International Paper Company · NYSE:IP
International Paper — Q2 2024 Earnings Presentation
44 slides from International Paper's earnings presentation, Jul 24, 2024
Slide 1: Second Quarter 2024 Earnings
Second Quarter 2024 Earnings July 24, 2024
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, as amended. Forward- looking statements can be identified by the use of forw
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: Andy Silvernail First 90 Days
Andy Silvernail First 90 Days ▪ Why IP ▪ Learning Journey ▪ Early Insights Second Quarter 2024 Earnings 7/24/2024 4
Slide 5: IP's Challenge
IP’s Challenge 5 Second Quarter 2024 Earnings 7/24/2024
Slide 6: IP's Challenged Decade of Performance
IP’s Challenged Decade of Performance … Net Sales1 ($B) EBITDA Margin1 EBITDA1 ($B) 23.6 23.3 22.4 19.4 18.9 17.5% 16.9% 17.2% 13.4% 11.8% 4.3 4.1 3.9 3.9 3.9 3.5 3.1 2.9 2.6 2.2 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 All EBITDA reflects Adjusted EBITDA Second Quarter 2024 Earnings 7/24/2
Slide 7: While Deploying More Than $35B of Cash
… While Deploying More Than $35B of Cash… Debt & Pension1 Dividend $7.3 $8.6 35% Returned to Shareholders 33% Reinvested in Businesses Capital Allocation 24% Strengthened Balance Sheet 2014 – 2023 M&A $2.6 $5.1 (in billions) 8% M&A Share Repurchases $11.8 Capex Source: IP public filings Second Quart
Slide 8: But Significantly Underinvested in Reliability, Capability & Productivity
… But Significantly Underinvested in Reliability, Capability & Productivity Underinvested in capital Box business underspent in maintenance expense relative to competitors relative to industry Capex as a % of revenue (2018-2023 avg.) Maintenance $ per MSF (2018-2023 avg.) 6.4% $2.52 $2.11 4.9% Compe
Slide 9: Cost Creep and Share Loss Eroded Earnings on Current Portfolio
… While Cost Creep and Share Loss Eroded Earnings on Current Portfolio Revenue $18.9 $18.3 Current Portfolio ($B) 6.1 6.5 ▲ Input Costs $ 1.0 Material Margin $(1.7) Operating Costs $(0.7) EBITDA1 Erosion (B) Operating 10.6 (400) bps Margin Decline 8.9 Costs (300) bps Box Share Decline 2.9 16% EBITDA
Slide 10: 90 Day Insights
90 Day Insights Build From Improve ▪ Ethical culture ▪ Customer-driven strategy ▪ Talented, experienced team ▪ Cost structure ▪ NA IPG franchise ▪ Team alignment ▪ Solid balance sheet ▪ Performance: culture & results 80 / 20 10 Second Quarter 2024 Earnings 7/24/2024
Slide 11: Performance & Outlook
Performance & Outlook 11 Second Quarter 2024 Earnings 7/24/2024
Slide 12: Second Quarter 2024 Highlights
Second Quarter 2024 Highlights 2Q23 1Q24 2Q24 2Q24 Performance • Sequential earnings increased; flat YoY Sales ($B) $4.7 $4.6 $4.7 1 • Higher sales prices and seasonally stronger Adjusted EBIT ($MM) $326 $147 $300 packaging volume 2 Adjusted Operating EPS $0.59 $0.17 $0.55 • Stable to moderate deman
Slide 13: 2Q24 vs 1Q24 Adjusted Operating EPS
2Q24 vs 1Q24 Adjusted Operating EPS1 0.7 .55 0.6 .07 .03 .00 .06 (.01) 0.5 .23 0.4 0.3 .17 0.2 0.1 0 1Q'24 Price/Mix Volume Operations Maintenance Input Costs Corporate 2Q'24 & Costs Outages & Other Items Second Quarter 2024 Earnings 7/24/2024 13
Slide 14: Industrial Packaging 2Q24 vs 1Q24 Adjusted EBIT
Industrial Packaging 2Q24 vs 1Q24 Adjusted EBIT1 27 (43) 91 Higher price/mix, including: (3) 3 291 $45MM Index movement $25MM Box Go-to-Market strategy $21MM Higher export & mix 216 Demand trends stable to improving Seasonally stronger volume plus one additional shipping day vs. 1Q $ Million IP U.S.
