International Paper posts strong quarter, reviews GCF business

International Paper posted strong third-quarter results on Thursday, reporting adjusted earnings of 44 cents per share, surpassing the Zacks consensus estimate of 24 cents by 83%.

The company achieved net earnings of $150m on $4.69bn in revenue, marking a 0.37% increase over expectations, though a year-on-year earnings decrease from 64 cents per share.

Despite robust sales figures, IP said its industrial packaging business recorded a drop in operating profit to $197m from $291m in the second quarter, largely due to seasonally-lower sales volumes, rising costs, and one fewer shipping day.

Conversely, Global Cellulose Fibers (GCF) improved, with profit climbing to $40m on higher fluff pulp sales and reduced downtime costs.

Strategically, IP said it was launching a review of options for its GCF division, which generated $2.9bn in 2023 revenue.

The review was part of a larger focus on sustainable packaging.

While no specific outcome was assured, IP said it had retained Morgan Stanley as an advisor.

IP also announced that it would permanently close its Georgetown, South Carolina mill by the end of the year, affecting more than 670 employees.

The mill’s 300,000-ton fluff pulp capacity would be shifted to other locations, ensuring no reduction in production capacity.

IP said it had agreed with Sylvamo to terminate their uncoated freesheet supply contract by 31 December.

These moves come as IP went through a corporate restructuring plan aimed at workforce reductions, likely impacting 650 roles and resulting in pre-tax charges between $80m and $100m.

IP was also advancing its acquisition of DS Smith, with intentions to list the enlarged group on the London Stock Exchange.

“Our third quarter earnings are above our outlook,” said chairman and chief executive officer Andy Silvernail.

“Higher prices across the portfolio, including benefits from our packaging go-to-market strategy were supported by a moderately improving box demand environment.

“We also had higher operating costs and lower volumes due to seasonality and commercial actions to improve profitability.”

Silvernail said that going forward, the company was “laser-focussed” on delivering profitable growth.

“We are deploying an 80/20 approach to strategically align resources to become excellent with our customers, while reducing complexity and cost across the company.

“This includes organisational restructuring and corporate cost reductions, as well as investments to strengthen our most competitive and strategic assets, paired with facility closures to structurally reduce operating costs

“ In addition, we are exploring strategic options for our Global Cellulose Fibers business - we recognize the impact of these difficult decisions and are providing support for team members who are affected.”

Silvernail said that looking ahead to the company’s combination with DS Smith, it expected the transaction to close early in the first quarter of next year.

“Overall, I'm confident that our transformational journey will unlock substantial value at IP and strengthen the company for our employees, customers and shareholders.”

At 1351 EDT (1751 GMT), shares in International Paper were up 13.13% in New York at $55.47.

Reporting by Josh White for Sharecast.com.