Q2 2026 International Paper Co Earnings Call

July 30, 2026

Operator: Good morning, and thank you for standing by. Welcome to International Paper's Q2 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, you will have an opportunity to ask questions. To ask a question, press star one on your telephone keypad. 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. It is now my pleasure to turn the call over to Mandi Gilliland, Senior Director of Investor Relations. Mand, the floor is yours.

Speaker #1: for standing by. Welcome to International Paper's second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, you will have an opportunity to ask questions.

Speaker #1: To ask a question, press *1 on your telephone keypad. To withdraw your question, press *1 again. As a reminder, to ask a question, press *1.

Speaker #1: To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Mandi Gilliland. Senior Director of Investor Relations, ma'am, the floor is yours.

Speaker #2: Thank you. Good morning, and good afternoon, and thank you for joining International Paper's second quarter 2026 earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer, and Lance Loeffler, Senior Vice President and Chief Financial Officer.

Mandi Gilliland: Thank you. Good morning, and good afternoon, and thank you for joining International Paper's Q2 2026 earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer, and Lance Loeffler, Senior Vice President and Chief Financial Officer. 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. These risks and uncertainties 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 U.S. 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 Q2 earnings press release and today's presentation slides.

Speaker #2: 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.

Speaker #2: contribute to actual results, differing materially from such forward-looking statements, can be found in our press releases and reports filed with the U.S. Securities and Exchange Commission.

Speaker #2: We will 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. Our website also contains copies of the second quarter earnings press release and today's presentation slides.

Speaker #2: So now, let me turn it over to Andy Silvernail.

Mandi Gilliland: Now let me turn it over to Andy Silvernail.

Speaker #3: Thanks, Mandi. Good morning, good afternoon, everyone. Let's begin on slide 3. During the past few quarters, we've been clear about our focus on improved execution.

Andy Silvernail: Thanks, Mandi. Good morning, good afternoon, everyone. Let's begin on slide three. During the past few quarters, we've been clear about our focus on improved execution. Results from the Q2 show tangible progress, reflecting the commitment of our team to deliver in a complex operating environment. Across the company, we delivered strong operational performance, successfully executed a particularly heavy outage schedule, and advanced key strategic investments. Also, we continued taking cost and complexity out of the business, producing results that exceeded our expectations for the quarter. In North America, we continued our trend of year-over-year box volume growth, and we expect to outpace the industry again this quarter. We also improved our overall mill performance and completed the Riverdale machine conversion on time. In EMEA, we accelerated cost out actions and advanced our transformational investments.

Speaker #3: Results from the second quarter show tangible progress, reflecting the commitment of our team to deliver and accomplish operating environment. Across the company, we delivered strong operational performance, successfully executed a particularly heavy outage schedule, and advanced key strategic investments.

Speaker #3: Also, we continue taking cost and complexity out of the business, producing results that exceeded our expectations for the quarter. In North America, we continued our trend of year-over-year box volume growth, and we expect to outpace the industry again this quarter.

Speaker #3: We also improved our overall mill performance and completed the Riverdale machine conversion on time. In EMEA, we accelerated cost-out actions and advanced our transformational investments.

Speaker #3: We also continued making steady progress toward the planned separation of our EMEA packaging business. More broadly, the priorities we established for 2026—improving reliability, simplifying the business, strengthening our cost structure, and investing where we can create the most value—are progressing as expected and reinforcing the momentum we're seeing.

Andy Silvernail: We also continued making steady progress toward the planned separation of our EMEA packaging business. More broadly, the priorities we established for 2026, improving reliability, simplifying the business, strengthening our cost structure, and investing where we can create the most value, are progressing as expected and reinforcing the momentum we're seeing. We still have work to do, but we're seeing better execution and improving performance as we build a stronger International Paper. Let's take a closer look at the quarter. I'm on slide four. One of the clear signs we're making progress is our ability to grow above the market. In the Q2, our box volumes in North America increased 1.7% year over year on a daily basis, and we expect to outpace the industry by approximately 2% for the full year.

Speaker #3: We still have work to do, but we're seeing better execution and improving performance as we build a stronger international paper. Let's take a closer look at the quarter.

Speaker #3: I'm on slide 4. One of the clearest signs we're making progress is our ability to grow above the market. In the second quarter, our box volumes in North America increased 1.7% year-over-year on a daily basis, and we expect to outpace the industry by approximately 2% for the full year.

Speaker #3: That growth is a direct result of the work we've done to strengthen customer relationships and win new business. We believe a superior customer experience is an important differentiator for International Paper.

Andy Silvernail: That growth is a direct result of the work we've done to strengthen customer relationships and win new business. We believe a superior customer experience is an important differentiator for International Paper. We're helping customers improve performance, innovate faster, and grow their businesses. One example of our customer focus in action is the investment we've made in our Aurora, Illinois, Commercial Performance and Innovation Center. At Aurora, we've created a place where our customers can work side by side with our designers, engineers, and technical experts to solve their toughest problems, innovate together, and bring new packaging solutions to market faster. I'm now moving to slide five. We're bringing the same intensity to our internal operations, which enables another strategic pillar, an advantage cost position. This slide shows the impact of the actions we've been taking to strengthen our mill system.

Speaker #3: We're helping customers improve performance, innovate faster, and grow their businesses. One example of our customer-focused action is the investment we've made in our Aurora, Illinois, commercial performance and innovation center.

Speaker #3: At Aurora, we've created a place where our customers can work side by side with our designers, engineers, and technical experts to solve their toughest problems, innovate together, and bring new packaging solutions to market faster.

Speaker #3: I'm now moving to slide 5. We're bringing the same intensity to our internal operations, which enables another strategic pillar: an advantage cost position. This slide shows the impact of the actions we've been taking to strengthen our mill system.

Speaker #3: Mill performance has improved by approximately 500 basis points year over year. More importantly, we're seeing consistent improvement in capacitalization as the benefits of our focused efforts begin to compound.

Andy Silvernail: Mill performance has improved by approximately 500 basis points year over year. More importantly, we're seeing consistent improvement in capacity utilization as the benefits of our focused efforts begin to compound. We've simplified the mill system and reduced costs by executing a series of footprint actions while directing capital to the assets and projects where it will have the greatest impact. We're also beginning to see returns from targeted investments in reliability and productivity. All of our actions have been driven by a win-the-day mentality that is enabled by a discipline of daily management. The result is a leaner, more efficient mill system that is generating more output from a stronger and more capable asset base. This trend is encouraging and reinforces our confidence that the actions we're taking are delivering the results we expect.

Speaker #3: We've simplified the mill system, and reduced costs by executing a series of footprint actions, while directing capital to the assets and projects where we'll have the greatest impact.

Speaker #3: We're also beginning to see returns from targeted investments in reliability and productivity, all of our actions have been driven by a win-the-day mentality that has enabled, by a discipline of daily management.

Speaker #3: The result is a leaner, more efficient mill system that has generated more output from a stronger and more capable asset base. This trend is encouraging and reinforces our confidence that the actions we're taking are delivering the results we expect.

Speaker #3: On the next slide, we'll take a closer look at some of the key investments helping to drive our improvement. I'm on slide 6. We're making focused investments across our system to upgrade our portfolio and drive reliability, productivity, and growth.

Andy Silvernail: On the next slide, we'll take a closer look at some of the key investments helping to drive our improvement. I'm on slide six. We're making focused investments across our system to upgrade our portfolio and drive reliability, productivity, and growth. This is 80/20 in action. We've made tough choices to exit areas where we weren't delivering adequate returns so we can reinvest that capital where we see the greatest opportunity to win. The four investments shown here are examples of that approach. Each one strengthens our competitive position, supports our customers, and drives financial returns in the mid-teens to mid-twenties. Let's start with the NORPAC mill. Before turning to the strategic rationale for NORPAC, I want to acknowledge the tragedy that occurred at the neighboring Nippon facility in May.

Speaker #3: This is 80/20 in action. We've made tough choices to exit areas where we weren't delivering adequate returns, so we can reinvest that capital where we see the greatest opportunity to win.

Speaker #3: The four investments shown here are examples of that approach. Each one strengthens our competitive position, supports our customers, and drives financial returns in the mid-teens to mid-20s.

Speaker #3: Let's start with the Norpaq Mill. Before turning to the strategic rationale for Norpaq, I want to acknowledge the tragedy that occurred at the neighboring Nippon facility in May.

Speaker #3: Our thoughts are with those directly impacted and with the entire Longview community, including our own Norpaq employees who call that community home. Safety above all else is our core value, and this is a sobering reminder of why we must be relentless in that commitment.

Andy Silvernail: Our thoughts are with those directly impacted and with the entire Longview community, including our own NORPAC employees, who call that community home. Safety above all else is our core value, and this is a sobering reminder of why we must be relentless in that commitment. Against that backdrop, we completed the NORPAC acquisition in June. The mill's production was temporarily slowed during the Nippon investigation, but we responded quickly to address the reduced steam supply from their facility. As a result, the current mill operations have returned to pre-incident level. NORPAC is an excellent fit for International Paper. It expands our ability to serve growing demand for lightweight, high-performance packaging grades, reduces distribution costs for the West Coast, lowers our total cost position, and strengthens our overall mill system. At Riverdale, the machine conversion is complete, and the ramp-up is progressing as expected.

Speaker #3: Against that backdrop, we completed the Norpaq acquisition in June. The mill's production was temporarily slowed during the Nippon investigation, but we responded quickly to address the reduced steam supply from their facility.

Speaker #3: As a result, the current mill operations have been returned to pre-incident levels. Norpaq is an excellent fit for International Paper. It expands our ability to serve growing demand for lightweight, high-performance packaging grades, reduces distribution costs for the West Coast, lowers our total cost position, and strengthens our overall mill system.

Speaker #3: At Riverdale, the machine conversion is complete, and the ramp-up is progressing as expected. We anticipate the ramp to be largely achieved by the end of the year, with the machine reaching full run rate in the first quarter of 2027.

Andy Silvernail: We anticipate the ramp to be largely achieved by the end of the year, with the machine reaching full run rate in Q1 2027. The ramp period allows us to work with customers to qualify the machine across all product lines. This project strengthens our product mix, enhances our advantage cost position, supports a more balanced paper system over time, and is expected to deliver returns consistent with our investment expectations. Next, the Dover converting facility acquisition strengthens our footprint in an attractive region, adds an established customer base, and supports our long-term growth strategy. In Waterloo, we're preparing to start up in Q4 and expect to be fully operational by Q2 2027.

Speaker #3: The ramp period allows us to work with customers to qualify the machine across all product lines. This project strengthens our product mix and enhances our advantaged cost position, supports a more balanced paper system over time, and is expected to deliver returns consistent with our investment expectations.

Speaker #3: Next, Dover Converting Facility acquisition strengthens our footprint in an attractive region, adds an established customer base, and supports our long-term growth strategy. In Waterloo, we're preparing to start up in the fourth quarter and expect to be fully operational by the second quarter of 2027.

Speaker #3: Waterloo is a state-of-the-art facility designed around safety, productivity, and innovation. It expands our presence in an attractive segment of the market and will position us to deliver high-quality packaging solutions with greater speed and reliability.

Andy Silvernail: Waterloo is a state-of-the-art facility designed around safety, productivity, and innovation. It expands our presence in an attractive segment of the market and will position us to deliver high-quality packaging solutions with greater speed and reliability. Together, these investments reflect our 80/20 approach, investing in the capabilities and locations that help us win and concentrating resources where they create the most value. Now, let's turn to Packaging Solutions EMEA for some of the investments underway there. I'm onto slide seven. Over the past 18 months, we've taken significant steps to transform the EMEA business. We've simplified the organization, integrated legacy acquisitions, reset the cost base, and built a stronger commercial model around key customer relationships. Investments have been a critical enabler of that work. Across EMEA, we're investing to maintain and strengthen the asset base, improve competitiveness and lower cost, and support growth where we see the most attractive opportunities.

