First Quarter 2015 Earnings | April 29, 2015s1.q4cdn.com/597881801/files/doc_presentations/...2010...
Transcript of First Quarter 2015 Earnings | April 29, 2015s1.q4cdn.com/597881801/files/doc_presentations/...2010...
First Quarter 2015 Earnings | April 29, 2015
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015 2
Forward-Looking Statements
Certain statements in these slides and made during this presentation may be considered forward-looking
statements. These statements reflect management's current views and are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or implied in these statements.
Factors which could cause actual results to differ include but are not limited to: (i) the level of our
indebtedness and increases in interest rates; (ii) industry conditions, including but not limited to changes in
the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and
changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and
political changes, including but not limited to the impairment of financial institutions, changes in currency
exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future
pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated
expenditures related to the cost of compliance with existing and new environmental and other governmental
regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our
manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; and (vii) our ability
to achieve the benefits we expect from all strategic acquisitions, divestitures and restructurings. These and
other factors that could cause or contribute to actual results differing materially from such forward-looking
statements are discussed in greater detail in our Securities and Exchange Commission filings. We undertake
no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non-U.S. GAAP financial information
will be presented.
A reconciliation of those numbers to U.S. GAAP financial measures is available on
the company’s website at internationalpaper.com under Investors.
3
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Ilim JV Information
All financial information and statistical measures regarding our 50/50 Ilim joint
venture in Russia (“Ilim”), other than historical International Paper Equity Earnings
and dividends received by International Paper, have been prepared by the
management of Ilim. Ilim management has indicated that the financial information
was prepared in accordance with International Financial Reporting Standards and
extracted from Ilim’s financial statements, but International Paper has not verified or
audited any of this information. Any projected financial information and statistical
measures reflect the current views of Ilim management and are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied by such projections. See “Forward-Looking Statements.”
4
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
$906 $1,003
$938
1Q14 4Q14 1Q15
EBITDA1
($MM)
First Quarter 2015 Results
1 From continuing operations before special items and non-operating pension expense
5
Solid performance through
successfully managing margins
Good execution on maintenance
outages
Strong operating results at Ilim JV
and continued improvement in
operational EBITDA
Modest impact from winter weather in
Southeast U.S.
Improved YoY performance in
EBITDA margin, EBITDA and FCF
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
1Q15 Financial Results
1Q14 4Q14 1Q15
Sales ($B) $5.7 $5.9 $5.5
EBIT1 ($MM) $559 $657 $615
EPS2 $0.60 $0.53 $0.84
EPS impact of Ilim F/X3 – IP Share
($0.10) ($0.40) ($0.04)
EBITDA1 ($MM) $906 $1,003 $938
EBITDA Margin1 15.8% 16.9% 17.0%
Free Cash Flow4
($MM) $252 $739 $319
1 From continuing operations before special items and non-operating pension expense 2 EPS based on Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) 3 Represents F/X impact primarily related to Ilim JV USD-denominated net debt (balance of ~$1.2B at end of 1Q2015) 4 See slide #20 for a reconciliation of cash provided by operations to free cash flow
xpedx is reflected as a Discontinued Operation in all periods presented.
