International Paper shows losses, gains in Q3 financial report

International Paper (IP), headquartered in Memphis, Tennessee, has released its third-quarter 2022 financial results. The report shows the company has lost more than $200 million in operating profits for industrial packaging and a gain of $70 million in operating profits for global cellulose fibers.  

"Our third-quarter earnings were significantly impacted by the challenging macro environment," International Paper CEO Mark Sutton says. "Lower consumer spending for goods and retail inventory destocking drove lower demand for packaging, and we also experienced significantly higher energy and distribution costs. As we enter the fourth quarter, we see packaging demand stabilizing at these lower levels and input costs providing some relief; however, we also expect seasonally higher operating costs. And for the year, we expect to exceed our $225 million target related to our Building a Better IP initiatives."  

Industrial packaging operating profits in the third quarter of 2022 were $369 million compared with $560 million in the second quarter of 2022, a loss of $200 million. The company says in North America, earnings decreased as higher sales prices for corrugated boxes and containerboard and lower planned maintenance outage expenses were more than offset by lower sales volumes for corrugated boxes and containerboard, higher operating and distribution costs and higher input costs, primarily for energy.   

Sales volumes for corrugated boxes were affected by the macroeconomic environment and reflected lower consumer spending on goods and retailer inventory destocking. Operating and distribution costs increased driven by economic downtime and inflation.   

The company adds that the second quarter 2022 results were impacted by some one-time items that did not repeat in the third quarter. In Europe, the Middle East and Asia, earnings were impacted by significantly higher energy costs and seasonally lower sales volumes in Morocco.  

Global cellulose fibers operating profits in the third quarter of 2022 were $95 million compared with $25 million in the second quarter of 2022. Earnings increased driven by higher sales prices for both fluff pulp and market pulp and lower planned maintenance outage expenses, partially offset by higher input costs, primarily for wood and chemicals and higher distribution costs.   

Sales volumes increased, reflecting a favorable demand/supply environment for fluff pulp and some improvement in supply chain conditions. As with industrial packaging, the second quarter 2022 results were impacted by some favorable one-time items that did not repeat in the third quarter.  

Third-quarter net earnings attributable to IP of $951 million, or $2.64 per diluted share, compared with $511 million, $1.38 per diluted share, in the second quarter of 2022 and $864 million, $2.20 per diluted share, in the third quarter of 2021. Third-quarter 2022 net earnings include a net after-tax benefit of $563 million, $1.56 per diluted share, related to the settlement of the previously announced timber monetization restructuring tax matter. Third-quarter 2021 net earnings include a net after-tax gain of $350 million, 89 cents per diluted share on the sale of its Kwidzyn, Poland, mill.  

Third-quarter adjusted operating earnings a nongenerally accepted accounting principal of $364 million, or $1.01 per diluted share, compared with $459 million, $1.24 per diluted share, in the second quarter of 2022 and $431 million, $1.10 per diluted share, in the third quarter of 2021.  

The company is reporting year-over-year revenue growth based on strong price realization. IP says it has $70 million of earnings achieved from Building a Better IP initiatives, bringing year-to-date to $175 million. Corporate expenses were $15 million for the third quarter of 2022, compared with $27 million in the second quarter of 2022.     

The company’s Ilim joint venture equity earnings were $64 million in the third quarter of 2022 compared with $95 million in the second quarter of 2022, a $30 million loss. Operationally, earnings decreased driven by lower sales prices for containerboard and higher operating costs. IP says it continues to actively explore strategic options for the Ilim joint venture, including a sale of its 50 percent ownership interest.  

"Looking ahead, while there is considerable geopolitical and macroeconomic uncertainty ahead of us, I am confident in our ability to navigate through various environments,” Sutton says. “We have a great team and a large system of mills and box plants that enables us to take care of our customers while optimizing our operations to reduce high marginal costs. We will also continue to invest in attractive cost reduction projects and accelerate our improvement initiatives to create value."