Speaker #3: Together, these investments reflect our 80/20 approach, investing in the capabilities and locations that help us win and concentrate resources where they create the most value.

Speaker #3: Now, let's turn to packaging solutions EMEA with some of the investments underway there. I'm on to slide 7. Over the past 18 months, we've taken significant steps to transform the EMEA business.

Speaker #3: We've simplified the organization, integrated legacy acquisitions, reset the cost base, and built a stronger commercial model around key customer relationships. Investments have been a critical enabler of that work.

Speaker #3: Across EMEA, we're investing to maintain and strengthen the asset base and prove competitiveness in lower cost, and support growth where we see the most attractive opportunities.

Speaker #3: The three examples on this slide highlight the difference that we're making by putting capital to work. At Lucca, we're modernizing our recycled container board platform by replacing an older paper machine with a new lightweight machine that will deliver higher yield, lower energy consumption, and greater sustainability performance.

Andy Silvernail: The three examples on this slide highlight the difference that we're making by putting capital to work. At Lucca, we're modernizing our recycled containerboard platform by replacing an older paper machine with a new lightweight machine that will deliver higher yield, lower energy consumption, and greater sustainability performance. It's a transformational investment that will create a more efficient mill and strengthen our ability to serve our converting network. We expect this investment to come online in Q3. In Germany, we're executing our cost-out strategy by consolidating volume from smaller facilities into more modern and efficient plants, like our lighthouse approach that we used in North America. We're maintaining capacity while improving utilization, lowering fixed costs, and strengthening our cost position. In Romania, we're investing to capitalize on growth. Eastern Europe continues to be one of the fastest-growing regions in our portfolio, at approximately 4% CAGR.

Speaker #3: It's a transformational investment that will create a more efficient mill and strengthen our ability to serve our converting network. We expect this investment to come online in the third quarter.

Speaker #3: In Germany, we're executing our cost-out strategy by consolidating volume from smaller facilities into more modern and efficient plants, like our lighthouse approach that we used in North America.

Speaker #3: We're maintaining capacity while improving utilization, lowering fixed costs, and strengthening our cost position. And in Romania, we're investing to capitalize on growth. Eastern Europe continues to be one of the fastest-growing regions in our portfolio, at approximately 4% CAGR.

Speaker #3: We're expanding capacity within an existing operation to support our customers and capture that growth. Taken together, these investments will generate stronger financial returns and illustrate how we're improving the business for the long term, strengthening our asset base, lowering costs, and investing where we see the best opportunities for growth.

Andy Silvernail: We're expanding capacity within an existing operation to support our customers and capture that growth. Taken together, these investments will generate stronger financial returns and illustrate how we're improving the business for the long term, strengthening our asset base, lowering costs, and investing where we see the best opportunities for growth. I'm moving on to slide eight and staying focused on our EMEA business. As in North America, we're simplifying the system and aligning resources to the assets and the opportunities that can create the most value. To date, we've announced more than $210 million of run rate footprint and cost savings actions. Those actions include 31 manufacturing facilities and a central office that have closed or are in the process of closing and are expected to result in net reductions of more than 3,000 positions. The actions shown here go beyond site closures.

Speaker #3: I'm moving on to slide 8 and staying focused on our EMEA business. As in North America, we're simplifying the system and aligning resources to the assets and the opportunities that can create the most value.

Speaker #3: To date, we've announced more than 210 million dollars of run-rate footprint and cost savings actions. Those actions include 31 manufacturing facilities and a central office that have closed or are in the process of closing, and our expected result is a net reduction of more than 3,000 positions.

Speaker #3: The actions shown here go beyond site closures, and important part of this work is asset optimization. We're optimizing the network by redeploying equipment, capital, and capacity into the sites where we can have the greatest impact.

Andy Silvernail: An important part of this work is asset optimization. We're optimizing the network by redeploying equipment, capital, and capacity into the sites where we can have the greatest impact. Approximately half of the equipment moves we have planned have already been completed, allowing us to consolidate operations, improve utilization, and better align our assets with customer demand. With that, let me turn it over to Lance to discuss our Q2 results and outlook in more detail.

Speaker #3: Approximately half of the equipment moves we have planned have already been completed, allowing us to consolidate operations, improve utilization, and better align our assets with customer demand.

Speaker #3: With that, let me turn it over to Lance to discuss our second-quarter results and outlook in more detail.

Speaker #2: Thanks, Andy. Turning to slide 9 in our enterprise results for the second quarter. Starting with sales in our North America business, while our box volumes are up 1.7% year over year on a daily basis, overall sales declined due to the planned exit of our non-strategic export business following the closure of our Savannah Mill.

Lance Loeffler: Thanks, Andy. Turning to slide nine and our enterprise results for Q2. Starting with sales in our North America business. While our box volumes are up 1.7% year over year on a daily basis, overall sales declined due to the planned exit of our non-strategic export business following the closure of our Savannah mill. In addition, our EMEA business experienced softer demand, primarily driven by the geopolitical environment. Earnings and margins declined year over year. In North America, the primary drivers were planned outage activity and the Riverdale conversion. In EMEA, we experienced margin squeeze due to the impact of higher paper prices on our packaging sales, as well as higher distribution costs. Despite those headwinds, operational performance was stronger than we anticipated, and the results reflect continued progress on execution across the company.

Speaker #2: In addition, our EMEA business experienced softer demand, primarily driven by the geopolitical environment. Earnings and margins declined year over year. In North America, the primary drivers were planned outage activity and the Riverdale conversion.

Speaker #2: In EMEA, we experienced margin squeeze due to the impact of higher paper prices on our packaging sales. As well as higher distribution costs. Despite those headwinds, operational performance was stronger than we anticipated, and the results reflect continued progress on execution across the company.

Speaker #2: Even with a quarter that included significant outage activity and investment spending, free cash flow was stronger than we anticipated. Free cash flow in the quarter was negative 7 million dollars as cash from operations was used to fund transformation initiatives, and capital investments of 533 million dollars.

Lance Loeffler: Even with a quarter that included significant outage activity and investment spending, free cash flow was stronger than we anticipated. Free cash flow in the quarter was -$7 million, as cash from operations was used to fund transformation initiatives and capital investments of $533 million. Turning to slide 10 and our Packaging Solutions North America Q2 results compared to the Q1. Overall, our results reflect solid performance across the business. Price and mix was favorable by $37 million, reflecting faster realization of previously announced price increases and a more favorable mix due to lower export sales. Volume was $16 million favorable, driven by normal seasonal improvement, 1 additional shipping day, and continued growth in our domestic business. Operations and costs were $1 million favorable, primarily driven by improved mill performance, Ixtac insurance recovery, and the non-repeat of the winter storm impact in the Q1.

Speaker #2: Turning to slide 10 in our packaging solutions North America second quarter results, compared to the first quarter. Overall, our results reflect solid performance across the business.

Speaker #2: Price and mix was favorable by 37 million dollars, reflecting faster realization of previously announced price increases and a more favorable mix due to lower export sales.

Speaker #2: Volume was 16 million dollars favorable, driven by normal seasonal improvement, one additional shipping day, and continued growth in our domestic business. Operations and costs were 1 million dollars favorable, primarily driven by improved mill performance, XTAC insurance recovery, and the non-repeat of the winter storm impact in the first quarter.

Speaker #2: These favorable items were primarily offset by increased costs associated with the Riverdale conversion and other reliability work completed during the outages. Maintenance outages were 127 million dollars unfavorable in the quarter.

Lance Loeffler: These favorable items were primarily offset by increased costs associated with the Riverdale conversion and other reliability work completed during the outages. Maintenance outages were $127 million unfavorable in the quarter. As planned, this was a very heavy outage quarter at roughly twice our normal levels. Despite the scale and complexity of the work, the team executed exceptionally well across the system. In fact, the second paper machine at Riverdale returned to service ahead of schedule while conversion work on paper machine 16 was underway. Input costs were $21 million favorable, primarily driven by the non-repeat of elevated energy costs associated with the Q1 winter storm. However, those benefits were partially offset by higher OCC and freight costs. In total, Packaging Solutions North America delivered $425 million of adjusted EBITDA in the Q2. Moving to our Q3 outlook for Packaging Solutions North America on slide 11.

Speaker #2: As planned, this was a very heavy outage quarter at roughly twice our normal levels. Despite the scale and complexity of the work, the team executed exceptionally well across the system.

Speaker #2: In fact, the second paper machine at Riverdale returned to service ahead of schedule while conversion work on paper machine 16 was underway. Input costs were 21 million dollars favorable, primarily driven by the non-repeat of elevated energy costs associated with the first quarter winter storm.

Speaker #2: However, those benefits were partially offset by higher OCC and freight costs. In total, Packaging Solutions North America delivered $425 million of adjusted EBITDA in the second quarter.

Speaker #2: Moving to our third quarter outlook for packaging solutions North America on slide 11. Price and mix are expected to be favorable, driven by the continued realization of previously announced price increases through June publications.

Lance Loeffler: Price and mix are expected to be favorable, driven by the continued realization of previously announced price increases through June publications. Volume is expected to be unfavorable as 1 additional shipping day is more than offset by anticipated lower export volumes. Operations and costs are expected to be favorable sequentially. Benefits from the Riverdale ramp-up and the contribution from NORPAC are expected to more than offset the step-down of Ixtac insurance proceeds anticipated in the Q3. Input costs are expected to be unfavorable, primarily due to higher OCC and seasonally higher energy costs. Lastly, to ensure the safety of our team members, we proactively suspended operations at our Pine Hill mill to complete structural roof repairs. We currently expect the mill to be operational by the end of August.

Speaker #2: Volume is expected to be unfavorable, as one additional shipping day is more than offset by anticipated lower export volumes. Operations and costs are expected to be favorable sequentially.

Speaker #2: Benefits from the Riverdale ramp-up and the contribution from NORPAC are expected to more than offset the step-down of XTAC insurance proceeds anticipated in the third quarter.

Speaker #2: Input costs are expected to be unfavorable, primarily due to higher OCC and seasonally higher energy costs. Lastly, to ensure the safety of our team members, we proactively suspended operations at our Pine Hill Mill to complete structural roof repairs.

Speaker #2: We currently expect the mill to be operational by the end of August. Our outlook shows a separate line item forecasting and approximately 85 million dollar impact in the third quarter.

Lance Loeffler: Our outlook shows a separate line item forecasting an approximately $85 million impact in the Q3 before any expected insurance recovery. These items result in an adjusted EBITDA outlook for Packaging Solutions North America of approximately $555 million to $585 million for the quarter, which includes that Pine Hill impact. Turning to slide 12, we outline the key drivers and assumptions behind the step-up we expect in North America from the H1 to the H2 of this year. Our full-year adjusted EBITDA outlook is now $2.35 billion to $2.45 billion. We have reduced the top end of the range by approximately $50 million, primarily based on the macro environment and the prolonged impact from the Middle East conflict. We delivered H1 adjusted EBITDA of $902 million and continue to expect a significant step-up in the H2 of this year.

Speaker #2: Before any expected insurance recovery. These items result in an adjusted EBITDA outlook for packaging solutions North America of approximately 555 million to 585 million dollars for the quarter, which includes that Pine Hill impact.

Speaker #2: Turning to slide 12, we outlined the key drivers and assumptions behind the step-up we expect in North America from the first half to the second half of this year.

