International Paper Reports Third Quarter 2024 Results
MEMPHIS, Tenn., Oct. 31, 2024 /PRNewswire/ -- International Paper (NYSE:IP) today reported third quarter 2024 financial results.
THIRD QUARTER 2024 HIGHLIGHTS
Third quarter net earnings of $150 million ($0.42 per diluted share)
Third quarter adjusted operating earnings (non-GAAP) of $153 million ($0.44 per diluted share)
Third quarter cash provided by operations of $521 million and returned $161 million to shareholders in dividends
"Our third quarter earnings are above our outlook," said Chairman and CEO Andy Silvernail. "Higher prices across the portfolio, including benefits from our packaging go-to-market strategy were supported by a moderately improving box demand environment. We also had higher operating costs and lower volumes due to seasonality and commercial actions to improve profitability."
"Going forward, we are laser-focused on delivering profitable growth as the low-cost, most reliable and innovative sustainable packaging solutions provider for our customers. We are deploying an 80/20 approach to strategically align resources to become excellent with our customers, while reducing complexity and cost across the company. This includes organizational restructuring and corporate cost reductions, as well as investments to strengthen our most competitive and strategic assets, paired with facility closures to structurally reduce operating costs. In addition, we are exploring strategic options for our Global Cellulose Fibers business. We recognize the impact of these difficult decisions and are providing support for team members who are affected," Silvernail added. "As we look forward to the combination with DS Smith, we expect the transaction will close early in the first quarter of 2025. Overall, I'm confident that our transformational journey will unlock substantial value at IP and strengthen the company for our employees, customers and shareholders."
Diluted Net EPS and Adjusted Operating EPS
Third Quarter 2024
SecondQuarter 2024
ThirdQuarter2023
Net Earnings (Loss) Per Share
$ 0.42
$ 1.41
$ 0.47
Less, Discontinued Operations (Gain) Loss, Net of Taxes
—
—
0.08
Net Earnings (Loss) from Continuing Operations
0.42
1.41
0.55
Add Back, Non-Operating Pension Expense (Income)
(0.03)
(0.02)
0.04
Add Back, Net Special Items Expense (Income)
0.33
0.14
0.08
Income Taxes - Non-Operating Pension and Special Items
(0.28)
(0.98)
(0.03)
Adjusted Operating Earnings Per Share*
$ 0.44
$ 0.55
$ 0.64
*
Adjusted operating earnings per share (non-GAAP) is defined as net earnings (loss) per share (GAAP) excluding the per share impact of discontinued operations, net special items and non-operating pension expense (income). Diluted earnings (loss) per share is the most directly comparable GAAP measure. Management uses this measure to focus on on-going operations, and believes that such measure is useful to investors in assessing the operational performance of the Company and enabling investors to perform meaningful comparisons of past and present consolidated operating results from continuing operations. For discussion of discontinued operations, net special items and non-operating pension expense (income), see the disclosure under Effects of Net Special Items, Discontinued Operations, Net of Taxes and Consolidated Statement of Operations and related notes included later in this release. A reconciliation of net earnings (loss) to adjusted operating earnings and diluted earnings (loss) per share to adjusted operating earnings per share, and an explanation of why we believe these non-GAAP financial measures provide useful information to investors, are included later in this release.
Select Financial Measures
(In millions)
ThirdQuarter 2024
SecondQuarter2024
ThirdQuarter2023
Net Sales
$ 4,686
$ 4,734
$ 4,613
Net Earnings (Loss)
150
498
165
Adjusted Operating Earnings
153
193
224
Cash Provided By (Used For) Operations
521
365
468
Free Cash Flow**
309
167
240
**
Free cash flow is a non-GAAP financial measure, which equals cash provided by operations less cash invested in capital projects. The most directly comparable GAAP measure is cash provided by (used for) operations. A reconciliation of cash provided by (used for) operations to free cash flow and an explanation of why we believe this non-GAAP financial measure provides useful information to investors, are included later in this release.
SEGMENT INFORMATIONThe following table presents net sales and business segment operating profit (loss), which is the Company's measure of segment profitability. Business segment operating profit (loss) is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280 - "Segment Reporting". Third quarter 2024 net sales by business segment and operating profit (loss) by business segment compared with the second quarter of 2024 and the third quarter of 2023 are as follows:
Business Segment Results
(In millions)
Third Quarter 2024
SecondQuarter 2024
Third Quarter 2023
Net Sales by Business Segment
Industrial Packaging
$ 3,926
$ 3,931
$ 3,787
Global Cellulose Fibers
710
717
725
Corporate and Inter-segment Sales
50
86
101
Net Sales
$ 4,686
$ 4,734
$ 4,613
Business Segment Operating Profit (Loss)
Industrial Packaging
$ 197
$ 291
$ 325
Global Cellulose Fibers
40
31
27
Industrial Packaging business segment operating profit (loss) in the third quarter of 2024 was $197 million compared with $291 million in the second quarter of 2024. In North America, business segment operating profit (loss) decreased as higher sales prices for boxes and containerboard were more than offset by seasonally lower sales volumes, higher operating costs and higher planned outage costs. Sales volumes were also impacted by one less shipping day in the third quarter of 2024. Operating costs were negatively impacted by lower volumes, reliability incidents and spending, seasonally higher labor and employee benefit costs. Input costs were higher, driven by higher energy and wood costs. Business segment operating profit (loss) benefited from the receipt of an insurance reimbursement related to the Ixtac, Mexico box plant fire that occurred in the first quarter of 2024. In EMEA Packaging, business segment operating profit (loss) was lower driven by seasonally lower volumes and higher input costs partially offset by lower planned outage costs and operating costs.
