INTERNATIONAL PAPER CO /NEW/ Q4 FY2024 earnings call

• DS Smith transaction: Expected to close at the end of January 31, 2025. The European Commission approved the acquisition with conditions, and IP agreed to divest 5 box plants in Northern France, Northern Spain and Portugal within 6 months. Will welcome DS Smith to IP on February 3 and will do a deep dive on DS Smith's path forward at Investor Day in March.
• Culture building: Building a performance - driven customer - centric culture with a clear strategy stemmed from mission and values of safety, ethics and excellence, focusing on profitable market share growth as the low - cost producer and most reliable and innovative sustainable packaging provider.
• $4 billion EBITDA target: Roughly $1.2 billion of improvement from cost out (net of inflation), with actions like zeroing up corporate organization, closing 5 box plants, 80/20 pilots (now lighthouses) delivering 20% + productivity gains and scaling to 22 box plants in 2025, overhauling capital investment process, commercial improvements contributing ~$800 million, and investing in greenfield corrugated box facility in Waterloo, Iowa and acquiring bulk plant in West Monroe, Louisiana.
• Fourth quarter performance: Operating earnings per share slightly better than outlook, EBITDA margin slightly better sequentially, free cash flow impacted by working capital changes, capital spending and DS Smith - related transaction costs.

For Industrial Packaging in Q4: Price and mix was higher by $63 million due to realization of ~$40 million benefits from prior index movement and additional benefits from containerboard export and open market sales. Volume was lower by $24 million sequentially due to 2 fewer shipping days in North America box and volume trade - offs related to commercial contract restructuring. Operations and costs was $22 million unfavorable sequentially mainly due to seasonally higher costs, step down in insurance recovery related to Ixtac box plant fire and reliability events in mill system. Planned maintenance outages were lower by $22 million sequentially and input costs were $20 million favorable. Accelerated depreciation decreased earnings by $9 million due to 5 packaging facility closures. For Global Cellulose Fibers in Q4: Price and mix was sequentially lower by $13 million due to price index movement. Volume sequentially was lower by $8 million due to Georgetown mill closure in early December and prior quarter order pull - forward. Operations and costs was unfavorable sequentially by $23 million including unabsorbed fix costs from Georgetown mill closure, reliability issues and higher seasonal costs. Planned maintenance outages were higher in the fourth quarter by $28 million and input costs were $4 million favorable. Accelerated depreciation decreased earnings by $222 million mostly due to Georgetown mill closure. Adjusted earnings for Industrial Packaging are expected to be higher sequentially by $52 million including non - repeat of accelerated D&A expense. Adjusted earnings for Global Cellulose Fibers are expected to be higher sequentially by approximately $220 million including non - repeat of accelerated depreciation expense.

• 2025 is expected to be a transformational year. First few months earnings continue stabilization trend, then progressively ramp from cost actions, commercial wins and 80/20 implementation. - Fourth quarter adjusted operating earnings per share was negative $0.02 vs $0.44 in third quarter. EBITDA margin slightly better sequentially. Free cash flow impacted by working capital changes, capital spending and DS Smith - related transaction costs.

• DS Smith acquisition divestment: Need to identify suitable buyers for 5 box plants in Northern France, Northern Spain and Portugal within 6 months, and there may be uncertainty in finding viable buyers. - Operational risks: Seasonally higher costs, step down in insurance recovery, reliability events in mill system, maintenance outages impacting earnings.

Q: Mark Weintraub asked about whether the volumes in the fourth quarter were in line with expectations and the $350 million lack of productivity.

A: Andrew Silvernail said volumes were exactly as expected from the contract process, and the $350 million lack of productivity is related to mill reliability and productivity. It's due to underspending on mill reliability for a long time and changeover of people, with actions like maintenance investment, reliability spend, and productivity improvement in box plant lighthouses.

Q: Phil Ng asked about how the actions layer through 2025 and how quickly the $300 - $400 million drag can be recovered.

A: Andrew Silvernail said cost actions announced last quarter will ramp through the year, commercial side has current pricing with no major expectation of giant wins, and there's a plan for quarterly actions to show progress.

Q: Mike Roxland asked about the Waterloo greenfield box plant CapEx and attractive return.

A: Andrew Silvernail said details will be disclosed later, expects cash - on - cash returns of about 20%, and the investment brings together elements of the strategy.

Q: Charlie Muir - Sands asked about the lighthouse strategy's P&L benefits and corporate expense guidance.

A: Andrew Silvernail said the lighthouse strategy delivers real productivity and dollars by taking out stranded cost, and corporate expense will see cost reallocations back to businesses with central costs going down precipitously.

Q: Gabe Hajde asked about catching up on underspend and near - term price inclusion.

A: Andrew Silvernail said it will take about 3 years to make up the underspend, and near - term January price increases are not included in Q1 Industrial Packaging view.