Speaker #2: Our full year adjusted EBITDA outlook is now 2.35 billion to 2.45 billion dollars. We have reduced the top end of the range by approximately 50 million dollars, primarily based on the macro environment and the prolonged impact from the Middle East conflict.

Speaker #2: We delivered first half adjusted EBITDA of 902 million dollars and continue to expect a significant step-up in the second half of this year. The right side of the slide walks through the primary drivers supporting that step-up and the progress we're making across the business.

Lance Loeffler: The right side of the slide walks through the primary drivers supporting that step-up and the progress we are making across the business. Compared to last quarter's view, the favorable adjustments include $50 per ton of the June published price increase, which is now factored into the price total. Volume is now slightly offset, given that we originally anticipated an uptick in H2 industry demand. We now expect industry demand trends to remain generally stable from the Q2 into the Q3. Some of our 80/20 initiatives were achieved earlier than planned, shifting a portion of the benefit into the H1 of the year and reducing the step-up reflected in the H2. Now that the heavy Q2 planned outages are behind us and the Riverdale ramp-up remains on schedule, our expectations for these items remain unchanged.

Speaker #2: Compared to last quarter's view, the favorable adjustments include $50 per ton of the June published price increase, which is now factored into the price total.

Speaker #2: Volume is now a slightly offset given that we originally anticipated an uptick in second half industry demand. We now expect industry demand trends to remain generally stable from the second quarter into the third quarter.

Speaker #2: Some of our 80/20 initiatives were achieved earlier than planned. Shifting a portion of the benefit into the first half of the year and reducing the step-up reflected in the second half.

Speaker #2: Now that the heavy second quarter planned outages are behind us, and the Riverdale ramp-up remains on schedule, our expectations for these items remain unchanged.

Speaker #2: The largest unfavorable category is the macro environment. We had anticipated approximately $50 million in headwinds; now we expect an impact closer to $150 million, primarily driven by elevated transportation spot rates and higher OCC, diesel, and employee medical costs.

Lance Loeffler: The largest unfavorable category is the macro environment, where we had anticipated approximately $50 million in headwinds. Now, we expect an impact closer to $150 million, primarily driven by elevated transportation spot rates and higher OCC, diesel, and employee medical costs. Putting it all together, these factors support an improvement of approximately $600 million from the H1 to the H2 of this year, excluding the impact from Pine Hill. Our preliminary estimate for the Pine Hill disruption in the H2 is between $70 and $100 million. We do expect to recover the majority of that impact through insurance in the H2, but we are still working through the details. The key takeaway is that we have successfully completed several important milestones in the H1 of 2026, including our heaviest outage quarter and the Riverdale conversion.

Speaker #2: Putting it all together, these factors support an improvement from the first half to the second half of this year, excluding the impact from Pine Hill.

Speaker #2: Our preliminary estimate for the Pine Hill disruption in the second half is between 70 and 100 million dollars. We do expect to recover the majority of that impact through insurance in the second half, but we're still working through the details.

Speaker #2: The key takeaway is that we have successfully completed several important milestones in the first half of 2026. Including our heaviest outage quarter and the Riverdale conversion.

Speaker #2: We're realizing prior price increases and continuing to execute our 80/20 initiatives. While the operating environment remains dynamic, these actions will help mitigate macro headwinds and support our confidence in the outlook for the remainder of 2026.

Lance Loeffler: We're realizing prior price increases and continuing to execute our 80/20 initiatives. While the operating environment remains dynamic, these actions will help mitigate macro headwinds and support our confidence in the outlook for the remainder of 2026. Turning to Packaging Solutions EMEA on slide 13, the business delivered results that were ahead of our expectations for the Q2. Price and mix was $12 million unfavorable sequentially, as higher paper prices for external sales were more than offset by the unfavorable impact of higher paper prices on our packaging sales. Volume was slightly lower sequentially, reflecting continued softness in the market, driven by geopolitical uncertainty and consumer sentiment. Operations and costs were $16 million unfavorable sequentially, but better than our expectations. While distribution costs associated with higher oil prices remained a headwind, the team made progress on cost-out actions, which mitigated the impact.

Speaker #2: Turning to packaging solutions EMEA on slide 13. The business delivered results that were ahead of our expectations for the second quarter. Price and mix was 12 million dollars unfavorable, sequentially as higher paper prices for external sales were more than offset by the unfavorable impact of higher paper prices on our packaging sales.

Speaker #2: Volume was slightly lower sequentially, reflecting continued softness in the market driven by geopolitical uncertainty and consumer sentiment. Operations and costs were $16 million unfavorable sequentially, but better than our expectations.

Speaker #2: While distribution costs associated with higher oil prices remained a headwind, the team made progress on cost out actions which mitigated the impact. Input costs were 10 million dollars favorable as lower energy costs which include subsidies more than offset higher OCC costs.

Lance Loeffler: Input costs were $10 million favorable as lower energy costs, which include subsidies, more than offset higher OCC costs. All in, Packaging Solutions EMEA delivered $182 million of adjusted EBITDA in the Q2. Moving to our Q3 outlook for Packaging Solutions EMEA on slide 14. Price and mix are expected to be favorable, driven by the continued realization of prior paper price increases and the related recovery in box pricing. Volume is expected to be favorable, reflecting seasonal strength and the continued onboarding of customer wins. Operations and costs are expected to improve sequentially, driven by progress on our cost-out initiatives and lower distribution costs. Lastly, input costs are expected to be slightly unfavorable as lower OCC costs are largely offset by higher energy costs, including the non-repeat of the energy subsidies received in the Q2.

Speaker #2: All in, Packaging Solutions EMEA delivered $182 million of adjusted EBITDA in the second quarter. Moving to our third quarter outlook for Packaging Solutions EMEA on slide 14.

Speaker #2: Price and mix are expected to be favorable, driven by the continued realization of prior paper price increases and the related recovery in box pricing.

Speaker #2: Volume is expected to be favorable, reflecting seasonal strength and the continued onboarding of customer wins. Operations and costs are expected to improve sequentially driven by progress on our cost out initiatives and lower distribution costs.

Speaker #2: Lastly, input costs are expected to be slightly unfavorable, as lower OCC costs are largely offset, including the non-repeat of the energy subsidies received in the second quarter.

Speaker #2: These items result in an adjusted EBITDA outlook for packaging solutions EMEA of approximately 230 million to 250 million for the third quarter. Turning to slide 15, we outlined the key drivers behind the step-up we expect in EMEA from the first half to the second half of this year.

Lance Loeffler: These items result in an adjusted EBITDA outlook for Packaging Solutions EMEA of approximately $230 million to $250 million for Q3. Turning to slide 15, we outline the key drivers behind the step-up we expect in EMEA from H1 to H2 of this year. H1 adjusted EBITDA was $390 million, slightly ahead of our prior expectations. With that higher starting point, the expected H2 step-up is now approximately $170 million, supporting our full year adjusted EBITDA outlook of $900 million to $1 billion for Packaging Solutions EMEA. The largest contributor remains margin recovery and commercial uplift. We expect packaging margins to improve in H2 of the year as prior paper price increases flow through to box contracts. This benefit is supported by incremental commercial growth from new customer wins, normal seasonality, and three additional shipping days.

Speaker #2: First half adjusted EBITDA was 390 million dollars, slightly ahead of our prior expectations. With that higher starting point, the expected second half step-up is now approximately 170 million dollars, supporting our full year adjusted EBITDA outlook of 900 million dollars to a billion dollars for packaging solutions EMEA.

Speaker #2: The largest contributor remains margin recovery and commercial uplift. We expect packaging margins to improve in the second half of the year as prior paper price increases flow through to box contracts.

Speaker #2: This benefit is supported by incremental commercial growth from new customer wins, normal seasonality, and three additional shipping days. Taken together, margin recovery and commercial volume uplift are expected to contribute approximately $110 million of incremental adjusted EBITDA in the second half.

Lance Loeffler: Taken together, margin recovery and commercial volume uplift are expected to contribute approximately $110 million of incremental adjusted EBITDA in H2. Beyond margin and volume, there are two additional contributing factors to the step-up. First, we expect to realize about $40 million in cost-out benefits in H2 of this year. These benefits will come mainly from footprint optimization actions and improvement in distribution costs, assuming no further material escalation in geopolitical-driven volatility. Lastly, input costs are expected to contribute approximately $20 million, reflecting anticipated lower OCC costs. Altogether, these factors add up to a H2 adjusted EBITDA of approximately $510 million to $610 million for EMEA. With that, I'll turn the call back over to Andy.

Speaker #2: Beyond margin and volume, there are two additional contributing factors to the step-up. First, we expect to realize about 40 million dollars in cost out benefits in the second half of this year.

Speaker #2: These benefits will come mainly from footprint optimization actions and improvement in distribution costs, assuming no further material escalation in geopolitically-driven volatility. Lastly, input costs are expected to contribute approximately $20 million.

Speaker #2: Reflecting anticipated lower OCC costs. Altogether, these factors add up to a second half adjusted EBITDA of approximately $510 million to $610 million for EMEA.

Speaker #2: With that, I'll turn the call back over to Andy.

Speaker #1: Thanks, Lance. I'm on slide 16. I'll start by doing a couple of points on the planned EMEA separation. We're making good progress and have a dedicated team focused on readiness activities.

Andy Silvernail: Thanks, Lance. I'm on slide 16. I'll start by noting a couple of points on the planned EMEA separation. We're making good progress and have a dedicated team focused on readiness activities. We are establishing the necessary governance, legal, operational, and technological infrastructure and making significant progress on our key transaction documents. The separation remains on track to the announced timeline. As we've discussed today, our focus remains clear. As always, all of our actions are focused on delivering value for our customers, our teammates, and our shareholders. We're improving execution across the company, strengthening reliability and performance across our network, simplifying the business, and investing strategically to create the most value. We're seeing positive momentum and advancing the priorities we've laid out for the year. As we close, I want to thank the IP team.

Speaker #1: We are establishing the necessary governance, legal, operational, and technological infrastructure and making significant progress on our key transaction documents. The separation remains on track to the announced timeline.

Speaker #1: Next, as we've discussed today, our focus remains clear. As always, all of our actions are focused on delivering value for our customers, our teammates, and our shareholders.

Speaker #1: We're improving execution across the company, strengthening reliability and performance across our network, simplifying the business and investing strategically to create the most value. We're seeing positive momentum and advancing the priorities we've laid out for the year.

Speaker #1: As we close, I want to thank the IP team. I am extremely proud of the focus and commitment they have demonstrated in the second quarter, and I have confidence that together we will deliver strong performance throughout the remainder of the year.

Andy Silvernail: I am extremely proud of the focus and commitment they have demonstrated in Q2, I have confidence that together, we will deliver strong performance throughout the remainder of the year. With that, let's open up for questions.

Speaker #1: With that, let's open up for questions.

Speaker #3: Thank you. If you would like to ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again.

Operator: Thank you. If you would like to ask a question, simply press star one on your telephone keypad. 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. We do ask that you limit yourself to one question and one follow-up question. Your first question comes from the line of George Staphos with Bank of America. Please go ahead.

Speaker #3: 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.

Speaker #3: We do ask that you limit yourself to one question and one follow-up question. Your first question comes from the line of George Staffos with Bank of America. Please go ahead.

Operator: Your first question comes from the line of George Staphos with Bank of America. Please go ahead.

Speaker #4: Hi everyone, good morning. Thanks for the details. Congratulations on the progress. I guess my first question, as we look at the ramp-up that you have for the second half versus the first half—and we appreciate the bridge detail.

