Q1 2025 International Paper Co Earnings Call

Good morning, and thank you for standing by welcome to International paper's first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, you'll have an opportunity to ask questions to ask you. A question press star one on your telephone keypad. She is dry your question.

Press Star one again.

As a reminder to ask a question press Star one she was dry your question Press Star One again and it is now my pleasure to turn the call over to Michelle Vargas Director of Investor Relations Ma'am the floor is yours.

Michelle Vargas: Thank you Crystal good morning, and good afternoon, and thank you for joining international paper's first quarter 2025 earnings call. Our speakers. This morning are Andy Silvernail, Chairman and Chief Executive Officer, and Lance Loeffler, Senior Vice President and Chief Financial Officer.

Michelle Vargas: There is important information at the beginning of our presentation, including certain legal disclaimers. For example, during this call. We will make forward looking statements that are subject to risks and uncertainties and other factors that could cause or contribute to actual results differ materially from such forward looking statements can be.

Michelle Vargas: Found in our press releases and reports filed with the U S Securities and Exchange Commission.

Michelle Vargas: Also present certain non U S. GAAP financial information a reconciliation of those figures to U S. GAAP financial measures is available on our website.

Michelle Vargas: Our website also contains copies of the first quarter earnings press release, and today's presentation slides I will now turn the call over to Andy Silvernail.

Andy Silvernail: Thanks, Michele good morning, good afternoon, everybody I'm going to start on slide three.

Andy Silvernail: Tomorrow, but in the role for a year of milestones a good opportunity to reflect on a year of substantial change.

Andy Silvernail: Back I'm excited about our progress the team that I'm privileged to lead has embraced our transformation moving with urgency and open mind Xyrem.

Andy Silvernail: Xyrem everywhere to win for this company along with a willingness to embrace a culture of safety above all else.

Andy Silvernail: During this first year together, we deployed our 80 20 approach to drive transformational change at IP. This began by focusing on our and over serving our customers by aligning our people assets and investments with what creates value for them and to drive profitable growth.

Andy Silvernail: We've made investments across our business drive step change improvements in service and reliability.

Andy Silvernail: ROE in our most attractive markets we're building on.

Andy Silvernail: Our execution muscle to drive commercial excellence and significant cost out across the company.

Andy Silvernail: Most recently, we welcomed our DS Smith colleagues and we are well on our way to being stronger together.

Andy Silvernail: Long way in a short time and I see significant opportunity ahead, as we accelerate our 80 20 execution and continue on our transformation journey.

Andy Silvernail: I'm moving to slide four.

Andy Silvernail: At our Investor Day last month, we shared our ambitions for the next few years, we outlined the three pillars of our strategy designed to drive sustainable value creation and began building an advantaged cost position, which provides a foundation to drive additional investments and build the right capabilities to serve our customers with excellence.

Andy Silvernail: By building a superior customer experience, we will win profitable market share. This virtual cycle will drive high relative supply position, enabling us to build advantaged capabilities and strengthened customer offerings, while increasing scale and further reducing structural costs.

Andy Silvernail: Before I turn to the next slide let me outline my specific goals for today's call.

Andy Silvernail: I will give an overview of what we've accomplished over the previous year I'm incredibly proud of the focus commitment and tireless work across the teams in North America and EMEA.

Andy Silvernail: Second we.

Andy Silvernail: We will address the realities of the economic noise and the impact on our businesses of consumer sentiment I'll provide our current view of what we're seeing in the market.

Andy Silvernail: Finally, we will go through in detail, how we're working to control our own destiny.

Dan: Dan on transformational and trajectory in the first half of the year will be at nearly $800 million of run rate quarterly EBITDA accelerating to $1 $1 billion by Q4.

Andy Silvernail: We are on a transformational journey.

Andy Silvernail: The external world is a little wild right now I'm involved in a lot of challenging moments from 911 to the great recession to Covid, we're going to stay focused on our strategy pilots in our execution and resolute and building a great company.

Andy Silvernail: We're moving now to slide five.

Here's another slide that we shared with you at Investor Day, which provided our earnings targets for 2025, including financial goals for each of our businesses and the underlying market assumptions at our Investor Day. We noted that we had seen a tick down in demand when the tariff conversation first started after the trade discussions escalated a week later, we saw another named a shift in demand.

Andy Silvernail: Despite the uncertainty about the macro landscape, we are controlling the controllable with a focus on driving commercial wins and inefficiencies out.

Andy Silvernail: Regardless of the macro environment, our job is to win for our customers create a great place to work and position it for long term profitable market share growth.

Andy Silvernail: At current demand levels, we can deliver for the year, it's impossible to predict the next few months.

Andy Silvernail: As much is being driven outside of normal market forces.

Andy Silvernail: Regardless, we will remain vigilant and work to accelerate our strategy if demand falls as further this is a self help story.

Andy Silvernail: I'll now turn to slide six you can see our current view of the demand environment.

Andy Silvernail: History demand in North America was down 2% in the first quarter and based on our order patterns, we expect that level of demand to continue into the second quarter.

Andy Silvernail: Demand across European margins were soft in the first quarter as expected and we expect it to remain stable in the second quarter on a quarter to quarter basis.

Andy Silvernail: In both regions demand has been stable in April, but we're very cautious about the outlook given the strong negative consumer and business sentiment.

Andy Silvernail: Given the wide range of uncertainty and volatility we're prepared for three very different scenarios. If the demand environment remained stable going forward I am confident we remain on track to deliver the targeted range of earnings improvements, if we see meaningful deterioration in the economic environment is likely would fall below our range, we would take appropriate countermeasures to ensure that we remain highly competitive.

Andy Silvernail: While funding our strategy and our dividend.

Andy Silvernail: Currently if the economic environment improves we still feel good about the upper end of our earnings targets without.

Andy Silvernail: With our transformational initiatives, along with our strong balance sheet IP is well positioned to navigate various macro environments.

Andy Silvernail: I am now moving to slide seven.

Andy Silvernail: As I mentioned upfront, we have accomplished a great deal in a year, but we have much to do we have solid momentum on our actions to drive significant cost out of our system by reducing complexity and reinvesting to build our advantage cost position as I shared at Investor day, we're targeting $1 $9 billion of cost out after inflation by the end of 2027.

Andy Silvernail: We've already taken actions across the company to drive approximately 60, thats approximately $400 million annual cost savings, while also pushing more resources closer to the customer.

Andy Silvernail: We continue to accelerate 80, 20 across North America, and Europe, we have line of sight to an additional $200 million fee savings opportunities, but at the end of 2025 and the synergies that we've outlined for DS Smith.

