International Paper Company · NYSE:IP
International Paper — Q4 2023 Earnings Presentation
44 slides from International Paper's earnings presentation, Feb 1, 2024
Slide 1: Fourth Quarter & Full-Year 2023 Earnings
Fourth Quarter & Full-Year 2023 Earnings February 1, 2024
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. Forward-looking statements can be identified by the use of forward-looking o
Slide 3: Full-Year 2023 Results
Full-Year 2023 Results Solid execution in a challenging environment Adjusted Operating EPS1 ▪ Earnings impacted by lower demand and cost inflation ▪ Delivered $260MM of Building a Better IP benefits $2.16 ▪ Executed strategic actions 2023 ➢ Invested in Packaging business to enhance capabilities ➢ Op
Slide 4: Full-Year 2023 Financials
Full-Year 2023 Financials Adjusted EBITDA1 ($B) 2021 2022 2023 Sales ($B) $19.4 $21.2 $18.9 1 $2.2 Adjusted EBIT ($B) $1.5 $1.8 $1.2 2023 2 Adjusted Operating EPS $2.41 $3.18 $2.16 1 Adjusted EBITDA ($B) $2.6 $2.9 $2.2 $2.9 1 2022 Adjusted EBITDA Margin 13.4% 13.5% 11.8% 3 Free Cash Flow ($B) $1.5 $
Slide 5: Fourth Quarter 2023 Results
Fourth Quarter 2023 Results 4Q 3Q 4Q 22 23 23 Sales ($B) $5.1 $4.6 $4.6 1 ▪ Sequential improvement in demand Adjusted EBIT ($MM) $474 $332 $268 2 ▪ Building a Better IP benefits of $65MM, Adjusted Operating EPS $0.87 $0.64 $0.41 including commercial / mix initiatives Adjusted EBITDA ($MM) 1 $725 $59
Slide 6: 4Q23 vs 3Q23 Adjusted Operating EPS
4Q23 vs 3Q23 Adjusted Operating EPS1 0.8 0.7 .64 (.18) 0.6 .07 (.12) 0.5 (.03) .04 (.01) .41 0.4 0.3 0.2 0.1 0 3Q'23 Price/Mix Volume Operations Maintenance Input Costs Corporate 4Q'23 & Costs Outages & Other Items Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 6
Slide 7: Industrial Packaging 4Q23 vs 3Q23 Adjusted EBIT
Industrial Packaging 4Q23 vs 3Q23 Adjusted EBIT1 325 (47) 8 315 27 (20) 22 Lower price/mix from index movement and exports Benefits from commercial initiatives One less shipping day QoQ IP U.S. box shipments (daily) + 2.9% QoQ $ Million – 5.8% YoY Export channel demand improved Lower energy and chem
Slide 8: N.A. Corrugated Packaging Segment Demand
N.A. Corrugated Packaging Segment Demand Customer Segment Industry Mix IP View of Segment Trends E-commerce, Shipping & Distribution ~20% Strong E-commerce ~30% above pre-pandemic Shipping & Distribution Favorable trend post destocking Food & Beverage ~45% Stable w/ expected improvement Fresh Produc
Slide 9: Containerboard Export Regional Demand & Inventories
Containerboard Export Regional Demand & Inventories IP View Europe IP Export Segments Demand China Inventory Demand Inventory Mid-East & Africa Latin America Rest of Asia Fresh Fruit & Vegetables Demand Heavy Weight Industrials Demand Demand Inventory Other Industrials Inventory Inventory • Solid de
Slide 10: Global Cellulose Fibers 4Q23 vs 3Q23 Adjusted EBIT
Global Cellulose Fibers 4Q23 vs 3Q23 Adjusted EBIT1 27 (26) Lower price/mix from index movement 1 (32) Higher fluff & specialty volume, offset (58) by reduction in commodity pulp Ops & Costs includes $18MM planned turbine maintenance expense $ Million Heavy maintenance outage schedule (35) Lower woo
Slide 11: Fluff Pulp Regional Demand & Inventories
Fluff Pulp Regional Demand & Inventories IP View N. America Europe Demand Demand China Inventory Inventory Demand Inventory Mid-East & Africa GCF analysis, McClay Latin America Rest of Asia Demand Demand Demand Inventory IP Fluff Shipments Inventory Inventory +11% • Demand improving in Developed Reg
