Q4 2025 International Paper Co Earnings Call

January 29, 2026

6 earnings call all lions have been placed on mute to prevent any background noise. After the speaker's remarks, you will have an opportunity to ask 1 question.

To ask a question press star 1 on your telephone keypad to withdraw your question, press star 1 again.

As a reminder.

Speaker #1: After the speaker's remarks, you will have It is now my pleasure to turn the call Investment in the business to accelerate organic growth, drive productivity, and support disciplined bolt-on acquisitions.

Speaker #1: reminder, due to time restraints, we ask that you limit it to one question in one question only. Press one. To withdraw your question, press one again.

Due to time restraints, we ask that you limit it to 1. Question in 1 question. Only press 1 to withdraw, your question. Press 1. Again, if it is now my pleasure to turn the call over to Mandy Gillan, senior director of investor relations. Ma'am. The floor is yours.

Good morning and good afternoon, and thank you for joining International papers. Fourth quarter, 2025 earnings call, our speakers. This morning are Andy, Silvernail, chairman and chief executive officer. Lance Loeffler, senior vice, president, and Chief Financial Officer, and Tim Nichols, Executive Vice President, and president of Dia Smith.

There is important information at the beginning of our presentation, including certain legal disclaimers. For example, during the call, we will make forward-looking statements that are subject to risks and uncertainties.

These and other factors that could cause or contribute to actual results. Differing materially from such forward-looking statements can be found in our press releases and reports filed with the US Securities and Exchange Commission.

We will also present certain non-us, gaap financial information, a Reconciliation of those figures to US. Gaap Financial measures is available on our website.

Our website also contains copies of the fourth quarter earnings press release and today's presentation slides

Beginning on slide 3 before we jump into the presentation. I want to provide Clarity on what will be discussed on the call today.

We will Begin by walking through the separation announcement for the Emma packaging business.

Then we will discuss our 2025 full year and fourth quarter results.

Followed by our outlook for packaging Solutions, North America and packaging Solutions and Mia.

We will close out the call with Q&A.

So now, let me turn the call over to Andy Silvernail. Who will start on slide 4?

Thanks, Mandy, good morning. Good afternoon everybody, and thank you for joining us to discuss the next steps in our transformation Journey.

Q4 2025 International Paper Co Earnings Call

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Q4 2025 International Paper Co Earnings Call

Thursday, January 29th, 2026 at 3:00 PM

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Andy Silvernail: Performance. Andy. Shifting now to a full-year and quarterly earnings update on page 15. In North America, we made significant progress on implementing our 80/20 plan and executing our strategy this year, achieving approximately 37% year-over-year adjusted EBITDA growth in 2025. We expect our volume growth to outpace the underlying market by 3 to 4 percentage points in Q4, which is well ahead of where we thought we'd be earlier last year. Throughout the year, we continued to advance our cost improvement strategy, delivering approximately $510 million of run rate cost benefits. The ongoing transformation resulted in approximately $110 million related to footprint optimization in 2025, and we expect to have similar amounts in 2026. We'll share more detail on these dynamics for North America in a moment. In EMEA, we're moving decisively on our transformation of the packaging business.

Andy Silvernail: Shifting now to a full-year and quarterly earnings update on page 15. In North America, we made significant progress on implementing our 80/20 plan and executing our strategy this year, achieving approximately 37% year-over-year adjusted EBITDA growth in 2025. We expect our volume growth to outpace the underlying market by 3 to 4 percentage points in Q4, which is well ahead of where we thought we'd be earlier last year. Throughout the year, we continued to advance our cost improvement strategy, delivering approximately $510 million of run rate cost benefits. The ongoing transformation resulted in approximately $110 million related to footprint optimization in 2025, and we expect to have similar amounts in 2026. We'll share more detail on these dynamics for North America in a moment. In EMEA, we're moving decisively on our transformation of the packaging business.

Andy Silvernail: We have actioned 20 site closures impacting approximately 1,400 roles, with another 7 sites and 700 roles in work council discussions. We have a clear roadmap for applying our commercial and structural cost levers and expect to see the benefits of our cost and commercial actions accelerate through 2026. Turning to our enterprise results for full-year 2025, which reflect the steadfast commitment of the entire IP team to execute our transformation plan, continue to deliver best-in-class customer experience, and create value for shareholders. We continue to drive strong growth from integration and 80/20 in a year of significant transformation. We expanded Adjusted EBITDA margin by 230 basis points. Our Adjusted EBIT and EPS were impacted by $958 million of accelerated depreciation by our footprint optimization and higher levels of depreciation and amortization related to the DS Smith acquisition.

We have actioned 20 site closures impacting approximately 1,400 roles, with another 7 sites and 700 roles in work council discussions. We have a clear roadmap for applying our commercial and structural cost levers and expect to see the benefits of our cost and commercial actions accelerate through 2026. Turning to our enterprise results for full-year 2025, which reflect the steadfast commitment of the entire IP team to execute our transformation plan, continue to deliver best-in-class customer experience, and create value for shareholders. We continue to drive strong growth from integration and 80/20 in a year of significant transformation. We expanded Adjusted EBITDA margin by 230 basis points. Our Adjusted EBIT and EPS were impacted by $958 million of accelerated depreciation by our footprint optimization and higher levels of depreciation and amortization related to the DS Smith acquisition.