Global Cellulose Fibers business segment operating profit (loss) in the third quarter of 2024 was $40 million compared with $31 million in the second quarter of 2024. The improvement of business segment operating profit (loss) reflected higher average sales prices for both fluff and paper and tissue grade pulp and lower planned outage costs. Lower sales volumes for commodity pulp were mostly offset by higher fluff pulp volume. Operating costs were higher, driven by mill reliability incidents, employee benefits costs and the timing of spending. Input costs were stable as lower energy and chemical costs were offset by higher wood costs.
EFFECTS OF SPECIAL ITEMSNet special items include items considered by management to not be reflective of the Company's underlying operations. Net special items in the third quarter of 2024 amount to a net after-tax charge of $12 million ($0.04 per diluted share) compared with a benefit of $297 million ($0.84 per diluted share) in the second quarter of 2024 and a charge of $22 million ($0.06 per diluted share) in the third quarter of 2023. Net special items in all periods include the following charges (benefits):
Third Quarter 2024
Second Quarter 2024
Third Quarter 2023
(In millions)
Before Tax
After Tax
Before Tax
After Tax
Before Tax
After Tax
Restructuring and other charges, net:
Severance costs
$ 56
$ 42
(a)
$ ,
$ ,
$ ,
$ ,
Total restructuring and other charges, net
56
42
—
—
—
—
Environmental remediation adjustment
—
—
25
19
(f)
29
22
(h)
DS Smith combination costs
26
26
(b)
17
17
(b)
—
—
Strategic advisory fees
25
19
(b)
12
9
(b)
—
—
Italy antitrust
(6)
(6)
(c)
—
—
—
—
Third-party warehouse fire
13
9
(d)
—
—
—
—
Net (gain) loss on miscellaneous land sales
—
—
(5)
(4)
(g)
—
—
Interest related to settlement of tax audits
—
—
—
—
—
—
Tax benefit related to internal legal entity restructuring
—
(78)
(e)
—
(338)
(e)
—
—
Tax benefit related to settlement of tax audits
—
—
—
—
—
—
Total special items, net
$ 114
$ 12
$ 49
$ (297)
$ 29
$ 22
(a)
Severance costs associated with the Company's 80/20 strategic approach which includes the realignment of resources.
(b)
Transaction related costs that the Company believes are not reflective of the Company's underlying operations.
(c)
Settlement associated with an Italian antitrust matter initially recorded as a special item in 2019.
(d)
The Company's cost for third-party damages associated with a warehouse fire in Morocco.
(e)
Tax benefit resulting from internal legal entity restructuring.
(f)
Environmental remediation adjustment associated with remediation work at a waste pit site at a mill acquired but never operated by the Company and last utilized by the predecessor owner of the mill.
(g)
(Gains) losses recognized in connection with miscellaneous land sales that the Company believes are not reflective of the Company's underlying operations.
(h)
Environmental remediation adjustment associated with remediation work at a wastewater management unit at a mill that the Company divested in 1999.
EARNINGS WEBCASTThe company will host a webcast today to discuss earnings and current market conditions, beginning at 10 a.m. ET (9 a.m. CT). All interested parties are invited to listen to the webcast via the company's website by clicking on the Investors tab and going to the Events & Presentations page at https://www.internationalpaper.com/investors/events-presentations. A replay of the webcast will also be on the website beginning approximately two hours after the call.
Parties who wish to participate in the webcast via teleconference may dial +1 (646) 307-1963 or, within the U.S. only, (800) 715-9871, and ask to be connected to the International Paper third quarter earnings call. The conference ID number is 3629265. Participants should call in no later than 9:45 a.m. ET (8:45 a.m. CT). An audio-only replay will be available for ninety days following the call. To access the replay, dial +1 (609) 800-9909 or, within the U.S. only, (800) 770-2030 and when prompted for the conference ID, enter 3629265.
About International PaperInternational Paper (NYSE:IP) is a global producer of sustainable packaging, pulp and other fiber-based products, and one of the world's largest recyclers. Headquartered in Memphis, Tenn., we employ approximately 39,000 colleagues globally who are committed to creating what's next. We serve customers worldwide, with manufacturing operations in North America, Europe Latin America and North Africa. Net sales for 2023 were $18.9 billion.
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