International Paper Company · NYSE:IP
International Paper — Q3 2023 Earnings Presentation
34 slides from International Paper's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Earnings
Third Quarter 2023 Earnings October 26, 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: Third Quarter 2023 Highlights
Third Quarter 2023 Highlights Adjusted Operating EPS1 Taking actions while navigating challenging macro environment Accelerating marginal cost reduction $0.64 Exceeded FY target for Building a Better IP initiatives 3Q23 Optimizing our mill system to reduce fixed cost Solid mill operating p
Slide 4: Third Quarter 2023 Financials
Third Quarter 2023 Financials Adjusted EBITDA1 ($MM) 3Q22 2Q23 3Q23 Sales ($B) $5.4 $4.7 $4.6 1 $590 Adjusted EBIT ($MM) $450 $326 $332 3Q23 2 Adjusted Operating EPS $0.83 $0.59 $0.64 1 Adjusted EBITDA ($MM) $711 $570 $590 $570 1 2Q23 Adjusted EBITDA Margin 13.2% 12.2% 12.8% 3 Free Cash Flow ($MM) $
Slide 5: 3Q23 vs 2Q23 Adjusted Operating EPS
3Q23 vs 2Q23 Adjusted Operating EPS1 0.8 0.7 .08 (.02) .02 .64 .59 (.35) .30 0.6 0.5 0.4 .02 0.3 0.2 0.1 0 2Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 3Q'23 & Costs Outages & Other Items Third Quarter 2023 Earnings 10/26/2023 5
Slide 6: Industrial Packaging 3Q23 vs 2Q23 Adjusted EBIT
Industrial Packaging 3Q23 vs 2Q23 Adjusted EBIT1 34 (12) 325 304 (103) 103 Lower price/mix from index movement and exports One less shipping day QoQ IP U.S. box shipments -4.0% YoY (daily) (1) Export channel demand improved Strong mill operating performance $ Million Effective cost management, lower
Slide 7: Global Cellulose Fibers 3Q23 vs 2Q23 Adjusted EBIT
Global Cellulose Fibers 3Q23 vs 2Q23 Adjusted EBIT1 30 (54) 5 27 Lower price/mix from index movement 2 36 Higher fluff volume, partially offset by reduction in commodity pulp $ Million Strong mill operating performance Effective cost management, improved supply chain cost, and lower cost of company
Slide 8: Fourth Quarter Earnings Outlook
Fourth Quarter Earnings Outlook Changes from 3Q23 Industrial Packaging Cellulose Fibers Price & Mix Prior index movement Prior index movement & lower export pricing to date Improving mix Volume Seasonality & improving demand (+) Improving demand, less commodity N.A. 1 less day (-) Ops & Costs Non-re
Slide 9: Building a Better IP Exceeded Full Year Target
Building a Better IP Exceeded Full Year Target 5-Year Average $1.8 Incremental Annual Earnings Growth Target YoY Achievement $ Millions $75MM 3Q23 / $195MM YTD YTD $150 80% Strategy Acceleration to Value capture YTD Actual = $195 $125 Profitable growth $150 to Actual = $250 $125 15% Process Opti
Slide 10: Industrial Packaging: Taking Actions to Drive Profitable Growth
Industrial Packaging Taking Actions to Drive Profitable Growth Commercial Operational Investment Excellence Excellence Excellence • Improving customer & segment mix • Reducing fixed & marginal costs • Expanding capabilities • Capturing additional value • Leveraging advanced technology • Improving pr
Slide 11: Industrial Packaging: Investing Across our Box System to Create Value
Industrial Packaging Investing Across our Box System to Create Value • Strengthening value proposition to customers • >70 projects in 2022/2023 • New converting machines • Corrugator upgrades • Specialty equipment • New world class box plant Atglen box plant in eastern PA Third Quarter 2023 Earnings
Slide 12: Global Cellulose Fibers: Path to Maximizing Value
Global Cellulose Fibers Path to Maximizing Value 5-Year Average Current Environment Strategic Opportunities $1.8 Actions Taken • Demand improving • Reduce exposure to Differentiated value of fluff commodity grades vs. commodity • Destocking generally completed • Align with strategic fluff Restru
Slide 13: CEO Perspective: IP is Well Positioned for the Future
CEO Perspective IP is Well Positioned for the Future Strong financial foundation Solid execution in challenging macro environment Taking actions to maximize value Third Quarter 2023 Earnings 10/26/2023 13
Slide 14: 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 15: Appendix & Footnotes
Appendix & Footnotes
Slide 16: Mill / PM Closure Impact
Mill / PM Closure Impact $ Million Industrial Packaging Global Cellulose Fiber Orange Mill Pensacola PM4 & Riegelwood PM20 Amount Amount Total Cost $4501 $2141 Non-Cash $3951 $2001 Cash Cost $551 $141 EBITDA Impact2 ~$140MM ~$90MM 300k Fluff Capacity Reduction (tons) 800k 200k SBSK 1Closure Costs ar
Slide 17: Industrial Packaging: Focused on Reducing Highest Marginal Costs
Industrial Packaging Focused on Reducing Highest Marginal Costs Fiber & Energy Supply Chain Supplies & Services • Maximizing lowest cost fiber • Mode optimization • Optimize planned maintenance • Wood vs. OCC • Rail vs. Truck outages and reduce spending • Round wood vs. chips • Reduce premium freigh