Andy Silvernail: We are laser focused on achieving significant synergies from the combination of IP Andy Smith. After a very successful launch of our 80 20 warehouses in Chicago Atlanta, We're now rolling out our <unk> performance system to more than 75 box plants across North America by the end of the year. We have also launched two lighthouses in our mill system to deploy.

Andy Silvernail: 820 across that system.

Andy Silvernail: We are focusing to further optimize our mill and box plant footprint, while driving down sourcing and supply chain costs, we have tremendous opportunities throughout the company to reduce complexity and drive out costs.

Andy Silvernail: I'm now moving to slide slide eight.

Andy Silvernail: We also have opportunities to drive significant earnings improvement through commercial excellence, we're targeting $1 $1 billion of commercial improvement benefits by the end of 2027.

Andy Silvernail: We are on track to achieve approximately $600 million of run rate benefits by the end of this year, we've made significant changes to improve our capabilities to over serve our customers, which includes investing in our people and our operations.

Andy Silvernail: In order to over serve our <unk> customers, we put more resources closer to the customer by invest in commercial capabilities and improving the customer experience as.

Andy Silvernail: As a result of this strategy, we significantly improved our service and on time delivery, which has resulted in best in class net promoter score.

Andy Silvernail: During the first quarter, our packaging solutions business in North America continued to improve commercially closing our volume gap to market by approximately 500 basis points. This was a 100 basis points better than we expected.

Andy Silvernail: Our momentum we expect to close this gap and grow at or above the market by the fourth quarter of this year.

Andy Silvernail: We will continue to invest in capabilities to improve the customer experience and drive profitable market share growth.

Speaker Change: We are committed to building a customer centric culture across international paper and I am excited about the opportunity to leverage this strong capability that has long existed at DS Smith.

Speaker Change: Importantly, we launched 80 20 of DS Smith's immediately after the close we have a rigorous implementation schedule, which will catalyze our synergy goals of $600 million to $700 million.

Speaker Change: So now, let's turn to our performance and outlook on slide nine.

Speaker Change: Going forward for financial reporting purposes, we will have three reporting segments. We will report legacy IP, Andy estimate businesses in North America packaging solutions in North America.

Speaker Change: We will refer to legacy IP DSS businesses in EMEA packaging solutions EMEA.

Speaker Change: Importantly in North America, we're going to go to market commercially for our people as international paper, while in Europe, we are leveraging the outstanding brand equity by going to market with DS Smith and International paper company.

Speaker Change: Regardless excuse me regarding our global cellulose fibers business. The strategic option process is ongoing and we have a number of interested parties in the due diligence phase no changes are expected to our timeline and we remain focused on achieving the right value for the business now.

Speaker Change: Now I'll share some highlights and then I'll turn it over to Lance <unk>, who will walk you through the details.

Speaker Change: I'm now on slide 10.

Speaker Change: Our first quarter results reflected higher sales and earnings driven by the <unk> acquisition sales price increases in North America benefits from transformation initiatives and some favorable nonrecurring items, which Lance will cover later. These items also contributed to stronger adjusted EBITDA margins in the quarter.

Speaker Change: As a result of our commercial strategy, we made good progress reversing the slides in our north American packaging business, while executing price increases.

Speaker Change: <unk> transformation strategy results in various onetime not onetime items that impact earnings and free cash flow.

Speaker Change: This quarter our earnings per share were impacted by accelerated depreciation charges related to our footprint optimization initiatives. Our free cash flow came in as expected and was impacted by $670 million related to investments in our transformation, including severance costs and DS Smith transaction costs.

Speaker Change: This amount also includes this year's incentive compensation payout for the full year, we still expect to be in the range of $100 million to $300 million of free cash flow as we communicated on Investor day.

Speaker Change: If you look to the second quarter, we expect flat adjusted EBITDA and higher earnings per share sequentially.

Speaker Change: We will have the non repeat of accelerated depreciation from the first quarter, a full quarter of packaging solutions. EMEA result in additional realisation from prior sales price index moves we are actively executing our prior price increases.

Speaker Change: Our cost out actions, we will continue to ramp up and we expect seasonally higher box demand in North America.

Speaker Change: Offsetting these benefits will be higher planned R&D spending and nonrecurring items that were favorable in the first quarter with that let me turn it over to Lance to provide more details about our first quarter performance and the outlook. Thanks, Brian.

Speaker Change: Thanks, Andy.

Lance Loeffler: Now turning to slide 11, let me provide some more details about the first quarter as we walk through the sequential earnings bridge.

Lance Loeffler: Just a quick note upfront this Fred shows the breakdown by category for the three months of legacy IP results.

Lance Loeffler: The two months of results related to the DS Smith legacy business are reflected in the last two categories of the bridge.

Lance Loeffler: So let's begin.

Lance Loeffler: Overall first quarter adjusted operating earnings per share was 23.

Lance Loeffler: As compared to a negative <unk> <unk> in the fourth quarter.

Lance Loeffler: As a reminder, the fourth quarter included accelerated depreciation related to our facility closures.

Lance Loeffler: Price and mix was higher by <unk> <unk> per share in the first quarter driven by the flow through of prior price index movements in our North American packaging business and energy credit sales in our global cellulose fibers business.

Lance Loeffler: Volume was flat sequentially across the businesses.

Lance Loeffler: Operations and costs were favorable by <unk> <unk> per share sequentially due to improved performance and favorable nonrecurring items, which includes insurance proceeds and lower costs associated with employee benefits along with lower incentive compensation expense.

Lance Loeffler: Maintenance outages were flat sequentially and input costs were unfavorable by <unk> <unk> per share due to higher energy costs early in the quarter, partially offset by lower fiber costs.

Lance Loeffler: Corporate items were favorable by <unk> 17 per share due to a lower tax rate as a result of favorable discrete items in the first quarter, primarily related to stock based compensation.

Lance Loeffler: Depreciation expense was <unk> <unk> unfavorable sequentially.

Lance Loeffler: As Youll recall accelerated depreciation was a 56% negative impact in the fourth quarter due to the closure of our Georgetown mill and several box plants.

Lance Loeffler: Depreciation expense in the first quarter includes the court the closure of our Red River Mill and two months of depreciation for DS Smith, including the step up in basis as a result of the acquisition.

Lance Loeffler: Lastly earnings for the two months of the DS Smith legacy business accounted for <unk> per share in the first quarter.

Lance Loeffler: Turning to the segments on slide 12, and starting with our packaging solutions North America businesses first quarter results.

Lance Loeffler: Higher sales and adjusted EBITDA for this quarter reflect the addition of the DS Smith, North American business, along with benefits from sales sales price increases and cost out actions.

Lance Loeffler: In addition, the business had $62 million of favorable nonrecurring items, which I'll cover on the next slide.

Andy Silvernail: Overall market demand was softer than anticipated however, as Andy mentioned earlier, it's our belief that the business successfully closed the volume gap to market by approximately 500 basis points in the quarter as a result of our focus on commercial excellence.