Slide 12: IP View 2024: Positive Momentum through the Year
IP View 2024 Positive Momentum through the Year • Demand recovery across portfolio continues • E-commerce and distribution remain strong Market • Food & beverage expected to improve Momentum • Durables and non-durables correlate with macro economy • Fluff pulp recovery continues as inventories expec
Slide 13: First Quarter Earnings Outlook
First Quarter Earnings Outlook Changes from 4Q23 January winter freeze ~$(40)MM Impact (Volume, Ops, Inputs) Industrial Packaging Cellulose Fibers Price & Mix Prior index movement (-) Favorable mix Commercial initiatives (+) Volume Seasonality (-) Stable N.A. 2 more days (+) Ops & Costs Seasonality
Slide 14: Industrial Packaging: Taking Actions to Improve Profitability and Returns
Industrial Packaging Taking Actions to Improve Profitability and Returns Commercial Operational Investment Excellence Excellence Excellence • Improving customer & segment mix • Reducing fixed & marginal costs • Strengthening box system • Capturing additional value • Leveraging advanced technology •
Slide 15: Global Cellulose Fibers Optimization Strategy
Global Cellulose Fibers Optimization Strategy 2023 Target Commercial & Operational Excellence ▪ Targeting 70% absorbents & specialty in ’24 ▪ Aligning with strategic fluff customers and capturing value ▪ Focusing on innovation and growing specialty ▪ Serving NBSK customers from advantaged mill ▪ Opt
Slide 16: Operational Excellence: Leveraging Advanced Technology
Operational Excellence Leveraging Advanced Technology Mill & Box ▪ New technologies and tools at operator level Operations ▪ Data dashboards for real-time cost and process visibility Transportation Production Planning Planning ✓ 22 newly developed dashboards in use ✓ Additional dashboards in develop
Slide 17: Capital Allocation: Maximizing Value Creation
Capital Allocation Maximizing Value Creation Highlights Investment Excellence Solid balance sheet ▪ Debt / EBITDA1 at 2.5x (Moody’s basis) ▪ Limited short & medium-term debt maturities ▪ Liquidity & cash = $3B Maximizing Return Qualified pension plan fully funded Cash to Value Shareowners Returned $
Slide 18: CEO Perspective: IP is Well Positioned for the Future
CEO Perspective IP is Well Positioned for the Future Strong financial foundation Positive momentum through 2024 Strategic focus on maximizing value Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 18
Slide 19: Investor Relations Media
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 20: Appendix & Footnotes
Appendix & Footnotes | 44% vvw vw. International Paper
Slide 21: 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 $ Million $65MM 4Q23 / $260MM YTD YTD $150 74% Strategy Acceleration to ▪ Value capture Actual = $260 $125 ▪ Profitable growth $150 to Actual = $250 $125 20% Process Optimizat
Slide 22: Cost Reduction Efforts
Cost Reduction Efforts Focused on Reducing Highest Marginal Costs Fiber & Energy Supply Chain Supplies & Services • Maximizing lowest cost fiber • Optimize planned • Mode optimization • Wood vs. OCC maintenance outages and • Rail vs. Truck reduce spending • Round wood vs. chips • Reduce premium frei
Slide 23: Mill / PM Closure Impact
Mill / PM Closure Impact ~70% of benefits achieved in 2024 $ 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 Benefit2 ~$140MM ~$90MM 300k Fluff Capacity Reduction (ton