George Staphos: Hi, everyone. Good morning. Thanks for the details. Congratulations on the progress. I guess my first question, as we look at the ramp-up that you have for H2 versus H1, and we appreciate the bridge detail. When we do some rough math, it implies a 50% or so increase from the midpoint from Q3 to Q4. Can you talk about some of the individual items that make you comfortable with that outlook, Andy and Lance? Recognizing prices change from day to day and week to week, what have you factored in for potentially higher diesel prices even since 30 June, 1 July, given where we're at right now? My second question is more broad. Can you update us in total what you've achieved in terms of 80/20 across both, you had the slide earlier on Europe, but also North America.

Speaker #4: When we do some rough math, it implies a 50% or so increase from the midpoint from third quarter to fourth quarter. So, can you talk about some of the individual items that make you comfortable with that outlook, Andy and Lance, recognizing prices change from day to day and week to week?

Speaker #4: What have you factored in for potentially higher diesel prices even since June 30, July 1st given where we're at right now? And my second question is more broad.

Speaker #4: Can you update us in total what you've achieved in terms of 80/20 across both you had the slide earlier on Europe, but also North America?

Speaker #4: What do you expect will be at for this year and what will be left for 27? Thank you very much.

George Staphos: What do you expect we'll be at for this year and what will be left for 2027? Thank you very much.

Speaker #5: Yeah, let me I'll take let me take the second one and I'll have Lance put some color on the first question. So I think George, across the board, if you look at the ramp first half to second half and then as you think about going forward, right, the 80/20 work has been central to everything we've done.

Andy Silvernail: Yeah. Let me take the second one, and I'll have Lance put some color on the first question. I think, George, across the board, if you look at the ramp H1 to H2, as you think about going forward, right, the 80/20 work has been central to everything we've done. Let me start with Europe. You've seen the focus on facility rationalization, on reducing the people cost intensity in the business. You have 31 facilities, over 3,000 people impacted by that. That will continue to move forward just as we have outlined in the past. That ramp that allows us to move into significant profit increases through the H2 of the year and as we think about next year. That's been the bulk of that.

Speaker #5: Let me start with Europe. You've seen the focus on facility rationalization and on reducing the people cost intensity in the business. That's 31 facilities, over 3,000 people impacted by that.

Speaker #5: And that will continue to move forward just as we have outlined in the past. So, that ramp allows us to move into significant profit increases through the second half of the year. And as we think about next year, that's been the bulk of that.

Speaker #5: And then really importantly, George, it's a matter of taking those resources and making really smart reinvestments like we have back in the US in terms of on the commercial side.

Andy Silvernail: George, it's a matter of taking those resources and making really smart reinvestments like we have back in the US in terms of on the commercial side. Reducing unnecessary waste, taking out unnecessary capacity or ineffective capacity, ineffective assets, driving profitability and reinvesting intelligently back into profitable growth of the business. We expect to see that same trend as we move into the H2 in Europe that we had in the US. In the US specifically, we've done the major structural changes to the mill footprint and the plant footprint. We've taken out the big chunks of those things. That being said, we're continually driving optimization. Every month I'm out in the field visiting mills and/or plants. I was recently in Pennsylvania, and the work that we're doing there, we built a new facility a number of years ago.

Speaker #5: So reducing unnecessary waste, taking out unnecessary capacity or ineffective capacity ineffective assets driving profitability and reinvesting intelligently back into profitable growth of the business.

Speaker #5: And we expect to see that same trend as we move into the second half in Europe that we had in the US. In the US specifically, right, we've done the major structural changes to the mill footprint and the plant footprint, right?

Speaker #5: So we've taken out the big chunks of those things. That being said, right, we're continually driving optimization. Every month I'm out in the field visiting mills and/or plants as recently in Pennsylvania.

Speaker #5: And the work that we're doing there—we built a new facility a number of years ago. We're driving some rationalization that is creating efficiencies in that plant.

Andy Silvernail: We're driving some rationalization that is driving efficiencies in that plant. Now it's about how do you tune that facility to drive incremental profitability, lower utilization of working capital and capital in general. It's the big investments that we have made. Cutting and building. The big investments, the big decisions that we made really throughout the last couple of years about taking assets out that were ineffective and reinvesting really aggressively back into a Mansfield, a Riverdale, a NORPAC as examples, back into now a Waterloo, and we've announced Mississippi too. The Dover, Delaware box plant that we built. Those things are ongoing, and you should expect to see that kind of change continuing across the company, really to take out unnecessary waste, reinvest back into profitable growth. Those are going to continue.

Speaker #5: And now it's about how do you tune that facility to drive incremental profitability lower utilization of working capital and capital in general. And then it's the big investments that we have made.

Speaker #5: So cutting and building, right? So the big investments, the big decisions that we made really throughout the last couple of years about taking assets out that were ineffective and reinvesting really aggressively back into a Mansfield, a Riverdale, an ORPEC as an examples back into now a Waterloo and we've announced Mississippi too.

Speaker #5: The Dover, Delaware box plant that we built—so those things are ongoing, and you should expect to see that kind of change continuing across the company.

Speaker #5: Really, to take out unnecessary waste and reinvest back into profitable growth — those are going to continue. Obviously, with the massive impact that we had in the U.S., you're starting to see we're moving towards optimization, and in Europe, we're really still right in the throes of it.

Andy Silvernail: Obviously, the massive impact that we had in the US, you're starting to see you're moving towards optimization. In Europe, we're really still right in the throes of it. Lance, you want to tackle the first one?

Speaker #5: So, Lance, you want to tackle the first one?

Speaker #2: Yeah, sure. Just to go back to your question, George, on 3Q to fourth quarter ramp. And I think in particular you're focused on North America.

Lance Loeffler: Yeah, sure. Just to go back to your question, George, on Q3 to Q4 ramp, I think in particular, you're focused on North America. I think it's really driven by the momentum that you see or what that would imply for the Q4 is really driven by a couple things. One, the continued ramp in Riverdale as we continue to bring that machine up and online to get to sort of the full run rate by early next year. The second, of course, is the pricing flow-through that's going to continue to strengthen into the end of the year on pubs, the price publications through June. We'll be continuing to add momentum as we realize more price across our box system into the end of the year.

Speaker #2: And I think it's really driven by the momentum that you see, or what that would imply for the fourth quarter, is really driven by a couple of things.

Speaker #2: One, the continued ramp in Riverdale. Right? As we continue to bring that machine up and online to get to sort of the full run rate by early next year.

Speaker #2: The second, of course, is the pricing flow through that's going to continue to strengthen into the end of the year on pubs the price publications through June, right?

Speaker #2: So we'll be continuing to add momentum as we realize more price across our box system into the end of the year. And then just the constant maturation of the cost out initiatives that we've got throughout the business, right?

Lance Loeffler: Just the constant maturation of the cost down initiatives that we've got throughout the business that we're continuing to work on throughout the course of the H2 that continue to layer on to the profit momentum that we have. I think those are the things. If you think about what are the headwinds and the way that we've thought about the cost side of this, from a diesel perspective, look, we've just taken a stance that hard to predict where that goes given some of the geopolitical uncertainty and the back and forth that we see going on around the world today. We've just basically taken, in our assumptions, the strip. That's something that we've kept relatively simple from an assumption perspective.

Speaker #2: That we're continuing to work on throughout the throughout the course of the back half of the year that continue to layer on to the profit momentum that we have.

Speaker #2: I think those are the things. And then you think about kind of what are the headwinds in the way that we've thought about the cost side of this.

Speaker #2: From a diesel perspective, look, we've just taken a stance that hard to predict where that goes. Given some of the geopolitical uncertainty and the back and forth that we see going on around the world today.

Speaker #2: So we've just basically taken in our assumptions the strip. And so that's something that we've kept relatively simple from an assumption perspective.

Speaker #4: Okay. I'll turn it over. Thank you guys.

George Staphos: Okay. I'll turn it over. Thank you, guys.

Speaker #5: Thanks, George.

Andy Silvernail: Thanks, George.

Speaker #3: You're our next question. Comes from the line of Matthew McKeller with RBC. Please go ahead.

Operator: Your next question comes from the line of Matthew McKellar with RBC. Please go ahead.

Speaker #6: Hi, good morning. Thanks for taking my questions. First, I'd like to ask how you're managing the downtime at Pine Hill with conditions is seemingly tight as they are.

Matthew McKellar: Hi. Good morning. Thanks for taking my questions. First, I'd like to ask just how you're managing the downtime at Pine Hill with conditions as seemingly tight as they are. You called out some favorable mix and less exports in the Q3 outlook for North America and the materials. I think that would be separate from the $85 million Pine Hill impact you called out. Any color on impacts and mix and how you supply your converting system would be helpful. I guess just to clarify, does your guidance for 2026 assume an insurance recovery that would be in the same ballpark as that $70 to $100 million hit that you expect the Q3 results? Thanks.

Speaker #6: You've called out some favorable mix unless exports in the Q3 outlook for North America and the materials. I think that would be separate. From 85 million dollar Pine Hill impacted called out.

Speaker #6: So any color on impact to mix and how you supply or converting system would be helpful. And then I guess just to clarify, does your guidance for 26 assume an insurance recovery that would be in the same ballpark as that 70 to 100 million dollar hit that you expect the Q3 results?

Speaker #6: Thanks.

Speaker #5: Yeah, let me touch on the insurance piece real quick. I mean, our intention is we think that there's high likelihood that a majority of that will be reimbursed.

Lance Loeffler: Let me touch on the insurance piece real quick. Our intention is we think that there's a high likelihood that a majority of that will be reimbursed. We're endeavoring to make sure that we try to match that in as close to the periods that are impacted as possible to avoid the noise in some of the sequential comp comparisons. We're focused on it. It's still early days. Majority of it's around the business interruption side of the business. We will be working with our insurance providers to work through it. We'll keep you guys updated as we get deeper into the process.

Speaker #5: We're endeavoring to make sure that we try to match that in as close to the periods that are impacted as possible to avoid the noise and some of the sequential comp comparisons.

Speaker #5: So we're focused on it. It's still early days. Majority of it's around the business interruption side of the business. And so we will be working with our insurance providers to work through it and we'll keep you guys updated as we get deeper into the process.

Speaker #5: Yeah. And on Pine Hill specifically, in terms of how you think about the network and the impact to it, there's a few things. Number one, we think that we'll be up and running by the end of August.

Andy Silvernail: On Pine Hill specifically, in terms of how you think about the network and the impact to it, there's a few things. Number one, we think that we'll be up and running by the end of August, so it won't be an extended period of downtime. However, given the tightness in our system and in the system in general, it certainly has an impact. We started actually, if you think about all the work that we've done in the past couple of years of optimizing the system, very thankful that we've been ahead of the curve on that in terms of being able to match paper grades to customers, to industries, to locations. We've had a lot of work has gone on ahead of time.

Speaker #5: So it won't be an extended period of downtime. However, given the tightness in our system and in the system in general, it certainly has an impact.

Speaker #5: We started—actually, if you think about all the work that we've done in the past couple of years of optimizing the system, I'm very thankful that we've been ahead of the curve on that, in terms of being able to match paper grades to customers, to industries, to locations.

Speaker #5: And so we've had a lot of work has gone on ahead of time, thankfully. That's really good news. And one of the things that we've been driving across the board is to maximize the mill network efficiency along all paper grades.

Andy Silvernail: Thankfully, that's really good news. One of the things we've been driving across the board is to maximize the mill network efficiency along all paper grades. Also, we have downgraded or reduced the amount of export that's out into the system, so we're pulling that back into the network to make sure we take care of our core customers. It will be a tight couple of months, right? If you think about July and August, there's no doubt it will be tight, and it exacerbates the tightness in the market across the board. We think we've got it covered. We can't deny, though, that it will be tight here over the next month or so. We think we'll ramp out of that pretty quickly.