Andy Silvernail: Our earnings also included approximately $190 million of accelerated depreciation associated with the decision to close the Red River mill in the first quarter.

Andy Silvernail: Turning to slide 13, and continuing on with the packaging solutions North America business.

Andy Silvernail: Price and mix in the first quarter was higher by $44 million.

Andy Silvernail: Due to price realization from prior index movements and open market sales for.

Andy Silvernail: For the second quarter, we expect an additional price realization of approximately $25 million for the same index moves.

Andy Silvernail: Volumes were seasonally lower in the first quarter, and we expect them to be stronger in the second quarter as we enter our heavy produce season.

Andy Silvernail: In addition, we expect the continued progress on growing our market position as a result of our commercial strip strategy focus.

Andy Silvernail: Operations and costs were $86 million favorable sequentially.

Andy Silvernail: This includes $62 million from lower costs associated with an employee medical benefits true up in insurance proceeds related to last year's exact box plant fire.

Andy Silvernail: The balance is related to improvement initiatives and lower costs associated with employee incentive compensation.

Andy Silvernail: For the second quarter, the discrete items I mentioned are not expected to repeat and we also expect to have some additional ancillary maintenance costs due to timing.

Andy Silvernail: Planned maintenance outages are anticipated to be heavier in the second quarter, resulting in $33 million of higher cost.

Andy Silvernail: Depreciation expense was higher by $208 million in the first quarter, primarily due to accelerated depreciation associated with the closure of our Red River mill.

Andy Silvernail: It also includes two months of depreciation for the DS Smith.

Andy Silvernail: North American assets.

Finally, the adjusted EBITDA contribution from our DS Smith operations in North America was $7 million for two months of the first quarter.

Andy Silvernail: Our second quarter outlook reflects three months of results for an additional $25 million.

Andy Silvernail: Now turning to slide 14.

Andy Silvernail: Let me take a moment and share our view on the costs and commercial initiatives that we believe will enable us to achieve our stated 2025 adjusted EBITDA target in North America.

Andy Silvernail: As a result of our Red River mill closure at the end of the first quarter. We expect these mill cost to wind down over the remainder of the year in.

Andy Silvernail: In addition, we will continue to see benefits associated with system optimization and productivity improvement across our mill and box network.

Andy Silvernail: Lastly, we expect to realize synergies associated with the DS Smith acquisition.

Andy Silvernail: Regarding our commercial initiatives, we anticipate full realization from the February price index move along with seasonally higher volume in the second half of this year.

Andy Silvernail: We made good progress in the first quarter growing with our customers and expect to close the volume gap to market by the fourth quarter.

Andy Silvernail: Moving onto our packaging solutions EMEA business on slide 15.

Andy Silvernail: We're excited to joined forces with the DS Smith team and expect to benefit from their strong customer oriented and innovation driven culture.

Andy Silvernail: Our laser focus on managing our seamless integration, while et cetera are accelerating significant synergy opportunities.

Andy Silvernail: As you can see first quarter results benefited from two months of the former DS Smith European legacy business.

Andy Silvernail: In addition, we realized benefits from energy incentives received in the quarter as a result of energy efficiency projects implemented by our team at our Madrid mill.

Speaker Change: As Andy mentioned earlier, we had expected an improving market environment coming into the year. However market demand was softer than expected in the first quarter. We will continue to monitor this environment our focus on the things that we can control.

Speaker Change: Staying with our packaging solutions EMEA business and looking at the details on slide 16.

Speaker Change: We are following a similar format as the EPS slide with the legacy DS Smith results largely reflected in the DNA and legacy EBITDA buckets.

Speaker Change: For IP legacy packaging business in EMEA.

Speaker Change: Price and mix was lower by $8 million sequentially from the realization of prior price decreases.

Speaker Change: Operations and costs were $26 million favorable sequentially, primarily due to lower incentive compensation and medical benefits expenses and a one time benefit from energy incentives on efficiency projects in the business, which will not repeat in the second quarter.

Speaker Change: Depreciation in the first quarter includes $91 million from two months of DS Smith.

Speaker Change: In the second quarter, we will have one additional month of depreciation of approximately $45 million.

Speaker Change: Lastly, the adjusted EBITDA contribution from the legacy DS Smith business in EMEA was $104 million for two months of the first quarter.

Speaker Change: Our second quarter outlook reflects three months of results for an additional $85 million.

Speaker Change: Now turning to slide 17.

Speaker Change: Let me also share our view on the costs and commercial initiatives, we expect to deliver on our 2000 and we expect to use to deliver our 2025 adjusted EBITDA target.

Speaker Change: We have launched our 80 20 performance system in Europe, and multiple regions and are pursuing our implementation plan across the mill and box networks there bye.

Speaker Change: By leveraging 80, 20, and the strengths of the combined business. We believe there are significant profit improvement opportunities ahead.

Speaker Change: We also expect benefits from recent price increases to flow through this business.

Speaker Change: Turning to our global cellulose fibers business on slide 18.

Speaker Change: As you can see from the charts the business generated strong adjusted EBITDA improvement as a result of strategic actions focused on the attractive fluff pulp market, while optimizing their mill footprint and significantly reducing their cost structure.

Speaker Change: As I turn to slide 19, and continuing on with the cellulose fibers business.

Speaker Change: And mix was higher sequentially by $28 million in the first quarter due to energy credit sales and higher fluff mix.

Speaker Change: In the second quarter, we expect favorable price realization from prior index movements.

Speaker Change: Operations and costs were favorable sequentially by $23 million due to improved mill performance and lower costs associated with employee incentive compensation.

Speaker Change: We expect sustained mill performance to continue into the second quarter.

Speaker Change: Planned maintenance outages in the first quarter were lower than planned due to moving one of our outages into the second quarter.

Speaker Change: With that change, we expect outage costs to be approximately $36 million higher than the second quarter and will be for approximately 80% of the outage schedule in the first half of this year.

Speaker Change: And finally, we had a lower depreciation expense in the first quarter relative to the fourth quarter, which included $222 million of accelerated depreciation associated with the Georgetown mill closure.

Turning to slide 20.

Speaker Change: As you can see we expect strong earnings improvement in the second half as we continue to ramp down costs associated with the Georgetown mill closure and.

Speaker Change: In addition.

Speaker Change: Costs associated with planned maintenance outages are expected to be $96 million lower than the second half of this year.

Speaker Change: Lastly, we are continuing to implement previously published price increases across this business.

Andy Silvernail: With that let me turn it back over to Andy Andy Thanks, Lance I'm on slide 21.

Andy Silvernail: What we've outlined here is the momentum we're building in our North American and EMEA packaging businesses.

