International Paper Company (IP) Earnings

Management highlights

### Core Strategic Execution Progress - Executed against 2026 priorities: improved reliability, simplified business operations, strengthened cost structure, and targeted strategic investment, with tangible progress across all focus areas - Delivered stronger operational performance than expected despite a heavy planned outage schedule and challenging macro conditions, exceeding internal earnings expectations - Achieved 1.7% year-over-year daily box volume growth in North America, and is on track to outpace industry growth by ~2% for the full year 2026 - Improved overall mill performance by 500 basis points year-over-year, with consistent gains in capacity utilization from sustained optimization efforts Completed Key Strategic Investments & Acquisitions - Completed the NORPAC mill acquisition in June 2026; operations returned to pre-incident levels after temporary production disruption from a neighboring facility incident, expands capacity for high-performance lightweight packaging and reduces West Coast distribution costs - Completed the Riverdale machine conversion on schedule; ramp-up is progressing as expected, with full run rate targeted for Q1 2027, improves product mix and strengthens cost position - Acquired the Dover Converting Facility to expand footprint in an attractive high-growth region, added an established customer base to support long-term growth - The new Waterloo facility is on track to start up in Q4 2026, with full operations expected by Q2 2027, expands capacity in a high-demand market segment and enables faster, more reliable customer delivery EMEA Transformation & Separation Progress - Accelerated cost-out actions, with $210 million of annualized run rate footprint and cost savings actions announced to date, including 31 manufacturing facilities and 1 central office planned/already closed, with net headcount reductions of over 3,000 positions - Half of planned equipment redeployment for network optimization has been completed, consolidating volume into more efficient modern facilities to improve utilization and lower fixed costs - Transformational investments are underway across the region: a new lightweight recycled containerboard machine at LUDA (on track to launch in Q3 2026), facility consolidation in Germany, and capacity expansion in Romania to capture 4% CAGR growth in Eastern Europe - The planned separation of the EMEA packaging business remains on schedule, with dedicated teams progressing on governance, legal, operational, and technology infrastructure setup

Guidance

• Full year 2026 consolidated adjusted EBITDA guidance: $2.35 billion to $2.45 billion, with the upper end of the prior range reduced by $50 million primarily due to macro headwinds and prolonged impacts from the Middle East conflict • Q3 2026 adjusted EBITDA guidance for Packaging Solutions North America: $555 million to $585 million, including an expected $85 million pre-insurance impact from the proactive Pine Hill mill shutdown for structural roof repairs • Q3 2026 adjusted EBITDA guidance for Packaging Solutions EMEA: $230 million to $250 million • Full year 2026 adjusted EBITDA guidance for Packaging Solutions EMEA: $900 million to $1 billion, supported by an expected ~$170 million step-up from first half to second half 2026 driven by margin recovery, cost-out benefits, and lower input costs • Management expects ~$600 million of adjusted EBITDA growth from first half to second half 2026 for North America (excluding the Pine Hill disruption); the estimated total impact of Pine Hill disruption in H2 2026 is $70 to $100 million, with most of this expected to be recovered via insurance • September 2026 containerboard price increases will primarily flow through to earnings in 2027, with full realization expected between Q1 and Q2 2027 • Guidance assumes current strip pricing for diesel, and moderating but still elevated OCC prices in the second half of 2026

Segment performance

1. Packaging Solutions North America: Delivered $425 million of adjusted EBITDA in Q2 2026. Favorable items included +$37 million from price and mix, +$16 million from volume, +$1 million from operations/costs, and +$21 million from input costs, partially offset by $127 million in unfavorable planned maintenance outage costs (twice normal levels for this heavy outage quarter). This segment accounts for approximately 70% of total year-to-date adjusted EBITDA (first half 2026 North America adjusted EBITDA: $902 million of total $1.292 billion). 2. Packaging Solutions EMEA: Delivered $182 million of adjusted EBITDA in Q2 2026, ahead of internal expectations. Price and mix was $12 million unfavorable sequentially, operations and costs were $16 million unfavorable (better than forecast), and input costs were $10 million favorable (lower energy costs offset higher OCC costs). First half 2026 adjusted EBITDA for EMEA was $390 million, representing approximately 30% of total year-to-date adjusted EBITDA.