Speaker #5: Also, we have downgraded or reduced the amount of export that's out into the system. So we're pulling that back into the network to make sure we take care of our core customers.

Speaker #5: So it will be a tight couple of months, right? If you think about July and August is no doubt it will be tight and it exacerbates the tightness in the market across the board.

Speaker #5: But we think we've got it covered. We can't deny, though, that it will be tight here over the next month or so. And then we think we'll ramp out of that pretty quickly.

Speaker #6: Okay. Very helpful. Thanks very much. And if I could just follow up with one more. Between what's been recognized so far and the announcements in the markets, North American pricing seems like it should be meaningfully higher in 27.

Matthew McKellar: Okay. Very helpful. Thanks very much. If I could just follow up with one more. Between what has been recognized so far and announced to the market, North American pricing seems like it should be meaningfully higher in 2027. How are you thinking about what kind of supply response we see across the industry as that kind of flows through? To what extent do exports continue to move lower? Are we likely to see new capacity announcements? How are you thinking about-

Speaker #6: How are you thinking about what kind of supplier response do you see across the industry as that kind of flows through? To what extent do exports continue to move lower?

Speaker #6: Are we likely to see new capacity announcements?

Andy Silvernail: Matthew, I'm gonna interrupt you. You're really muffled. We could not hear the second part of that. Could you start the question over again?

Speaker #5: Matthew, I'm going to let me interrupt you. You're really muffled. We could not hear the second part of that. So if you could you start the question over again.

Speaker #6: Sure. Sorry about that. So between price that's been announced and recognized so far, it seems like North American pricing should be meaningfully higher in 27.

Matthew McKellar: Sure. Sorry about that.

Andy Silvernail: That's better.

Matthew McKellar: Between price that's been announced and recognized so far, it seems like North American pricing should be meaningfully higher in 2027. How do you think about what kind of supply response we see across the industry as that flows through? To what extent do industry exports continue to move lower? Do we see new capacity announcements? How do you expect this to play out? Thank you.

Speaker #6: How do you think about what kind of supply response we see across the industry as that flows through? To what extent do industry exports continue to move lower?

Speaker #6: Do we see new capacity announcements? How do you expect this to play out? Thank you.

Speaker #5: Yeah. Great question. So first of all, in terms of like anything, right, supply demand dynamics are going to drive competitors' reactions, alternative reactions, things from overseas.

Andy Silvernail: Yeah. Great question. First of all, in terms of like anything, right? Supply-demand dynamics are going to drive competitors' reactions, alternative reactions, things from overseas. You could expect to see potentially a bunch of stuff. I think structurally, as I look at the cost of building, we've done a lot of analysis on replacement costs, right? As you can imagine, and I think pretty much anyone would attest to, replacement cost of mill assets has skyrocketed in the last half decade. If you think kind of post-COVID, just the ability to build a mill, to bring on incremental capacity, it's a much higher bar than it was five or 10 years ago. I think that's a very fair thing to say. That's not to say that it will not happen, but the bar is higher.

Speaker #5: You could expect to see potentially a bunch of stuff. I think, structurally, as I look at the cost of building, we've done a lot of analysis on replacement costs, right?

Speaker #5: And as you can imagine, and I think we're pretty much anyone would attest to, replacement cost of mill assets has skyrocketed in the last half decade.

Speaker #5: If you think kind of post-COVID, just the ability to build a mill, to bring on incremental capacity, it's a much higher bar than it was 5 or 10 years ago.

Speaker #5: I think that's a very fair thing to say. So that's not to say that it will not happen, but the bar is higher. It's more expensive and I think you've really got to think through that.

Andy Silvernail: It's more expensive, I think you've really got to think through that. You've heard me say in the past that I thought the threshold for people to really take a high look at that is kind of mid-teens to high teens return on invested capital. I think for somebody to enter the market with a major mill investment, I don't know that we're quite there yet. In our own analysis and we think about that. Reactions from overseas, obviously, you have the shipping costs that are very substantial, especially when you look at the incremental energy costs, incremental OCC costs that are out there in the system. There are some challenges to that, but we'd be naive to think that you won't see some movement across that.

Speaker #5: You've heard me say in the past that I thought the threshold for people to really take a hard look at that is kind of mid-teens to high-teens return on invested capital.

Speaker #5: And I think there's for somebody to enter the market with a major mill investment, I don't know that we're quite there yet. But in our own analysis and we think about that.

Speaker #5: Reactions from overseas, obviously you have the shipping costs that are very substantial, especially when you look at the incremental energy costs, incremental OCC costs that are out there in the system.

Speaker #5: So there are some challenges to that, but we'd be naive to think that you won't see some movement across that. And then finally, on alternatives and replacements—obviously what we've seen in the Middle East with the cost of energy, and therefore how that's impacting the world of plastics—generally, I feel good about where we are.

Andy Silvernail: Finally on alternatives replacements, obviously what we've seen in the Middle East with the cost of energy and therefore how that's impacting the world of plastics. Generally, I feel good about where we are. I like our position. I like how we have managed our business and how we're reacting to the market, I feel good about where we stand and good about the future.

Speaker #5: I like our position. I like how we have managed our business and how we're reacting to the market. And so I feel good about where we stand and good about the future.

Speaker #2: Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Operator: Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Speaker #7: Thank you. Apologize if it's a bit detail-oriented here, but it sort of ties together George and Matthew's question a little bit. In just clarifying, is Pine Hill included in the updated 3.2 to 3.4 billion guide?

Mark Weintraub: Thank you. I apologize if it's a bit detail-oriented here, but it sort of ties together George and Matthew's question a little bit in just clarifying. Is Pine Hill included in the updated $3.2 to 3.4 billion guide, if and/or recoupment of insurance proceeds, because that might help explain that very large pickup from Q3 to Q4, and just clarify a few other things?

Speaker #7: And if and/or recoupment of insurance proceeds because that might help explain that very large pickup from 3Q to 4Q and just clarify a few other things.

Speaker #7: If you could just tell us the specifics on that.

Andy Silvernail: Yeah

Mark Weintraub: tell us the specifics on that.

Speaker #5: Yeah, so in the overall total guide, it's not included—it's excluded, right? But what we're anticipating is that we recuperate the majority of the loss in the second half of the year.

Andy Silvernail: In the overall total guide, it's not included. It's excluded, right? What we're anticipating is that we recuperate the majority of the loss in H2.

Speaker #7: Got it. Okay. And then if I could, sort of two, but for next year, given what you're seeing here, how are you feeling about kind of the 4, 5, 5 billion that you've talked about for a while, which frankly seemed like a big stretch at one point, but maybe is looking somewhat more feasible?

Mark Weintraub: Got it. Okay. If I could, sort of two. For next year, given what you are seeing here, how are you feeling about kind of the $4 billion, $5 billion that you have talked about for a while, which frankly seemed like a big stretch at one point, but maybe is looking somewhat more feasible. I do not know if you are willing to provide updated thoughts there. At the same time, you talked about demand being more flat rather than up year over year in corrugated. Any kind of additional color? Is that just a macro call or what is the change there?

Speaker #7: I'm not sure if you're willing to provide any updated thoughts there. At the same time, you talked about demand being more flat rather than up year over year in corrugated.

Speaker #7: Any kind of additional colors? Is that just a macro call or what's the change there?

Speaker #5: Yes. So let me tackle the second question first, and then I'll come back to the broader implication. On the demand side, what we've seen in the U.S. and in Europe is the expected pickup in the second half. We're now not seeing that, given what's going on with inflation and affordability.

Andy Silvernail: Yes. Let me tackle the second question first. I will come back to the broader implication. On the demand side, what we have seen in the US and in Europe is the expected pickup in H2. We are now not seeing that given what is going on with inflation and affordability. We think that mutes the overall market going into H2, where we had expected a pickup of about 1 point. We are downgrading that to effectively flat in H2 in North America and up modestly in Europe in H2.

Speaker #5: We think that mutes the overall market going into the second half of the year. What we had expected a pickup of about a point.

Speaker #5: And so we're downgrading that to effectively flat in the second half of the year in North America, and up modestly in Europe in the second half of the year.

Speaker #5: That being said, that really is, if you look at the things that are kind of holding back the market, I'll put the affordability just kind of across the board, that issue as the biggest issue.

Andy Silvernail: That being said, if you look at the things that are kind of holding back the market, I will put the affordability, just kind of across the board, that issue as the biggest issue, and the uncertainty for the lower end of the economy. Right? If you are sitting in the bottom half of the economic spectrum, you are struggling today, you can see it with the major consumer packaged goods companies that are out there, the protein companies, the vegetable companies, et cetera. They are certainly seeing that, especially in that more cash-constrained part of the economic spectrum. That, you put housing with that, we still really have not seen any relief there.

Speaker #5: And the uncertainty for the lower end of the economy, right? So, if you're sitting in the bottom half of the economic spectrum, you're struggling today. And you can see it with the major consumer packaged goods companies that are out there—the protein companies, the vegetable companies, etc.

Speaker #5: They're certainly seeing that, especially in that more cash-constrained part of the economic spectrum. And that, and you put housing with that, we still really have not seen any relief there.

Speaker #5: So, we see some pretty exciting pent-up demand into the future, but I think the conflicts and the affordability questions are going to mute that here, certainly into the second half.

Andy Silvernail: We see some pretty exciting pent-up demand into the future. I think the conflicts and the affordability questions are going to mute that here, certainly into H2. We will see what that means for 2027. Very specifically, we are seeing some slowness on the fruit and vegetable side, specifically on the West Coast from what is going on. You have seen everything in the news around some of the issues on the vegetable side with some contamination. We are seeing that firsthand, it is showing up in the western part of the US, where the eastern part is pretty much in line with exactly what we thought. We believe we can really focus in and narrow that that is a short-term impact. That will be a headwind for us. We are seeing it in the month of July.

Speaker #5: And we'll see what that means for '27. Very specifically, we're seeing some slowness on the fruit and vegetable side, specifically on the West Coast from what's going on.

Speaker #5: You've seen everything in the news around some of the issues on the vegetable side with some contamination. We're seeing that firsthand, and it's showing up in the western part of the U.S.

Speaker #5: Where the eastern part is pretty much in line with exactly what we thought. So we believe we can really focus in and narrow that that's a short-term impact.

Speaker #5: But that will be a headwind. For us, we're seeing it in the month of July. We'll see if that lets up here as you see a rebound when people go back to normal behavior.

Andy Silvernail: We'll see if that lets up here as you see a rebound when people go back to normal behavior. I expect we'll have some headwind in Q3 from that. We think about what does this mean for the future, I'm going to be very careful not to give any real detail about the future for a couple of reasons. One, there's a lot of uncertainty out there with what's going on with everything in the Middle East, and what's happening to input costs and everything else. We'll hold off commenting further of what we think the likelihood of demand looks like into H2 of next year. You've seen the pricing. You can do the math on the pricing, right? We've always given kind of a guide of about $9 is a good proxy as we're doing that math, right?

Speaker #5: But I expect we'll have some headwind in the third quarter from that. As it regards the as we think about what does this mean for the future, I'm going to be very careful not to give any real detail about the future for a couple of reasons.

Speaker #5: One, there's a lot of uncertainty out there with what's going on with everything in the Middle East. And what's happening to input costs and everything else.

Speaker #5: And so we'll hold off commenting further of what we think the likelihood of demand looks like into the second half of next year. You've seen the pricing, you can do the math on the pricing.

Speaker #5: Right? We've always given kind of a guide of about $9 as a good proxy as we're doing that math, right? So, as we think about that math and how it flows through, you can do your math on that.