Slide 18: Select Financial Metrics
Select Financial Metrics1 5-Year Average $1.8 $ Million 2021 2022 2023F Maintenance Outage Expense $531 $601 $587 Maintenance & Regulatory $415 $649 Targeting Capex Cost Reduction $10 $50 $1,100 - $1,200 Strategic $124 $232 Depreciation & Amortization $1,097 $1,040 $1,000 Net Interest Expense $337 $
Slide 19: Free Cash Flow
Free Cash Flow 5-Year Average $1.8 $ Million 2020 2021 3Q22 2022 2Q23 3Q23 Cash Provided by $3,063 $2,0301 $435 $2,174 $528 $468 Operations Cash Invested in Capital Projects, Net of $(751) $(549) $(238) $(931) $(267) $(228) Insurance Recoveries Free Cash Flow $2,312 $1,481 $197 $1,243 $261 $240 1202
Slide 20: Maintenance Outages Expenses
Maintenance Outages Expenses 2023 Forecast $ Million 1Q23A 2Q23A 3Q23A 4Q23F 2023F Industrial Packaging $161 $107 $73 $52 $393 North America $161 $86 $73 $49 $369 Riverdale Papers - $21 - - $21 EMEA - - - $3 $3 Global Cellulose Fibers $68 $34 $32 $60 $194 North America $53 $34 $32 $60 $179 Georgetow
Slide 21: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 622 532 421 130 398 458 143 137 36 270 191 179 63 59 55 61 127 120 113 102 106 45 2 36 68 70 15 29 19 25 Economic Maintenance Third Quarter 2023 Earnings 10/26/2023 21
Slide 22: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 3Q22 2Q23 3Q23 Industrial Packaging - - - Global Cellulose Fibers - - - Environmental Remediation $(29) Legal Settlement $15 Tax Audit Settlement Interest $6 Corporate Debt Extinguishment $(93) Timber Monetization Settle
Slide 23: Special Items Net of Tax
Special Items Net of Tax 3Q23 $ Million EPS Earnings Before Special Items $224 $0.64 Special Items Net of Taxes: Environmental Remediation $(22) Total Special Items Net of Taxes $(22) $(0.06) Non-Operating Pension (Expense) Income $(10) $(0.03) Discontinued Operations Net of Tax $(27) $(0.08) Net Ea
Slide 24: Operating Profits by Business Segment
Operating Profits by Business Segment $ Million 3Q22 2Q23 3Q23 Earnings (Loss) Before Income Taxes and Equity Earnings $313 $255 $232 Interest Expense, Net $1232 $592 $58 Adjustment for Less Than Wholly Owned Subsidiaries $(1) $0 $0 Corporate Expenses, Net $15 $8 $20 Net Special Items $62 $0 $29 Non
Slide 25: Geographic Business Segment Operating Results
Geographic Business Segment Operating Results Quarterly 2 Business Segment Sales D&A 1 $ Million Operating Profit 3Q22 2Q23 3Q23 3Q23 3Q22 2Q23 3Q23 Industrial Packaging North America $4,055 $3,550 $3,491 $187 $387 $284 $313 EMEA $355 $351 $316 $15 $(18) $20 $12 Global Cellulose Fibers Global Cellul
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 2Q23 $255 ($33) - - $222 347 $0.64 3Q23 $232 ($39) - ($1) $192 348 $0.55 Net Special I
Slide 27: Debt Maturity Profile
Debt Maturity Profile Maturities as of September 30, 2023 $800 $700 $600 $500 $ Million $400 $300 $200 $100 $0 2032 2045 2023 2024 2025 2026 2027 2028 2029 2030 2031 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2046 2047 2048 27 Third Quarter 2023 Earnings 10/26/2023
Slide 28: 3Q23 vs 3Q22 Adjusted Operating EPS
3Q23 vs 3Q22 Adjusted Operating EPS1 1 .83 (.69) 0.8 .06 .64 .76 0.6 0.4 (.13) 0.2 (.15) 0 (.04) -0.2 Volume Operations Maintenance Input Costs Corporate 3Q'23 3Q'22 Price/Mix & Costs Outages & Other Items -0.4 Third Quarter 2023 Earnings 10/26/2023 28
Slide 29: Industrial Packaging 3Q23 vs 3Q22 Adjusted EBIT
Industrial Packaging 3Q23 vs 3Q22 Adjusted EBIT1 450 369 (224) 400 297 325 350 300 250 200 (38) $ Million 150 (75) 100 (4) 50 0 3Q'22 Price/Mix Volume Operations Maintenance Input Costs 3Q'23 & Costs Outages Third Quarter 2023 Earnings 10/26/2023 29
Slide 30: Global Cellulose Fibers 3Q23 vs 3Q22 Adjusted EBIT
Global Cellulose Fibers 3Q23 vs 3Q22 Adjusted EBIT1 95 (92) $ Million 51 27 (20) 7 (14) 3Q’22 Price/Mix Volume Operations Maintenance Input Costs 3Q’23 & Costs Outages Third Quarter 2023 Earnings 10/26/2023 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 3Q23 vs 2Q23
Global Input Costs 3Q23 vs 2Q23 $(7)MM Unfavorable, $(0.02) per share By Business By Input Type U.S Average Cost vs 2Q23 5 18 Wood -2% OCC 10% 1 Natural Gas 20% Wood Wood Electricity 10% OCC OCC -3 Chemical Composite -7% (12) Wood OCC -23 Industrial Global Cellulose Fibers Packaging Fiber Energy Che
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 4 1 Before special items and non-operating pension expen
Slide 34: Footnotes
Footnotes 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 special items, business net special
International Paper Company — Q3 2023 Earnings Presentation on 6ix