Second Quarter 2015 Earnings | July 29,...
Transcript of Second Quarter 2015 Earnings | July 29,...
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Second Quarter 2015 Earnings | July 29, 2015
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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.
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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.
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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.”
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
$0.93
$0.84
$0.97
2Q14 1Q15 2Q15
EPS1
($MM)
Second Quarter 2015 Results
1 EPS based on Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense)
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Strong Q2 earnings driven by
outstanding NA Industrial Packaging
results with 24% EBITDA margins
Good operations and heavy outages
executed well
Ilim JV continues to perform well
Valliant #3 PM fully on-line ahead of
schedule
Substantial FCF generation of $511MM
1H2015 ROIC of 10%+
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2Q15 Financial Results
2Q14 1Q15 2Q15
Sales ($B) $5.9 $5.5 $5.7
EBIT1 ($MM) $686 $615 $650
EPS2 $0.93 $0.84 $0.97
EPS impact of Ilim F/X3 – IP Share
$0.07 ($0.04) $0.06
EBITDA1 ($MM) $1,041 $938 $978
EBITDA Margin1 17.6% 17.0% 17.1%
Free Cash Flow4 ($MM)
$377 $319 $511
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 ~$1.1B at end of 2Q2015) 4 See slide #19 for a reconciliation of cash provided by operations to free cash flow
xpedx is reflected as a Discontinued Operation in all periods presented.
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$377 $319
$511
2Q14 1Q15 2Q15
FCF4 ($MM)
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
.84
.97 (.10) .07
.06
.03
.07
1Q15 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Corporate & Other Items
Ilim JV 2Q15
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2Q15 vs. 1Q15 EPS
Operating Earnings
0 0
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
468
528
(9)
(33)
44
40 18
1Q15 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs 2Q15
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Industrial Packaging | 2Q15 vs. 1Q15 $ M
illio
n
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015
2015 2016
Valliant Update
Achieved full ramp-up in less than two
months
Qualifications complete
Provides flexibility to optimize system
and reduce total delivered cost
On track to deliver project IRR of 25+%
NA Industrial Packaging | Strengthening Our World Class Asset Base
Next Phase of Optimization
~$300MM capital investment within
mill system
20%+ IRR projects
Key Drivers
Improves system flexibility
Enhances quality
Further manufacturing and supply chain cost reductions
Supports future growth potential
Mill System
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
46
34
(8)
(10)
(3)
4
3 2
1Q15 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 2Q15
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Consumer Packaging | 2Q15 vs. 1Q15 $
Mill
ion
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015
Consumer Packaging | Strengthening our NA business
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Riegelwood, NC realignment progressing well
Carolina brand sale complete
Coated paperboard transition on track
Pulp expansion/conversion activities underway
Foodservice expansion at Kenton, OH Facility
Expansion project on track
Equipment coming on line within next 90 days
Enables IP to facilitate fiber cup growth opportunities with existing customers
and new customer wins
The U.S. cup market growth
continues, in part due to the
consumer driven foam-to-
paper conversion.
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
109 101
(3)
(30)
(5)
15
14
1
1Q15 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs FX / Other 2Q15
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Printing Papers | 2Q15 vs. 1Q15 $ M
illio
n
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Ilim Joint Venture | 2Q15 vs. 1Q15
$ Million 2Q14 1Q15 2Q15
Sales Volume (thousand tons)
782 805 826
Sales $545 $462 $500
Operational EBITDA1 $112 $186 $153
F/X (Impact of USD Net Debt2) $72 ($47) $65
IP Equity Earnings(Loss)3 $43 $39 $67
Solid results during heavy outage quarter
Favorable post-project production continues at Bratsk and Koryazhma
Experiencing increased inflation and expect some softwood pulp price
pressure
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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 Represents F/X impact primarily related to Ilim JV USD-denominated net debt (balance of ~$1.1B at end of 2Q2015); 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 1Q15 includes an after-tax f/x loss (primarily on USD-denominated net debt) of $(18)MM; 2Q14 and 2Q15 include after-tax f/x gains of
$29MM and $27MM, respectively.