Andy Silvernail: We think about that math and how it flows through, you can do your math on there of what that means going forward. We've talked in detail about the cost-out efforts that we've done. The other thing we just have to be cautious of is we're getting closer and closer to the spin. By regulation, we have to be very cautious about forward-looking statements that aren't appropriate in that process. We'll be holding off from there. You'll hear more in Q3, and obviously in Q4, we'll lay out all of the details of our expectations for 2027.

Speaker #5: Of what that means going forward. We've talked in detail about the cost-out efforts that we've done. The other thing we just have to be cautious of is we're getting closer and closer to the spin.

Speaker #5: And so, by regulation, we have to be very cautious about forward-looking statements that aren’t appropriate in that process. So, we’ll be holding off a little bit there.

Speaker #5: You'll hear more in the third quarter, and obviously in the fourth quarter we'll lay out all of the details of our expectations for 2027.

Speaker #7: Fair enough. And just to clarify, so that $9 reference, that's a $1 per ton of contained board leads to $9. Got it. Okay.

Mark Weintraub: Fair enough. Just to cover it, that $9 reference, that's that $1 per ton of containerboard leads to $9-

Speaker #5: Correct. Yeah. Thank you. Thank you, Mark. Yeah. Thank you for clarifying that.

Andy Silvernail: Correct.

Mark Weintraub: Got it. Okay.

Andy Silvernail: Thank you, Mark. Thank you for clarifying that.

Speaker #2: Your next question comes from the line of Phil Ing with Jefferies. Please go ahead.

Operator: Your next question comes from the line of Phil Ng with Jefferies. Please go ahead.

Speaker #6: Hey, guys. Solid quarter and good execution. I guess my first question, Andy, you and your peers are certainly at, well, a September container board price increase in North America and as you alluded, the market's quite tight.

Phil Ng: Hey, guys. Solid quarter and good execution. I guess, my first question, Andy, you and your peers are certainly out with a September containerboard price increase in North America, and as you alluded, the market's quite tight. When I think about this increase, do you need this to kind of offset the inflation outlook that you're seeing that's in front of you? Or this is more of getting a proper return because you guys are obviously recapitalizing your assets. More importantly, bigger picture, when you think about the supply-demand backdrop and where you're deploying capital, what's your pricing philosophy? How should we think about it going forward longer term?

Speaker #6: So when I think about this increase, do you need us to kind of offset the inflation outlook? Or is this more about getting a proper return, because you guys are obviously recapitalizing your assets?

Speaker #6: And more importantly, bigger picture, when you think about the supply-demand backdrop and where you're deploying capital, what's your pricing philosophy? How should we think about it going forward, longer term?

Speaker #5: Yeah. Look, I mean, at the end of the day, it's a combination of pricing to market and supply-demand scenarios, right? And so we make our own decisions on what we believe is the right thing to do, given what's happening.

Andy Silvernail: Look, I mean, at the end of the day, it's a combination of pricing to market and supply-demand scenarios, right? We make our own decisions on what we believe is the right thing to do, given what's happening. Certainly on the demand side. Right now, a lot more is happening on the supply side with inflation and the tightness in the market. As we think about pricing, we think about what is appropriate given all of the different market forces, and that's why we've landed where we've landed thus far this year. We'll continue to do that, right?

Speaker #5: Certainly on the demand side, right now, a lot more is happening on the supply side with inflation and the tightness in the market. And so we as we think about pricing, we think about what is appropriate given all of the different market forces and that's why we've landed where we've landed.

Speaker #5: Thus far this year, and we'll continue to do that, right? Pricing, as you know, is incredibly dynamic in this environment, and we're really kind of looking at all those different pieces and all those different factors. That's been driving our investment philosophy and how we've thought about the assets that we want to have, and what drives maximum profitability for our business.

Andy Silvernail: Pricing, as you know, is incredibly dynamic in this environment. We're really kind of looking at all those different pieces and all those different factors. That's been driving our investment philosophy and how we've thought about the assets that we want to have and what drives profitability, maximum profitability for our business. The pricing up to now has really been eaten by inflation. I mean, if you look at what's happened with OCC, energy, diesel, freight, you name it, right? It's unfortunately really eaten every bit of the pricing up until today. What happens to inflation going forward, and therefore what happens relative to the most recent announced price increases, we don't know, right? It's impossible to know. Obviously, we would expect some of it to flow through attractively to the bottom line.

Speaker #5: The pricing up to now has really been eaten by inflation. I mean, if you look at what's happened with OCC, energy, diesel, freight—you name it, right?

Speaker #5: It's unfortunately really eaten every bit of that pricing up until today. What happens to inflation going forward, and therefore what happens relative to the most recent announced price increases, we don't know.

Speaker #5: Right? It's impossible to know. Obviously, we would expect some of it to flow through attractively to the bottom line. But we'll have to see kind of what happens specifically to what's going on in the energy world from the conflict in the Middle East.

Andy Silvernail: We'll have to see kind of what happens specifically to what's going on in the energy world from the conflict in the Middle East, and what we're seeing with just general inflation across the economy that's still flowing through from trade and tariffs and all the noise on that. We feel really good about where we are right now. We feel good about the mechanisms we use in that decision-making and ultimately turning into profits in line with the things that we've talked about in the past.

Speaker #5: And what we're seeing with just general inflation across the economy that's still flowing through from trade and tariffs and all the noise on that.

Speaker #5: So we feel really good about where we are right now. We feel good about the mechanisms we use in that decision-making. And ultimately, turning into profits in line with the things that we've talked about in the past.

Speaker #6: Okay, very helpful context, Andy. And then, as you kind of articulated earlier in your prepared remarks, you're deploying your 80/20 playbook. You're taking out some high-cost capacity first.

Phil Ng: Okay. Very helpful context, Andy. As you kind of articulated earlier in your prepared remarks, you're deploying your 80/20 playbook. You're taking out some high-cost capacity. First, that was on the mill side. You've done some on the box side. One, where are you with that journey on your box network? Right sizing. Certainly you've announced some investments this year, whether it's Riverdale, Dover, Waterloo, NORPAC. Where are you in terms of recapitalizing your asset base in terms of investments? Are you still pretty early in that journey? Just give us a little color in terms of where you are in that process at this point.

Speaker #6: That was on the mill side. You've done some on the box side. So one, where are you with that journey on your box network?

Speaker #6: Right-sizing. And then certainly, you've announced some investments this year, whether it's Riverdale, Dover, Waterloo, or Norpak. Where are you in terms of recapitalizing your asset base in terms of investments?

Speaker #6: Are you still pretty early in that journey? Just give us a little color in terms of where you are in that process at this point.

Speaker #5: Yeah, really good questions, both of them. On the first side, what I would say is, in the box world, we're really in—I'm just going to call it—optimization mode.

Andy Silvernail: Yeah, really good questions, both of them. On the first side, what I would say in the box world, we're really in, I'm just going to call it optimization mode, where we've taken out the obvious kind of high cost capacity, things that had to be kind of completely recapitalized. They were uninvestable, so to speak. We've done kind of the big swath of that. Now what you're seeing are the moves that look like, I'm going to call it on the most aggressive end, a Waterloo or a Mississippi. Where you're really going in and you're making a major bet on a market, on a geography or on productivity. That's kind of the most aggressive side. You have things like Dover, which is really around strengthening around a market, and being able to integrate box and paper.

Speaker #5: Where we've taken out the obvious kind of high-cost capacity things that had to be kind of completely recapitalized. We're not they were uninvestable, so to speak.

Speaker #5: We've done kind of the big swath of that. Now what you're seeing, right, are the moves that look like I'm going to call it on the most aggressive end, a Waterloo or a Mississippi, right, where you're really going in and you're making a major bet on a market, on a geography, or on productivity.

Speaker #5: That's kind of the most aggressive side. And then you have things like Dover, which is really around strengthening around a market and being able to integrate box and paper, right?

Speaker #5: Being able to do that in the right kind of market that's really very consistent with our strategy. Then the next I would call the next level would be Brownfields, which we have a number that are underway, which we're boosting the right kind of capacity driving cost points down, driving responsiveness up.

Andy Silvernail: Being able to do that in the right kind of market is really very consistent with our strategy. I would call the next level would be brownfields, which we have a number that are underway, which we're boosting the right kind of capacity, driving cost points down, driving responsiveness up in the business. The last part, the last level of those, is really around what I'll call just 80/20 optimization. Price, volume, mix, how you think about all those things coming together in and around a geography that has multiple plants. The example I mentioned earlier that I was in Pennsylvania here a week ago, and there we have multiple facilities servicing that geographic marketplace and getting that right mix of a super plant, which is really kind of blow and go, versus hybrid plants that are dealing with a lot more complexity in the marketplace.

Speaker #5: In the business. And then the last part, the last level of those is really around what I'll call just 80/20 optimization—price, volume, mix—how you think about all those things coming together.

Speaker #5: In and around a geography that has multiple plants. So the example I mentioned earlier that I was in Pennsylvania here a week ago. And there, right, we have multiple facilities servicing that geographic marketplace.

Speaker #5: And getting that right mix of a super plant—which is really kind of blow-and-go—versus hybrid plants that are dealing with a lot more complexity in the marketplace, finding that right combination, we're starting to dial that in. Which means responsiveness goes up and cost comes down.

Andy Silvernail: Finding that right combination, we're starting to dial that in, which means responsiveness goes up, cost comes down, that's exactly what we're trying to do. We're absolutely working that spectrum of things. We'll continue to make those bets. In terms of kind of the bolus of stuff, the really big things that have come one after another, you're going to see it be much more measured as we go forward. On the big investment side, these are related, obviously. We've made a lot of big bets in the last 2 years, what I'm really happy about is they're starting to really show up. That's big. If you think about the combination of things that we've done. Closures of 3 different mills that effectively were uninvestable. You had to put a lot of money into them for really nothing back.

Speaker #5: And that's exactly what we're trying to do. So we're absolutely working that spectrum of things, and we'll continue to make those bets. But in terms of the bolus of stuff, the really big things that have come one after another, you're going to see it be much more measured as we go forward.

Speaker #5: On the big investment side, and these are related, obviously, we've made a lot of big bets in the last two years. And what I'm really happy about is they're starting to really show up.

Speaker #5: That's big. So if you think about the combination of things that we've done—right? Closures of three different mills that effectively were uninvestable, right?

Speaker #5: You could have put you had to put a lot of money into them for really nothing back. That was really around extending the life and frankly, building product or paper that wasn't fit for the right kind of market at the right kind of profitability levels.

Andy Silvernail: It was really around extending the life and frankly, building product or paper that wasn't fit for the right kind of market at the right kind of profitability levels. We made those tough decisions, we reinvested super aggressively back into places like Mansfield, Riverdale, NORPAC, where we see a future of more appropriate paper for the marketplace, both in terms of grade and location and market, at significantly lower cost points. Frankly, I think we're going to find that NORPAC was a great acquisition in terms of a great asset, a great team in the right location at a very attractive cost point, as an example. The investments in Mansfield have paid off dramatically. We're starting to see Riverdale ramp up, knock on wood. Because we're still early in that journey.

Speaker #5: We made those tough decisions, and then we reinvested super aggressively back into places like Mansfield, Riverdale, Norpak—where we see a future of more appropriate paper for the marketplace, both in terms of grade and location and market.

Speaker #5: And significantly lower cost points. I think, frankly, I think we're going to find that Norpak was a great acquisition. In terms of grade asset, a great team in the right location, at a very attractive cost point.

Speaker #5: As an example. The investments in Mansfield have paid off dramatically. We're starting to see Riverdale ramp up. I'm knocking on wood, right? Because we're still earning early in that journey.