6
15.8%
16.9% 17.0%
1Q14 4Q14 1Q15
EBITDA Margin1 ($MM)
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
IP EBITDA Margins | Strong Performance Across Key Businesses
IP EBITDA margins based on operating profit before special items 1 Excludes the Recycling Business and revenue from trade volumes 2 Uncoated Papers (excludes Pulp); Excludes Joint Marketing Agreement (JMA) sales
7.6%
11.5% 11.2%
NA Papers
1Q14 4Q14 1Q15
7
1
18.3%
19.5%
18.0%
Europe and Russia Papers 1Q14 4Q14 1Q15
30.2% 27.8%
31.5%
Brazil Papers
1Q14 4Q14 1Q15
22.5% 22.7%
22.9%
NA Industrial Packaging
1Q14 4Q14 1Q15
7.3%
14.9% 13.6%
NA Consumer Packaging
1Q14 4Q14 1Q15
2
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
.53
.84
(.03) (.10)
(.01) (.02) .06
.41
4Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Corporate & Other Items
Ilim JV 1Q15
8
1Q15 vs. 4Q14 EPS
Operating Earnings
FX .36
Ops .05
0
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
484 468
(11) (40) (18) 24 29
4Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs 1Q15
9
Industrial Packaging | 1Q15 vs. 4Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
55
46
(17)
(4) (2)
2
6
6
4Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 1Q15
10
Consumer Packaging | 1Q15 vs. 4Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
155
109
(13)
(30)
(13) (3) 9
4
4Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs FX / Other 1Q15
11
Printing Papers | 1Q15 vs. 4Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Ilim Joint Venture | 1Q15 vs. 4Q14
$ Million 1Q14 4Q14 1Q15
Sales Volume (thousand tons)
781 859 805
Sales $554 $520 $462
Operational EBITDA1 $115 $143 $186
F/X (Impact of USD Net Debt2) ($114) ($432) ($47)
IP Equity Earnings(Loss)3 ($31) ($136) $39
Post-project opportunities for system optimization and cost management
Slightly unfavorable non-cash F/X impact on debt; however, ruble
devaluation has positioned JV as lowest cost NBSK producer in the world
Bratsk outage expense and higher inflation expected in 2Q
12
Ilim JV results are on an IFRS basis with the exception of IP Equity Earnings which is US GAAP 1 Before F/X impact on USD-denominated net debt 2 Mainly driven by Ilim JV USD-denominated net debt (1Q15 balance ~$1.2B); Ilim Group’s functional currency is the Ruble (RUB); Non-functional-denominated
currency balances are measured monthly using the month-end exchange rate
3 IP Equity Earnings(Loss) for 1Q14, 4Q14 and 1Q15 include after-tax f/x losses (primarily on USD-denominated net debt) of ($45)MM, $(171)MM and $(18)MM,
respectively.
Earnings Presentation | First Quarter 2015 13
Second Quarter Outlook | Changes from 1Q15
North America EMEA & Russia Brazil Asia1
Volume
Paper Stable Stable Improving Stable
Packaging Seasonal
Increase Stable Stable Stable
Pricing / Mix
Paper Improving Mix Stable Increasing Stable
Packaging Stable Stable Stable Stable
Operations & Other
Paper Improving Stable Stable Stable
Packaging Improving Stable Stable Stable
Inputs & Freight
Paper Stable Stable Stable Stable
Packaging Stable Stable Stable Stable
Mill Maintenance Outages
Paper Increase $16MM Increase $24MM Decrease $6MM N/A
Packaging Increase $26MM Increase $3MM Increase $2MM N/A
Ilim JV Equity Earnings Stable
Other Items Tax rate, in line with full-year outlook of 33%
Interest expense, ~$140MM in 2Q2015
Corporate expense, ~$15MM in 2Q2015
1 Includes India
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Global
Economic
Recession
ROIC1 above our Cost of Capital | Increasing Shareholder Value
14
4.5%
6.3%
7.5%
6.5%
5.0%
8.1%
9.5%
8.3%
9.3% 9.2%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ROIC WACC
2010 – 2014
8.9% (average ROIC)
1 ROIC = Operating Earnings before Interest / Average Invested Capital [Equity (adjusted to remove pension related amounts in OCI, net of tax) + Interest-Bearing Debt]
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015 15
Delivering on Our Commitments For Value Creation
Strategically