Lance Loeffler: Thanks, Andy. I'm on slide 17. I'd like to begin by reiterating the progress and momentum we've built in North America. Our teams delivered meaningful improvement across the business in a challenging environment, and the results reinforce our strategy is working. Notably, we have gained commercial momentum through focused service and reliability efforts, increasing on-time delivery percentage to the upper 90s%, which has allowed us to win the trust of both new and existing customers. Also, our investments in our commercial team, adding new sales reps and upskilling the existing team, have supported customer excellence across our national and local accounts, evidenced by our above-market volume growth in the second half of 2025, as well as strong price realization. We continue to optimize our box footprint while rolling out our Lighthouse model to shift decision-making and strategy closer to our customers.

Lance Loeffler: Input costs were $24 million favorable for the quarter, primarily due to minimizing the impact from the natural gas curtailment at our Valliant mill early in the quarter, which has now been resolved. All of this leads to an Adjusted EBITDA for North America of $560 million for the fourth quarter of 2025. Turning to slide 19 and looking ahead to 2026, our EBITDA growth will be primarily driven by approximately $100 million of commercial benefits, as well as $500 million of cost benefits. Key drivers to this include strategic customer wins in the commercial front, as well as cost-out benefits across footprint optimization, productivity, supply chain, sourcing, and overhead. Those benefits will be offset by approximately $200 million of non-recurring transformation costs related to our ongoing investments in reliability and capacity, primarily driven by the Riverdale mill conversion in the first half of 2026.

Input costs were $24 million favorable for the quarter, primarily due to minimizing the impact from the natural gas curtailment at our Valliant mill early in the quarter, which has now been resolved. All of this leads to an Adjusted EBITDA for North America of $560 million for the fourth quarter of 2025. Turning to slide 19 and looking ahead to 2026, our EBITDA growth will be primarily driven by approximately $100 million of commercial benefits, as well as $500 million of cost benefits. Key drivers to this include strategic customer wins in the commercial front, as well as cost-out benefits across footprint optimization, productivity, supply chain, sourcing, and overhead. Those benefits will be offset by approximately $200 million of non-recurring transformation costs related to our ongoing investments in reliability and capacity, primarily driven by the Riverdale mill conversion in the first half of 2026.

Lance Loeffler: These investments are critical to support our profitable growth ambitions and bolster our lightweight capabilities to meet customer demand. This year, we also expect inflation to rise by approximately $200 million while we continue to optimize our sourcing and procurement to minimize the impacts. The takeaway here is that we remain confident in our trajectory to deliver on our 2026 targets of $2.5 to 2.6 billion, with the assumption that the industry growth is flat to up 1%, and we outperform the industry by approximately 2%. Our 2026 target does not include the impact of any future pricing realization, as we do not forecast price until it publishes. However, we would expect to see an incremental Adjusted EBITDA impact of approximately $90 million for every $10 per ton price move on an annualized basis.

Lance Loeffler: Now, moving to slide 20, we wanted to provide additional visibility into how we anticipate this year playing out with our planned transformation investments. There are a few factors driving the shape of 2026 that we wanted to be very clear about. In the first half of the year, we expect to see typical seasonality and one fewer shipping day. However, the main driver of our anticipated year-over-year decline comes from our planned investments in reliability, capacity, and capabilities. This manifests itself in higher maintenance outages and costs related to our Riverdale mill conversion. Altogether, these represent approximately $165 million of non-recurring timing impacts that will unwind in the second half. Normalized for these one-time impacts, we remain on a strong growth trajectory with approximately 10% first-half year-over-year EBITDA growth.

Now, moving to slide 20, we wanted to provide additional visibility into how we anticipate this year playing out with our planned transformation investments. There are a few factors driving the shape of 2026 that we wanted to be very clear about. In the first half of the year, we expect to see typical seasonality and one fewer shipping day. However, the main driver of our anticipated year-over-year decline comes from our planned investments in reliability, capacity, and capabilities. This manifests itself in higher maintenance outages and costs related to our Riverdale mill conversion. Altogether, these represent approximately $165 million of non-recurring timing impacts that will unwind in the second half. Normalized for these one-time impacts, we remain on a strong growth trajectory with approximately 10% first-half year-over-year EBITDA growth.

Lance Loeffler: In the second half, we expect our performance to materially accelerate, driven largely by non-repeating items from the first half and realizing the additional momentum from our 2025 transformation activities. To add some more color on the sequential jump, approximately $200 million will come from returning to a normalized outage schedule, approximately $80 million associated with Riverdale non-repeating items and margin benefits, and a $75 million benefit from second-half volume seasonality. The remaining $200 million in our plan will be achieved through commercial and operational productivity actions as a part of our 80/20 transformation. The main drivers here are from continued footprint optimization, mill and box productivity improvements from rolling out the Lighthouse model, as well as supply chain efficiencies, procurement initiatives, and the winding down of ongoing mill costs. Our team remains laser-focused on executing against this plan, and we have high confidence in our ability to deliver.