Speaker #5: And then to the last part of your question about investment, we've said to expect the same kind of level of investment in North America for the next two to three years.

Andy Silvernail: To the last part of your question about investment, we've said to expect the same kind of level of investment in North America for the next 2 to 3 years, you should expect that. What I'm trying to drive is the 2 key elements, 2 key pillars of our strategy. One is around an advantage cost position. We have a footprint and we have, I'll call it the bones of assets to be absolutely the low cost player in the marketplace. I fully intend to drive that relentlessly to be the low cost player, not the low price player. That's not what we're trying to do. We're trying to be in a position where we have strategic choices that others do not. We very much are trying to drive that across the business. Second, on responsiveness.

Speaker #5: And you should expect that, right? What I'm trying to drive is the two key elements, two key pillars of our strategy. One is around an advantage cost position.

Speaker #5: We have a footprint, and we have—I'll call it the bones of assets—to be absolutely the low-cost player in the marketplace. And I fully intend to drive that relentlessly.

Speaker #5: To be the low-cost player, not the low-price player—that's not what we're trying to do. We're trying to be in a position where we have strategic choices that others do not.

Speaker #5: And we very much are trying to drive that across the business. Second, on responsiveness—right? We're integrating more fully our mill and our box network.

Andy Silvernail: We're integrating more fully our mill and our box network, where we're making the right kind of paper in the right places for distribution to drive cost down and service levels up, which then drives a lower cost position within the box network and the ability to react even faster to customers. That cycle, that virtuous cycle is what we're now investing in, and that's going to require us to continue to make investments pretty aggressively over the next few years.

Speaker #5: We're building we're making the right kind of paper and the right places or distribution to drive cost down and service levels up. Which then drives a lower cost position within the box network.

Speaker #5: And the ability to react even faster to customers. And so, that cycle, right? That virtuous cycle is what we're now investing in. And that's going to require us to continue to make investments pretty aggressively over the next few years.

Phil Ng: That's super insightful, Andy, looking forward to these investments hopefully coming to fruition, contributing nice to next year.

Speaker #6: That's super insightful, Andy. And looking forward to these investments, hopefully, coming to fruition contributing nicely next year.

Speaker #5: Thank you.

Andy Silvernail: Thank you.

Speaker #7: Your next question comes from the line of Gabe Heddy with Wells Fargo Securities. Please go ahead.

Operator: Your next question comes from the line of Gabe Hajde with Wells Fargo Securities. Please go ahead.

Speaker #8: Andy Lance, good morning. Thanks for taking the question. I wanted to ask about the spin. And as you kind of put all the infrastructure in place for that to be a standalone entity, would you say that there are still other options that could be pursued or evaluated as part of that process?

Gabe Hajde: Andy, Lance. Good morning. Thanks for taking the question.

Andy Silvernail: Morning.

Gabe Hajde: I wanted to ask about the spin, and as you kind of put all the infrastructure in place for that to be a standalone entity, would you say that there are still other options that could be pursued or evaluated as part of that process?

Speaker #5: Yeah. Look, we're working diligently to focus on the spin. That's our priority: to drive the spin. We have a clear path to doing that.

Andy Silvernail: Yeah, look, we're working diligently to focus on the spin. That's our priority, is to drive the spin. We have a clear path to doing that. We're on track to that. All of our efforts are focused on that. I don't see a reason why we won't hit the timelines that we've outlined. In terms of alternatives, we've said all along that at the end of the day, we have to do the right thing for our shareholders. If someone shows up and has an appropriate interest and they are the right kind of partner, we have to listen to that. We certainly would with the right kind of proposition. Look, at the end of the day, it's about our fiduciary duty and our responsibility to our shareholders and to drive the most value, and that's what we're going to focus on.

Speaker #5: We're on track to that. All of our efforts are focused on that. And I don't see a reason why we won't hit the timelines that we've outlined.

Speaker #5: In terms of alternatives, we've said all along that at the end of the day, right, we have to do the right thing for our shareholders.

Speaker #5: And if someone shows up and has an appropriate interest and they are the right kind of partner, we have to listen to that. And we certainly would with the right kind of proposition.

Speaker #5: And so look, at the end of the day, it's about our fiduciary duty and our responsibility to our shareholders. And to drive the most value.

Speaker #5: And that's what we're going to focus on.

Speaker #8: Thank you. I want to take one more stab, I guess, at Georges' and, I think, Mark's question. If we dial back to kind of pre-D.

Gabe Hajde: Thank you. I want to take one more stab, I guess, at George's and I think Mark's question. If we dial back to pre DS Smith, and I'm simple, so I'm going to stick with, I think, $1.2 billion of cost saves and $800 million of commercial opportunity in what was kind of PS North America.

Speaker #8: S. Smith's, and I'm simple, so I'm going to stick with, I think, $1.2 billion of cost saves and $800 million of commercial opportunity in what was kind of P.S.

Speaker #8: North America. You guys, I think, acquired maybe 100 million dollars or so of EBITDA in there. But take out the report card. Have you actioned everything on the cost side to get you to that 1.2 billion?

Gabe Hajde: You guys, I think, acquired maybe $100 million or so of EBITDA in there. Take out the report card, have you actioned everything on the cost side to get you to that $1.2 billion? On an exit rate or what you've accomplished thus far in 2025, 2026, where would you say you are at on the $1.2 billion? On a commercial side, any help there? I think we can do some of our own math, I appreciate that-

Speaker #8: And on an exit rate, or what you've accomplished thus far, in 25, 26, where would you say you are at on the 1.2 billion?

Speaker #8: And then on the commercial side, any health there? I mean, I think we can do some of our own math, but I appreciate that.

Andy Silvernail: Yeah

Speaker #8: Demand is probably 3 to 4 percent less than what you would have anticipated in March. Yep.

Gabe Hajde: demand is probably 3% to 4% less than what you would have anticipated-

Andy Silvernail: Yeah

Gabe Hajde: in March. Yep.

Speaker #5: Yeah. So, first of all, I think I applaud the fact that you have triangulated appropriately on it. The fact that your attention to detail, and really understanding that, that's a really good thing here.

Andy Silvernail: Yeah. First of all, I applaud the fact that you have triangulated appropriately on it, that the fact that your attention to detail and really understanding that's a really good thing here. I think, in terms of, there are a few things that have shifted since that original goal. What I mean by that is, just how the world has shifted. That's really around demand is lower and inflation is significantly higher. If you just look at those two pieces of it. We've been squeezed. You're right, it's actually probably more like 4% to 5% if you look at the difference between expectation and actual.

Speaker #5: I think, in terms of that, there are a few things that have shifted since that original goal. And what I mean by that is just how the world has shifted.

Speaker #5: And that's really around demand being lower, right? And inflation is significantly higher, right? If you just kind of look at those two pieces of it.

Speaker #5: So we've been squeezed. You're right. It's actually probably more like 4 to 5 percent if you look at the difference between expectation and actual.

Speaker #8: Yeah. What we were assuming.

Gabe Hajde: Yeah, what we were seeing. Yep.

Speaker #5: Right. If you look at that, it's probably 4 or 5 percent. And I'd have to go back and add up the difference in inflation compared to our expectation.

Andy Silvernail: If you look at that, it's probably 4% or 5%. I'd have to go back and add up the difference in inflation compared to our expectation. If you think about it on a year-on-year basis, we're looking at about $200 million of internal inflation, not including input inflation. Right? Obviously, the internal we've dealt with incredibly well. The external, that muddies between that input inflation and then what happens on the commercial side, and you understand that really well. That said, as context, let's go the cost side first, and let's come back to the commercial.

Speaker #5: But if you kind of think of it on a year-and-year-out basis, we're looking at about 200 million dollars of internal inflation, not including input inflation, right?

Speaker #5: Obviously, the internal we've dealt with incredibly well. The external kind of muddies between that input inflation and then what happens on the commercial side.

Speaker #5: And you understand that really well. That said, as context, let's go to the cost side first and then come back to the commercial. So on the commercial, if you look at what you'd expect, that's going to flow through—the actions that will flow through—into next year.

Andy Silvernail: On the commercial, if you look at what you'd expect that's going to flow through the actions, that will flow through into next year, in North America, it's in the range of $350 to $400 million that is carryover cost out of all the things that we've done that are being finalized, that roll over. If you just do the math on that's about what that is. In Europe, it's more like a couple hundred million dollars, like $200 to $250 million that's incremental. You've got about half of that $1.2 billion that we talked about before that will be finalized, it's flowed through. To be clear, almost all of that is actioned. Europe still has a few things. They're going to do more as the year goes on, but you're not talking about three quarters of it having to be actioned.

Speaker #5: In North America, it's in the range of $350 to $400 million—that is carryover cost out of all the things that we've done, that are being finalized, that roll over, right?

Speaker #5: So that if you just kind of do the math on that, that's about what that is. In Europe, it's more like a couple hundred million dollars, right?

Speaker #5: 2 to 250 million dollars. It's incremental. So you've got about half of that 1.2 billion that we talked about before that will be finalized is flowed through.

Speaker #5: To be clear, almost all of that is actioned, right? Europe still has a few things. I mean, they're going to do more as the year goes on.

Speaker #5: But you're not talking about three-quarters of it having to be actioned. You're talking about a quarter of it having to be actioned. The rest of it has been actioned and is working its way through the system.

Andy Silvernail: You're talking about a quarter of it having to be actioned. The rest of it has been actioned and is working its way through the system. What I would say, the negative to that is where we have gotten it wrong is the cost to execute has been higher than we expected to some degree, but not outside the realm of pretty darn good execution. It's taken a little bit longer than we had expected, a little bit more expensive. If you actually look at the dollars, we've gotten them. There's no doubt about it. On the commercial side, what I would say is the commercial has been far more than we expected. It's a much larger number than if you went back two years ago than we expected, but it's been eaten up by the inflation.

Speaker #5: What I would say that the negative to that is where we have gotten it wrong is the cost to execute has been higher than we expected by to some degree.

Speaker #5: But not outside the realm of a pretty darn good execution. So it's taken a little bit longer. And then we had expected a little bit more expensive.

Speaker #5: But if you actually look at the dollars, we've gotten them. There's no doubt about it. On the commercial side, right, what I would say is the commercial has been far more than we expected.

Speaker #5: Right? So it's a much larger number than if you went back two years ago than we expected. But it's been eaten up by the inflation.

Speaker #5: Right? And so when it's all said and done, when you put all this together and you kind of look at the 2027 and again, we got to be really careful.

Andy Silvernail: When it's all said and done, when you put all this together and you look at the 2027, and again, we got to be really careful about how we talk about it, but we're going to be right in the range of what we said two years ago. That we're going to be right there. If you back out GCF being sold and you look at the split between North America and Europe, we're going to deliver pretty darn near exactly what we said we were going to do two years ago. It's been a lot of bumps along the way, and the path has not been straight, but I can't tell you how happy I am and how proud I am of people grabbing onto it, dealing with this incredible uncertainty, and putting this company in a position to win.

Speaker #5: About how we talk about it. But we're going to be right in the range of what we said two years ago. Right? We're going to be right there.

Speaker #5: If you kind of back out, kind of GCF being sold, and you look at the split between North America and Europe, we're going to deliver pretty darn near exactly what we said we were going to do two years ago.

Speaker #5: And so, it's been a lot of bumps along the way, and the path has not been straight. But I can't tell you how happy I am and how proud I am of people grabbing onto it, dealing with this incredible uncertainty, and putting this company in a position to win.

Speaker #8: Right. Thank you for that. I mean, I don't think anyone, as you pointed out, had tariffs or a Middle East conflict in the.