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015 14
Financial Strength of IP | Balance Sheet & Share Buyback Update
$2B senior unsecured notes issuance in May to cover
debt tender and pension contribution
$1.0B tender offer
$750MM contribution to pension plan
$420MM YTD share repurchases, totaling $1.865B
against our $3.0B program
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Earnings Presentation | Second Quarter 2015 15
Third Quarter Outlook | Changes from 2Q15
North America EMEA & Russia Brazil Asia1
Volume
Paper Improving Stable Seasonally Stronger
Stable
Packaging Stable Stable Stable Pressure
Pricing / Mix
Paper Stable Improving in Europe Stable Stable
Packaging Stable Pressure Stable Pressure
Operations & Other
Paper Improving Stable Improving Stable
Packaging Improving Stable Stable Stable
Inputs & Freight
Paper Stable Stable Electricity & Wood
Stable
Packaging Energy, OCC
& Rail Rates Stable Stable Stable
Mill Maintenance Outages
Paper Decrease $26MM Decrease $6MM Increase $2MM Increase $1MM
Packaging Decrease $62MM Increase $2MM Decrease $1MM N/A
Ilim JV Equity Earnings Less outages will enable increased production and sales Non-recurring 2Q currency impact of +$0.06 on USD net debt, assuming stable F/X as of June 30, 2015
Other Items Tax rate, in line with full-year outlook of 33%
Interest expense, ~$145MM in 3Q2015
Corporate expense, ~$15MM in 3Q2015
1 Includes India
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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 Ilim Joint Marketing Agreement (JMA) sales
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1
12.5%
18.0%
12.9%
Europe and Russia Papers
32.4% 31.5%
28.1%
Brazil Papers
23.7%
22.9%
24.1%
NA Industrial Packaging
2Q14
1Q15
2Q15
12.9%
13.6%
14.4%
NA Consumer Packaging
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NA IPG 72%
NA CPG 7%
Brazil Papers 6%
NA Papers 5%
Europe & Russia Papers
3%
All Others 7%
2Q15 EBITDA $978MM
11.2% 11.2%
10.6%
NA Papers
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Earnings Presentation | Second Quarter 2015 17
Strength of International Paper
Continuing to perform well, particularly in light of
challenges in Brazil and Asia
Attractive margins driven by solid execution and
IP initiatives
Executing well on accretive investment opportunities
Significant and reliable FCF generation enables
attractive capital allocation strategy
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Appendix Investor Relations Contacts
Jay Royalty 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
$ Million 2Q14 1Q15 2Q15
Cash Provided by Operations
$7341 $638 $8652
Less Capital Investment
($357) ($319) ($354)
Free Cash Flow $377 $319 $511
Free Cash Flow
1 Excludes $205MM cash paid for pension plan contribution 2 Excludes $750MM cash paid for pension plan contribution
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Earnings Presentation | Second Quarter 2015
Maintenance Outages Expenses | 2015
$ Million 1Q15A 2Q15A 3Q15F 4Q15F 2015F
Industrial Packaging $63 $95 $38 $65 $261
North America 63 93 37 65 258
Brazil 0 2 1 0 3
Printing Papers Total $33 $63 $34 $36 $166
North America 27 41 15 36 119
Europe 0 22 16 0 38
Brazil 6 0 2 0 8
India 0 0 1 0 1
Consumer Packaging $15 $12 $8 $17 $52
North America 15 10 4 17 46
Europe 0 2 4 0 4
Total Impact $111 $170 $80 $118 $479
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
99 88 46
118 123
48 93
140 146 1
70
276
60 58
69
53 0
55
Maintenance Market
13 1
24 24 20
7 18 12
41 13
4
53
19
58
16 20 1
31
13
29
North American Downtime
21 20
2 15
19
12 0
18 15
Containerboard Uncoated Papers1
Market Pulp
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
1Courtland shutdown of two machines in 4Q13; entire mill shutdown of four machines complete in February 2014
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21
100
322
178 181
117
0
48
Coated Paperboard
158
201
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Special Items Pre-Tax ($ Million) 2Q14 1Q15 2Q15
Industrial Packaging
Acquisition and Integration Costs $4 - -
Other ($1) - -
Printing Papers Courtland Mill Shutdown ($49) - -
Consumer Pkg. Riegelwood Repurposing - - $14
Other ($1) ($1)
Corporate
Debt Extinguishment ($262) - -
Debt Premium Costs - ($207)
Other - $4
Total Special Items Before Tax ($309) $0 ($190)
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Special Items Before Tax | Continuing Operations
xpedx is reflected as a Discontinued Operation in all periods presented.