In the second half, we expect our performance to materially accelerate, driven largely by non-repeating items from the first half and realizing the additional momentum from our 2025 transformation activities. To add some more color on the sequential jump, approximately $200 million will come from returning to a normalized outage schedule, approximately $80 million associated with Riverdale non-repeating items and margin benefits, and a $75 million benefit from second-half volume seasonality. The remaining $200 million in our plan will be achieved through commercial and operational productivity actions as a part of our 80/20 transformation. The main drivers here are from continued footprint optimization, mill and box productivity improvements from rolling out the Lighthouse model, as well as supply chain efficiencies, procurement initiatives, and the winding down of ongoing mill costs. Our team remains laser-focused on executing against this plan, and we have high confidence in our ability to deliver.

Lance Loeffler: We are currently assessing the impact, and at this point, we're estimating that the total impact could be in the range of $20 to $25 million for Q1. That wraps up our review of North America performance and outlook. With that, let's move on to EMEA. Turning to Packaging Solutions EMEA on slide 22, we delivered a solid Q4 with sequential EBITDA growth of $19 million. The improvement was primarily driven by favorable pricing on key inputs, including fiber and natural gas, along with benefits for some of our early 80/20 cost actions. From a demand standpoint, the market remained soft but broadly stable with continued pressure on board pricing. Overall, while we are still in the early stage of our transformation in EMEA, we are starting to see the benefits of our strategy materialize and are very confident of the path ahead.

We are currently assessing the impact, and at this point, we're estimating that the total impact could be in the range of $20 to $25 million for Q1. That wraps up our review of North America performance and outlook. With that, let's move on to EMEA. Turning to Packaging Solutions EMEA on slide 22, we delivered a solid Q4 with sequential EBITDA growth of $19 million. The improvement was primarily driven by favorable pricing on key inputs, including fiber and natural gas, along with benefits for some of our early 80/20 cost actions. From a demand standpoint, the market remained soft but broadly stable with continued pressure on board pricing. Overall, while we are still in the early stage of our transformation in EMEA, we are starting to see the benefits of our strategy materialize and are very confident of the path ahead.

Lance Loeffler: Now on slide 23, and looking at a full-year 2026, our Adjusted EBITDA growth in EMEA will be driven by $200 million of commercial benefits, primarily driven by above-industry growth with continued momentum of flow-through already captured from 2025 growth with our strategic customers. In addition, we expect approximately $200 million of cost-out benefits, primarily driven by footprint and headcount optimization, as well as cost improvements across procurement, distribution, and our mill and box systems. We expect these benefits to be offset by approximately $100 million of inflation impact. Overall, we continue to build momentum on our transformation and will continue to act decisively to optimize our footprint and operations while strategically investing in reliability and quality to best serve our EMEA customer base.

Lance Loeffler: Moving to slide 24, I want to take a moment to share an additional detail on recent actions we've taken to improve our cost position and focus resources on the most attractive markets. In 2025, we actioned closures across 20 sites, reducing headcount by more than 1,400 positions, while we are engaged in ongoing consultation on our additional 7 sites and more than 700 roles. We expect this to deliver run rate cost savings of more than $160 million. At the same time, it's important to recognize these actions affect people and their families. We do not make these decisions lightly, and I want to thank the employees across these facilities and offices for their professionalism, dedication, and contributions to the company. Turning to slide 25 and our outlook for the first quarter, we expect EBITDA to be roughly in line with the fourth quarter.

Moving to slide 24, I want to take a moment to share an additional detail on recent actions we've taken to improve our cost position and focus resources on the most attractive markets. In 2025, we actioned closures across 20 sites, reducing headcount by more than 1,400 positions, while we are engaged in ongoing consultation on our additional 7 sites and more than 700 roles. We expect this to deliver run rate cost savings of more than $160 million. At the same time, it's important to recognize these actions affect people and their families. We do not make these decisions lightly, and I want to thank the employees across these facilities and offices for their professionalism, dedication, and contributions to the company. Turning to slide 25 and our outlook for the first quarter, we expect EBITDA to be roughly in line with the fourth quarter.

Lance Loeffler: We anticipate price and volume tailwinds of approximately $33 million, driven by favorable mix and continued benefits from our strategic wins in 2025. Ops and costs are higher by $42 million, primarily driven by the timing of energy subsidies typically received in the second half of the year, as well as costs related to accounting policy changes. We continue to build momentum with our strategic actions while managing through ongoing market volatility and focusing on those things that we can control as we execute our plan. Now, let me turn it back over to Andy, who will close it out with some key takeaways from today. Andy? Thank you, Lance. Turning to slide 26 and our full-year 2026 targets. We are confident in our trajectory, our plan for the coming year, and our ability to execute against our targets for 2026.