Reinvest in Business Return Cash to
Shareholders
Maintain Strong
Balance Sheet
Robust Capital Allocation Strategy
$1.05 $1.20
$1.40
$1.60
4Q11 4Q12 4Q13 4Q14
Annualized Dividend Share Buybacks
$1.5B share buyback (September 2013)
Additional $1.5B
authorization (July 2014)
Running our businesses well and generating strong FCF;
Returns consistently above cost of capital
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015 16
Strategic Reinvestment | Valliant Restart Update
Valliant #3 produced first saleable product within the last several days
Ramp up expected through end of 2015
~360k tons of capacity in recycled medium provides flexibility to optimize
system and serve our customers well
Machine is very cost competitive due to leveraging existing mill
infrastructure
A capital effective project with greater than 25% IRR
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015 17
Strategic Reinvestment | Riegelwood, NC Conversion
As announced on March 31, 2015:
Conversion of Riegelwood Mill
$135MM investment with 20%+ IRR
Streamlining and repositioning Coated Paperboard business
Selling Carolina® brand of coated bristols
Reducing coated paperboard capacity by 350,000 at Riegelwood by early 2016
Focusing on growth in food service and packaging markets out of Texarkana and
Augusta mills
-
200
400
600
800
1,000
1,200
1,400
2005 2007 2010 2012 2014 Post Conversion
Th
ou
sa
nd
To
ns
Growing NA Pulp business
Additional 400,000 tons of capacity
on line by mid-year 2016
Flexibility to produce softwood
market pulp while fluff demand
ramps up
IP Fluff Pulp Sales
Fully Ramped
Fluff Pulp Conversion Startups (capacity in tons)
2002: Pensacola +330k 2012: Franklin +200k
2007: Riegelwood +190k 2016: Riegelwood +400k
Earnings Presentation | First Quarter 2015 18
1Q15 Key Takeaways
Performing Well
Strong positions in key markets
Managing margins in a tough environment
High return capital projects
Strong FCF enabling robust capital
allocation strategy
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Appendix Investor Relations Contacts
Jay Royalty 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
19
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
$ Million 1Q14 4Q14 1Q15
Cash Provided by Operations
$5291 $1,144 $638
Less Capital Investment
($277) ($405) ($319)
Free Cash Flow $252 $739 $319
Free Cash Flow
1 Excludes $58MM cash paid for pension plan contribution
20
Earnings Presentation | First Quarter 2015
Maintenance Outages Expenses | 2015
$ Million 1Q15A 2Q15F 3Q15F 4Q15F 2015F
Industrial Packaging $63 $94 $36 $66 $259
North America 63 92 35 66 256
Brazil 0 2 1 0 3
Printing Papers Total $33 $67 $38 $46 $184
North America 27 43 14 39 123
Europe 0 24 22 0 46
Brazil 6 0 1 7 14
India 0 0 1 0 1
Consumer Packaging $15 $15 $6 $17 $53
North America 15 12 4 17 48
Europe 0 3 2 0 5
Total Impact $111 $176 $80 $129 $496
21
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
167 99 88
46
118 123
48 93
140
30
1 70
276
60 58
69 53
Maintenance Market
13 1
24 24 20
7 18
24
41 13
18
53
19
58
16 20 1
31
13
North American Downtime
14 21 20
2 15 19
12
0
18
Containerboard Uncoated Papers2
Market Pulp
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
1Augusta PM#2 was permanently shutdown in March 2013 (36000 tons / quarter) 2Courtland shutdown of two machines in 4Q13; shutdown complete in February 2014
146
22
197
100
158
322
178 181
117
0
48
Coated Paperboard1
31
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Special Items Pre-Tax ($ Million) 1Q14 4Q14 1Q15
Industrial Packaging
Acquisition and Integration Costs ($14) ($5) -
Asia Goodwill Impairment - ($100) -
Printing Papers Courtland Mill Shutdown ($495) ($7) -
Consumer Pkg. Other ($1) ($4) -
Corporate ASG Loss on Sale & Impairment - ($47) -
Other ($1) $8 -
Total Special Items Before Tax ($511) ($155) $0
23
Special Items Before Tax | Continuing Operations
xpedx is reflected as a Discontinued Operation in all periods presented.