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Special Items Net of Taxes
2Q15
$ Million EPS
Earnings Before Special Items and Non-Operating Pension Expense
$409 $0.97
Special Items Net of Taxes:
Debt Premium Costs ($133)
Tax Adjustments ($28)
Riegelwood Repurposing $9
Other $1
Total Special Items Net of Taxes ($151) ($0.36)
Non-Operating Pension Expense ($31) ($0.07)
Net Earnings $227 $0.54
23 Earnings Presentation
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 $532 $167 3,507 $199 24%
Brazil ($7) $5 81 ($25) (3%)
Printing Papers
North America2 $31 $19 459 $109 11%
Europe & Russia3 $16 $13 3004 $97 13%4
Brazil $35 $24 254 $232 28%
India5 ($3) $4 63 $16 3%
North America Pulp $18 $16 328 $104 16%
Consumer Packaging
North America6 $27 $45 371 $194 14%
Europe $16 $4 89 $225 27%
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
2Q15 EBITDA | Integrated Mill Business Margins
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Operating Profits by Industry Segment | Continuing Operations
$ Million 2Q14 1Q15 2Q15
Industrial Packaging $534 $468 $528
Printing Papers $118 $109 $101
Consumer Packaging $34 $46 $34
Operating Profit $686 $623 $663
Net Interest Expense ($164) ($137) ($144)
Noncontrolling Interest / Equity Earnings Adjustment $2 $1 ($5)
Corporate Items ($2) ($9) ($8)
Non-Operating Pension Expense ($61) ($72) ($50)
Special Items ($309) $0 ($190)
Net Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest
$152 $406 $266
Equity Earnings(Loss), net of taxes – Ilim $43 $39 $67
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Geographic Business Segment Operating Results
$ Million Sales Operating Profit
2Q14 1Q15 2Q15 2Q14 1Q15 2Q15
Industrial Packaging
North America $3,210 $3,063 $3,205 $523 $468 $533
Europe $339 $282 $277 $10 $4 $4
Brazil $97 $62 $63 $1 ($3) ($7)
Asia $154 $146 $149 $0 ($1) ($2)
Printing Papers
North America $500 $482 $471 $33 $34 $31
Europe $380 $293 $312 $20 $35 $20
Brazil $262 $197 $210 $53 $37 $35
Asia / India $60 $47 $45 ($2) ($2) ($3)
N.A. Pulp $219 $209 $211 $14 $5 $18
Consumer Packaging
North America $505 $470 $500 $22 $22 $27
Europe $85 $83 $75 $11 $25 $16
Asia (Sun JV) $253 $225 $222 $1 ($1) ($9)
Does not reflect total company sales
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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
2Q15 $506 ($168) $9 $62 $409 422 $0.97
Non-Operating Pension Expense
1Q15 ($72) $28 $0 $0 ($44) 424 ($0.10)
2Q15 ($50) $19 $0 $0 ($31) 422 ($0.07)
Net Special Items
1Q15 $0 $0 $0 $0 $0 424 $0.00
2Q15 ($190) $39 $0 $0 ($151) 422 ($0.36)
Net Earnings from Continuing Operations
1Q15 $406 ($130) $2 $35 $313 424 $0.74
2Q15 $266 ($110) $9 $62 $227 422 $0.54
1 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at Webcasts and Presentations
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second 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.
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.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
.97
.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 2Q
2005 2006 2007 2010 2008
Impact of Mineral
Rights Gain
2009
.83
2011
.93
Final Land Sale
2012 2013 2014 2015
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
.93 .97
(.10)
(.02) (.05) (.01) .02
.12 .02
.06
2Q14 Price / Mix Volume Operations & Costs
Coutland Closure
Maintenance Outages
Input Costs Corporate & Other Items
Ilim JV 2Q15
2Q15 vs. 2Q14 EPS
Operating Earnings
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FX (.01)
Operations .07
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
534 528 (35) (11)
(4) (6)
(4) 54
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 2Q15
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Industrial Packaging | 2Q15 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2Q15 vs. 1Q15 2Q15 vs. 2Q14
Business Volume Price /
Ton Volume
Price / Ton
N.A. Container1 3% ($1) (1%) ($7)
European Container 2% €3 2% (€4)
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
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
NA Industrial Packaging Relative EBITDA Margins
1 Trailing twelve months 2 RockTenn margins prior to 2Q15
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%
21.5%
17.4%
22.9%
19.0%
17.3%
24.1%
22.2%
IP PCA WestRock
2Q14 1Q15 2Q15
21.0%
TTM1
TTM1
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WRK
reports
7/30/15
23.8%
2
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
34 34 (11)
(11)
(1)
3 10
10
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 2Q15
33
Consumer Packaging | 2Q15 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Average IP price realization (includes the impact of mix across all grades)