Lance Loeffler: We're projecting enterprise net sales of $24.1 to $24.9 billion, with Adjusted EBITDA of $3.5 to $3.7 billion, and free cash flow of $300 to $500 million. As for Q1, including corporate, we're guiding to $740 to $760 million of Adjusted EBITDA. Importantly, as Lance mentioned earlier, our guidance does not include the impact of price actions. The enhanced positioning and greater efficiency that we've realized through our strategic actions and 80/20 implementation have us well-positioned for 2026, and we expect that we will begin to see that flow-through in the coming year. As we discussed today, we are taking swift and decisive action to create long-term value for our shareholders. The combination of IP and DS Smith created two regional powerhouses that are leading providers of sustainable packaging solutions with significant scale and strong customer relationships.

We're projecting enterprise net sales of $24.1 to $24.9 billion, with Adjusted EBITDA of $3.5 to $3.7 billion, and free cash flow of $300 to $500 million. As for Q1, including corporate, we're guiding to $740 to $760 million of Adjusted EBITDA. Importantly, as Lance mentioned earlier, our guidance does not include the impact of price actions. The enhanced positioning and greater efficiency that we've realized through our strategic actions and 80/20 implementation have us well-positioned for 2026, and we expect that we will begin to see that flow-through in the coming year. As we discussed today, we are taking swift and decisive action to create long-term value for our shareholders. The combination of IP and DS Smith created two regional powerhouses that are leading providers of sustainable packaging solutions with significant scale and strong customer relationships.

Lance Loeffler: Our 80/20 actions over the past year have reduced complexity in each region, and the next step to continue the transformation is to segment the businesses so they can realize their full potential. Separating the businesses will provide each with the ability to best align capital and resources to distinct regional opportunities, market environments, and customer needs. Each business will have the necessary ingredients, including strong investment-grade balance sheets, to execute its 80/20 plan and the virtuous strategic cycle in the most effective way possible. We believe this is the most certain path to deliver our 2027 target of $5 billion of EBITDA and enables each business to achieve best-in-class performance and best-in-class valuation as we create long-term value for our shareholders. At this time, let's open up the line to questions. Thank you. If you would like to ask a question, simply press star one on your telephone keypad.

Our 80/20 actions over the past year have reduced complexity in each region, and the next step to continue the transformation is to segment the businesses so they can realize their full potential. Separating the businesses will provide each with the ability to best align capital and resources to distinct regional opportunities, market environments, and customer needs. Each business will have the necessary ingredients, including strong investment-grade balance sheets, to execute its 80/20 plan and the virtuous strategic cycle in the most effective way possible. We believe this is the most certain path to deliver our 2027 target of $5 billion of EBITDA and enables each business to achieve best-in-class performance and best-in-class valuation as we create long-term value for our shareholders. At this time, let's open up the line to questions.

Lance Loeffler: To withdraw your question, press star one again. As a reminder, to ask a question, press star one. To withdraw your question, press star one again. We will now pause a moment to compile the Q&A roster, and we do ask that you limit yourself to one question. Our first question is going to come from the line of George Staphos with Bank of America. Please go ahead. Everyone, good morning. Thanks for the details. My question: in your free cash flow guidance of $300 to $500 million, can you give us some of the other important assumptions that are in there? I don't believe price is in there, but if you could confirm that. Related, are you out with a price letter to customers? And then, most importantly, in terms of the question, if you want to just take this, $300 to $500 million doesn't cover your dividend.

Lance Loeffler: Dividend $1 billion and the free cash flow $300 to 500 million. Might the spin be an opportunity to review the policy, and how do you feel about it? Thank you. Yeah, sure. So we've said all along that covering the dividend was about $3.6 to 3.7 billion of EBITDA is the break-even. Obviously, in 2026, we have substantial restructuring costs that are going in, and some one-time costs that don't fit into the restructuring line. So you've got a combination of those things. We are maintaining our dividend policy as it is through 2026. And of course, through any process like this, you're going to review that work in conjunction with shareholders to make sure we get to the right place on a dividend post-spin. And we'll evaluate that throughout the year in conversation with shareholders. Thank you so much. You bet.

Uh, uh, what was the second part of the question, George the dividend, a billion and the free cash flow. 300 500 might, the spin be an opportunity to review the policy and how do you feel about it? Thank you. Yeah, sure. So uh, you know, we've said all along that the the, the covering the dividend was about 3.6 to 3.7 billion. Dollars of IBA is, is the break even obviously in 2026? We have substantial restructuring costs. Uh, that are going in and some 1-time costs that don't fit into the restructuring line. So you've got a combination of of, of those things. Um, we are maintaining our dividend policy as it is through 2026. And of course, you know, through any process like this, you're going to review that uh working in conjunction with with shareholders to, you know, make sure we get to the right place on a on a dividend post spin. Uh, and we'll evaluate that throughout the year in conversation with the shareholders.