Andy Silvernail: This analysis, we've excluded GTS you can get a sense of the progress in the core we have clear line of sight to sustainable earnings improvement and feel very good about our progress we're building execution muscle across the company and transforming it into a performance driven culture.

Andy Silvernail: Based on the actions we've taken.

Our run rate by the second half of the year will be approximately $4 billion annually adjusted EBITDA in the core packaging business. This positions us well put us on a path to achieve our five $5 billion to $6 billion target.

Andy Silvernail: Now turning to slide 22.

Andy Silvernail: I'm confident we're on the right path with the right people and the right approach 80 20 is how we work our performance system drive breakthrough results by focusing our strategy and execution on the critical few non trivial. Many we put our focus and investments against our best opportunities to win for our customers our people and our owners.

Andy Silvernail: We will remain disciplined in driving an advantage cost position service and innovation excellence and winning profitable market share.

Andy Silvernail: Before we turn to questions I want to thank our 65000 colleagues for their dedication to our transformation and commitment to win for our customers our owners and our fellow teammates at <unk>.

Andy Silvernail: You that we have the opportunity to build something very special with that operator, let's now pass to take questions.

Speaker Change: Thank you. Thank you would like to ask a question simply press star one on your telephone keypad to withdraw your question Press Star. One again, we will now pause a moment to compile the Q&A roster. We do ask that you limit yourself to one question and one follow up question.

Speaker Change: And your first question comes from Selman <unk> with Jefferies. Please go ahead.

Speaker Change: Good morning Bill.

Speaker Change: No Phil.

Speaker Change: Hey, guys, sorry, I had an issue with my thought.

Speaker Change: Well I appreciate all the great color you guys shared in the deck and Lance looking forward to working with you.

Speaker Change: Thank you.

Speaker Change: Im here encouraging encouraging you guys reiterated your full year guide I guess, yeah kind of kick things off Andy I think you said demand trends are spotty as you would imagine to February and March and things kind of stabilize in April. So my question I want to kind of hit the full year EBITDA Guide you guys laid out whether it's the midpoint of the knee.

Speaker Change: Or the low end of the full year guide what kind of demand assumptions are you, assuming whether it's north America and in Europe.

Speaker Change: And then how our order patterns kind of shaping up at this point and you also gave US you know a downside recession steroid any color around how we should think about where EBITDA could shake out in that environment.

Speaker Change: Yeah, you bet, Phil and Jim.

Speaker Change: Great question and obviously the question, we're really focused in on.

Speaker Change: Side of.

Speaker Change: Our own self help.

Speaker Change: In terms of the demand environment right now if demand stays where it is.

Speaker Change: We feel confident that we'll land in between that three five and four.

Speaker Change: If it were to stay that way and right now in April.

Speaker Change: It has stabilized.

Speaker Change: That being said I think we've all been paying attention to the consumer sentiment.

Speaker Change: The business sentiment out there and obviously the new numbers that came out this morning, our first quarter GDP.

Speaker Change: If I, if we see meaningful weakness from here, it's going to stretch us theres no doubt about it right that gets really challenging if.

Speaker Change: If we see it tick down of a couple of more couple of hundred basis points. If you recall at the Investor Day, we were talking about a market growth rate, particularly in North America kind of one to one 5% somewhere in there and and given what happened in the marketplace.

Speaker Change: I think everyone saw the revision upward yesterday.

Speaker Change: The overall box demand in North America, which was down too.

Speaker Change: So that swing in call it 335 point swing.

Speaker Change: Between expectations literally.

Speaker Change: A few months ago. So if you went back to January I think everyone felt pretty confident in that one to one 5% until we've seen a pretty consistent ticked down here really in two steps one was actually before our Investor day, we saw that a little bit I mentioned that at the Investor Day, and then obviously the following week is when is when things kind of the intensity.

Speaker Change: Ramped up around trade discussions and we saw another step down after that.

Speaker Change: But importantly, fill and not not directly to your question, but I think everyone I keep this in context.

Speaker Change: That gap, we said that we would close throughout the year kind of a U shaped curve in terms of GAAP to market. We definitely started on the other side and we're about 100 basis points better than what we had expected. If you recall I had said I thought we'd be down about 7%.

Speaker Change: And in the first quarter, we were down eight but that's with a three five point swing to market right and so the market has swung that three five points or three points relative to where our expectation was.

Speaker Change: And so I feel really good about our gap closer to market.

Speaker Change: Finally to put a point on your question.

Speaker Change: Look this is all going to be about.

Speaker Change: The variance that we're talking about right now is all going to be driven by the top end of the market I think our initiatives are in excellent stead relative to the commercial side.

Speaker Change: And on the on the cost side in North America.

Speaker Change: And effectively right if we see a weakening market there are a handful of levers that we're prepared to pull and frankly some of them were pulling down. So so one is to accelerate our strategy of cost out right. We're going as fast as we can what would allow us to go faster rates. If you end up with the demand gap you have more options around.

Speaker Change: Excess capacity and so you can move quicker.

Speaker Change: Around those things that's not obviously not the situation we want.

Speaker Change: But we have a full schedule laid out if you look at it if we had kind of a big program chart in front of me that you would see the next 253 years laid out of execution points of how we're laying that out across our system in North America and in Europe, and so we would just pull some stuff forward.

Speaker Change: On the commercial side I'm really encouraged by a couple of things one that gap closure I talked about but what enabled that gap closure is winning in local markets.

Speaker Change: We actually saw in the first quarter.

Speaker Change: When we were on the positive side of the ledger in terms of the market in terms of winning market share in the first quarter locally so in that in that in that kind of niche local business. That's a really good sign that the focus we put in on the right customers with the right people and the right assets. The right incentive systems is starting to pay off with the gap to market with.

Speaker Change: <unk> had a large contract business that has multi year cycles and so these are decisions that were made last year and even two years ago that we're now lapping into the back half of the year. So accelerate the cost out if things weaken and keep the focus on commercially on winning market share, that's where we really need to be filled.

Speaker Change: Super So.

Speaker Change: So if I heard you correctly three to five three to 3.5 dollars 4 billion EBITDA target as long as demand is kind of in this zip code or call. It down 2% if I heard you correctly, you'll feel free.

Speaker Change: If you look at where we are right now Phil if you kind of look at the demand levels with normal seasonal patterns.

Speaker Change: Would land in that three five to four it would be towards the towards the mid to lower end to be clear.

Speaker Change: But it would be in that three five to four range. The upside scenario right is if we if we get if we get some solution to some of these issues.

Speaker Change: We've seen it already a couple of different times and things of Gyrated.

Speaker Change: <unk> can turn pretty quickly and look.

