International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2005 Earnings Presentation
31 slides from International Paper's earnings presentation, Apr 22, 2005
Slide 1: First Quarter 2005 Review
First Quarter 2005 Review April 22, 2005 John V. Faraci Chairman & CEO Christopher P. Liddell SVP & CFO
Slide 2: Forward Looking Statements
Forward Looking Statements Statements 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, the strength of demand for the compan
Slide 3: Statements Relating to Non-GAAP Financial Measures
Statements Relating to Non-GAAP Financial Measures During the course of this presentation, certain non-U.S. GAAP financial information will be presented. A reconciliation of those numbers to U.S. GAAP financial measures is available on the company’s website at www.internationalpaper.com under Invest
Slide 4: Agenda
Agenda First Quarter Review Second Quarter Outlook
Slide 5: First Quarter 2005 Summary
First Quarter 2005 Summary Volumes seasonally soft in the first quarter Soft Jan — Feb Stronger in March Took downtime to balance IP supply with customer demand Continued to realize IP announced price increases in paper, packaging and pulp Mill operations improved Raw material costs increased
Slide 6: Net Sales Revenue
Net Sales Revenue Highest first quarter net sales revenue since 2001 $billion 7 6.5 6 5.5 5 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Slide 7: Diluted EPS from Continuing Operations and Before Special Items
Diluted EPS from Continuing Operations and Before Special Items* Highest first quarter earnings in five years .03 .11 .11 ..11 .11 .32 .29 .32 .14 .19 .22 .19 .12 .33 .42 .42 .34 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2001 2002 2003 2004 2005 * A reconciliation to GAAP EPS is available a
Slide 8: 1Q'05 vs. 4Q'04
1Q’05 vs. 4Q’04 Diluted EPS from cont. ops before special items Volume ($0.07) Downtime ($0.02) 1Q05 Tax rate 24% 4Q04 Tax rate 16% EPS $/ Share $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $.42 $.06 ($09) $.08 ($07) ($04) ($03) $.34 Paper $0.02 Packaging $0.01 Wood Prod $0.02 CHH $0.01 Wood Costs ($0.
Slide 9: 1Q'05 vs. 1Q'04
1Q’05 vs. 1Q’04 Diluted EPS from cont. ops before special items Paper $0.22 Packaging $0.16 Other $0.01 LIFO ($0.04) Pension ($0.04) Supply Chain ($0.02) Other $0.02 EPS $ / Share $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $.12 $.39 ($05) $.10 ($16) ($08) $.02 ($0) $.34 1Q04 Tax rate 33% 1Q05 T
Slide 10: Lack of Order Downtime
Lack of Order Downtime M Short Tons Europe 10 Uncoated 40 Containerboard 45 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 Containerboard Coated Papers Uncoated Papers Bleached Board Pulp European Papers *Downtime is in thousand short tons after rationalization actions, excludes ma
Slide 11: Printing Papers
Printing Papers $ Millions 1Q’05 4Q’04 Sales $1,985 $1,985 Earnings 183 196 1Q’05 Change vs 4Q’04: Volume Realizations/ton Uncoated* Flat $5 Coated* (3%) $35 Pulp* (3%) $35 Europe (uncoated) (4%) Flat * U.S. operations only and excluding Fine Papers Average IP realization (includes the impact of mix
Slide 12: Printing Papers
Printing Papers U.S. UFS price realizations by grade 1Q’05 Change vs 4Q’04 Grades Realizations/ton Cut-size ($10) Printing papers $10 Envelope $20 Bristols $35 Forms ($20) Total UFS (weighted avg.) $5 U.S. operations only and excluding Fine Papers Average IP realization (includes the impact of mix a
Slide 13: Industrial Packaging
Industrial Packaging $Millions 1Q’05 4Q’04 Sales $1,295 $1,295 Earnings 105 131 1Q’05 Change vs 4Q’04: Volume Realizations/ton Containerboard 2% Flat U.S. Container Flat Flat Average IP realization (includes the impact of mix across all grades)
Slide 14: Consumer Packaging
Consumer Packaging $Millions 1Q’05 4Q’04 Sales $630 $685 Earnings 23 39 1Q’05 Change vs 4Q’04: Volume Realizations/ton Bleached Board* 2% $15 Sales Revenue Converting Businesses (14%) * U.S. operations only Average IP realization (includes the impact of mix across all grades)
Slide 15: Forest Products
Forest Products $Millions 1Q’05 4Q’04 Sales $610 $570 Earnings 207 176 1Q’05 Change vs 4Q’04: Volume Realizations/unit Lumber (mbf) 1% $25 Plywood (msf) 11% $15 Average IP realization (includes the impact of mix across all grades)