Lance Loeffler: And our next question is going to come from the line of Mark Weintraub with Seaport Research Partners. Please go ahead. Thank you. First couple of real straight good morning. A few really straightforward questions. One is, so on some of the slides, it says at the segment level, it doesn't exclude that it's excluding corporate. And then on the final slide, it doesn't sort of say anything about that. So just one clarification. How should we be thinking about corporate relative to the various numbers you're putting out there, the $3.5 to 3.7 billion? Is that included or not included? Yeah. So the guide that Andy gave, on a total company basis $740 to 760 million, includes the impact of corporate. So if you take what we gave you on the region slides, and the difference between that should cover the corporate line item. Yep.

Okay, very good. And then second any quick reason, why? And, and maybe this is normal course, um, normal course. But why 12 to 15 months to, to complete this process? It seems like a long time to me, but maybe I'm, I'm just wrong. Yeah, I I I'll touch on that, you know, there's, you got the mechanics frankly of accounting, right? There's just, it's a, it's a heavy lift from an accounting perspective. Uh, what we don't have here is, is kind of, um, you know, large legal entity issues or things like that. Um, and obviously, we're going to move to do it as quickly as possible Mark. Um, but, uh, the, the best guidance that we've been given and, and the precedent. So usually somewhere in that 12, to 15 month, time frame, Lance, anything you'd add to that. Yeah, no. I I would say, I would Echo Andy's comments. I think, you know, this is this is a little different than if if you look back at the SLO exercise, we went through several years ago that had a lot more operational tethering that we had to, to unwind, uh, to get that to where it needed to be. This is, this is largely an accounting.

Touch on that, you know, there's, you got the mechanics frankly of accounting, right? There's just, it's a, it's a heavy lift from an accounting perspective. Uh, what we don't have here is, is kind of, um, you know, large legal entity issues or things like that. Um, and obviously, we're going to move to do it as quickly as possible Mark, um, but, uh, the best guidance that we've been given and, and the precedents it usually somewhere in that 12, to 15 month, time frame, Lance, anything you'd add to that. Yeah, no. I I would say, I would Echo Andy's comments. I think, you know, this is this is a little different than if if you look back at the SLO exercise, we went through several years ago that had a lot more operational tethering that we had to, to unwind, uh, to get that to where it needed to be. This is, this is largely an accounting exercise that we're going to start off, uh, you know,

Andy Silvernail: Yeah. A few things in there, Mark. So first and foremost, the vast majority of what we're talking about are things that have been actioned, and the tail here are the cost of finalizing that. So as an example, closures and the lingering cost of finalizing those closures, those tails start to fall off as we get through this year. That's a big one. Second, we've got more actions. They're not the large-scale actions that we've seen so far, but we're starting to get much more into the nitty-gritty around things like supply chain and procurement, distribution, rolling out the Lighthouse models throughout the mill system, and the productivity investments that we're ramping up going into that. And so there's a lot of intensity that happened last year and certainly throughout this year that's going to continue to drive those.

Lance Loeffler: So the key to it is it's literally the costs have got to be counted down to the penny in terms of facilities, impact to people, which is always unfortunate, but a tough reality and a transformation. And that's the level of granularity we're operating at. And that's both in North America. And then you saw for the first time today that we were able to, now that we've gotten past a bunch of the consultation periods, to lay out the granularity in Europe. And you can see the magnitude of what we're doing in Europe that we will accelerate throughout the year. So this is extremely granular. Look, I'm also realistic. There's a lot of moving parts. There's no doubt about it, but we are executing quite well. Thanks so much. Thank you, Mark. Your next question comes from the line of Charlie Muir-Sands with BNP Paribas.

And if you look at the volume wins we've had in North America. Um, uh, they have been absolutely at those quality levels that we've been talking about. Um, and so I feel really good about the business that we're winning and coming on, you know, again, you know, we won substantial market share here in North America, um, in the back half of the year. You know, we were, we were 3 or 4 Points above Market. We'll find out where the market actually settled, um, you know, later on here. But, but we feel very confident in giving the, the other results that we've seen, um, that we have won quality market share, and you can see the expanding margins at the same time. Uh, and Europe. Right? The, the, the, the the market has been softer in Europe, um, and just like, in the US, you have to play with the market is, um, we have been really disciplined about making sure that we're, we are bringing our value to the market and we're not chasing Bad Business. Uh, that's very important in a software market and we have not been doing that. Um, and, uh, and, and again, you can count it by, uh, by by, by, by meters, or you can count it by

Hey guys. Uh, thanks for all the great stuff. Thanks for all the great car lots unpack. Um, I guess kind of kick things off uh the 2026 guidance. Um, Lance last quarter, you guys gave us a nice slide deck, calling out, 600 million of South pulp and Commercial efforts. Uh, certainly, there's feels like there's some movement, but you know, the guy itself does it account for any incremental cost actions that has yet to be announced? So, or was that kind of accounted for, uh, second? I I think on the commercial front, certainly better in North America and Europe, and they correct me if I'm wrong. Lance, uh, the North American piece accounts for the exports, we kind of co-mingled it. So where are you seeing some? Some of the Winds on the commercial side, whether it's North America in Europe. I mean, Europe, I'm particularly curious. Just give I thought the commercial side of things were quite good, uh, but it was more on the cost out. So, help us kind of tease through, uh, some of those, uh, Dynamics.

