International Paper Reports Full-Year and Fourth Quarter 2022 Results

International Paper (“IP”) reported full-year and fourth quarter 2022 financial results.

Full-Year and Fourth Quarter 2022 Highlights

• Full-year 2022 net earnings (loss) attributable to International Paper of $1.5 billion ($4.10 per diluted share) compared with $1.8 billion ($4.47 per diluted share) for full-year 2021
• Full-year 2022 adjusted operating earnings* (non-GAAP) of $1.2 billion ($3.18 per diluted share) compared with $944 million ($2.41 per diluted share) for full-year 2021
• Fourth quarter net earnings (loss) attributable to International Paper of $(318) million ($(0.90) per diluted share) including a $533 million non-cash impairment of our Ilim joint venture investment; Fourth quarter adjusted operating earnings* (non-GAAP) of $309 million ($0.87 per diluted share)
• 9% full-year revenue growth; 24% full-year operating earnings growth
• Building a Better IP initiatives delivered $250 million of earnings benefit in 2022, including $75 million in fourth quarter
• $2.2 billion of full-year 2022 cash provided by operations, including $761 million of cash provided in fourth quarter
• Returned $1.93 billion to shareholders through $1.26 billion share repurchases and $673 million in dividends in full-year 2022; $355 million returned to shareholders in fourth quarter

“In 2022, International Paper grew revenue and earnings in a dynamic and challenging macro environment and returned $1.9 billion to our shareowners,” said Mark Sutton, Chairman and Chief Executive Officer. “Our commercial and mill operational performance was solid, while significant inflation and lower demand impacted margins. We also delivered $250 million of earnings benefits from our Building a Better IP initiatives, exceeding our target for the year and building solid momentum going forward.”

Sutton added, “As we enter 2023, International Paper is well-positioned to navigate various economic environments from a position of strength, given our strategic customer relationships, our highly talented teams, our track record of solid cash generation and our strong balance sheet.  We also remain focused on creating value for all our stakeholders as we continue Building a Better IP.”

Segment Information

Business segment operating profits are used by International Paper’s management to measure the earnings performance of its businesses and is calculated as set forth in footnote (h) below under “Sales and Earnings by Business Segment”. As a result of the spin-off of our global Printing Papers business on October 1, 2021, the Printing Papers business segment has been eliminated and all prior year amounts have been adjusted to reflect this business as a discontinued operation. For discussion of discontinued operations, see the disclosure under Discontinued Operations included later in this release.

Industrial Packaging

Industrial Packaging operating profits (losses) in the fourth quarter of 2022 were $416 million compared with $369 million in the third quarter of 2022. In North America, earnings increased driven by higher sales prices for corrugated boxes and lower input costs, primarily for recovered fiber and energy. Sales volumes for corrugated boxes and containerboard were lower, reflecting continued consumer spending focus on non-discretionary goods and retailer inventory destocking. Lower demand resulted in increased economic downtime which negatively impacted operating costs. Operating costs also increased due to seasonality, inflation and the impact of Winter Storm Elliott. In EMEA, earnings improved driven by seasonally higher sales volumes in Morocco and lower energy costs.

Global Cellulose Fibers

Global Cellulose Fibers operating profits (losses) in the fourth quarter of 2022 were $35 million compared with $95 million in the third quarter of 2022. Earnings decreased driven by higher planned maintenance outage expenses and lower sales volumes, partially offset by higher sales prices for fluff pulp and lower input costs, primarily for energy. Volume was lower due to additional pull through of shipments in the third quarter as supply chain velocity began to improve. Operating costs were higher driven by the impact of Winter Storm Elliott and isolated reliability incidents.

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 recognized a $533 million impairment charge in the fourth quarter of 2022. The impairment charge includes recognition of $375 million of foreign currency cumulative translation adjustment loss. Equity earnings (losses), excluding impairment, were $44 million in the fourth quarter of 2022 compared with $64 million in the third quarter of 2022. 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 charge, is included in Assets Held for Sale.

Corporate Expenses

Corporate expenses, net was a benefit of $20 million for the fourth quarter of 2022, compared with expense of $15 million in the third quarter of 2022.

Effective Tax Rate

The reported effective tax rate for the fourth quarter of 2022 was 46%, compared to a third quarter of 2022 reported effective tax rate of (184)%. The third quarter was significantly lower due to one-time tax benefits for the sale of Sylvamo shares and an IRS settlement. The higher tax rate in the fourth quarter reflects tax expense related to increases in foreign and state deferred taxes as well as a non-deductible goodwill impairment (see special items table below).

Excluding special items and non-operating pension expense, the operational effective tax rate for the fourth quarter of 2022 was 25%, compared with 21% for the third quarter of 2022. The higher operational effective tax rate in the fourth quarter is primarily due to an increase in state deferred taxes.

Effects of Special Items

Net special items in the fourth quarter of 2022 amount to a net after-tax charge of $174 million ($0.49 per diluted share) compared with a gain of $551 million ($1.53 per diluted share) in the third quarter of 2022 and a charge of $222 million ($0.58 per diluted share) in the fourth quarter of 2021.

Discontinued Operations, Net of Taxes

Discontinued operations, net of taxes include the equity earnings associated with our Ilim joint venture and the operating earnings of our former Printing Papers segment and EMEA Coated Paperboard and Pulp business including the Kwidzyn, Poland mill, divested in the third quarter of 2021.

For the full fourth quarter results, click here.

About International Paper

International Paper (NYSE: IP) is a leading global supplier of renewable fiber-based products. We produce corrugated packaging products that protect and promote goods, and enable worldwide commerce, and pulp for diapers, tissue and other personal care products that promote health and wellness. Headquartered in Memphis, Tenn., we employ approximately 38,000 colleagues globally. 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