International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Investor Presentation (July 2005)
37 slides from International Paper's investor presentation, Jul 19, 2005
Slide 1: Transformation
Transformation John V. Faraci Chairman & CEO Marianne M. Parrs Executive VP & CFO July 19, 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements These slides contain forward-looking statements. Such statements reflect management’s current views and are subject to risks and uncertainties that could cause actual results to differ materially, including but not limited to, the ability of the company to accomplish its t
Slide 3: Transformation
Transformation Significantly improve profitability Improve the balance sheet Return value to shareowners Focused Global Paper and Packaging Company
Slide 4: Transformation Plan Overview
Transformation Plan Overview Key Platform Businesses Uncoated Papers, Global Packaging, Global Improve Profitability Improvement initiatives Reduce cost base of transformed company Realign U.S. mills Selected Assets to Evaluate 50.5% stake in Carter Holt Harvey Coated Papers Beverage Pkg. Kraft Pape
Slide 5: IP Today
IP Today Diversified Paper & Forest Products Company 51% of 2004 Revenue Paper Uncoated Papers Uncoated free sheet Bristols xpedx Distribution Market Pulp Coated Papers Coated groundwood Coated free sheet 28% of 2004 Revenue Packaging Industrial Packaging Containerboard Corrugated boxes Kraft paper
Slide 6: The Case for Transformation
The Case for Transformation The world and our business has changed and IP’s strategy has changed with it Will not wait for the market cycle to improve – must take new steps now
Slide 7: Transformation Plan
Transformation Plan Today Diversified N. American Paper and Forest Products Company Narrow IP’s focus to key platform businesses Improve profitability of key platform businesses Pursue options for selected assets Future Focused Global Paper and Packaging Company Improved balance sheet Returning valu
Slide 8: Transformation Plan: Key platform businesses
Transformation Plan Overview Key platform businesses Key Platform Businesses Uncoated Papers, Global Packaging, Global Improve Profitability Improvement initiatives Reduce cost base of transformed company Realign U.S. mills Selected Assets to Evaluate 50.5% stake in Carter Holt Harvey Coated Papers
Slide 9: Uncoated Papers
Uncoated Papers IP’s distinct market advantages Low cost producers can earn cost of capital returns Best ROS in industry segment - U.S., Europe and Brazil Significant potential Cost improvement in U.S. Demand growth in E. Europe, Latin America and Asia IP is the largest, best positioned global produ
Slide 10: Uncoated Papers: Leader in uncoated paper
Uncoated Papers Leader in uncoated paper U.S. 8 mills 4.8 MM tpy W. Europe 3 mills 600,000 tpy E. Europe 2 mills 700,000 tpy 2004 Results* $5.8 B revenue 14 paper mills 6.6 MM tpy Brazil 1 mill 500,000 tpy Uncoated papers mill * Includes Market Pulp revenues ($660MM) but excludes Fine Papers ($165MM
Slide 11: Distribution - xpedx
Distribution - xpedx Key channel to market for paper & packaging #1 North American merchant with synergy and supply chain opportunities with IP’s paper and packaging segments Printing Papers 60% Packaging 20% Facility Supplies 15% Graphics 5% xpedx 2004 sales revenue by category xpedx represents 35%
Slide 12: Packaging
Packaging Global platform in packaging Strong U.S. industrial packaging and European corrugated box businesses A top global producer of coated board Global packaging customers
Slide 13: U.S. Industrial Packaging
U.S. Industrial Packaging Strong businesses 2004 Results* $3.3 B revenue 70 box plants 8 board mills 4.6 MM tpy Corrugated box plant Containerboard mill * Excludes Specialty Papers revenues ($680MM)
Slide 14: International Container
International Container Strong business Europe 25 box plants 2 recycled board mills Asia 6 box plants Latin America 1 box plant 2004 Results $920 MM revenue 32 box plants 2 recycled board mills Corrugated box plant Recycled board mill
Slide 15: Consumer Packaging
Consumer Packaging Global customers and differentiated products North America 3 coated board mills 1.4 MM tpy Eastern Europe** 2 coated board machines 240,000 tpy 2004 Results* $1.7 B revenue 27 converting plants 5 mills producing coated board 1.6 MM tpy Converting plant Coated board mill * Excludes
Slide 16: Transformation Plan: Improve profitability
Transformation Plan Overview Improve profitability Key Platform Businesses Uncoated Papers, Global Packaging, Global Improve Profitability Improvement initiatives Reduce cost base of transformed company Realign U.S. mills Selected Assets to Evaluate 50.5% stake in Carter Holt Harvey Coated Papers Be
Slide 17: Improve Profitability Initiatives
Improve Profitability Initiatives Improvement initiatives on more focused asset base Manufacturing excellence Supply chain Lower S&A Mix improvements Targeted customer segments (volume) U.S. mill realignment Targeting $400 MM average annual savings Assumes no change in input costs from current level
Slide 18: Realign U.S. mill system
Improve Profitability Realign U.S. mill system Improve profitability of U.S. mill system without increasing capacity Next Steps Transform high cost uncoated paper mill into low cost linerboard mill (Pensacola, FL) Close 1 small medium mill (Ft. Madison, IA) Evaluate Options Downsize 1 small uncoated
Slide 19: Realign U.S. mill system - Uncoated Papers