Hey guys, uh, thanks for all the great. Thanks for all the great car a lot to unpack. Um, I guess kind of kick things off uh the 2026 guidance. Um, Lance last quarter, you guys gave us a nice Flight Deck, calling out, 600 million of Southpaw and Commercial efforts. Uh, certainly there's feels like there's some movement, but you know, the guy itself does it account for any incremental cost actions that has yet to be announced? So, or was that kind of accounted for, uh, second? I I think on the commercial front, certainly better in North America and Europe, and they correct me if I'm wrong. Lance, uh, the North American piece accounts for the exports, we kind of co-mingled it. So where are you seeing some? Some of the Winds on the commercial side, whether it's North America in Europe. I mean, Europe, I'm particularly curious. Just give I thought the commercial side of things were quite good, uh, but it was more on the cost out. So, help us kind of tease through, uh, some of those, uh, Dynamics.

Yeah, I I think the range that we've given provides a pretty decent margin in there in terms of the 740 to 760 in the quarter and the 35 to 37 in the year. Um, you know, in terms of kind of, I was just calling, you know, good guys. Bad guys. You know, how do you think about that over the year? Uh, you know, on the on the the good guys side? Um, the uh, the year has started strong. Um, and I will certainly say that January was strong. Obviously the ice storm that's going to be on the bad guys side, um, to see kind of what that impact is going to be, um, you know, it's a super thumb thumbnail sketch of 20 to 25 million. It's just hard to to know, right? You, you could, you could make that up. Um, but, uh, but certainly, you know, Mill, shutdowns and certainly some of the areas that were hit hard in terms of box, the box, I will come back. F, you know, fast. But you got some Mill impact. Um, that, we'll, we'll see how that plays out. But that's a, that's a pretty modest bad guy. Um, that's out there. Uh, again, you know, the the the January has has started strong

Of market share in there. Um, in in terms of other good guys, right? We have we don't have anything in here for price, um, you know, and and we don't normally do that. We don't normally guide that and so we've kept to that practice. Um, but depending upon, uh, what happens with pricing, that's a pretty substantial. Um, good guy, that's not in any of our numbers here. Um, you know, the, the real, you know, big bad guy is, is potentially out there. We don't know, is what we faced last year was, was the global economy and, uh, um, you know, again right now things have started. Well, but, you know, that's, that's hard to predict throughout there. So I feel good about where we are. I I think that they're giving the pricing is more upside than downside, um, you know, in terms of of opportunity. And so, we feel like we played it down the middle.

Provides a pretty decent margin in there, in terms of the 740 to 760 in the quarter and the 35 to 37 in the year. Um, you know, in terms of kind of, I was just calling, you know, good guys. Bad guys. You know, how do you think about that over the year? You know, on the on the the good guys side? Um, the uh, the year has started strong. Um, and I will certainly say that January was strong. Obviously the ice storm that's going to be on the bad guys side, um, to see kind of what that impact is going to be, um, you know, it's a super thumb thumbnail sketch of 20 to 25 million. It's just hard to to know, right? You, you could, you could make that up. Um, but, uh, but certainly, you know, Mill, shutdowns and certainly some of the areas that were hit hard in terms of box the box, I will come back back, you know, fast. But you got some Mill impact. Um, that we'll, we'll see how that plays out. But that's a, that's a pretty modest bad guy. Um, that's out there. Uh, again, you know, the the the January has has started strong. We've seen that in our

Of market share in there. Um, in in terms of other good guys, right? We have we don't have anything in here for price, um, you know, and and we don't normally do that. We don't normally guide that and so we've kept to that practice. Um, but depending upon, uh, what happens with pricing, that's a pretty substantial. Um, good guy, that's not in any of our numbers here. Um, you know, the real, you know, big bad guy is, is potentially out there. We don't know, is what we faced last year was, was the global economy and, uh, um, you know, again right now things have started well, but, you know, that's, that's hard to predict throughout there. So I feel good about where we are. I I think that they're giving the pricing is more upside than downside, um, you know, in terms of of opportunity. And so, we feel like we played it down the middle.

Lance Loeffler: Our next question comes from the line of Mike Roxland with Truist Securities. Please go ahead. Yeah. Thank you, Andy, Lance, Mandy, and team for taking my questions. Some costs in North America appear to be more sticky, like mill reliability, etc. I mean, your volumes up were 2% in Q4, better than you expected, yet EBITDA missed. So I'm wondering if you can speak to costs in North America, which ones are more problematic, stickier, how you intend to tackle them. And was the cost structure in North America part of your calculus in terms of deciding to spin out Europe? And what I'm trying to get at is if you have to deal with a cost structure that's a little bit more challenging than you expected, it's harder to tackle that plus having a European arm as well. So any color you can provide would be helpful.

