International Paper Company · NYSE:IP
International Paper — Q1 2023 Earnings Presentation
34 slides from International Paper's earnings presentation, Apr 27, 2023
Slide 1: First Quarter 2023 Earnings
First Quarter 2023 Earnings April 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: First Quarter 2023 Highlights
First Quarter 2023 Highlights Adjusted Operating EPS1 Solid performance in a challenging macro environment Continued progress on Building a Better IP initiatives $0.53 Strong mill operating performance 1Q23 Successfully executed highest maintenance outage quarter Margins in both businesses
Slide 4: Current View: Navigating the Challenging Macro Environment
Current View Navigating the Challenging Macro Environment What Has Changed Ongoing Commitments (vs prior full year outlook) • 1H weaker demand with greater impact • Delivering value to customers from inventory destocking • Optimizing the system • Index and export prices are lower • Maintaining divid
Slide 5: First Quarter 2023 Financials
First Quarter 2023 Financials 1Q22 4Q22 1Q23 Adjusted EBITDA1 ($MM) Sales ($B) $5.2 $5.1 $5.0 1 Adjusted EBIT ($MM) $336 $474 $298 $539 2 1Q23 Adjusted Operating EPS $0.51 $0.87 $0.53 1 Adjusted EBITDA ($MM) $597 $725 $539 1 $725 Adjusted EBITDA Margin 11.4% 14.1% 10.7% 4Q22 3 Free Cash Flow ($MM) $
Slide 6: 1Q23 vs 4Q22 Adjusted Operating EPS
1Q23 vs 4Q22 Adjusted Operating EPS1 1 .87 (.10) 0.9 (.01) (.26) 0.8 0.7 .28 (.04) 0.6 .53 (.21) 0.5 0.4 0.3 0.2 0.1 0 4Q'22 Price/Mix Volume Operations Maintenance Input Costs Corporate 1Q'23 & Costs Outages & Other Items First Quarter 2023 Earnings 4/27/2023 6
Slide 7: Industrial Packaging 1Q23 vs 4Q22 Adjusted EBIT
Industrial Packaging 1Q23 vs 4Q22 Adjusted EBIT1 416 (48) Lower price from index movement and 5 (68) exports 105 322 Four more shipping days QoQ (88) IP U.S. box shipments -8.5% YoY (daily) March U.S. box shipments -11.8% YoY Export channel demand weak $ Million Operating costs impacted by non-repea
Slide 8: N.A. Corrugated Packaging: Lower Demand Across all Segments
N.A. Corrugated Packaging Lower Demand Across all Segments 5-Year IP Trend March Average Customer Segment Industry $1.8 1Q YoY vs 1Q Food & Beverage ~45% Processed Food Beverage Protein Consumer spending focused on Fresh Produce non-discretionary and value Other Non-Durables ~30% Retailers & manufac
Slide 9: Global Cellulose Fibers 1Q23 vs 4Q22 Adjusted EBIT
Global Cellulose Fibers 1Q23 vs 4Q22 Adjusted EBIT1 40 35 (3) (10) 30 (56) 20 Margin improvement from contract restructuring offset by lower price from 10 index movement & unfavorable mix (16) Volume lower due to seasonality and 0 customer inventory destocking Operating costs impacted by lower -10 v
Slide 10: Global Cellulose Fibers: Commercial & Operational Momentum
Global Cellulose Fibers Commercial & Operational Momentum 5-Year Average $1.8 Key drivers to deliver value-creating returns Strategically align with most attractive regions, customers and product segments Deliver innovation to create value for our customers and grow specialty products Enhance commer
Slide 11: Building a Better IP: Solid Momentum
Building a Better IP Solid Momentum 5-Year Average $1.8 Incremental Annual Earnings Growth Target YoY Achievement $ Millions $65MM 1Q23 $150 80% Strategy Acceleration to Margin improvement $125 Profitable growth $150 to Actual = $250 $125 13% Process Optimization Leverage advanced technology &
Slide 12: Capital Allocation: Maximize Value Creation
Capital Allocation Maximize Value Creation Investment Highlights Excellence Strong balance sheet Debt / EBITDA1 at 2.1x (Moody’s basis) YE 2022 Limited medium and long-term debt maturities Fully funded qualified pension plan Return Maximizing Cash to Returned $319MM to shareowners Shareowners Va
Slide 13: Second Quarter Earnings Outlook
Second Quarter Earnings Outlook Changes from 1Q23 Industrial Packaging Cellulose Fibers Price & Mix Prior index movement Prior index movement & lower export pricing to date Volume Seasonality (+) Seasonality & normalizing demand N.A. 1 less day (-) Ops & Costs Timing of spending Lower distribution &
Slide 14: 2023 Outlook
2023 Outlook Navigating an Uncertain Macro Environment 5-Year Average $ Billions Prior Updated $1.8 Assumptions (Unless Noted Otherwise) Outlook Outlook Includes the impact of sales price changes to date Adjusted EBITDA1 ~$2.8 $2.3 to $2.5 Optimizing marginal cost across mill & converting system
Slide 15: CEO Perspective: IP is Agile and Resilient Through the Cycle
CEO Perspective IP is Agile and Resilient Through the Cycle 5-Year Average $1.8 Taking actions to navigate current macro environment Strong financial foundation Committed to maximizing value First Quarter 2023 Earnings 4/27/2023 15
