International Paper(IP) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter adjusted operating earnings per share was $0.23 compared to a negative$0.02 in the fourth quarter, indicating a significant recovery [26] - The company expects nearly $800 million of run rate quarterly EBITDA in the first half of the year, accelerating to$1.1 billion by Q4 [10] - The company anticipates free cash flow for the full year to be in the range of $100 million to$300 million [24] Business Line Data and Key Metrics Changes - The Packaging Solutions North America business saw higher sales and adjusted EBITDA due to the addition of the DS Smith North American business and benefits from sales price increases [29] - The adjusted EBITDA contribution from DS Smith operations in North America was $7 million for two months of the first quarter, with expectations for an additional$25 million in the second quarter [33] - The Packaging Solutions EMEA business benefited from two months of the former DS Smith European legacy business, contributing $104 million to adjusted EBITDA for the first quarter [37] Market Data and Key Metrics Changes - Industry demand in North America was down 2$1.9 billion of cost reductions by the end of 2027, with approximately $400 million already achieved [15] - The integration of DS Smith is a key focus, with significant synergies expected from the combination [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic environment, noting strong negative consumer and business sentiment [12] - The company is prepared for three different scenarios regarding demand, with a focus on controlling its own destiny through strategic execution [14] - Management emphasized the importance of maintaining a disciplined approach to strategy execution despite external challenges [70] Other Important Information - The company will report legacy IP and DS Smith businesses in North America as Packaging Solutions North America and in EMEA as Packaging Solutions EMEA [20] - The strategic option process for the global cellulose fiber business is ongoing, with several interested parties in the due diligence phase [21] Q&A Session Summary Question: What demand assumptions are being used for the full year EBITDA guidance? - Management indicated confidence in landing between 3.5% and 4% EBITDA if demand remains stable, with April showing signs of stabilization [49][50] Question: How has the tariff situation impacted the pulp business? - Management noted a mid-single-digit risk to demand due to tariffs, but overall demand remains stable [62][63] Question: Can you provide more details on market share gains in North America? - Management reported improvements in service and reliability, leading to a turnaround in market share, particularly among small to medium-sized customers [78][79]