Lance Loeffler: Then on the reliability front, it's as we have described, which is you've got to get in there and you've got to make the investments consistently over a period of time to drive the reliability and not have things pop up that can be very expensive in any given period. As you know, a singular mill struggling can be a $100 million hit in a year easily if a mill is really struggling. So we are aggressively investing back into our mill system in North America. And that's if you look at the expanded CapEx, if you look at the one-time accelerated transformation costs, even the Lighthouse rollout, those are all things that we are doing to drive that reliability. It's absolutely showing up for the customers. They're feeling that positive reliability, and it's showing up in their customer satisfaction numbers.

Reliability front. It. It's it's as we have described which is um, you've got to get in there and you've got to make the Investments consistently over a period of time to drive the reliability and not have, um, things pop up? That can be very expensive in any given period. I mean, you know, you know, a singular Mill struggling, um, can be a hundred million dollar hit in a year easily, um, if if a mill is really struggling and so, uh, we are putting um aggressively investing back into our Mill system, um, in North America. And that's if you look at the expanded capex, if you look at the, the the the 1 time, uh, accelerated transformation costs, uh, even the lighthouse roll out. Those are all things that that we are doing, uh, to drive that reliability. It's absolutely showing up for the customers of their feeling that positive reliability and it's showing up in their customer satisfaction numbers. Um, it's showing up in our cost numbers but it is that's a slugfest and you and you got to stick with it. And the team is doing an excellent job on the European side.

Yeah, so, so on the, on the cost side. Look, I I I'm I'm really happy with what we've done. We've taken out, you know, over 700 million dollars in in total costs. When you look at the the execution on that. So I'm very happy with the progress that we've made on that the things that are harder to get at there's really 2. Right? 1 is the speed at which um you take things down and all of those costs go away, right? So as you as you as you as you close the mill uh there tend to be lingering costs during the shutdown and ultimately into the final closure and then potentially the uh, the sale or disposal of of the property. Those tend to linger a little bit. Um and then on the reliability front, it it's it's as we have described which is you've got to get in there and you've got to make the Investments consistently over a period of time to drive the reliability and not have, um, things pop up. That can be very expensive in any given period and as you know you know a singular Mill struggling um can be a hundred million dollar hit in a year.

Lance Loeffler: Was that a huge factor in terms of your consideration for spinning Europe? Because when I get back to your investment. No, no, not at all. The real driver for this decision is the fact that the value is really in the regions. When you get right down to it and you look at where value is created, the acquisition and the combination, what it did was it created two regional powerhouses that really have very, very, very little overlap. I'm talking almost zero overlap in terms of how those businesses are structured in the market, how those businesses go to market with customers, and how you execute all the way from inputs, fiber supply, all the way through the market. They're really distinctive markets. And so using 80/20 as the lens and as the mindset, you want to simplify, right? You want to take the complexity out.

Lance Loeffler: You want to focus on where the value is in the discrete markets, and then you want to get capital and people aligned and focused to those best opportunities. And that's really the driver there. The exciting opportunity in Europe is even with the headwinds that the business had all of last year with a combination of the war in Ukraine and trade tensions and the softness in the market, the business performed well relative to the marketplace and is getting after the changes in a way that's really distinctive to that marketplace. And this business coming out as a standalone business is going to have a great balance sheet. It's going to have great positioning in the market, top of its class in terms of customer satisfaction, and the ability to direct and align people and capital to that unique mission. And that's really what this is all about.

You want to focus on where the value is in the discrete markets, and then you want to get capital and people aligned and focused to those best opportunities. And that's really the driver there. The exciting opportunity in Europe is even with the headwinds that the business had all of last year with a combination of the war in Ukraine and trade tensions and the softness in the market, the business performed well relative to the marketplace and is getting after the changes in a way that's really distinctive to that marketplace. And this business coming out as a standalone business is going to have a great balance sheet. It's going to have great positioning in the market, top of its class in terms of customer satisfaction, and the ability to direct and align people and capital to that unique mission. And that's really what this is all about.

Market. Um, is the the business performed well relative to the marketplace um, and is getting after the changes in a way that's really distinctive to that Marketplace. Um, and this business coming out as a standalone, business is going to have a great balance sheet, um, it's going to have great positioning in the market, you know, top of its class in terms of of customer satisfaction. Uh, and the ability to direct and align people and capital to that unique Mission, and that's really what this is all about. So I'm I'm super excited for what team in the Tim and the team have lined up um, and as an independent company, um, I believe it's going to thrive, um, having that focus and that, uh, that that aligned Capital allocation and the same thing in the US um, and and this really allows us for each to realize its unique Mission and and really Drive incredible value.

