International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2008 Earnings Presentation
46 slides from International Paper's earnings presentation, Apr 30, 2008
Slide 1: First Quarter 2008 Review
First Quarter 2008 Review April 30, 2008 First Quarter 2008 Review April 30, 2008 Tim S. Nicholls Senior Vice President & Chief Financial Officer John V. Faraci Chairman & Chief Executive Officer Exhibit 99.2
Slide 2: First Quarter 2008 Results Summary
First Quarter 2008 Results Summary $0.15 $0.28 $0.04 First Quarter 2008 Results Summary Volumes – Weakened in North America – Held up outside North America Prices – Improved globally Input Costs – Escalated globally Improved free cash flow Lower Forest Products earnings Ilim’s 4Q07 earnings on track
Slide 3: 1Q08 vs. 1Q07 EPS: Higher Costs, Higher Prices, Lower Forest Products Earnings
1Q08 vs. 1Q07 EPS Higher Costs, Higher Prices, Lower Forest Products Earnings .15 .04 0.37 .45 .21 .01 .07 0.04 (.24) (.03) .01 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 1Q '07 Price Volume Cost/Mix Materials & Freight Interest Ilim Shares 1Q '08 $ / Share $ / Share IPG .05 CPG .02 P&C .09 Eur
Slide 4: Global Sales Volumes 1Q08 vs. 1Q07
Global Sales Volumes 1Q08 vs. 1Q07 Global Sales Volumes 1Q08 vs. 1Q07 1,000 1,500 2,000 2,500 Printing Papers Pulp Container board Coated Paperboard Container xpedx Revenue 1Q07 1Q08 0% 5% 28% 2% 3% 19% xpedx includes the addition of Central Lewmar revenues
Slide 5: Increasing Global Input & Freight Costs
Increasing Global Input & Freight Costs $161MM, or $0.24/Share Impact vs. 1Q07 Increasing Global Input & Freight Costs $161MM, or $0.24/Share Impact vs. 1Q07 Input costs for continuing businesses Percentage change reflects North American input costs N.A. 24% 26% 3% 6% (16) (40) (52) (53) ($60) ($50)
Slide 6: Recovering North American Input Cost Increases
Recovering North American Input Cost Increases Recovered via Price Increases Recovering North American Input Cost Increases Recovered via Price Increases North American Papers & Packaging ($200) ($100) 2003 vs. 2002 2004 vs. 2003 2005 vs. 2004 2006 vs. 2005 2007 vs. 2006 1Q08 vs. 1Q07 Price Increase
Slide 7: Global Input & Freight Costs by Segment
Global Input & Freight Costs by Segment $161 Million Global Impact 1Q08 vs. 1Q07 Global Input & Freight Costs by Segment $161 Million Global Impact 1Q08 vs. 1Q07 Consumer Packaging ($27) Industrial Packaging ($45) Printing Papers ($89) ($90) ($80) ($70) ($60) ($50) ($40) ($30) ($20) ($10) Wood Energ
Slide 8: Corporate Items
Corporate Items 10% Reduction 1Q07 vs. 1Q08 $56 $37 $21 Corporate Items 10% Reduction 1Q07 vs. 1Q08 1Q07 4Q07 1Q08 Business Corporate
Slide 9: Printing Papers Earnings 1Q08 vs. 1Q07
Printing Papers Earnings 1Q08 vs. 1Q07 Printing Papers Earnings 1Q08 vs. 1Q07 (10) 1Q07 North America Paper North America Pulp Europe Brazil 1Q08
Slide 10: Printing Papers Price, Volume and Earnings
Price/ton Volume 1Q08 vs. 1Q07 Price/ton 1Q08 vs. 4Q07 Volume Business 1Q08 4Q07 1Q07 $ Million Printing Papers Average IP price realization (includes the impact of mix across all grades) €44 46% (1%) (5%) (7%) (7%) 2% (14%) (1%) ($20) Brazilian Uncoated Papers (€7) European Uncoated Papers U.S. Pul
Slide 11: Printing Papers Earnings 1Q08 vs. 1Q07
Printing Papers Earnings 1Q08 vs. 1Q07 Printing Papers Earnings 1Q08 vs. 1Q07 NA 22 Europe 4 Brazil (1) NA 58 Europe 31 Brazil 2 (89) (9) 1Q '07 Price Materials & Freight Cost / Mix Volume 1Q '08
Slide 12: Industrial Packaging Earnings 1Q08 vs. 1Q07