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 $471 $164 3,347 $190 23%
Brazil ($3) $5 72 $28 3%
Printing Papers
North America2 $34 $20 471 $115 11%
Europe & Russia3 $30 $11 3204 $128 18%4
Brazil $37 $25 235 $264 31%
India5 ($2) $4 64 $31 6%
North America Pulp $5 $16 329 $64 10%
Consumer Packaging
North America6 $22 $42 338 $189 14%
Europe $25 $3 99 $283 34%
Segment operating profit before special items 1 Includes Corrugated Packaging, Saturating Kraft & Bag businesses, Gypsum & Release Kraft business; excludes Recycling business and revenue from trade volumes
2 Includes Bleached Kraft business 3 Uncoated Papers (excludes Pulp)
4 Excludes Joint Marketing Agreement (JMA) sales
5 Includes adjustment for minority ownership share 6 Includes Foodservice business
1Q15 EBITDA | Integrated Mill Business Margins
24
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Operating Profits by Industry Segment | Continuing Operations
$ Million 1Q14 4Q14 1Q15
Industrial Packaging $467 $484 $468
Printing Papers $85 $155 $109
Consumer Packaging $18 $55 $46
Operating Profit $570 $694 $623
Net Interest Expense ($143) ($142) ($137)
Noncontrolling Interest / Equity Earnings Adjustment $0 ($2) $1
Corporate Items ($11) ($35) ($9)
Non-Operating Pension Expense ($44) ($53) ($72)
Special Items ($511) ($155) $0
Net Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest
($139) $307 $406
Equity Earnings(Loss), net of taxes – Ilim ($31) ($136) $39
25
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Geographic Business Segment Operating Results
$ Million Sales Operating Profit
1Q14 4Q14 1Q15 1Q14 4Q14 1Q15
Industrial Packaging
North America $3,084 $3,159 $3,063 $460 $479 $468
Europe $342 $316 $282 $9 $8 $4
Brazil $85 $79 $62 ($2) ($1) ($3)
Asia $182 $143 $146 $0 ($2) ($1)
Printing Papers
North America $515 $511 $482 $11 $37 $34
Europe $375 $352 $293 $38 $38 $35
Brazil $245 $288 $197 $45 $53 $37
Asia / India $64 $55 $47 ($2) ($3) ($2)
N.A. Pulp $207 $234 $209 ($7) $30 $5
Consumer Packaging
North America $464 $496 $470 ($6) $32 $22
Europe $91 $95 $83 $26 $27 $25
Asia (Sun JV) $274 $264 $225 ($2) ($4) ($1)
Does not reflect total company sales
26
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2015 Operating Earnings
Pre-Tax $MM
Tax $MM
Non-controlling
Interest $MM
Equity Earnings
Net Income $MM
Average Shares
MM
Diluted EPS1
Operating Earnings
1Q15 $478 ($158) $2 $35 $357 424 $0.84
Non-Operating Pension Expense
1Q15 ($72) $28 $0 $0 ($44) 424 ($0.10)
Net Special Items
1Q15 $0 $0 $0 $0 $0 424 $0.00
Net Earnings from Continuing Operations
1Q15 $406 ($130) $2 $35 $313 424 $0.74
1 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at Webcasts and Presentations
xpedx is reflected as a Discontinued Operation in all periods presented.
27
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Operating Business EPS
2005-2006 as originally reported
2007-2011 adjusted for elimination of the Ilim JV reporting lag
2005-2010 Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings
xpedx is reflected as a Discontinued Operation from 2010 forward.