Slide 15: Global Cellulose Fibers 2Q24 vs 1Q24 Adjusted EBIT
Global Cellulose Fibers 2Q24 vs 1Q24 Adjusted EBIT1 19 (1) 31 Higher price/mix from price index 36 movement and Optimization strategy Higher fluff volume, offset by (47) reduction in commodity pulp Ops & Costs favorably impacted by mill efficiencies following pulp machine closure, and timing $ Milli
Slide 16: Third Quarter Earnings Outlook
Third Quarter Earnings Outlook Changes from 2Q24 Industrial Packaging Cellulose Fibers Price & Mix Prior index movement & export YTD (+) Prior index movement (+) Box Go-to-Market strategy (+) N.A. 1 less day (-) Volume Seasonality (-) Seasonality (-) Box Go-to-Market strategy (-) Reliability spendin
Slide 17: 80/20 Strategic Approach
80/20 Strategic Approach Improved Focus & Alignment Drives Significant Improvement 17 Second Quarter 2024 Earnings 7/24/2024
Slide 18: Four Steps to 80/20
Four Steps to 80/20 1. Simplify 2. Segment 3. Resource 4. Growth Choose our crops Separate tomatoes and Only water as needed Fertilize & Harvest pumpkins A Differentiated Approach to Winning Second Quarter 2024 Earnings 7/24/2024 18
Slide 19: Aligning Resources with Opportunity
Aligning Resources with Opportunity CUSTOMERS REVENUE SUPPORT STRUCTURE 20% 80% 20% 80% 20% 80% Second Quarter 2024 Earnings 7/24/2024 19
Slide 20: IP's 80/20 Approach to Resource Allocation – Future State
IP’s 80/20 Approach to Resource Allocation – Future State 80 20 Segment Businesses Center Zero Up Zero Up Align Resources Public Company (minimum) Focused Strategic Priorities Authority & Accountability Second Quarter 2024 Earnings 7/24/2024 20
Slide 21: Targeting $4B EBITDA over Medium Term
Targeting $4B EBITDA over Medium Term1 Strategic Drivers - 80/20 Approach $4B Focus on People, Customers & Products where we win Simplify, align and reduce cost structure $2.2B Invest for reliability, productivity, innovation Price to value 2023 Medium Term Profitable Growth All EBITDA reflects Adju
Slide 22: Next Steps
Next Steps ▪ Accelerate 80/20 strategy work ▪ Investor roadshow ▪ Shareholder vote – DS Smith ▪ October update – earnings call ▪ Investor Day Second Quarter 2024 Earnings 7/24/2024 22
Slide 23: Q&A
Q&A 23 Second Quarter 2024 Earnings 7/24/2024
Slide 24: 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 Second Quarter 2024 Earnings 7/24/2024 24
Slide 25: Appendix & Footnotes
Appendix & Footnotes Second Quarter 2024 Earnings 7/24/2024 25
Slide 26: N.A. Corrugated Packaging Demand Trends
N.A. Corrugated Packaging Demand Trends Customer Segment Industry Mix IP View of Demand Trends E-commerce, Shipping & Distribution ~20% Improving E-commerce Strong growth from consumer preferences for online retail Shipping & Distribution Favorable trend post destocking Food & Beverage ~45% Stable w
Slide 27: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Quarterly Business Segment Sales D&A 1 $ Million Operating Profit 2Q23 1Q24 2Q24 2Q24 2Q23 1Q24 2Q24 North America $3,550 $3,486 $3,628 $186 $284 $192 $281 EMEA $351 $348 $328 $16 $20 $24 $10 Global Cellulose Fibers Global Cellulose Fibers $698 $704 $717
Slide 28: 2Q24 vs 2Q23 Adjusted Operating EPS
2Q24 vs 2Q23 Adjusted Operating EPS1 0.7 .59 (.10) .05 (.02) (.03) .55 0.6 .05 .01 0.5 0.4 0.3 0.2 0.1 0 2Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 2Q'24 & Costs Outages & Other Items Second Quarter 2024 Earnings 7/24/2024 28
Slide 29: Industrial Packaging 2Q24 vs 2Q23 Adjusted EBIT
Industrial Packaging 2Q24 vs 2Q23 Adjusted EBIT1 350 (5) 14 (21) 24 (25) 304 291 300 250 200 $ Million 150 100 50 0 2Q'23 Price/Mix Volume Operations Maintenance Input Costs 2Q'24 & Costs Outages Second Quarter 2024 Earnings 7/24/2024 29
Slide 30: Global Cellulose Fibers 2Q24 vs 2Q23 Adjusted EBIT
Global Cellulose Fibers 2Q24 vs 2Q23 Adjusted EBIT1 30 (43) 15 31 26 (4) $ Million 7 2Q'23 Price/Mix Volume Operations Maintenance & Costs Input Costs Outages 2Q'24 Second Quarter 2024 Earnings 7/24/2024 30