Industrial Packaging Earnings 1Q08 vs. 1Q07 1Q07 North America Europe 1Q08 Industrial Packaging Earnings 1Q08 vs. 1Q07
Slide 13: Industrial Packaging Price, Volume and Earnings
Price / Ton Volume 1Q08 vs. 1Q07 1Q08 vs. 4Q07 Volume Price / Ton Business 1Q08 4Q07 1Q07 $ Million Industrial Packaging Average IP price realization (includes the impact of mix across all grades) €63 (4%) Flat 29% €4 1% European Container (2%) 10% N.A. Container N.A. Containerboard $1,445 $1,390 $1
Slide 14: Industrial Packaging Earnings 1Q08 vs. 1Q07
Industrial Packaging Earnings 1Q08 vs. 1Q07 (45) 1Q '07 Price Volume Cost / Mix Materials & Freight 1Q '08 Industrial Packaging Earnings 1Q08 vs. 1Q07 Outages 24 Mix 14 Cost (10)
Slide 15: Consumer Packaging Price, Volume and Earnings
Price Price/Ton Revenue Volume 1Q08 vs. 1Q07 Price Revenue Business 1Q08 vs. 4Q07 Volume Price/Ton Business 1Q08 4Q07 1Q07 $ Million Consumer Packaging Average IP price realization (includes the impact of mix across all grades) *Excludes a special item of ($5) million related to the reorganization o
Slide 16: Consumer Packaging Earnings 1Q08 vs. 1Q07
Consumer Packaging Earnings 1Q08 vs. 1Q07 1Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Consumer Packaging Earnings 1Q08 vs. 1Q07 (13) 14* (27) (2) *Excludes a special item of ($5) million related to the reorganization of Shorewood’s Canadian operations Cost (6) Mix (6) Outages (1)
Slide 17: xpedx
1Q08 4Q07 1Q07 $ Million xpedx $1,985 $2,045 $1,675 Earnings Sales xpedx Operating earnings up slightly from 1Q07 – Including incremental bad debt expenses – Including Canadian unit start-up costs Earnings decline since 1Q07 due to changes in overhead allocation
Slide 18: Forest Products
Forest Products 1Q08 4Q07 1Q07 Forest Products 13,000 61,000 30,000 Acres Sold $1,871 $2,750 $2,659 Price / Acre Earnings ($ Million) Sales ($ Million)
Slide 19: Ilim Joint Venture 4Q07 Results
Ilim Joint Venture 4Q07 Results IP’s Share: $17MM or $0.04 EPS Ilim Joint Venture 4Q07 Results IP’s Share: $17MM or $0.04 EPS Strong end-use markets in Russia & China – Solid economic growth – Growing demand for pulp, paper & packaging – Increasing pricing Business performing ahead of plan – Shipmen
Slide 20: Free Cash Flow Improvement
Free Cash Flow Improvement 1Q07 1Q08 Free Cash Flow ($ Million) Free Cash Flow Improvement ($178) Free Cash Flow ($215) Less Capital Investment Cash Provided by Continuing Operations
Slide 21: Weyerhaeuser CBPR Acquisition Update: Creating the Premier Global Supplier
Weyerhaeuser CBPR Acquisition Update Creating the Premier Global Supplier Weyerhaeuser CBPR Acquisition Update Creating the Premier Global Supplier Compelling Valuation Well-Maintained, Quality Assets Consistent with Transformation Plan Significant Synergies Good Strategic Fit Higher EBITDA Margins
Slide 22: Weyerhaeuser CBPR Acquisition Update: Improving the Quality of our Earnings
Weyerhaeuser CBPR Acquisition Update Improving the Quality of our Earnings Printing Papers Forest Products Distribution Printing Papers Forest Products Weyerhaeuser CBPR Acquisition Update Improving the Quality of our Earnings EBITDA - $2.8B 2007 Pro Forma with Weyerhaeuser Assets EBITDA - $3.9B (1)
Slide 23: Weyerhaeuser CBPR Acquisition Update
Weyerhaeuser CBPR Acquisition Update Weyerhaeuser CBPR Acquisition Update Filed for Hart-Scott-Rodino Act approval Integration planning in progress Preparing for transition services Targeting to close during 3Q
Slide 24: 2Q08 Outlook