Slide 24: 2023 vs 2022 Adjusted Operating EPS
2023 vs 2022 Adjusted Operating EPS1 3.5 3.18 (.89) 3 (.47) 2.5 .20 2.16 2.02 (1.90) 2 1.5 1 0.5 .02 0 2022 Price/Mix Volume Operations Maintenance Input Costs Corporate 2023 & Costs Outages & Other Items -0.5 Includes impact of economic downtime Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 2
Slide 25: Free Cash Flow
Free Cash Flow 5-Year Average $1.8 $ Million 2021 4Q22 2022 3Q23 4Q23 2023 Cash Provided by $2,0301 $761 $2,174 $468 $492 $1,833 Operations Cash Invested in Capital Projects, Net $(549) $(322) $(931) $(228) $(305) $(1,141) of Insurance Recoveries Free Cash Flow $1,481 $439 $1,243 $240 $187 $692 1202
Slide 26: Geographic Business Segment Operating Results (Annual)
Geographic Business Segment Operating Results Annually Business Segment Sales 1 $ Million Operating Profit 2022 2023 2022 2023 Industrial Packaging North America $16,011 $14,293 $1,753 $1,186 EMEA $1,572 $1,398 $(11) $80 Global Cellulose Fibers Global Cellulose Fibers $3,227 $2,890 $106 $(17) Fourth
Slide 27: Geographic Business Segment Operating Results (Quarterly)
Geographic Business Segment Operating Results Quarterly 2 Business Segment Sales D&A 1 $ Million Operating Profit 4Q22 3Q23 4Q23 4Q23 4Q22 3Q23 4Q23 Industrial Packaging North America $3,805 $3,491 $3,528 $192 $416 $313 $287 EMEA $394 $316 $340 $19 $0 $12 $28 Global Cellulose Fibers Global Cellulose
Slide 28: Operating Profits by Business Segment
Operating Profits by Business Segment $ Million 4Q22 3Q23 4Q23 2022 2023 Earnings (Loss) Before Income Taxes and Equity Earnings $322 $232 $(326) $1,511 $382 Interest Expense, Net $592 $58 $52 $3252 $2312 Adjustment for Less Than Wholly Owned Subsidiaries $(3) $0 $(2) $(5) $(2) Corporate Expenses, N
Slide 29: 2023 Operating Earnings
2023 Operating Earnings Non- Equity Average Pre-Tax Tax controlling Net Income Earnings Shares Diluted EPS1 $MM $MM Interest $MM $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 4Q23 ($32
Slide 30: Select Financial Metrics
Select Financial Metrics1 5-Year Average $1.8 $ Million 2022 2023 2024F Maintenance Outage Expense $601 $593 $548 Maintenance & Regulatory $649 $815 Capex Targeting Cost Reduction $50 $85 $800 - $1,000 Strategic $232 $241 Depreciation & Amortization $1,040 $1,010 $1,050 Net Interest Expense $267 $23
Slide 31: Maintenance Outages Expenses 2023
Maintenance Outages Expenses 2023 $ Million 1Q23A 2Q23A 3Q23A 4Q23A 2023A Industrial Packaging $161 $107 $73 $51 $392 North America $161 $86 $73 $48 $368 Riverdale Papers - $21 - - $21 EMEA - - - $3 $3 Global Cellulose Fibers $68 $34 $32 $67 $201 North America $53 $34 $32 $67 $186 Georgetown Papers
Slide 32: Maintenance Outages Expenses 2024 Forecast
Maintenance Outages Expenses 2024 Forecast $ Million 1Q24F 2Q24F 3Q24F 4Q24F 2024F Industrial Packaging $82 $77 $132 $101 $392 North America $82 $55 $132 $100 $369 Riverdale Papers - $19 - - $19 EMEA - $3 - $1 $4 Global Cellulose Fibers $51 $39 $15 $51 $156 North America $28 $39 $15 $51 $133 Georget
Slide 33: North America Downtime
North America Downtime Containerboard Cellulose Fibers Thousand Tons Thousand Tons 622 532 421 130 105 398 458 143 137 243 36 191 179 63 59 55 61 68 127 120 113 102 106 36 70 75 29 19 25 Economic Maintenance Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 33