Risks & headwinds

• Sustained macroeconomic headwinds: persistent inflation, consumer affordability pressures, and continued weak housing market have muted expected second half demand growth, with North American industry demand now forecast to be flat rather than up in H2 2026 • Geopolitical risks: the ongoing Middle East conflict has created prolonged uncertainty, elevated energy and diesel costs, and disrupted near-term demand in the region, impacting EMEA margins and distribution costs • Operational risk: the proactive Pine Hill mill shutdown for roof repairs has created additional tightness in the North American containerboard market, resulting in an expected $70 to $100 million pre-insurance EBITDA impact in H2 2026 • Input cost volatility: elevated OCC, freight, diesel, and employee medical costs have created larger-than-expected cost headwinds, currently projected at $150 million for 2026 (up from a prior forecast of $50 million) • Industry competitive risk: higher containerboard pricing could potentially trigger new capacity additions or import competition, though high replacement costs for mill assets create a high barrier to new entry • Short-term demand disruption: recent product contamination issues in West Coast fruit and vegetable markets have created visible near-term volume headwinds in July 2026 • Execution risk: the EMEA separation process adds incremental workload and complexity to ongoing operations, and cost-out execution has taken longer and cost more than originally projected

Analyst Q&A

• Q: The implied guidance step-up from Q3 to Q4 2026 is ~50% at the midpoint. What items support this outlook, what recent diesel price increases have you factored in, and what is your progress on 80-20 initiatives across regions for 2026, with what work left for 2027?

  A: For North America, the Q3 to Q4 step-up comes from three core sources: continued Riverdale machine ramp-up, continued flow-through of June price increases, and maturation of ongoing cost-out initiatives. The guidance already accounts for recent elevated diesel prices. On 80-20, EMEA is still in the thick of facility rationalization (31 facilities closing, 3,000+ positions cut), with savings ramping into H2 2026 and 2027. North America has completed most major structural footprint changes, and is now in ongoing incremental optimization focused on tuning existing assets for higher profitability. High-impact investments like Riverdale, NORPAC, Waterloo, and Dover are ongoing, continuing the strategy of cutting underperforming assets and reinvesting in profitable growth.

• Q: How are you managing Pine Hill mill downtime amid tight market conditions, and is the majority of the $70-$100 million impact expected to be recovered via insurance in 2026? Also, how do you expect industry supply to respond to higher North American pricing in 2027?

  A: Pine Hill is expected to be back online by end of August, so downtime will not be extended. Pre-emptive network optimization over the past two years lets us reallocate supply from reduced exports to core domestic customers to cover the gap, though the market will remain tight through August. Management expects a majority of the Pine Hill disruption cost will be recovered via insurance, and is working to match recovery timing to the impact period. For 2027 supply response, skyrocketing post-COVID replacement costs for new mill capacity create a very high barrier to entry, requiring mid-to-high teens returns on invested capital that are not yet widespread enough to trigger large new capacity additions. High shipping and input costs also limit potential import competition.

• Q: What is your pricing philosophy for the recent September containerboard price increase? Is it to offset inflation, or to achieve appropriate returns amid tighter supply? Also, where are you in the journey of right-sizing your box network and recapitalizing your overall asset base?

  A: Pricing is set based on a combination of market dynamics, supply-demand balance, and inflationary cost pressures. Most price increases so far in 2026 have been absorbed by higher input costs (OCC, energy, diesel, freight), and management expects a portion of the latest increase to flow through to the bottom line if inflation stabilizes. For the box network, the large-scale phase of closing high-cost uninvestable capacity is mostly complete. The focus has shifted to optimization: large greenfield bets (Waterloo, Mississippi), strategic tuck-in acquisitions (Dover), brownfield upgrades, and regional portfolio optimization to improve responsiveness and lower costs. On overall asset recapitalization, after several years of large bets (closing three unprofitable mills, reinvesting in Mansfield, Riverdale, NORPAC), the pace of major investments will moderate, but aggressive investment to build a low-cost, customer-responsive integrated network will continue for the next 2-3 years.

• Q: Is the planned EMEA spin still the only option being pursued, or are alternatives still on the table? Also, where do you stand on the original $1.2 billion target cost synergy from the DS Smith acquisition, how much has been actioned, and how does lower-than-expected demand impact that target?

  A: Management is fully focused on executing the planned spin, which remains on schedule, but has a fiduciary duty to consider any appropriate alternative proposals that deliver maximum shareholder value, so alternatives are not ruled out. Lower demand and higher inflation have created headwinds to the original $1.2 billion cost synergy target, but ~75% of the cost-out actions have already been completed, with ~$550-$600 million of synergies fully actioned and flowing through the system. Execution has taken longer and cost more than originally projected, but management still expects to hit the full original target when all actions are complete, with commercial upside partially offset by higher inflation leaving the total on track for 2027.