Is the the business performed well relative to the marketplace um, and is getting after the changes in a way, that's really distinctive to that Marketplace. Um, and this business coming out as a standalone, business is going to have a great balance sheet, um, it's going to have great positioning in the market, you know, top of its class in terms of of customer satisfaction. Uh, and the ability to direct and align people and capital to that unique Mission and that's really what this is all about. So I'm I'm super excited for what team and the Tim and the team have lined up um, and as an independent company, um, I believe it's going to thrive, um, having that focus and that, uh, that that aligned Capital allocation and the same thing in the US um, and and this really allows us for each to realize its unique Mission and and really Drive incredible value.

There. So there's there's no price. Now, that being said, as I mentioned in my remarks, uh, just as there's a, a seventy dollar pricing increase, uh, in North America, that's been, um, uh, um, put out into the marketplace by us to our customers in Europe. There have been a, a lot of of, uh, there's been a lot of activity, and there's about a hundred Euro paper price, increase that's gone out in most markets. Um, and uh, what we don't know is is whether, you know, kind of what's going to stick, it's a more Dynamic Market. Um, in the US on an annualized basis, if you got every penny of that, that's a little over 600 million dollars, about 630 million and in Europe, if you got every penny of that, it would be about 300 million um incrementally from from what we're talking about today, but in neither case do we have those built into the numbers?

Yes. So so specific to to so so yes. You're correct on North America First. There is nothing in there in terms of price. Um, in Amia same thing, it's only things that have been executed and we have line of sight too. So you have the underlying Assumption of market growth, uh, in there which is Lance said was was, uh, 1.7%. And then you got a half a point, which are winds, that we know that we have today and so, um, we we do not have incremental price that has not been, that is not settled into the market, um, built into there, so, there's, there's no price. Now, that being said, as I mentioned in my remarks, uh, just as there's a, a seventy dollar pricing increase, uh, in North America, that's been, um, uh, um, put out into the marketplace by us to our customers in Europe. There have been a, a lot of of, uh, there's been a lot of activity, and there's about a hundred Euro paper price, increase that's gone out in most markets. Um, and uh, what we don't know is is

Do we answer your question that I want to make sure we? Yeah yeah yeah I think so. It was kind of a net zero right in the beginning not in net to 100 million. If I if I read correctly understand and if I can ask 1 more follow up, I mean right in the beginning, on your investor day, you were very helpful in giving a, an Amia a North America split all the way to 2027. Now I know, you know pathways through the year. You said demand is a bit worse, pricing came down a bit from your initial expectations. Um so I think you were talking about. Maybe you're coming down a bit from that initial guide of what at 1.8 to 2 billion. Um, I'm wondering, you know, given the context of your 5 billion guide now what what Europe plays a part of in that, if you can share any color. Yeah. We, we haven't broken out specifically, but generally you're talking about kind of 3 5 in North America and 1.

Do we what's your question that I want to make sure we yeah yeah yeah yeah I think so. It was kind of a net zero right in the beginning gnats in that 100 million. If I if I read it correctly understand and if I can ask 1 more follow up, I mean right in the beginning, on your investor day, you were very helpful in giving a an Amia and a North America split all the way to 2027. Now, I know, you know, pathways through the year. You said demand is a bit worse, pricing came down a bit from your initial expectations. Um so I think you were talking about. Maybe you're coming down a bit from that initial guide of what at 1.8 to 2 billion. Um, I'm wondering, you know, given the context of your 5 billion guide now what what Europe plays a part of in that, if you can share any color would be great? Yeah. Yeah. We we haven't broken out specifically but generally you're talking.

Uh from the Legacy pieces of international paper and the Legacy pieces of Dia Smith. Now have 2 regions that are that are number 1 in their regions. Um, have an exciting strategy in terms of cost position how we're working with customers, how we're building, our relative share position, and ultimately the financial upside that we see here, all of the hard work that's been put in, um, the focus on 8020 making really tough choices around assets and reinvesting back into the business aggressively, uh, to drive the customer service experience that we're seeing today winning share uh aggressively taking cost, cost out and maximizing return on invested Capital. When I look at that, I see 2 businesses, um, that will stand on their own with great balance sheets with the ability to invest in their future with the ability to make Dynamic Capital, allocation decisions, to maximize value for shareholders. I'm very excited about that future. And I, I applaud the team for all the incredible work that they've done. I thank our shareholders, uh, for, uh,

Well, thank you very much. I appreciate everybody joining us today. This is an important and a very exciting day. For International Paper, the decision uh to split into 2, public companies, to build 2 power houses that we have put together uh from the Legacy pieces of international paper and the Legacy pieces of Dia Smith. Now have 2 regions that are that are number 1 in their regions. Um, have been exciting strategy in terms of cost position. How we're working with customers, how we're building, our relative share position, and ultimately the financial upside that we see here, all of the hard work that's been put in, um, the focus on 8020 making really tough decisions around assets and reinvesting back into the business aggressively uh to drive the customer service experience that we're seeing today winning share uh aggressively taking cost, cost out and maximizing return on invested Capital. When I look at that, I see 2 businesses, um, that will stand on their own with great balance sheets, with the ability to invest in their future.

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Q4 2025 International Paper Co Earnings Call

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Q4 2025 International Paper Co Earnings Call

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