2Q08 Outlook Changes from 1Q08 Non-North America North America Better Increase Improving Better Improving Increase 2Q08 Outlook Changes from 1Q08 Uncertain Slight Increase Slight Increase Flat Operations Volume Pricing Flat Packaging Paper Uncertain Input & Freight Costs Maintenance Outages Slight D
Slide 25: 1Q08 vs. 4Q07 EPS
1Q08 vs. 4Q07 EPS Lower Forest Products Earnings & Increasing Input Costs .28 .04 0.37 .41 0.07 .05 .04 (.04) (.02) (.14) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 4Q '07 Price Volume Cost/Mix Materials & Freight Corporate / Other Ilim 1Q '08 $ / Share $ / Share Papers .03 Packaging ..02 Cost
Slide 26: Printing Papers Earnings 1Q08 vs. 4Q07
Printing Papers Earnings 1Q08 vs. 4Q07 Printing Papers Earnings 1Q08 vs. 4Q07 (2) (14) (55) 4Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Cost (13) Mix 4 Outages (5) (2)
Slide 27: Industrial Packaging Earnings 1Q08 vs. 4Q07
Industrial Packaging Earnings 1Q08 vs. 4Q07 (23) (8) 4Q '07 Price Volume* Cost / Mix Materials & Freight Other 1Q '08 Industrial Packaging Earnings 1Q08 vs. 4Q07 Cost 15 Mix Outages (16) *Excludes trade volume
Slide 28: Consumer Packaging Earnings 1Q08 vs. 4Q07
Consumer Packaging Earnings 1Q08 vs. 4Q07 4Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Consumer Packaging Earnings 1Q08 vs. 4Q07 14* (4) (12) Outages 14 Cost (8) Mix (5) *Excludes a special item of ($5) million related to the reorganization of Shorewood’s Canadian operations
Slide 29: Global Sales Volumes 1Q08 vs. 4Q07
Global Sales Volumes 1Q08 vs. 4Q07 Global Sales Volumes 1Q08 vs. 4Q07 1,000 1,500 2,000 2,500 Printing Papers Pulp Container board Coated Paperboard Container xpedx Revenue 4Q07 1Q08 (1%) (7%) 9% 0% (2%) (3%) Containerboard includes the addition of Pensacola linerboard capacity xpedx includes the ad
Slide 30: Increasing Global Input & Freight Costs vs. 4Q07
Increasing Global Input & Freight Costs $90MM, or $0.14/Share Impact vs. 4Q07 Increasing Global Input & Freight Costs $90MM, or $0.14/Share Impact vs. 4Q07 Input costs for continuing businesses Percentage change reflects North American input costs N.A. 12% 11% 2% 4% (9) (15) (25) (41) ($50) ($40) ($
Slide 31: Diluted EPS from Continuing Operations before Special Items
Diluted EPS from Continuing Operations before Special Items .16 .30 .34 .27 .20 .17 .04 .12 .30 .47 .45 .52 .57 .69 .41 .45 .02 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Diluted EPS from Continuing Operations before Special Items A reconciliation to GAAP EPS is available at www.internationa
Slide 32: 1Q08 Diluted Earnings per Share: Special Items & Discontinued Operations
1Q08 Diluted Earnings per Share Special Items & Discontinued Operations $0.31 ($0.04) $0.35 ($0.06) $0.41 Net Earnings Discontinued Operations Earnings from Continuing Operations Special Items Earnings from Continuing Operations & Before Special Items Special Items & Discontinued Operations
Slide 33: Special Items & Discontinued Operations
Special Items & Discontinued Operations 1Q08 Earnings per Share $ Million Special Items (net of tax & minority interest) Earnings per Share $ Million Discontinued Operations (net of tax) Special Items & Discontinued Operations 1Q08 ($3) Shorewood Canadian Reorganization ($25) Legal Reserves Restruct
Slide 34: Key Financial Statistics
2007 1 2008 Estimate 3 2006 1 Key Financial Statistics 30% $1.1 $1.3 32 - 33% $140 - $340 - $1.1 $1.1 29% $1.2 $1.1 Effective Tax Rate Corporate Items ($ Million) Net Interest Expense ($ Million) Depreciation & Amortization ($ Billion) Capital Spending ($ Billion) Excludes discontinued operations an