Improve Profitability Realign U.S. mill system - Uncoated Papers Rationalized 1 million tons of uncoated paper capacity 2000- 2003 Indefinitely shut three uncoated paper machines removing 430K tpy of capacity in 1H’05 Next Steps Convert Pensacola, FL mill to linerboard removing 300K tpy of uncoated
Slide 20: Uncoated paper machines on global cost curve
Improve Profitability Realign U.S. mill system - Uncoated Papers Improving IP’s uncoated paper machines position on global cost curve 2004 Cash Cost Per Ton ($) 0 100 200 300 400 500 600 700 800 900 0 5,000 10,000 15,000 20,000 25,000 30,000 Over 70% of IP’s uncoated paper machines are in the first
Slide 21: Realign U.S. mill system - Containerboard
Improve Profitability Realign U.S. mill system - Containerboard Next Steps Convert Pensacola, FL mill to lightweight linerboard adding 500K tpy of high-value capacity in 2006/2007 - Close 100K tpy of medium capacity at Ft. Madison, Iowa . Evaluate Options Close Pineville, LA mill removing 400K tpy o
Slide 22: Realign U.S. mill system summary
Improve Profitability Realign U.S. mill system summary Targeted results of U.S. mill realignment: Fewer, larger, lower-cost, more profitable mills Lowest cost and able to run at full capacity Mill system will be sized to match IP capacity to our customer demand
Slide 23: Transformation Plan: Selected assets to evaluate
Transformation Plan Overview Selected assets to evaluate Key Platform Businesses Uncoated Papers, Global Packaging, Global Improve Profitability Improvement initiatives Reduce cost base of transformed company Realign U.S. mills Selected Assets to Evaluate 50.5% stake in Carter Holt Harvey Coated Pap
Slide 24: Pursue strategic options – Carter Holt Harvey
Focus on Uncoated Papers & Packaging Pursue strategic options – Carter Holt Harvey 50.5% stake in Carter Holt Harvey 2004 Results $2.2 B revenue 4 paper mills 1.1 MM tpy of linerboard & pulp 29 wood products plants 785,000 acres $100 MM op. profit $210 MM D&A $3.3 B capital employed Carter Holt Harv
Slide 25: Pursue strategic options – Coated & SC Paper
Focus on Uncoated Papers & Packaging Pursue strategic options – Coated & SC Paper Coated & SC Paper* 2004 Results $1.6 B revenue 5 coated paper mills—2.2 MM tpy $5 MM op. profit $140 MM D&A $3.0 B capital employed U.S. 4 mills 2.0 MM tpy Bucksport, ME Jay, ME Quinnesec, MI Sartell, MN Pine Bluff, AR
Slide 26: Pursue strategic options – Beverage Pkg.
Focus on Uncoated Papers & Packaging Pursue strategic options – Beverage Pkg. Beverage Pkg.* 2004 Results $0.9 B revenue 17 plants 1 mill – 450K tpy $40 MM op. profit $35 MM D&A $480 MM capital employed Pine Bluff, AR Converting plant Liquid packaging board mill * Includes Pine Bluff, AR liquid pack
Slide 27: Pursue strategic options – Kraft Papers
Focus on Uncoated Papers & Packaging Pursue strategic options – Kraft Papers Kraft Papers* 2004 Results $160 MM revenue 1 mill – 400K tpy Kraft paper ($5) MM op. profit $17 MM D&A $240 MM capital employed Roanoke Rapids, NC Kraft paper mill * Includes Roanoke Rapids Kraft paper mill.
Slide 28: Pursue strategic options – Arizona Chemical
Focus on Uncoated Papers & Packaging Pursue strategic options – Arizona Chemical W. Europe 6 plants U.S. 6 plants Arizona Chemical 2004 Results $0.7 B revenue 12 plants $40 MM op. profit $25 D&A $320 MM capital employed Converting plant
Slide 29: Pursue strategic options – Forest Products
Focus on Uncoated Papers & Packaging Pursue strategic options – Forest Products Great Lakes 0.5 MM acres Northeast 0.3 MM acres South 6.0 MM acres Forest Resources 2004 Results $0.9 B revenue 6.8 MM acres $540 MM op. profit $60 MM COTH $2.5 B capital employed Wood Products 2004 Results $1.5 B revenu
Slide 30: Selected assets contribution to 2004 results
Focus on Uncoated Papers & Packaging Pursue strategic options for selected assets Selected assets contribution to 2004 results 100 90 80 70 60 50 40 30 20 10 0 Business Segment Capital Employed Business Segment Sales Operating Profit Key Businesses Forest Products Other selected assets 20% 10% 30% 2
Slide 31: Transformation Plan: Priorities for use of proceeds
Transformation Plan Overview Priorities for use of proceeds Key Platform Businesses Uncoated Papers, Global Packaging, Global Improve Profitability Improvement initiatives Reduce cost base of transformed company Realign U.S. mills Selected Assets to Evaluate 50.5% stake in Carter Holt Harvey Coated
Slide 32: Priorities for Use of Proceeds
Priorities for Use of Proceeds Asset sales after-tax proceeds are anticipated to be in the range of $8-10 B, depending on the mix of businesses sold or spun off Priorities for use of asset sales proceeds: 1. Maintain investment grade credit rating – repay debt beyond target of $12 B (40-50%) 2. Retu
Slide 33: Transformation Timeline
Transformation Timeline Carter Holt Harvey Coated & SC Papers (incl. Inpacel mill) Beverage Packaging (incl. Pine Bluff mill) Arizona Chemical Kraft Papers (incl. Roanoke Rapids mill) Selected forestlands and related wood products business U.S. mill realignment Expect to substantially complete trans
Slide 34: IP Going Forward
IP Going Forward More focused Improved profitability Higher earnings per share Less debt Improved return on investment
Slide 35: Summary
Summary Executing transformational portfolio choices Improving our key platform businesses Strengthening the balance sheet Returning value to shareowners
Slide 36: International Paper
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Slide 37: International Paper
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