28
.36 .31
.29
.12 .12
.35
.40
.47 .45
.52
.57
.73
.45 .49
.41
.15
.07
.27
.38
.22
.05
.44
.85
.72 .76 .77 .78
.67
.58
.49
.77
.66 .64 .61
1.01
.81
.60
.93 .95
.53
.84
.42
.08
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2005 2006 2007 2010 2008
Impact of Mineral
Rights Gain
2009
.83
2011
.93
Final Land Sale
2012 2013 2014 2015
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
.60
.84
(.03) (.02)
(.06)
.01
.12 .04
.02
.16
1Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland Closure
Corporate & Other Items
Ilim JV 1Q15
1Q15 vs. 1Q14 EPS
Operating Earnings
29
FX .06
Ops. .10
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
467 468 (20) (10) (28)
(1)
6
54
1Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 1Q15
Industrial Packaging | 1Q15 vs. 1Q14 $
Mill
ion
30
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
1Q15 vs. 4Q14 1Q15 vs. 1Q14
Business Volume Price /
Ton Volume
Price / Ton
N.A. Container1 (5%) ($6) 1% ($8)
European Container (3%) €7 (1%) (€10)
Average IP volume and price realization (includes the impact of mix across all segments) 1 Corrugator plant sales on FBA shipping day basis
Industrial Packaging | Volume and Pricing Trends
31
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
NA Industrial Packaging Relative EBITDA Margins
1 Reflects Company’s change in accounting method beginning in 2014 2 Trailing twelve months
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Excludes the Recycling Business and revenue from trade volumes
Competitor EBITDA margin estimates obtained from public filings and IP analysis
23.7%
22.5% 21.2%
15.2%
22.7% 21.4%
17.7%
22.9%
19.0%
IP PCA RockTenn
1Q14 4Q14 1Q15
20.8%
17.8%
2014
TTM2
TTM2
32
1
RKT
reports
4/30/15
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
18
46
4
4
7
5
8
1Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs 1Q15
Consumer Packaging | 1Q15 vs. 1Q14 $
Mill
ion
33
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Average IP price realization (includes the impact of mix across all grades)
1Q15 vs. 4Q14 1Q15 vs. 1Q14
Volume Price/Ton Volume Price/Ton
NA Coated Paperboard (1%) $3 (2%) $41
Revenue Price Revenue Price
Foodservice (3%) NA 10% NA
Consumer Packaging | Volume and Pricing Trends
34
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
NA Consumer Packaging Relative EBITDA Margins
1 Trailing twelve months
IP EBITDA margins based on North American Consumer Packaging operating profit before special items
Competitor adjusted EBITDA margins obtained from public filings and IP analysis; reflects Food & Beverage segment
7.3%
10.5%
14.9%
12.9% 13.6%
IP MWV
1Q14 4Q14 1Q15
35
15.1%
13.3%
2014
TTM1
MWV
reports
4/29/15
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
85
109
(3) (8)
(14)
(3)
13
28
11
1Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland FX / Other 1Q15
36
Printing Papers | 1Q15 vs. 1Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
1Q15 vs. 4Q14 1Q15 vs. 1Q14
Business Volume Price / Ton Volume Price / Ton
NA Paper (5%) ($12) (7%) $4
NA Pulp1 (9%) ($12) 1% $4
European Paper2 (6%) (€7) (2%) (€25)
Average IP volume and price realization (includes the impact of mix across all grades) 1 Reflects Fluff and Market Pulp combined 2 Excludes Russia
Printing Papers | Volume and Pricing Trends
37
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
N.A. Printing Papers & Pulp Relative EBITDA Margins
6.6%
13.0%
14.4%
15.8%
10.9%
IP Domtar
1Q14 4Q14 1Q15
1 Trailing twelve months
IP EBITDA margins based on operating profit from continuing operations before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
13.9%
TTM1 2014
14.0%
38
UFS
reports
4/30/15
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
$ Million 1Q14 4Q14 1Q15
Sales $245 $288 $197
Earnings $45 $53 $37
EBITDA Margin 30% 28% 31%
1Q15 vs. 4Q14 1Q15 vs. 1Q14
Business Volume Price/Ton Volume Price/Ton
Uncoated Freesheet (27%) ($11) (13%) $7
Domestic (39%) $34 (19%) $61
Export (11%) ($49) (8%) ($40)
Segment operating profit before special items
IP Brazil results are reported in the Printing Papers segment
Average IP Brazil price realization (includes the impact of mix across all grades)
Printing Papers | IP Brazil
39
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2009 2010 2011 2012 2013 2014
Sales Volume (Million short tons) 2.6 2.8 2.8 2.9 2.7 3.2
Sales ($B) 1.3 1.9 2.2 2.0 1.9 2.1
Debt ($B) 0.4 0.5 0.9 1.2 1.5 1.4
Operating EBITDA ($MM) 197 516 591 291 208 470
F/X Gain (loss)1 (35) 12 (60) 39 (80) (684)
EBITDA ($MM) 163 528 531 330 128 (214)
Depreciation ($MM) 120 121 124 134 177 193
EBIT ($MM) 43 407 406 196 (49) (408)
Interest Expense ($MM) 28 18 7 6 39 69
Net Income (loss) ($MM) (19) 266 299 132 (72) (362)
IP Equity Earnings (loss) ($MM) (27) 103 134 56 (46) (194)
Dividends (to IP) ($MM) 50 34 85 0 0 56
Ilim JV results are IFRS basis.
