International Paper Company · NYSE:IP
International Paper — International Paper Co /New/ — Q1 2007 Earnings Presentation
32 slides from International Paper's earnings presentation, May 3, 2007
Slide 1: First Quarter 2007 Review
First Quarter 2007 Review May 3, 2007 First Quarter 2007 Review May 3, 2007 John V. Faraci Chairman & CEO Marianne M. Parrs EVP & CFO Exhibit 99.2
Slide 2: Statements Relating to Non-GAAP Financial Measures
BOD 03-07 D uring 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 Investors. Statements Relating to Non-GAAP Fin
Slide 3: Agenda
BOD 03-07 Agenda Agenda First Quarter 2007 Review Second Quarter 2007 Outlook 2007 Priorities
Slide 4: First Quarter 2007 Summary
BOD 03-07 First Quarter 2007 Summary First Quarter 2007 Summary Best first quarter since year 2000 Pricing momentum maintained Volumes flat Manufacturing operations performed well Higher raw material and distribution costs Lower land sales and higher tax rate Lower interest expense and share count E
Slide 5: Diluted EPS from Continuing Operations and Before Special Items
BOD 03-07 $/Share 0.00 0.10 0.20 0.30 0.40 0.50 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q .11 .15 .11 .03 .02 .30 .16 .34 .27 .20 .17 .04 .12 .30 Diluted EPS from Continuing Operations and Before Special Items Diluted EPS from Continuing Operations and Before Special Items * A reconciliatio
Slide 6: 1Q '07 vs. 4Q '06
BOD 03-07 1Q ‘07 vs. 4Q ‘06 1Q ‘07 vs. 4Q ‘06 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 4Q '06 Cost/Mix Maint. Outages Materials / Distrib. Land Sales Corp / Other Interest Divest. Acquisition Tax 1Q '07 EPS $ / Share EPS $ / Share 2007 Tax rate 32% 2006 Tax rate 28% 0.09 Packaging .06 Papers .03 En
Slide 7: 1Q '07 vs. 1Q '06
BOD 03-07 1Q ‘07 vs. 1Q ‘06 1Q ‘07 vs. 1Q ‘06 EPS $ / Share EPS $ / Share EPS from cont. ops before special items EPS from cont. ops before special items Papers .18 Packaging .10 2007 Tax rate 32% 2006 Tax rate 26% Distribution (.03) (0.05) (0.08) 0.03 (0.03) (0.01) 0.11 0.05 0.28 0.12 0.13 (0.08) 0
Slide 8: Raw Material & Distribution Costs
BOD 03-07 Raw Material & Distribution Costs Raw Material & Distribution Costs EBIT impact 1Q’07 vs. 1Q’06 EBIT impact 1Q’07 vs. 1Q’06 Total of $17 million or $0.03 per share negative impact in 1Q’07 versus 1Q’06 (25) (20) (15) (10) (5) Non-U.S. Distribution Wood EBIT ($MM) (3) (7) (8) Chemicals Ener
Slide 9: Printing Papers
BOD 03-07 Printing Papers * Excluding a $128MM special charge $ 1,540 Sales Earnings 1Q’07 4Q’06 $ Millions Uncoated Pulp Europe (uncoated) Brazil (cutsize) ($10) $11 €29 $9 Volume Realizations/ton $ 1,475 191* 1Q’07 Change vs 4Q’06: 3% 23% (3%) 10% Average IP realization (includes the impact of mix
Slide 10: Total UFS – North American Bookings / IP UFS Backlogs
BOD 03-07 Total UFS – North American Bookings IP UFS Backlogs IP UFS Backlogs
Slide 11: Industrial Packaging
BOD 03-07 Industrial Packaging Average IP realization (includes the impact of mix across all grades) $ 1,235 Sales Earnings 1Q’07 4Q’06 $ Millions Containerboard U.S. Container $3 $12 Volume Realizations/ton $ 1,265 1Q’07 Change vs 4Q’06: (9%) (2%)
Slide 12: Consumer Packaging
BOD 03-07 Consumer Packaging Average IP realization (includes the impact of mix across all grades) $ 750 Sales Earnings 1Q’07 4Q’06 $ Millions Coated Paperboard $3 Volume Realizations/ton $ 735 1Q’07 Change vs 4Q’06: 3% Converting Businesses Sales Revenue (7%)
Slide 13: Distribution
BOD 03-07 Distribution $ 1,675 Sales Earnings 1Q’07 4Q’06 $ Millions $ 1,715 Record first quarter EBIT; up 6% compared to
Slide 14: Forest Resources
BOD 03-07 Forest Resources $ 85 Sales Earnings 1Q’07 4Q’06 $ Millions $ 190
Slide 15: Special Items (net of tax & minority interest)
BOD 03-07 Special Items (net of tax & minority interest) $164 – Brazil Asset Exchange – Divestitures (10) – Restructuring / Corporate $0.57 $254 Total Special Items Discontinued Operations (net of tax) $(29) – Beverage Packaging (4) – Wood Products – Kraft – Weldwood Tariff Refund $(0.05) $(23) Tota
Slide 16: Earnings from Continuing Operations Reconciliation to 1Q'07 Diluted EPS
BOD 03-07 Earnings from Continuing Operations and Before Special Items $0.45 Special Items 0.57 Earnings from Continuing Operations 1.02 Discontinued Operations (0.05) Net Earnings $0.97 Reconciliation to 1Q’07 Diluted Earnings Per Share Diluted EPS
Slide 17: Highlights
BOD 03-07 Highlights Highlights Operating margins up nearly 300 basis points compared to first quarter 2006 Record first quarter profit for Europe and xpedx Riegelwood mill improvement on track Brazil Asset Swap completed Divestitures completed Strength of global footprint First Quarter 2007 First Q
