International Paper Company Q3 FY2025 earnings call

Key messages: making progress on transformation, macro conditions challenging, focused on controlling what's in our hands. Simplifying organization by exiting select businesses. Rollout of lighthouse model. Directing resources toward most advantaged opportunities. Third quarter results reflect solid progress. Packaging Solutions North America had price and mix higher, volumes stable, operations and costs favorable. EMEA had soft demand but EBITDA growth sequentially. Announced mill closures, Bag business sale, outsourcing of North American IT service and support functions in North America. Launched Lighthouse pilots in EMEA.

North America: Third quarter saw 40% increase in adjusted EBITDA year-to-date compared to 2024, with adjusted EBITDA margin expanding by 370 basis points. Packaging Solutions businesses grew EBITDA sequentially 28%. Exited select businesses, markets and functions. Closed Savannah, redeployed people, avoided capital call for Riverdale conversion. Fourth quarter outlook for North America is ~$600 million EBITDA. EMEA: EBITDA grew sequentially but soft demand. Third quarter adjusted EBITDA $209 million. Fourth quarter outlook ~$230 million EBITDA. Showing bridge for EMEA reflecting 80/20 progress and anticipated EBITDA benefits.

Full year 2025 revised targets: net sales $24 billion, adjusted EBITDA $3 billion, free cash flow -$100 million to $300 million. 2027 target $5 billion EBITDA. 2026 full year guidance to be provided in January. 2026 expected to have $600 million incremental adjusted EBITDA from cost actions, margin gains from strategic commercial wins, partially offset by exiting nonstrategic businesses. Expect 1% to 1.5% volume growth in North America and 1% to 2% in EMEA over time.

Macro conditions in North America and EMEA continue to be challenging. Market softness in EMEA has affected performance. Cost actions and transformations have associated costs. Uncertainty around regulatory approval for GCF sale. Challenges in restructuring Europe operations with consultation processes.

Q: Difference between EMEA and North America in terms of transformation opportunities and commercial aspects.

A: North America had excess mill capacity, Europe has excess box capacity and complex above-country structure. Commercial decisions in North America were about reversing low-margin contracts, in Europe more about focusing resources.

Q: Perspective on strategic rationale and high-level economics for Riverdale conversion.

A: ~$250 million investment, expected near 20% returns.

Q: Movement in free cash flow guidance.

A: Primarily due to market slowdown, ~$500 million profit difference from expected market, some incremental higher costs.

Q: EBITDA benefit from Riceboro and Savannah closures.

A: Savannah was destroying value, exiting low-value export market; Riceboro was small mill, moving volume to other mills.

Q: Europe business cash flow and strategy.

A: Europe using cash, going through restructuring, evaluating non-internally consumed product, moving aggressively to rightsize with consultation processes.