specialty Papers CHH exploring options for Forestlands 95 0 TBD TBD
Slide 17: Invest in Best Performing Assets: Industrial Packaging
Invest in Best Performing Assets Industrial Packaging Box USA Acquisition Increases integration level in U.S. from 60% to 70% On track to capture synergies Facility rationalization Optimize containerboard mill system Sharing best practices
Slide 18: Per capita paper & board consumption
Expand in High Return, Growth Markets Per capita paper & board consumption Finland USA Sweden Canada Japan Taiwan Korea Chile Brazil China Russia India Africa World kilograms per person Growth Potential Consumption at 10 - 15% of U.S. rate Source: RISI
Slide 19: Expand in High Return, Growth Markets: Asia/China
Expand in High Return, Growth Markets Asia/China Bangkok, Thailand Chengdu, PRC Taipei, Taiwan Tianjin, PRC Guangzhou, PRC Shanghai, PRC Dalian, PRC Fukusaki, Japan Seoul, S. Korea Leshan, PRC Shishou, PRC Revenue $210 MM EBITDA Margin 20% Industrial Pkg. plants (6) Wood products plants (2) Consumer
Slide 20: Focus on China
Expand in High Return, Growth Markets Asia/China Focus on China Invest in our packaging business Evaluate pulp, paper and board options Ship to China from low cost IP producing areas Grow via joint ventures and organic growth
Slide 21: Expand in High Return, Growth Markets: Eastern Europe
Expand in High Return, Growth Markets Eastern Europe Svetogorsk, Russia Kwidzyn, Poland Turkey Revenue $630 MM EBITDA Margin 38% Paper mills (3) Industrial Pkg. plants (4)
Slide 22: Growth Markets: Eastern Europe
Expand in High Return, Growth Markets Eastern Europe Expand capacity in uncoated free sheet and coated board Focus on organic growth Limited acquisition opportunities
Slide 23: Growth initiatives in Eastern Europe: Kwidzyn, Poland
Kwidzyn, Poland Expand in High Return, Growth Markets Growth initiatives in Eastern Europe Market Pulp 65,000 tpy Coated Board 160,000 tpy Newsprint 100,000 tpy UFS 400,000 tpy
Slide 24: Growth initiatives in Eastern Europe: Svetogorsk, Russia
Expand in High Return, Growth Markets Growth initiatives in Eastern Europe Svetogorsk, Russia Liquid Pkg. Board 100,000 tpy UFS 300,000 tpy
Slide 25: Latin America: Expand in High Return, Growth Markets
Latin America Expand in High Return, Growth Markets San Salvador, El Salvador Bogota, Colombia Santiago, Chile Guacara, Venezuela Santiago, D.R. Mogi Guacu, Brazil Inpacel, Brazil Amapa, Brazil Tres Lagoas, Brazil Industrial Pkg. plants (1) Paper mills (2) Plantations Wood products plants (2) Revenu
Slide 26: Brazil - Platform for Growth: Mogi Guaçu
Brazil - Platform for Growth UFS: 440,000 tpy Land: 47,000 hectares UFS = Uncoated freesheet Mogi Guaçu Amapá Inpacel Três Lagoas Forests Mill Mogi Gua çu
Slide 27: Brazil - Platform for Growth: Inpacel
CGW: 220,000 tpy Land: 50,000 hectares CGW = Coated groundwood Inpacel Brazil - Platform for Growth Amapá Inpacel Três Lagoas Forests Mill Mogi Gua çu
Slide 28: Brazil - Platform for Growth: Amapá Eucalyptus Plantation
Brazil - Platform for Growth Eucalyptus Plantation Land: 307,000 hectares Amapá Amapá Inpacel Três Lagoas Forests Mill Mogi Gua çu
Slide 29: Brazil - Platform for Growth: Três Lagoas Eucalyptus Plantation
Brazil - Platform for Growth Eucalyptus Plantation Land: 100,000 hectares Três Lagoas Amapá Inpacel Três Lagoas Forests Mill Mogi Gua çu