Slide 18: Second Quarter 2007 Outlook
BOD 03-07 Second Quarter 2007 Outlook Second Quarter 2007 Outlook Volume - seasonally stronger in addition to a full quarter of Luiz Antonio Prices - Implementing IP’s previously announced – North American, European and Brazilian paper price increases – Global containerboard and box price increases
Slide 19: 2007 Priorities
BOD 03-07 G G G 2007 Priorities 2007 Priorities Improve Existing Businesses Deliver on earnings from Selective Reinvestments – Luiz Antonio – IP/Sun JV Return Value to Shareholders – Dutch Tender $1.4 Billion – Open market $817 Million Building on a Solid First Quarter 2007 G G G
Slide 20: Transformation Plan Update: Divestitures Essentially Complete
BOD 03-07 Carter Holt Harvey Brazil Coated Papers US Coated Papers Kraft Papers Forestlands Bev. Packaging Wood Products Consider Strategic Options Distribute Sales Book Evaluate Bids Sales Agreement Announced Close on Sale Arizona Chemical Proceeds $1.1B $0.4B $1.4B $6.6B Transformation Plan Update
Slide 21: Key Financial Statistics
BOD 03-07 29% $746 MM $156 MM $521 MM $1.1 B $1.1 B Effective Tax Rate Corporate Items Supply Chain Expense Net Interest Expense Depreciation & Amort. Capital Spending 20% $607 MM $135 MM $595 MM $1.2 B $1.1 B 30-32% $675–725 MM $210 MM $330 MM $1.1 -1.2 B $1.1-1.2 B 2007 Est. Excludes discontinued
Slide 22: Lack of Order Downtime
BOD 03-07 M Short Tons 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Containerboard Uncoated Papers Pulp Coated Paperboard European Papers *Includes indefinitely closed uncoated papers capacity at Pensacola, FL, Bastrop, LA and Jay, ME in 2Q05 (72,000 tons), 3Q05 (108,000 tons) and 4Q’05 (108,0
Slide 23: Raw Material & Distribution Costs
BOD 03-07 Raw Material & Distribution Costs Raw Material & Distribution Costs EBIT impact 1Q’07 vs. 4Q’06 EBIT impact 1Q’07 vs. 4Q’06 Total of $21 million or $0.03 per share negative impact in 1Q’07 versus 4Q’06 (15) (10) (5) Non-U.S. Distribution Wood EBIT ($MM) (3) (6) (6) Chemicals Energy (12) Al
Slide 24: Q2'07 Maintenance Outages
BOD 03-07 (8) (15) (22) 2Q’07 Forecast vs. 1Q’07 Actual $(MM) Total Impact Consumer Packaging Industrial Packaging Printing Papers 95,000 10,000 30,000 55,000 Maintenance Outage (tons) Maintenance outages and dollar impacts are estimated and are subject to change. Q2’07 Maintenance Outages Q2’07 Mai
Slide 25: Earnings by Industry Segment
BOD 03-07 Earnings by Industry Segment Earnings by Industry Segment Earnings by Industry Segment Printing Papers $231 $191 $105 Industrial Packaging Consumer Packaging Distribution Forest Products Other Businesses Operating Profit Interest Expense, net (63) (86) (149) Minority Interest Corporate Ite
Slide 26: 2007 Earnings from Continuing Operations
BOD 03-07 MI – Minority Interest; Net – Net Income; ETR – Effective Tax Rate; EPS – Earnings per Share; NM – Not Meaningful Before Special Items Q1 (99) (6) 32% 448.4 0.45 Special Items Q1 (44) 15% 448.4 0.57 Earnings from Continuing Operations Q1 (143) (6) 24% 448.4 1.02 2007 Earnings from Continui
Slide 27: Average Sales Realizations
BOD 03-07 * U.S. only Average IP realization (includes the impact of mix across all grades) Average Sales Realizations Packaging Printing Papers Segments* 4Q’06 Average Sales Realizations 1Q’06 Mar 07 Corrugated boxes Containerboard Pulp Uncoated Grades ($/ton) 1Q’07 Mar 06
Slide 28: Natural Gas Costs
BOD 03-07 Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Natural Gas Costs * NYMEX Natural Gas closing prices Index: Jan 2004 Natural Gas Costs = 100
Slide 29: U.S. Mill Wood Costs
BOD 03-07 Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan U.S. Mill Wood Costs U.S. Mill Wood Costs Index: Jan 2004 Wood Costs = 100 * Delivered cost to U.S. pulp & paper mills
Slide 30: Caustic Soda Costs
BOD 03-07 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Caustic Soda Costs Index: Jan 2004 Caustic Soda Costs = 100 * Delivered cost to U.S. facilities
Slide 31: Global Consumption
BOD 03-07 Global Consumption Global Consumption Key input indicative annual purchase levels Key input indicative annual purchase levels Natural Gas MMbtu 28,000,000 14,000,000 Fuel Oil BBL 4,100,000 400,000 Coal Tons 1,300,000 230,000 Wood Tons 40,000,000 8,200,000 OCC Tons 600,000 313,000 Caustic S
Slide 32: International Paper
INTERNATIONAL ® PAPER INTERNATIONAL (AA) PAPER
International Paper Co /New/ — Q1 2007 Earnings Presentation on 6ix