Slide 34: Special Items Before Tax
Special Items Before Tax Continuing Operations Special Items Pre-Tax $(Million) 4Q22 3Q23 4Q23 Building a Better IP $8 Industrial Packaging Mill Closure $(428) EMEA Packaging Goodwill Impairment $(76) Building a Better IP $3 Global Cellulose Fibers Machine Closures $(112) Building a Better IP $8 Env
Slide 35: Special Items Net of Tax
Special Items Net of Tax 4Q23 2023 $ Million EPS $ Million EPS Earnings Before Special Items $142 $0.41 $755 $2.16 Special Items Net of Taxes: Environmental Remediation $(5) $(27) Building a Better IP $14 $14 Tax Audit Settlement (Including Interest) $27 Timber Monetization Settlement Interest $(2)
Slide 36: Debt Maturity Profile
Debt Maturity Profile Maturities as of December 31, 2023 $800 $700 $600 $500 $ Million $400 $300 $200 $100 $0 2042 2043 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2044 2045 2046 2047 2048 Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 36
Slide 37: 4Q23 vs 4Q22 Adjusted Operating EPS
4Q23 vs 4Q22 Adjusted Operating EPS1 1 .87 (.92) 0.8 0.6 .46 (.05) .41 0.4 0.2 .12 (.10) .03 0 4Q'22 Price/Mix Volume Operations Maintenance Input Costs Corporate 4Q'23 & Costs Outages & Other Items -0.2 Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 37
Slide 38: Industrial Packaging 4Q23 vs 4Q22 Adjusted EBIT
Industrial Packaging 4Q23 vs 4Q22 Adjusted EBIT1 500 416 (300) 450 400 162 315 350 300 250 63 (48) 200 22 $ Million 150 100 50 0 4Q'22 Price/Mix Volume Operations Maintenance Input Costs 4Q'23 & Costs Outages Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 38
Slide 39: Global Cellulose Fibers 4Q23 vs 4Q22 Adjusted EBIT
Global Cellulose Fibers 4Q23 vs 4Q22 Adjusted EBIT1 35 (136) (58) $ Million 55 (7) 5 (10) 4Q’22 Price/Mix Operations Maintenance Volume Input Costs 4Q’23 & Costs Outages Fourth Quarter and Full-Year 2023 Earnings 2/1/2024 39
Slide 40: Global Consumption: 2023 Annual Purchases for Key Inputs
Global Consumption 2023 Annual Purchases for Key Inputs Commodity North America EMEA Natural Gas (MMBTUs) 87,000,000 2,200,000 Energy Fuel Oil (Barrels) 190,000 70,000 Wood (Tons) 44,000,000 0 Fiber Old Corrugated Containers / DLK (Tons) 4,500,000 540,000 Caustic Soda (Tons) 330,000 900 Chemicals St
Slide 41: Global Input Costs 4Q23 vs 3Q23
Global Input Costs 4Q23 vs 3Q23 $15MM Favorable, $0.04 per share By Business By Input Type U.S Average Cost vs 3Q23 8 Wood -0.5% 10 1 OCC 14% 7 6 Wood 9 Natural Gas 4% Wood 8 Electricity -10% OCC OCC Wood (2) Chemical Composite -6% OCC (16) (1) Industrial Global Cellulose Fibers Packaging Fiber Ener
Slide 42: 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)). All periods have been adjusted to reflect the Ilim JV as disc
Slide 43: Footnotes
Footnotes Slide 17 1 Preliminary calculation. Moody’s methodology is used to calculate Adjusted Debt to EBITDA ratio. Moody’s adjusts debt to include balance sheet debt, operating leases/deferred tax liability and debt issuance expense, and pension gap. EBITDA is adjusted to include lease and pensio
Slide 44: Footnotes
Footnotes Slide 29 1 A non-GAAP reconciliation to GAAP EPS is available at https://www.internationalpaper.com/investors/financial-reports/quarterly-results Slide 30 1 Before special items Slide 37 1 Adjusted operating EPS, a non-GAAP financial measure based on Adjusted Operating Earnings (defined as
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