2Q15 vs. 1Q15 2Q15 vs. 2Q14
Volume Price/Ton Volume Price/Ton
NA Coated Paperboard 6% ($19) (3%) $1
Revenue Price Revenue Price
Foodservice 8% NA 6% NA
Consumer Packaging | Volume and Pricing Trends
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
NA Consumer Packaging Relative EBITDA Margins
1 Trailing twelve months 2 MWV margins prior to 2Q15
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
12.9% 13.7% 13.6%
10.1%
14.4%
IP WestRock
2Q14 1Q15 2Q15
35
15.5% TTM1
WRK
reports
7/30/15
2
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
118
101
(13)
(5) (16)
(8) 11 10
4
2Q14 Price / Mix Volume Operations & Costs
Courtland Maintenance Outages
Input Costs FX / Other 2Q15
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Printing Papers | 2Q15 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2Q15 vs. 1Q15 2Q15 vs. 2Q14
Business Volume Price / Ton Volume Price / Ton
NA Paper (3%) $7 (5%) ($9)
NA Pulp1 Flat $8 (2%) ($9)
European Paper2 Flat €5 2% (€19)
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
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
N.A. Printing Papers & Pulp Relative EBITDA Margins
12.0% 12.8%
10.9%
13.8%
12.3%
IP Domtar
2Q14 1Q15 2Q15
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
14.0%
TTM1
38
UFS
reports
7/30/15
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
$ Million 2Q14 1Q15 2Q15
Sales $262 $197 $210
Earnings $53 $37 $35
EBITDA Margin 32% 31% 28%
2Q15 vs. 1Q15 2Q15 vs. 2Q14
Uncoated Freesheet Volume Price/Ton Volume Price/Ton
Domestic (BRL) 0% R$22 (13%) R$143
Export (USD) 15% ($11) (1%) ($66)
Segment operating profit before special items
IP Brazil results are reported in the Printing Papers segment
Average IP Brazil price realization (includes the impact of mix across all grades)
Printing Papers | IP Brazil
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2009 2010 2011 2012 2013 2014
Sales Volume (Million short tons) 2.6 2.8 2.8 2.9 2.7 3.2
Sales ($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)
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Ilim Joint Venture | Full Year Financials
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Ilim Joint Venture | Volume and Pricing Trends
2Q15 vs. 1Q15 2Q15 vs. 2Q14
Business Volume Price/Ton Volume Price/Ton
Pulp 3% ($2) 12% ($60)
Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
Total Cash Cost Components | 2Q15 YTD
Fiber 32%
Materials 15%
Freight 15%
Labor 12%
Energy 9%
Overhead 9%
Chemicals 8%
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North American mills only
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
($8)
$20
$3 $6
Fiber Energy Chemicals Freight
North America Outside North America
$18
$1 $2
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
Input costs ($MM) for continuing businesses
43
Global Input Costs vs. 1Q15 | $21MM Favorable, or $0.03/Share
Wood
OCC
Wood
Wood
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
($2)
$44
$16 $16
Fiber Energy Chemicals Freight
North America Outside North America
$54
$10 $10
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
44
Global Input Costs vs. 2Q14 | $74MM Favorable, or $0.12/Share
Wood
OCC
Wood
Input costs ($MM) for continuing businesses
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
2012 2013 2014 2015
U.S. Mill Wood Delivered Cost Trend | Flat vs. 1Q15 Average Cost
Cost Indexed to January 2007 values
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Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
2012 2013 2014 2015
Cost Indexed to January 2007 values
U.S. OCC Delivered Cost Trend | 1% Increase vs. 1Q15 Average Cost
46
-
Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2007 2008 2009 2010 2011 0
50
100
150
200
250
2012 2013 2014 2015
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 20% Decrease vs. 1Q15 Average Cost
Cost Indexed to January 2007 values
47
-
Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2007 2008 2009 2010 2011 40
90
140
190
240
290
340
2012 2013 2014 2015
U.S. Fuel Oil Trend | 11% Increase vs. 1Q15 Average Cost
Cost Indexed to January 2007 values
WTI Crude prices
48
-
Earnings Presentation | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2007 2008 2009 2010 2011 75
100
125
150
175
200
2012 2013 2014 2015
U.S. Chemical Composite Index Trend | 2% Decrease vs. 1Q15 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 | Second Quarter 2015 Earnings Presentation | Second Quarter 2015
2015 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 69,000,000 11,000,000
Fuel Oil (Barrels) 700,000 380,000
Coal (Tons) 350,000 640,000
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) 20,000 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