IP earnings decline from 2021

Full-year 2022 net earnings declined for International Paper (IP), Memphis, Tennessee, when compared with the full-year 2021 net earnings. The company achieved net earnings of $1.5 billion, or $4.10 per diluted share, in 2022, down from $1.8 billion, or $4.47 per diluted share, in 2021.

The company has achieved full-year adjusted operating earnings of $1.2 billion, or $3.18 per diluted share, compared with $944 million, or $2.41 per diluted share, for its 2021 fiscal year.

Additionally, IP has reported net loss of $318 million, or 90 cents per diluted share, for the fourth quarter of 2022, including a $533 million noncash impairment of its Ilim joint venture investment and fourth-quarter adjusted operating earnings of $309 million, or 87 cents per diluted share.

“In 2022, International Paper grew revenue and earnings in a dynamic and challenging macro environment and returned $1.9 billion to our shareowners,” says Mark Sutton, chairman and chief executive officer at International Paper. “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.”

Industrial Packaging profits rise

According to IP’s fourth-quarter earnings report, the company’s Industrial Packaging operating profits were $416 million in the fourth quarter of 2022 compared with $369 million in the third quarter of 2022.

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During the company’s fourth-quarter earnings call, which took place Jan. 31, Sutton said U.S. box shipments were down about 6 percent year over year on a daily basis, similar to what the company experienced in the third quarter of 2022 as consumer priorities shifted toward nondiscretionary goods and services.

Despite the decrease in box shipments, IP reports that its North American earnings increased for its Industrial Packaging division, driven by higher sales prices for corrugated boxes and lower input costs, primarily for recovered fiber and energy.

IP says sales volumes for corrugated boxes and containerboard were lower due to continued consumer spending focus on nondiscretionary goods and retailer inventory destocking. Lower demand resulted in increased economic downtime, which adversely impacted the division’s operating costs.

IP says its Industrial Packaging division’s operating costs also increased due to seasonality, inflation and the impact of Winter Storm Elliott.

In the Europe, Middle East and Africa region, the Industrial Packaging division’s earnings improved from the third quarter, driven by seasonally higher sales volumes in Morocco and lower energy costs.

Mergers and acquisitions movement

In January, IP announced an agreement to sell its investment in the Ilim joint venture to its joint venture partners for $484 million, subject to regulatory approvals in Russia.  

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“The [joint venture] partners have also expressed interest in purchasing all of IP shares in JSC Ilim Group, which represents a 2.39 percent stake for $24 million,” Sutton said during the fourth-quarter earnings call. “We also intend to divest all other residual and nonmaterial interest associated with Ilim to our [joint venture] partners. The deal is subject to regulatory approvals in Russia. We are making good progress and will provide you with additional information when it becomes available. Upon finalizing this deal, IP will no longer have any investments in Russia.”

During the company’s earnings call, International Paper Chief Financial Officer Tim Nicholls said the company invested $931 in its business in 2022. He noted that the company started a new corrugated box plant in eastern Pennsylvania that has an expected return on investment of 20 percent. He added that the company plans to make investments across its box system to support growth.

“We will continue to be disciplined and selective when assessing [merger and acquisition] opportunities that may supplement our goal of accelerating profitable growth,” Nicholls said.

Sutton adds, “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.”