Slide 35: Incremental Maintenance Outages 2Q08 vs. 1Q08
Impact ($ Million) 2Q08 Forecast vs. 1Q08 Actual in Maintenance Outages (Tons) Incremental Maintenance Outages ($60) ($10) ($26) ($24) Total Impact Consumer Packaging Industrial Packaging Printing Papers (85,000) (5,000) (55,000) (25,000) Maintenance outages and dollar impacts are estimated and are
Slide 36: Planned Maintenance Outages
3Q08E 2Q08E 4Q08E $ Millions 1Q08 Planned Maintenance Outages Total Impact Consumer Packaging Industrial Packaging Printing Papers Planned maintenance outages are subject to change Planned Maintenance Outages
Slide 37: Corporate Items Revised Allocations for 2006 & 2007
2007 3Q07 2006 1Q07 4Q07 2Q07 1Q08 $ Million Corporate Items Revised Allocations for 2006 & 2007 Other Printing Papers Unallocated Corporate Items Distribution Forest Products Total Industrial Packaging Consumer Packaging Corporate Items Revised Allocations for 2006 & 2007
Slide 38: Operating Profits by Industry Segment
Operating Profits by Industry Segment from Continuing Operations before Special Items 1Q07 1Q08 4Q07 $ Million Operating Profits by Industry Segment from Continuing Operations before Special Items Earnings from continuing operations before income taxes, equity earnings & minority interest Equity Ear
Slide 39: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results from Continuing Operations before Special Items Operating Profit Sales $ Million 4Q07 1Q07 1Q08 1Q08 4Q07 1Q07 Geographic Business Segment Operating Results from Continuing Operations before Special Items Asian $1,985 $1,050 $2,045 $1,005 $1,675 Asian In
Slide 40: 2008 Earnings from Continuing Operations
2008 Earnings from Continuing Operations Equity Earnings Diluted EPS ² Earnings from Continuing Operations Net Income $MM Estimated Tax Rate Minority Interest $MM Special Items Pre-Tax $MM Before Special Items Average Shares ¹ MM Tax $MM 2008 Earnings from Continuing Operations Assuming dilution A r
Slide 41: Business Segment Price Realization
Business Segment Price Realization 1Q08 1Q08 4Q07 4Q07 1Q07 1Q07 Average Selling Price Realizations Industrial Packaging ($/ton) Printing Papers ($/ton) Business Segment Price Realization Containerboard Corrugated Boxes Pulp Uncoated Freesheet Average IP U.S. selling price realizations (includes the
Slide 42: Natural Gas Costs
Natural Gas Costs Jan Apr July Oct Jan Apr July Oct Jan Apr Jul Oct Jan NYMEX Natural Gas closing prices Index: Jan 2005 Natural Gas Costs = 100 Natural Gas Costs
Slide 43: U.S. Mill Wood Costs
U.S. Mill Wood Costs Jan Apr July Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan U.S. Mill Wood Costs Index: Jan 2005 Wood Costs = 100 Delivered cost to U.S. facilities
Slide 44: U.S. Caustic Soda Costs
U.S. Caustic Soda Costs Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Index: Jan 2005 Caustic Soda Costs = 100 Delivered cost to U.S. facilities U.S. Caustic Soda Costs
Slide 45: U.S. Corn Starch Costs
U.S. Corn Starch Costs Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar Index: Jan 2006 Corn Starch Costs = 100 Delivered cost to U.S. facilities U.S. Corn Starch Costs
Slide 46: Annual Purchase Estimates for Key Inputs
Commodity Non – U. S. U. S. Global Consumption Annual Purchase Estimates for Key Inputs 110,000 350,000 Corn Starch (Tons) Chemicals Fiber Energy 50,000 240,000 Sodium Chlorate (Tons) - 40,000 LD Polyethylene (Tons) 4,000 24,000 Latex (Tons) 230,000 1,300,000 Coal (Tons) 8,200,000 43,000,000 Wood (T
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