International Paper Reports Second Quarter 2023 Results

International Paper reported second quarter 2023 financial results.

Second Quarter 2023 Highlights

• Net earnings of $235 million ($0.68 per diluted share); Adjusted operating earnings* (non-GAAP) of $204 million ($0.59 per diluted share)
• $55 million of earnings achieved from Building a Better IP initiatives, bringing year-to-date to $120 million
• Cash provided by operations of $528 million, bringing year-to-date to $873 million; Free cash flow** (non-GAAP) of $265 million year-to-date 2023
• Returned $200 million to shareholders through $40 million share repurchases and $160 million in dividends, bringing year-to-date to $519 million

“In the second quarter, the operations of International Paper continued to run well and we managed our businesses effectively in a challenging demand environment,” said Mark Sutton, Chairman and Chief Executive Officer. “We continued to advance our Building a Better IP initiatives, including our commercial improvement and cost management opportunities. The benefits of that work and our strong financial foundation position International Paper well as we navigate the current economic environment.”

Segment Information

Industrial Packaging

Operating profits (losses) in the second quarter of 2023 were $304 million compared with $322 million in the first quarter of 2023. In North America, earnings decreased on lower sales prices in a continued soft demand environment for corrugated boxes and containerboard as customer inventory destocking continued. The demand environment resulted in additional economic downtime driving higher operating costs that more than offset lower planned maintenance outage costs and input costs, primarily for energy, freight and wood. In EMEA, earnings were flat as lower energy costs were offset by seasonally lower volumes and lower sales prices for containerboard.

Global Cellulose Fibers 

Operating profits (losses) in the second quarter of 2023 were $30 million compared with $(16) million in the first quarter of 2023. Earnings improved in spite of lower sales of fluff pulp and decreased pulp pricing in a challenging global market environment impacted by customer inventory destocking as supply chain conditions improved. The earnings improvement was driven by lower operating costs, planned maintenance costs and input costs, primarily for chemicals and energy.

Equity Method Investment – Ilim Joint Venture

On January 24, 2023, the Company announced an agreement to sell its investment in the Ilim joint venture, subject to regulatory approvals. The Company initially recognized an impairment charge of $533 million including approximately $375 million foreign currency cumulative translation adjustment loss in the fourth quarter of 2022. Through the second quarter of 2023, the Company recognized an additional $76 million impairment charge.

Equity earnings (losses), excluding impairment, were $46 million in the second quarter of 2023 compared with $43 million in the first quarter of 2023. The current period and historical results have been adjusted to reflect Ilim as a discontinued operation and our investment balance, following the adjustment to fair value and resulting impairment charges, is included in Assets Held for Sale.

Corporate Expenses

Corporate expenses, net was an expense of $8 million for both the second quarter of 2023 and the first quarter of 2023.

Effective Tax Rate

The reported effective tax rate for the second quarter of 2023 was 13%, compared to a first quarter of 2023 reported effective tax rate of 22%. The lower tax rate in the second quarter reflects a tax benefit related to the closure of the 2015-2016 IRS audit (see special items table below).

Excluding special items and non-operating pension expense, the operational effective tax rate was 22% for both the second quarter of 2023 and the first quarter of 2023.

The operational effective tax rate is a non-GAAP financial measure and is calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). Management believes that this presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate between past and present periods.

Effects of Special Items

Net special items in the second quarter of 2023 amount to a net after-tax gain of $27 million ($0.08 per diluted share) compared with a charge of $2 million ($0.01 per diluted share) in the first quarter of 2023 and a benefit of $17 million ($0.05 per diluted share) in the second quarter of 2022.

To view the full second quarter results, click here.

About International Paper

International Paper (NYSE: IP) is a global producer of planet-friendly packaging, pulp and other fiber-based products, and one of North America’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, Latin America, North Africa and Europe. Net sales for 2022 were $21.2 billion. Additional information can be found by visiting internationalpaper.com.

Source: International Paper Company