Slide 31: Business Segment Operating Profit (Loss)
Business Segment Operating Profit (Loss) $ Million 2Q23 1Q24 2Q24 Business Segment Operating Profit (Loss) Industrial Packaging1 $304 $216 $291 Global Cellulose Fibers1 $30 $(47) $31 Second Quarter 2024 Earnings 7/24/2024 31
Slide 32: Select Financial Metrics: Capex
Select Financial Metrics1 5-Year Average $1.8 $ Million 2022 2023 2024F Maintenance Outage Expense $601 $593 $533 Maintenance & Regulatory $649 $815 Capex Targeting Cost Reduction $50 $85 $800 - $1,000 Strategic $232 $241 Depreciation & Amortization2 $1,040 $1,432 $1,040 Net Interest Expense3 $267 $
Slide 33: Maintenance Outages Expenses
Maintenance Outages Expenses 2024 Forecast $ Million 1Q24A 2Q24A 3Q24F 4Q24F 2024F Industrial Packaging $77 $80 $124 $93 $374 North America $77 $59 $124 $91 $351 Riverdale Papers - $18 - - $18 EMEA - $3 - $2 $5 Global Cellulose Fibers $57 $38 $13 $51 $159 North America $33 $38 $13 $51 $135 Georgetow
Slide 34: Free Cash Flow
Free Cash Flow1 $ Million 2021 2022 2Q23 2023 1Q24 2Q24 Cash Provided by $2,0302 $2,174 $528 $1,833 $395 $365 Operations Cash Invested in $(549) $(931) $(267) $(1,141) $(251) $(198) Capital Projects Free Cash Flow $1,481 $1,243 $261 $692 $144 $167 22021 cash provided by operations includes tax payme
Slide 35: 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 36: 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 2Q24 $206 $293 - $(1) $498 353 $1.41 Net Special Items 1Q24 $18 $(4) - - $14 349 $0.
Slide 37: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 2Q23 1Q24 2Q24 Mill Closure $(4) Industrial Packaging Net Gain/(Loss) on Miscellaneous Land Sales $5 Global Cellulose Fibers Machine Closures $(4) Legal Reserve Adjustments $(10) Net Gain/(Loss) on Miscellaneous Land Sal
Slide 38: Special Items Net of Tax
Special Items Net of Tax 2Q24 $ Million EPS Earnings Before Special Items $193 $0.55 Special Items Net of Taxes: Environmental Remediation Adjustment $(19) Net Gain/(Loss) on Miscellaneous Land Sales $4 Internal Legal Entity Restructuring $338 DS Smith Combination Costs $(17) Strategic Advisory Fees
Slide 39: Sales Volume by Product
Sales Volume by Product Preliminary and Unaudited Three Months Ended Three Months Six Months Ended June 30, Ended March 31, June 30, 2024 2023 2024 2024 2023 Industrial Packaging (In thousands of short tons) Corrugated Packaging (b) 2,255 2,393 2,232 4,487 4,774 Containerboard 791 600 739 1,530 1,14
Slide 40: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 622 532 421 130 105 398 458 143 137 243 36 132 231 68 12 179 55 61 11 127 120 113 102 106 102 36 35 75 57 29 19 25 24 Economic Maintenance Second Quarter 2024 Earnings 7/24/2024 40
Slide 41: Global Input Costs 2Q24 vs 1Q24
Global Input Costs 2Q24 vs 1Q24 $2MM Favorable, $0.00 per share By Business By Input Type U.S Average Cost vs 1Q24 3 1 Wood -1% OCC 11% 16 Natural Gas -19% Wood Flat 2 Electricity -2% (9) (4) Chemical Composite 1% (1) OCC (4) Industrial Global Cellulose Fibers Packaging Fiber Energy Chemicals Freigh
Slide 42: Footnotes
Footnotes Slide 6 1All metrics are as previously disclosed. 2013 includes xpedx. Years 2013-2017 are inclusive of N.A. Consumer Packaging. 2021 excludes Papers. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available on IP's website at https://www.inter
Slide 43: Footnotes
Footnotes Slide 16 1 No reconciliation of the anticipated operational effective income tax rate for 2024, a forward-looking non-GAAP financial measure, to the most comparable GAAP measure, is included in this presentation because we are unable to quantify certain amounts that would be required to be
Slide 44: Footnotes
Footnotes Slide 31 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
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