Slide 16: 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 17: Appendix & Footnotes
Appendix & Footnotes
Slide 18: Select Financial Metrics
Select Financial Metrics1 5-Year Average $1.8 $ Million 2021 2022 2023F Maintenance Outage Expense $531 $601 $600 Maintenance & Regulatory $415 $649 Targeting Cost Reduction $10 $50 $1,000 - $1,200 Strategic $124 $232 Depreciation & Amortization $1,097 $1,040 $1,013 Net Interest Expense $337 $267 $2
Slide 19: Free Cash Flow
Free Cash Flow 5-Year Average $1.8 $ Million 2020 2021 1Q22 2022 4Q22 1Q23 Cash Provided by $3,063 $2,0301 $588 $2,174 $761 $3452 Operations Cash Invested in Capital Projects, Net of $(751) $(549) $(185) $(931) $(322) $(341) Insurance Recoveries Free Cash Flow $2,312 $1,481 $403 $1,243 $439 $4 12021
Slide 20: Maintenance Outages Expenses 2023 Forecast
Maintenance Outages Expenses 2023 Forecast $ Million 1Q23A 2Q23F 3Q23F 4Q23F 2023F Industrial Packaging $161 $151 $50 $45 $407 North America $161 $132 $50 $42 $385 Riverdale Papers - $19 - - $19 EMEA - - - $3 $3 Global Cellulose Fibers $68 $35 $23 $67 $193 North America $53 $35 $23 $67 $178 Georgeto
Slide 21: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 532 421 130 398 36 270 2 191 179 60 63 59 55 61 117 127 120 113 45 29 68 70 15 19 Economic Maintenance First Quarter 2023 Earnings 4/27/2023 21
Slide 22: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 1Q22 4Q22 1Q23 Industrial Packaging EMEA Packaging Goodwill Impairment $(76) Global Cellulose Fibers Building a Better IP Environmental Remediation $(48) Litigation Reserve $(11) Foreign Currency Cumulative Translation A
Slide 23: Special Items Net of Tax
Special Items Net of Tax 1Q23 $ Million EPS Earnings Before Special Items $185 $0.53 Special Items Net of Taxes: Timber Monetization Settlement Interest $(2) Total Special Items Net of Taxes $(2) $(0.01) Non-Operating Pension (Expense) Income $(11) $(0.03) Net Earnings (Loss) $172 $0.49 First Quarte
Slide 24: Operating Profits by Business Segment
Operating Profits by Business Segment $ Million 1Q22 4Q22 1Q23 Earnings (Loss) Before Income Taxes and Equity Earnings $362 $322 $221 Interest Expense, Net $69 $592 $622 Adjustment for Less Than Wholly Owned Subsidiaries $0 $(3) $0 Corporate Items, Net $12 $(20) $8 Net Special Items ($46) $141 $0 No
Slide 25: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Quarterly 2 Business Segment Sales D&A 1 $ Million Operating Profit 1Q22 4Q22 1Q23 1Q23 1Q22 4Q22 1Q23 Industrial Packaging North America $4,025 $3,805 $3,724 $178 $400 $416 $302 EMEA $410 $394 $391 $15 $(3) $0 $20 Global Cellulose Fibers Global Cellulos
Slide 26: 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 Net Special Items 1Q23 $3 ($1) - - $2 353 $0.01 Non-Operating Pension Expense 1Q23 $15
Slide 27: Debt Maturity Profile
Debt Maturity Profile Maturities as of April 1, 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 First Quarter 2023 Earnings 4/27/2023
Slide 28: 1Q23 vs 1Q22 Adjusted Operating EPS
1Q23 vs 1Q22 Adjusted Operating EPS1 1.4 1.2 .60 (.19) 1 (.72) 0.8 .51 .09 .53 0.6 .23 0.4 .01 0.2 0 1Q'22 Price/Mix Volume Operations Maintenance Input Costs Corporate 1Q'23 & Costs Outages & Other Items First Quarter 2023 Earnings 4/27/2023 28
Slide 29: Industrial Packaging 1Q23 vs 1Q22 Adjusted EBIT
Industrial Packaging 1Q23 vs 1Q22 Adjusted EBIT1 700 176 (92) 600 (293) 500 397 400 130 322 300 $ Million 4 200 100 0 1Q'22 Price/Mix Volume Operations Maintenance Input Costs 1Q'23 & Costs Outages First Quarter 2023 Earnings 4/27/2023 29
Slide 30: Global Cellulose Fibers 1Q23 vs 1Q22 Adjusted EBIT
Global Cellulose Fibers 1Q23 vs 1Q22 Adjusted EBIT1 112 135 (8) 92 (84) 72 52 $ Million 32 (49) 1 (16) 12 (11) -8 -28 Volume Operations Maintenance Input Costs 1Q'23 & Costs Outages -48 1Q'22 Price/Mix -68 First Quarter 2023 Earnings 4/27/2023 30
Slide 31: 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 32: Global Input Costs 1Q23 vs 4Q22
Global Input Costs 1Q23 vs 4Q22 $134MM Favorable, $0.28 per share By Business By Input Type U.S Average Cost vs 4Q22 Wood -1% 83 OCC 11% 105 Natural Gas -45% 43 Electricity -9% 29 Chemical Composite -3% OCC 12 Wood (4) Industrial Global Cellulose Fibers Fiber Energy Chemicals Freight Packaging Energ
Slide 33: 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 5 1 Before special items and non-operating pension expen
Slide 34: Footnotes
Footnotes Slide 18 1 Before special items Slide 24 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 spec
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