Speaker Change: There is enormous amount of pent up demand to outlay capital and a lot of places around the around the year I think the excitement that we saw in January was an excitement around the pent up demand around business investment and even consumer sentiment to a lesser degree.

Speaker Change: But that business demand into what's really curtailed that has been that that sentiment and everyone I talked to my peers customers the investment community everyone's experiencing that and obviously, we're in really good barometer of what's happening in the economy. So so yes fill that need.

Speaker Change: You've nailed that exactly right in terms of your expectation of where we would land depending upon the demand scenario.

Speaker Change: And given the tariffs and trade flow dynamic your pulp business I would imagine it's probably most sensitive to yes. It gets about half that business goes to a big part of that shadow.

Speaker Change: It doesn't sound like demand has been impacted I mean, what youre guiding is demand is pretty stable, but curious what what do you see on the order side of things has that impacted your conversations as you got a look from a strategic review and then just lastly on the containerboard business appreciating you export a lot less but help us think through the potential add back for Recip bolt.

Speaker Change: Terrorists on your container business.

Speaker Change: So Phil let me, let me answer that question directly and then let me do a little bit of a sides side turn and just talk about impact of tariffs just generally I think that's important to note.

Speaker Change: No.

Speaker Change: For <unk>.

Speaker Change: Yes, we've got a bunch of business that goes to Asia, but youre talking about mid single digits risk.

Speaker Change: I'm a demand scenario based on on people having to two to go in different directions around where supply is the reality is there are easy replacement you are talking about really really poor secondary replacement that those choices will be made on the lower end of the socioeconomic spectrum.

Speaker Change: In places like Asia, but generally it's not like there are big alternatives you can just go job too.

Speaker Change: And so we think there is kind of mid single digits of risk.

Speaker Change: To the top line and then obviously how that flows through based on that.

Speaker Change: The flow of goods across the globe.

Speaker Change: And then and then a lot in the reason I say mid single digits as you probably have.

Speaker Change: Sure.

Speaker Change: <unk> increased amount is going to find its way into other parts of the marketplace that frankly are constrained right now so in that in that business. There are some pretty meaningful capacity constraints.

Speaker Change: That business globally.

Speaker Change: Globally so.

Speaker Change: You'll have some relief from Asia, I don't like the relief, but you'll have some early from Asia. The market is still healthy in other places so I feel like we're generally going to be okay.

Speaker Change: Specific to your question of how it may affect the process.

Speaker Change: We're not pollyannas.

Speaker Change: So obviously people are going to look at that we've had very good interest. So far people are deep into diligence so that process is ongoing.

Speaker Change: But I've said in the past many times and I'll reiterate again. This is about value. This is this is a high quality business. It has more volatility than we like and it's not our core packaging business, but as I've said many times, we're not going to give it away.

Speaker Change: And so.

Speaker Change: It's a matter of getting the value that we deserve for the business.

Speaker Change: On tariffs more broadly and I think most people know this we don't have a lot of direct tariff effect right. So we don't ship a lot of stuff across borders.

Speaker Change: That's going to be impacted by the tariffs pretty much almost all of the impact that we're going to see are the vast majority of the impact that we're going to see is going to be second order effects and really what happens to demand therefore, what happens to price and what could happen to inflation.

Speaker Change: Obviously that the scenario that everybody is concerned about is weakening demand plus inflation.

Speaker Change: We don't see that scenario playing out so far.

Speaker Change: There is no evidence of that as you guys. All know we tend to have a natural hedge.

Speaker Change: Weakening demand you tend to get weakening commodity prices, so that offsets itself.

Speaker Change: Many ways.

Speaker Change: But that's the biggest thing that we're concerned about is weakening demand and then a third order effect of price and then potentially if you get a spike in inflation.

Speaker Change: The kind of really dark scenario that at this stage, we don't see but you got to at least consider you have to think about it I think one of the big lessons that we've learned all of US have learned two have been around for a while with some of these larger shocks to the system is take advantage of it right that you hate to do it but when bad things happen like this excel.

Speaker Change: Right your strategy double down if those folks who frankly abandon their strategies to get in trouble and we will leverage our capabilities. We will take the cost out we will use our balance sheet like we did in the first quarter. Obviously, we expect cash flows to get a heck of a lot better through the back half of the year. There is no reason to believe it won't.

Speaker Change: We want to protect our dividend.

Speaker Change: And we want to execute that strategy and so look if I think of three or four years from now.

Speaker Change: Do I think that this moment in time is going to affect the economic outlook of course, it will do I think will be basically where we thought we'd be two months ago from in a global economy, Yes, I do and so we got to stick to the strategy and we got it we got to execute.

Speaker Change: A really great color. Thank you guys.

Speaker Change: Thanks Bill.

Speaker Change: Your next question comes from the line of Mike Rosslyn with Truest Securities. Please go ahead.

Mike Rosslyn: Yes, Thank you, Andy Atlanta, Mark and Michel for taking my questions and congrats on all the progress.

Speaker Change: Thanks, Mike.

Mike Rosslyn: Just wanted to.

Speaker Change: Follow up with you on that market position.

Speaker Change: Sure the North American market position with the local east could you provide just some more color about the share gains that you had there where was your share player where does it stand now and what are you doing to achieve share gains.

Speaker Change: Salesforce brings more liability.

Speaker Change: Yes, so Mike the way the way to kind of separate our business is I would put.

Speaker Change: It's between 60, 70% or so of our business and there is what you would call national or Super Regional accounts right. Those are those are large accounts that youre doing business over multiple geographies, that's $60 to 70% of our business and the only reason I say $60 70, as you get the Gray area. Once you start parsing it at that.

Speaker Change: Those more local levels, so you've got kind of 30% 40% of the business, that's really local and what I mean by that is.

Speaker Change: You've got business with a multinational consumer products company and then you've got business with.

Speaker Change: Bob's mushroom factory and you do right in and those are really important customer stars and frankly coming out of the pandemic.

Speaker Change: His business boomed in our industry.

Speaker Change: And capacity got constrained we made a series of choices about choosing where we were going to allocate our capacity.

Speaker Change: And frankly when service levels faltered, and we didn't invest back into our business. The way we showed up we disappointed a lot of those small to medium sized customers and so.

Speaker Change: We didn't have capacity to offer them. So the whole negative cycle of that negative sales cycle took effect plus kind of weak service offerings.

Speaker Change: The improvement started before I started I'd love to take all the credit for it but I can't.

Speaker Change: Tom Hammock and team did an amazing job and painful right. They made some really brave choices.

Speaker Change: Over the last couple of years, but they make the right choices, which were to reinvest back into the business to drive service and reliability. Our on time delivery has gone over two years from literally the high <unk> to the high Ninety's and that two year timeframe and we've talked about the impact to net promoter score and so as our as our salespeople.