Slide 16: Special Items
Special Items 1Q’05 $MM Diluted EPS Special Items Divestitures (79) Other Goodwill (42) Debt Repayment Costs (24) (66) Tax & Min. Int. Impact of Above 57 Special Items Total (88) (0.18)
Slide 17: Reconciliation to 1Q'05 Diluted Earnings Per Share
Reconciliation to 1Q’05 Diluted Earnings Per Share Diluted EPS Earnings from Continuing Operations and Before Special Items $0.34 Special Items (0.18) Earnings from Continuing Operations $0.16 Net Earnings $0.16
Slide 18: Second Quarter 2005 Outlook
Second Quarter 2005 Outlook Seasonally stronger—modest improvement Volume improving relative to first quarter Pricing - some upside Operational improvements being realized Raw material costs stay at high levels and continue to squeeze profit margins by an additional $0.03-0.05 per. share
Slide 19: Second Quarter 2005 Outlook
Second Quarter 2005 Outlook Forecast earnings impact Higher coated, pulp and Brazilian Printing Papers Mixed earnings offset lower U.S. uncoated & European operations Seasonally higher box and Industrial Pkg Improving containerboard volumes coupled with higher realizations Consumer Pkg Seasonally st
Slide 20: Second Quarter 2005 Outlook
Second Quarter 2005 Outlook Targeting inventories at or below current levels Continue to focus on customers and cost reduction through internal initiatives
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Slide 22: Appendix
Appendix
Slide 23: Basic EPS from Continuing Operations and Before Special Items
Basic EPS from Continuing Operations and Before Special Items* Highest first quarter earnings in five years .32 .32 .33 .30 .20 .22 .20 .14 .11 .11 .11 .11 .12 .03 .43 .43 .34 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2001 2002 2003 2004 2005 * A reconciliation to GAAP EPS is available at w
Slide 24: Impact of Higher Raw Material Costs
Impact of Higher Raw Material Costs EBIT impact 1Q’05 vs. 4Q’04 Material costs $43 million negative EBIT impact in 1Q’05 versus 4Q’04 EBIT ($) 10 0 (10) (20) (30) (40) (9) (11) (27) (6) Wood Caustic Oil/Coal/ Natural Other Soda Electricity Gas
Slide 25: Forest Resources
Forest Resources $Millions 1Q’05 4Q’04 1Q’04 Earnings Sources — Gross Margin Sales of Forestlands $69 $65 $95 Harvest & Recreational Income 69 81 70 Forestland Expenses (34) (55) (42) Land Utilization (real estate), Net of Expenses 54 55 27 Total EBIT $158 $146 $150
Slide 26: Average Sales Realizations
Average Sales Realizations Average Sales Realizations Segments Grades Mar 05 Mar 04 1Q’05 4Q’04 1Q’04 Printing Uncoated 820 729 815 811 723 Papers* Coated 802 712 806 773 723 $/ton Pulp 496 440 488 453 431 Packaging Containerboard 437 376 454 456 372 $/ton Corrugated boxes* 702 618 702 702 625 Fores
Slide 27: 2005 Earnings from Continuing Operations
2005 Earnings from Continuing Operations Pre-Tax Tax MI Net ETR Average Diluted Shares** EPS $MM $MM $MM $MM MM Shares $/Share Before Special Items Q1 223 (54) (4) 165 24% 488.9 0.34 Special Items Q1 (145) 36 21 (88) 25% 488.9 (0.18) Earnings from Operations Q1 78 (18) 17 77* 23% 488.9 0.16 MI – Min
Slide 28: High U.S. Mills Wood Costs
High U.S. Mills Wood Costs Impacted by wet weather in 1Q’05 Index: Jan 2003 Wood Costs = 100 Wood costs peaked in 1Q’05 and should moderate in 2Q’05 120 110 100 90 2003 2004 2005 Jan Mar May July Sep Nov Jan Mar May July Sep Nov Jan Mar * Delivered cost to U.S. pulp & paper mills
Slide 29: Rising Caustic Soda Costs
Rising Caustic Soda Costs Continued upward pressure in 1Q’05 Index: Jan 2003 Caustic Soda Costs = 100 Caustic soda costs have increased 130% since 1Q’03 300 200 100 0 2003 2004 2005 Jan Mar May July Sep Nov Jan Mar May July Sep Nov Jan Mar
Slide 30: Natural Gas Costs
Natural Gas Costs Costs dropped in 1Q’05 Index: Jan 2003 Natural Gas Costs = 100 Natural gas costs projected to increase in 2Q’05 2003 2004 2005 Jan Mar May July Sep Nov Jan Mar May July Sep Nov Jan Mar
Slide 31: International Paper
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International Paper Co /New/ — Q1 2005 Earnings Presentation on 6ix