IP Equity Earnings (loss) on US GAAP basis. 1Represents F/X impact primarily related to Ilim JV USD-denominated net debt (balance of ~$1.3B at year end 2014)
40
Ilim Joint Venture | Full Year Financials
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Ilim Joint Venture | Volume and Pricing Trends
1Q15 vs. 4Q14 1Q15 vs. 1Q14
Business Volume Price/Ton Volume Price/Ton
Pulp (5%) ($13) 4% ($73)
Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)
41
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
Total Cash Cost Components | 1Q15 YTD
Fiber 32%
Materials 15%
Freight 15%
Labor 12%
Energy 9%
Overhead 9%
Chemicals 8%
42
North American mills only
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
$1
$19
$5
$14
Fiber Energy Chemicals Freight
North America Outside North America
$29
$4 $6
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
Input costs ($MM) for continuing businesses
43
Global Input Costs vs. 4Q14 | $39MM Favorable, or $0.06/Share
Wood
OCC
Wood
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
$6
$49
$11
Fiber Energy Chemicals Freight
North America Outside North America
$54
$13 $8
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
44
Global Input Costs vs. 1Q14 | $75MM Favorable, or $0.12/Share
Wood
OCC
Wood
Input costs ($MM) for continuing businesses
$9
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
2012 2013 2014
U.S. Mill Wood Delivered Cost Trend | 1% Increase vs. 4Q14 Average Cost
Cost Indexed to January 2007 values
45
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
2012 2013 2014
Cost Indexed to January 2007 values
U.S. OCC Delivered Cost Trend | 4% Decrease vs. 4Q14 Average Cost
46
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2007 2008 2009 2010 2011 0
50
100
150
200
250
2012 2013 2014
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 12% Decrease vs. 4Q14 Average Cost
Cost Indexed to January 2007 values
47
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2007 2008 2009 2010 2011 40
90
140
190
240
290
340
2012 2013 2014
U.S. Fuel Oil Trend | 29% Decrease vs. 4Q14 Average Cost
Cost Indexed to January 2007 values
WTI Crude prices
48
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2007 2008 2009 2010 2011 75
100
125
150
175
200
2012 2013 2014
U.S. Chemical Composite Index Trend | 1% Decrease vs. 4Q14 Average Cost
Cost Indexed to January 2007 values
Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2007 - 2008 excludes WY PKG
49
Earnings Presentation | First Quarter 2015 Earnings Presentation | First Quarter 2015
2015 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 60,000,000 11,000,000
Fuel Oil (Barrels) 650,000 380,000
Coal (Tons) 415,000 640,000
Fiber Wood (Tons) 52,000,000 8,000,000
Old Corrugated Containers / DLK (Tons) 4,600,000 630,000
Chemicals
Caustic Soda (Tons) 350,000 80,000
Starch (Tons) 390,000 100,000
Sodium Chlorate (Tons) 160,000 57,000
LD Polyethylene (Tons) 37,000 -
Latex (Tons) 22,000 11,000
Does not include Asia or volume consumed by joint ventures (Sun JV, Ilim JV) Estimates are based on normal operations and may be impacted by downtime
50