Speaker Change: Our local sales people were thinking that we have two sales forces right. We have a national sales force in North America, we have a regional or key accounts sales force in Europe, and then in both geographies that you have people, calling on those local sales those local accounts and so we've gotten a lot more focus we've hired more people we've radically.

Speaker Change: We improved our service and reliability through investment and frankly segmentation right. We've dedicated people to the right customer segment. So you don't have confusion as you're servicing people and so we started to see that turnaround in that marketplace.

Speaker Change: Modest to be clear, we're not we're not spiking the football yet are holding that drove fee.

Speaker Change: But it's we've seen consistent progress and I think back to last summer last summer when I first was looking at this we were losing market share in that area right. We in that small to medium sized local customer we were losing market share and we're now holding our own and that's a good sign.

Speaker Change: That's great color.

Speaker Change: Thank you for that.

Speaker Change: My follow up.

Speaker Change: Wanted to get a sense given the slowdown.

Speaker Change: Alrighty.

Speaker Change: February March can you give us a sense of your operating rate in <unk>.

Speaker Change: What's been Barrick and <unk>, where does it where does it stand now that things have stabilized.

Speaker Change: And has the weakness really afford you an opportunity to further assess the portfolio to see which cells, which plans are performing at where there is potential for lets say further right sizing consolidations.

Speaker Change: Yes, Mike. So if you think about that just where we are and the demand side.

Speaker Change: I would say we're seeing so far in April is stability from if you look at kind of last part of February right.

Speaker Change: So end of February we saw the step down March after the tariff discussions kind of kicked in we saw that little bit of a step all through April we've now seen stability from that second step down we've seen that stability.

Speaker Change: If we just assume that that's what holds that's where I am offering that that guidance of where I think we will land.

Speaker Change: For the year in terms of your question.

Speaker Change: Does it allow us to rethink it.

Speaker Change: The way I would think about it is there are there are very obvious choices in our business around.

Speaker Change: Where you want to be and where you want to grow your capability.

Speaker Change: To win there are also some very obvious choices about about what you need to get out of and you've seen us move aggressively really starting since the fall of last year.

Speaker Change: You've seen us move for a footprint optimization.

Speaker Change: To address that and so with a weakening demand curve you'd have to believe that something is structurally different to just say I'm going to do more than what I intended to do over the three year window I don't see that being the case, what I see however is the ability to pull forward some of the things that.

Speaker Change: You are working on so you. So you can pull forward some of the footprint.

Speaker Change: Optimization efforts that youre working on but ultimately.

I think in.

Speaker Change: In 2027, due I think what's going on is going to radically change the overall demand picture and therefore, the assets required at that endpoint to win in the marketplace. I don't think it materially had that could change. Let me look if we go into a really aggressive dramatic change in the global.

Speaker Change: <unk> that isn't that becomes systemic all bets are off that's a different deal do I expect that I do not.

Speaker Change: I considering it yes, I am because you have to or you have to at least think about that as a possibility, but I think the probability is relatively low and so where we're playing right. Now is on the April demand is where we are let's see what happens we know the business sentiment consumer sentiment are negative and.

Speaker Change: So what I'm going to say is we have a negative bias relative to what the demand picture is likely to play out and so therefore, we're playing stronger offense on dealing with those things.

Speaker Change: But look this is an environment and we've all we've all lived in it where one day. It's the world is coming to an end in the next day is Hallelujah.

Speaker Change: So given that you can't you can't Gyrate, a 65000 person company.

Speaker Change: With with literally 400 locations across the World again gyrate based on that stuff you've got to think about what business do I want to be and what is my strategy can I afford what I wanted you I've got a balance of affordability and aggressiveness.

Speaker Change: But you got to stick to your strategy.

Speaker Change: No. That's very helpful. Thank you and good luck. Thank you.

Mike Rosslyn: Thanks, Mike.

Speaker Change: Your next question comes from the line of Mark Weintraub with Seaport Research partners. Please go ahead.

Mark Weintraub: Great. Thanks, very much and thanks for all the color so far just sort of coming back to understanding the bridge from first half to second half than first half I think it's like 155 billion or so of EBITDA based on.

Mark Weintraub: What you did in the first quarter and the guide so it kind of suggests like a 500 $600 million pick up in the second half.

Mark Weintraub: And now you've spoken to.

Mark Weintraub: As you point out there's less maintenance outage I think that's like a $130 million and you've got DS Smith for for an extra month, which as you know maybe another 90 to 100 million or whatever there.

Mark Weintraub: And so the balance that to $53 50.

Mark Weintraub: Presumably is primarily from the cost outs et cetera, but what I did notice is that you.

Mark Weintraub: You also have a pretty small increase for price mix in <unk> for your North American packaging solutions business.

Mark Weintraub: Can you kind of explain that and is there more to come in the second half of the year as whats already been published in.

In the trade rags gets implemented.

Mark Weintraub: Yes, so mark so first of all you are absolutely nailed it in terms of thinking about how this flows right. The way the way that we've been working on and thinking about it is is you have what I'm going to call kind of a relatively low quality number in the first quarter, let's just call. It like it is right. The second quarter number is almost identical but its exception.

Speaker Change: Only high quality.

Speaker Change: It's kind of the way to think about that those two together I think that run rate that we're at right now that we just reported those two together is about where you are as you look at that that first half so you've nailed that.

Speaker Change: That second half there are there are a few things that are happening in the second half and what I like about it is not like we have to go do something Dave most of that has already been done is how it flows through in the second half. So you've got the cost out that started in the fall of last year at the timing of how that flows and when that hits that starts to.

Speaker Change: Accelerate as you go past the wind down of closure of assets and those basically are the cost there goes away right that kind of finally that tails off you've got the impact of the stuff. We did in the first quarter, which is principally the Red River mill. That's does that still has some tail on it in the second half, but it accelerates as you move through the year.

Speaker Change: The benefits of that start to accelerate through the year.

Speaker Change: Obviously, the elimination of the matrix organization that we tackled late last year.

Speaker Change: <unk> had people that were all the way through the year you saw people that are finally.

Speaker Change: Exiting the business now that starts to fully realize itself as you get to the second half and then yes on the price side you start to realize a lot more of that as you know.

Speaker Change: Those those are contractually connected right. So the timing of those things when price hits the market. When it gets published if it gets published and then how it rolls through contracts.

Speaker Change: It's mechanical and so what youre seeing here is basically the mechanical realization of that price.

Speaker Change: And so just to clarify on that last point.

Speaker Change: First and in the U S is there more that would be expected to show up in the second half related to say the February increase and then also.

Speaker Change: Thank you and then also if you look on slide 14, you'll see where that shows up.

Speaker Change: Great.

