International Paper said that the slowing economy and a strong
U.S. dollar along with continued market-related downtime and rising energy
costs are further pressuring the usual fourth-quarter seasonal weakness.
Earnings in the fourth quarter will likely fall in the range of $0.30 per
share.
The company is balancing its supply to meet
the demands of its customers and expects it will take more than 100,000 tons of
additional downtime in the fourth quarter compared to the third. This brings
the fourth-quarter total to more than 700,000 tons of market-related downtime.
``We intend to keep production in line with
demand, and are taking aggressive steps to respond to weakened market
conditions,'' said John Faraci, executive vice president and CFO. ``We expected
a seasonal slowdown in the quarter, but rising fuel costs and concerns about
the economic outlook are impacting our business across the board.''
Energy costs, particularly natural gas, are
continuing to rise rapidly and are up $40 million compared to the previous
quarter. Many of International Paper's operating facilities are equipped to
burn either gas or oil, and those that can are now switching to oil.
Pricing has been stable in the printing
papers and packaging businesses except for coated freesheet papers where prices
are $30 per ton below the third-quarter average. Year-end coated freesheet prices
will be about $20 below the fourth-quarter average.
Also negatively impacting the quarter's
results has been the continuing pressure on building materials prices and
volume. Some of this is seasonal, but the company has also curtailed production
to match customer demand in this business as well. International Paper will
also have lower earnings from its timberlands business this quarter.
On the positive front, International Paper's
capacity rationalization and realignment initiatives are on or ahead of
schedule. The Champion merger synergies target has been increased by 20
percent, to $500 million. The integration of International Paper and Champion
International is proceeding extremely well.
Asset sales are progressing rapidly as
International Paper focuses on its three core businesses -- paper, packaging
and forest products. The company has increased its asset sales target to $5
billion including timberlands, to be completed by the end of 2001.
To date, the company has paid down $900
million in debt since the Champion acquisition and will continue to use cash
proceeds from divestitures to pay down debt in 2001.
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