Slide 30: IP Brazilian Options
Amapá Três Lagoas Inpacel Mogi Guaçu Evaluating new pulp & paper mill at IP’s forest plantation in Três Lagoas, Brazil IP Brazilian Options
Slide 31: Três Lagoas Opportunity
Tr ê s Lagoas Opportunity Capital Est. $1.2-1.3 B Potential startup 2008 Major Capex 2006/07 ROI > 15+% 900,000 tpy eucalyptus pulp mill 100% market pulp or 500,000 tpy UFS paper mill and market pulp Commissioned engineering study to evaluate a new mill in Tr ê s Lagoas, Brazil
Slide 32: Attractiveness of Brazil
Attractiveness of Brazil Location Market Access People Factor Costs Excellent location to serve growing Brazilian demand and key U.S., Asia and W. European markets IP has the brands and channels of distribution IP has the people to execute the strategy Attractive labor, fiber costs
Slide 33: Brazilian Opportunity: Low cost fiber
Amapá Três Lagoas Brazilian Opportunity Low cost fiber Height: 21 m Height: 26 m DBH: 12 cm Bark thickness: 4mm DBH: 18 cm Bark thickness: 4mm Years to Maturity $125 $29 $52 Fiber Cost/Ton Copy Paper Produced* Annual Growth (M 3 /heactare/year) U.S. SYP Tres Lagoas Amapa * U.S. southern yellow pine
Slide 34: Brazilian Opportunity: Low cost UFS producer
Brazilian Opportunity Low cost UFS producer Cash Costs $/ton New Brazilian mill will be low cost UFS producer Source: Jaakko Poyry, IP Strategic Planning $0 $100 $200 $300 $400 $500 Brazilian Greenfield 1st Quartile U.S. Asian Greenfield Russian Greenfield Average Mill U.S. Fiber Labor Energy Other
Slide 35: Brazilian Opportunity: Low cost pulp producer
Brazilian Opportunity Low cost pulp producer New Brazilian mill will be low cost pulp producer Source: Jakko Poyry, IP Strategic Planning Cash Costs $/ton $0 $100 $200 $300 $400 Brazilian Greenfield 1st Quartile U.S. Asian Greenfield Russian Greenfield Average Mill U.S. Fiber Labor Energy Other Conv
Slide 36: Global Uncoated Freesheet Demand growth by region 2003-8
Global Uncoated Freesheet Demand growth by region 2003 - 2008 Other North America Latin America Asia Pacific W. Europe Eastern Europe 2003 Demand by Region (million metric tons) Average 2.6 % per year Rapid demand growth is expected in the emerging markets Source: EMGE, Jaakko Poyry, IP Strategic Pl
Slide 37: Global Uncoated Freesheet Supply/demand growth by region 2003-2008
+6.0 +3.3 Global Uncoated Freesheet Supply/demand growth by region 2003-2008 Growth (p.a. %) MM metric tons Growth (p.a. %) MM metric tons Supply Change Demand Change 0.4 2.8 0.6 0.4 1.0 0.8 2.6 3.2 3.4 4.0 3.4 2.2 1.3 2.0 1.9 Asia Pacific 1.2 0.7 Western Europe 2.5 0.3 Eastern Europe 0.5 0.1 Latin
Slide 38: Três Lagoas Opportunity: Issues to be resolved
Tr ê s Lagoas Opportunity Issues to be resolved Decision time frame – 4Q 2005 1. Market supply/demand analysis 2. Configuration and capital costs 3. Return on investment 4. Impact on IP global supply platform
Slide 39: IP into the Future
IP into the Future More focused company with great assets & people Globally competitive assets based on productivity, factor costs & scale Globally integrated IP supply network serving targeted customers Maintain financial discipline Committed to earning a 9% ROI cycle average
Slide 40: International Paper
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