Speaker Change: Then also particularly since we're kind of newer to understanding how the European business. How it works there've been a number of significant increases that were reflected on containerboard, but at the same time occ's been going higher so where things stand today.

Speaker Change: What type of tailwind should we expect in Europe from price changes recognizing things could change.

Speaker Change: I am a little bipolar on this one mark just because due to exactly your point, we have seen the price increases so to be clear at the Investor day, we talked about our first price increase that was starting to go through the market since that time, there's been a second that has moved through the market. Neither one of those has been realized yet in the market.

Speaker Change: And so what I would say is at a static level that that's definitely a positive tailwind in the second half of the year. However, I am not calling it out and we're not building it in and we're not because of the weakness in the marketplace.

Speaker Change: And so if the market shores up I'll get more confidence that those that the second one will come through the first one we think will make its way through and Thats in the numbers the second one.

Speaker Change: Theres a longer just for folks who are quite used to the European market. There is a longer lag time from the change in paper price to the change in block price box price in Europe, and just how it flows through the market and because of the amount of contracts because of the small versus large customers and how that mccann.

Speaker Change: <unk> work relative to price index is there's just more flex in that and you've heard people have heard me say in the past right.

Speaker Change: Over earn for a longer period of time and you under earned for a longer period of time in the European market based on on that price compression or expansion. We have been in a compression territory. We believe we're entering that expansion territory as we get into the second half of the year. So there is some good news out there mark, but we got to be really mindful that thats connected to.

Speaker Change: Two.

Speaker Change: Demand and so again first price increase I think hold second one we will see where it goes.

Speaker Change: Thanks, so much.

Mark Weintraub: You bet Mark.

Speaker Change: Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari: Hi, good morning.

Speaker Change: Hey, Andy good morning.

Speaker Change: Hey, just following up on Mark's question, you have a relatively steep earnings ramp from the first half to the second half, it's a little deeper in Europe. So it sounds like price improvement from the first hike is not baked into the second half improvement I just want to make sure that I got the first price increase is.

Speaker Change: First price increases so if you if you go back and you look at slide 17.

Speaker Change: That first price increase is in there.

Speaker Change: Okay, but.

Speaker Change: But the second is not.

Speaker Change: Got it got it and then can you talk a little bit more about the assumptions for what happens in the second half in Europe, either internally or externally that that gives you confidence in that.

Speaker Change: Big sequential move from the first half to the second half and Andy I guess, maybe it's a hard question to answer but when you think about sort of degree of difficulty or maybe how much. Your time is being spent driving these improvements in EMEA versus North America is there any kind of sense you can give us in terms of you know.

Speaker Change: The level of confidence in where your time is being spent.

Speaker Change: Yes sure no problem at all so I think if you go back to the Investor Day, we talked about a modest improvement in the back half of the year and the European economy. That's what we that's what we called out.

Speaker Change: Right now that looks suspect.

Speaker Change: But again based on the current environment that we have we think we can hit these numbers right. So that means we now expect Europe to be a little bit softer than we expected.

Speaker Change: When we talked to you on at the Investor Day.

Speaker Change: So again current environment, we think we can deliver.

Speaker Change: At these levels and the reason being is that we do believe that that first price increase that first price increase was really out of necessity versus what I would call strengthened market. Afterwards, if we're just candid about it.

Speaker Change: And then the second one was basically from a little bit of a modest improvement.

Speaker Change: Other than expected I think that people saw that second price increase might be able to hold going through but I'm cautious about that because of that second half. What I think is a little bit of a weaker second half than we had expected given what's going on in the trade environment.

Speaker Change: And so what's on slide 17 in terms of that buildup. If you look at the.

Speaker Change: Cost out that we're going after in the early days of that plus the commercial benefits that we believe will all roll through in the second half of the year.

Speaker Change: Relative to two to my time, but I've really focused on here. If you put it really simply what I'm focused on right now.

Speaker Change: Building the team, which.

Speaker Change: Having joy and Lance join US My team My senior team is full we've got a great team.

Speaker Change: At the at the senior team level and in the different businesses in North America, and Europe to North American team now has been together since the fall of last year I mean, the newly constituted focused packaging business unit.

Speaker Change: The EMEA team DS Smith at run it run at DS Smith commercially.

Speaker Change: It is a mix of folks who came from DS Smith and folks who came from IP It's outstanding.

Speaker Change: <unk> you had a chance to meet Paul and Stefano.

Speaker Change: At the Investor day, who really have their hands on the tail in Europe, and so <unk> been focusing on the team building. The team and then 80 20 deployment that is where we're spending all of my time. So if you. If you think about kind of how my time flows. It flows around directing people great teams deployed $8 20 at the point of <unk>.

Speaker Change: <unk> and so.

Speaker Change: It's probably if I think about just energy I put a lot of energy into DS Smith, and the first quarter as a lot of you know I spent.

Speaker Change: Almost 10 weeks in Europe. It started the year to get that off on the right foot I think Kim and the team are in a great place over there.

Speaker Change: <unk> in Europe, focusing on.

Speaker Change: The rollout of 2020, we kicked it off actually like a week before we had the Investor day, we now have a full ramp of initial 80 20 launches through every region in Europe by the middle of the summer. So it will be we'll be running full out by the middle of the summer there so I'm paying attention to that and then in North America.

Speaker Change: Yeah.

Speaker Change: Kind of a generation ahead, so to speak in North America.

Speaker Change: And so here it is making sure that we keep on track to this.

Speaker Change: The schedules and the outlines of of cost.

Speaker Change: Cost out and on the commercial side and so I'm balancing my time between the two regions, but we got fully are fully staffed teams I feel like we're in a great position in North America, we have a really clear.

Speaker Change: Casual.

Speaker Change: What to do when the <unk> and the expected impact and in Europe that we have that from the synergy work that we did but now thats being woven in with how we think about 80 20 and really importantly.

Speaker Change: One of the conversations that we've been having internally is that you can get into this mixed messaging of what's a synergy and what's an 80 20 improvement I don't care right, we're talking about improvement and better than the last thing we're going to do is get caught into accounting and who is who owns a synergy and who owns an 80 20 impact you.

Speaker Change: <unk> all seen that movie, it's a terrible movie, it's about impact and so winning for our customers and getting the cost out of the business.

Speaker Change: Yeah.

Speaker Change: Okay, that's very very helpful I'll turn it over thanks.

Speaker Change: Thank you Anthony.

Speaker Change: And our final question comes from the line of George Staphos with Bank of America. Please go ahead.

Speaker Change: Yes.

Hi, everyone. Good morning. Thanks, Hey, you are details how are you doing.

Speaker Change: How're you doing.

Speaker Change: Well it sounds sounds like it sounds like it just <unk>.

Speaker Change: ATK today, but two questions. One is kind of a shorter term question on DS Smith and.

Speaker Change: And then one is maybe more of an intermediate term question on North America and.

Speaker Change: What you can and can't control, Andy So first on Europe and DS Smith.

I go back to slide 16.

Speaker Change: We're looking at I think lower EBITDA sequentially.

Speaker Change: <unk> $104 85, despite there being an extra month.

Speaker Change: Thank you sort of hit on a lot of the overwriting factors, but is there any one or two things you'd call out there in terms of that sequential downtick recognizing as you were answering.

Speaker Change: Anthony and Mark's questions earlier, you were expecting a bigger step up in pricing in the second half, but what's what's happening there in terms of that step down.

Speaker Change: So you've got I think you might be looking at the bridge a little bit differently.

Speaker Change: So you have you have two months.

Speaker Change: And that first column you have two months in the first column and you only have one month, because you're looking at sequential.

Speaker Change: I Gotcha I gotcha.

Speaker Change: Houston to the legacy Okay, Alright fair enough.

Speaker Change: This will be the incremental yes, sorry about that sorry for the confusion.

Speaker Change: We know youre walking through that and Mike did I Miss something.

Speaker Change: No that's just the sequential implications.

Speaker Change: Okay understood.

Speaker Change: We appreciate that color and sorry for the misinformation there.

Speaker Change: Intermediate question is on controlling what you can and what you can and so as you look at trying to close the gap in North America.

Speaker Change: Youre focused on the smaller accounts.

Speaker Change: Bob's mushroom factory.

Speaker Change: Accounts typically.

Speaker Change: We hear they liked it too by the way.

Speaker Change: [laughter].

Speaker Change: Are the types of accounts that initially when things start to slow down will actually pull in the horns more quickly based on our industry research over time.

Speaker Change: Trying to implement your commercial improvement, which includes without getting too forward looking value over volume.

Speaker Change: Where would you say ultimately the risks or on volume as the year progresses.

Speaker Change: Whats a weaker environment. My guess is you want to really focus more on the commercial and focus on the margin which might mean.

Speaker Change: Wrapped with some of your.

Speaker Change: Footprint.

Speaker Change: Alignment more quickly does that maybe put some of the volume expectation and closing the gap at risk. How would you have been I think about that and how you imagine what the priorities are thanks and good luck in the quarter.

Speaker Change: Yeah. Thank you there's a lot in that question. So let me kind of parse through it the first one I want to clarify something upfront which is.

Speaker Change: We are not disproportionately deployed to the smaller customer to be 100% clear right, where we're focused on what we call <unk> customer. So so so large customers either nationally regionally or locally.

Speaker Change: That kind of a big middle that I've talked about in the past, which really equates to about 70% of the marketplace.

Speaker Change: Is in that is in that segment of of what we're interested in.

Speaker Change: The wins that we're getting are around what I'll call those those local.

Speaker Change: Bigger customers.

Speaker Change: Where where we frankly had really fallen down right, we had really fallen down on service levels and on coverage and we've been making the investments back there.

Speaker Change: So that's that positive trend the focus on the national accounts and large regional accounts I.

Speaker Change: I think we've been relatively good there is a big change there is our service levels are just so much better because of the investments that we've made in assets and in people.

Speaker Change: And so I feel I feel good commercially we're on the right track and if you look at that gap to market that we've had consistently and now you're seeing it that close.

Speaker Change: We know by customer.

Speaker Change: Where where that is likely to land and we don't see any major customer defections between now and we just don't see it in the pipeline today.

Speaker Change: And so our confidence level about closing that gap to market in the back half is important right. So the question is I don't we just don't know where the market is going to be given the.

Speaker Change: The chaos thats been out there and so.

Speaker Change: But our real focus commercially is let's close that gap to market because we believe in the long term trends in the packaging business like we laid out at the analyst day.

Speaker Change: We believe that that's going to attract the overall economy over long periods of time, and we feel good about the two markets.

Speaker Change: Specifically that we're in.

Speaker Change: Making sure that I addressed the final parts of the question.

Speaker Change: If we if we end up with the weakness in pockets.

Speaker Change: We can accelerate we can pull forward some of those actions based on capacity utilization.

Speaker Change: But again, we've got if you really got to stick to that strategy. So.

Speaker Change: I feel good about we are controlling what we can control we're controlling our own destiny.

Speaker Change: Will accelerate and pivot based on what the market gives us with an eye towards our long term strategy because I really believe that we are onto the right strategy that focused on we have to be the advantaged cost player. We know that and we have the right and the scale to be there.

Speaker Change: Customer excellence. Thank goodness, we have made those investments and we're starting to see the turn on that we obviously you've got to continue to get better, but we feel really good about where we are thus far.

Speaker Change: <unk>.

Speaker Change: In.

Speaker Change: Our interactions specific too.

Speaker Change: The question's a value over volume I think where we are now we were at a bed with value over volume two years ago, we were completely out of bed in the painful transition that we've made over the last two years has been getting to them to.

Speaker Change: To be competitive in the market at the appropriate levels not at some crazy premium just to be clear right. We know where the market is we know where we have to be.

Speaker Change: And we're going to when we may get some premium because of our service and our quality and our innovation, but we know where we have to compete and that's going to be our focus so I don't see us.

Speaker Change: Being crazy about choices around value of our volume I think we are in the right place today I think we're playing the game the right way in North America I know, we're doing that in Europe. They are very very good the team in Europe is very good.

Speaker Change: With the customer in terms of the intimacy with the customer understanding of the marketplace. They are working awfully hard now to realize the price increase that has gone through and to be very sensitive to that overall marketplace, but overall I think we found the right spot.

Thank you Andy.

You bet.

Speaker Change: Thank you I'll now turn the call over to Andy Silvernail for closing comments.

Andy Silvernail: So I want to thank everybody for joining us here for the quarterly call. We appreciate the opportunity to update you on our strategy hopefully what you are seeing now is.

Andy Silvernail: Predictability and repeatability of the message and because of the actions that we're taking to control our own destiny. That's what it's all about and most importantly that happens because of the 65000 people across international paper.

Andy Silvernail: And we're just absolutely thrilled to have the team from DS Smith, our new colleagues on board.

Andy Silvernail: Had the opportunity to spend an awful lot of time with them.

Andy Silvernail: In the first quarter of this year and is just a great group they are outstanding.

Andy Silvernail: An incredibly bright future, but we've got to stick to the strategy and we've got to execute so with that thank you very much to my team. Thank you very much to the investment community for the attention and the time you gave us and it's our job now to go out and execute.

Andy Silvernail: And once again, we'd like to thank you for participating in international paper's first quarter 2025 earnings call and you may now disconnect.

Andy Silvernail: [music].

Andy Silvernail: Okay.

Andy Silvernail: [music].