Gabe Hajde: Thank you for that. I don't think anyone, as you pointed out, had tariffs or a Middle East conflict in the bingo.

Andy Silvernail: It was not on our bingo card, no. It was not.

Speaker #5: It was not on our bingo cards. No, it was not.

Speaker #8: I'll hop back in. Thank you.

Gabe Hajde: I'll hop back in. Thank you.

Speaker #5: Thanks.

Andy Silvernail: Thanks.

Speaker #2: Your next question comes from the line of Mike Roxlin with ahead.

Operator: Your next question comes from the line of Mike Roczen with Truist Securities. Please go ahead.

Speaker #8: Thank you, Andy Lance, Mandy, for taking my questions and congrats on all the progress.

Mike Roczen: Thank you, Andy, Lance, and Mandi, for taking my questions, and congrats on all the progress.

Mike Roxland: Thank you, Andy, Lance, and Mandi, for taking my questions, and congrats on all the progress.

Speaker #5: Good morning, Mike.

Andy Silvernail: Good morning, Mike.

Speaker #8: Yeah. In terms of volumes, just a quick question there. You mentioned that your North American volumes are up about 1.7% on a per-day basis.

Mike Roczen: Yeah. In terms of volumes, just a quick question there. You mentioned that your North American volumes are up about 1.7% on a per day basis. I think last quarter, you were guiding them to be up around 3%. What actually occurred during the quarter, and what changed relative to your initial expectations? Can you also provide just some more color on how shipments are trending thus far in July, given you also mentioned some headwinds from the West Coast fruit and vegetable market?

Mike Roxland: Yeah. In terms of volumes, just a quick question there. You mentioned that your North American volumes are up about 1.7% on a per day basis. I think last quarter, you were guiding them to be up around 3%. What actually occurred during the quarter, and what changed relative to your initial expectations? Can you also provide just some more color on how shipments are trending thus far in July, given you also mentioned some headwinds from the West Coast fruit and vegetable market?

Speaker #8: I think last quarter, you were guiding them to be up around 3 percent. What changed with respect to the curve, or actually, what occurred during the quarter and what changed relative to your initial expectations?

Speaker #8: And can you also provide just some more color on how shipments are trending thus far in July given you also mentioned some headwinds from the West Coast of food and vegetable market?

Speaker #5: Yeah. I'll cover the first question. I think the confusion there was we're up 1.7 percent. I think the 3 percent was what we thought we'd be in terms of versus the market.

Lance Loeffler: Yeah, I'll cover the first question. I think the confusion there was we're up 1.7%. I think the 3% was what we thought we'd be in terms of versus the market.

Speaker #5: Yeah, so it was the difference there. I think that's where you're getting the 3%. Because nothing's changed from our expectations in terms of where we're following.

Andy Silvernail: Yeah.

Lance Loeffler: It's the difference there, and I think that's where you're getting the 3%. Nothing's changed from our expectations in terms of where we're following.

Speaker #5: I think we're right. We're right kind of where we thought we would be. That's exactly right. I don't know, Andy, if you want to add more color.

Andy Silvernail: Yeah.

Lance Loeffler: I think we're right where we thought we would be.

Andy Silvernail: That's exactly right.

Lance Loeffler: I don't know, Andy, if you want to add more color.

Speaker #5: Yeah, I'm sorry. Mike, could you clarify the second part of that question?

Andy Silvernail: Yeah. I'm sorry, can you clarify that, Mike, the second part of that question?

Speaker #8: Oh, sure. Yeah. Just I wanted to get this. Just yeah. Any color you can have in terms of how your shipments are trending in July.

Mike Roczen: Oh, sure, yeah. Just any color you can have in terms of how you.

Mike Roxland: Oh, sure, yeah. Just any color you can have in terms of how you.

Mike Roczen: Sure

Mike Roxland: Sure

Mike Roczen: share much of trending in July.

Mike Roxland: share much of trending in July.

Speaker #5: Yeah, so I would say outside our fruit and vegetable, it's pretty much in line with where it's been, which is softer than we had expected, right?

Andy Silvernail: Yeah. Outside of fruit and vegetable, it is pretty much in line with where it has been, which is softer than we had expected, right? Not outside of the bands. I do expect to have some headwind in fruit and vegetable on the West Coast in the month of July. We will have to see. I do not know if people may have seen the Taco Bell announcements this morning. They are starting to see a return to growth and whatnot. That will work itself through. I do expect there to be some volume headwinds in Q3 from it. The exact number is really hard to put your arms around just because it was really noisy for a couple of weeks.

Speaker #5: But not outside of the bands. I do expect to have some headwind in fruit and vegetable on the West Coast in the month of July.

Speaker #5: We'll have to see I don't know if people may have seen the Taco Bell announcements this morning. They expect they're starting to see a return to growth and whatnot.

Speaker #5: And so, that will work itself through. I do expect there to be some volume headwinds in the third quarter from it. The exact number is really hard to put your arms around, just because it was really noisy for a couple of weeks.

Speaker #5: You can see the noise is starting to die down. But let's find out kind of where it is and if consumers are moving back kind of well, I'll call it just a normal consumption which historically with these things has happened after a short period of time.

Andy Silvernail: You can see the noise is starting to die down, but let us find out where it is and if consumers are moving back, what I will call just a normal consumption, which historically with these things has happened after a short period of time, but we will see where that goes.

Speaker #5: But we'll see where that goes.

Speaker #8: Got it. I have one quick follow-up, just on price. Lance, I think you mentioned a more favorable price in Q2 due to faster realization of previously announced price increases.

Mike Roczen: Got it. Then just one quick follow-up just on price. Lance, I think you mentioned more favorable price in Q2 due to faster realization of previously announced price increases. What does that relate to? Have you reworked contracts that is allowing you to now recapture price at a faster pace than you have historically? Just any color as to why you are able to capture price faster than history. I would appreciate the color. Thank you.

Mike Roxland: Got it. Then just one quick follow-up just on price. Lance, I think you mentioned more favorable price in Q2 due to faster realization of previously announced price increases. What does that relate to? Have you reworked contracts that is allowing you to now recapture price at a faster pace than you have historically? Just any color as to why you are able to capture price faster than history. I would appreciate the color. Thank you.

Speaker #8: What does that relate to? I mean, have you reworked contracts that is allowing you now to recapture price at a faster pace than you have historically?

Speaker #8: Just any color as to why you're able to capture price faster than history would appreciate the color. Thank you.

Speaker #5: Yeah. Look, I think it's just a factor of how we work through this. We try to make some assumptions on a three-year forward I mean, excuse me, a three-month forward look.

Lance Loeffler: Yeah, look, I think it is just a factor of how we work through this. It is on a contract-by-contract basis. We try to make some assumptions on a three-month forward look, 90-day forward look. We have effectively just outperformed in the way that we are executing those contracts.

Andy Silvernail: Yeah, look, I think it is just a factor of how we work through this. It is on a contract-by-contract basis. We try to make some assumptions on a three-month forward look, 90-day forward look. We have effectively just outperformed in the way that we are executing those contracts.

Speaker #5: 90-day forward look. But we effectively just sort of outperformed in the way that we're executing those contracts.

Andy Silvernail: I think part of this is just tied to the fact that we put a lot of work into building our commercial team, right? If you look at the work we've done in terms of people and process, it's not something we've talked a lot about on these calls, but it's where we have retooled a very large percentage of our field force. We've changed incentives, and we have invested in their tools. I think it allows them just to move a little bit faster into the marketplace.

Speaker #7: And I think part of this is just tied to the fact that we put a lot of work into building our commercial team, right?

Speaker #7: So if you look at the work we've done in terms of people and process, it's not something we've talked a lot about on these calls.

Speaker #7: But it's where we have retooled a very large percentage of our field force we've changed incentives. And we have invested in their tools. And so I think it allows them just to move a little bit faster into the marketplace.

Speaker #8: Got it. Thank you.

Mike Roczen: Got it. Thank you.

Mike Roxland: Got it. Thank you.

Speaker #2: We have time for one more question. And that question comes from the line of Anthony Pittinari with City. Please go ahead.

Operator: We have time for one more question, and that question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari: Good morning.

Speaker #8: Good morning.

Speaker #5: Good morning.

Andy Silvernail: Good morning.

Speaker #8: Just following up on the pay—just following up on the last question. Assuming the price increase is realized in the publication in September, would the hike be fully realized exiting Q1? I’m trying to figure out how much you would see in calendar ’26 versus calendar ’27.

Anthony Pettinari: Hey, just following up on the last question. Assuming the price increase is realized in the publication in September, would the hike be fully realized exiting Q1 2027? I'm just trying to figure out how much you would see in calendar 2026 versus calendar 2027.

Speaker #5: I don't think you'd see.

Andy Silvernail: I don't think you'd see.

Anthony Pettinari: Understanding the. Yeah.

Speaker #8: Yeah.

Speaker #5: Yeah. Regardless of what happens to the pub, you pick your number, right? Just the way it flows, you're not likely to see much in '26.

Andy Silvernail: Yeah, regardless of what happens to the pulp, you pick your number, right? Just the way it flows, you're not likely to see much in 2026. It's really a 2027.

Speaker #5: It's really a '27. It's really '27.

Lance Loeffler: 2027, yeah.

Andy Silvernail: It's really 2027.

Speaker #8: Got it. Got it. And it would be fully realized exiting one Q, two Q? I don't know how you think about the lag, but.

Anthony Pettinari: Got it. It would be fully realized exiting Q1, Q2? I don't know how you think about the lag.

Speaker #5: You'd probably one, two Q, somewhere. Right in there. Yeah. It's going to be between there. But I mean, it's not going to look a lot different than what you've seen historically.

Andy Silvernail: You'd probably-

Lance Loeffler: One, Q2, somewhere in there.

Andy Silvernail: Right in there. Yeah. It's going to be between there, but it's not going to look a lot different than what you've seen historically. We can't imagine it'd be like that. It's pretty systematic.

Speaker #5: We can't imagine it'd be like that. It's pretty systematic.

Speaker #8: Got it. Got it. And then one last quick one. And I'm sorry if I missed this, but if I think about the assumptions underlying the full-year guide, on the cost side, so I guess OCC, diesel, at the midpoint, are the assumptions that those remain at current levels, or two Q, quarter-end end levels, or you're baking in some inflation?

Anthony Pettinari: Got it. One last quick one, and I'm sorry if I missed this, but if I think about the assumptions underlying the full year guide on the cost side, so I guess OCC diesel at the midpoint, are the assumptions that those remain at current levels or Q2 quarter end levels? Are you baking in some inflation? Just wondering the kind of cost assumptions underlying-

Speaker #8: Just wondering the kind of cost assumptions underlying.

Speaker #5: Yeah, yeah. So we're assuming some cost increase as you get into the latter half of the year around OCC. But really, our diesel cost, like I said earlier, is really—the assumption that we're driving there is just today's strip.

Lance Loeffler: Yeah

Anthony Pettinari: this view.

Lance Loeffler: Yeah. We're assuming some cost increase as you get into the latter half of the year around OCC. Really our diesel cost, like I said earlier, the assumption that we're driving there is just today's strip.

Anthony Pettinari: this view.

Speaker #8: Okay. That's very helpful. I'll turn it over.

Anthony Pettinari: Okay. That's very helpful. I'll turn it over.

Speaker #5: Yeah, thank you, guys, very much. Just a few closing comments. So first, just some notes of thanks. I want to thank the European team. They have just carried an incredible load working through Project DIAMOND.

Andy Silvernail: Yeah. Thank you guys very much. Just a few closing comments. First, just some notes of thanks. I want to thank the European team. They have just carried an incredible load working through Project Diamond and the corporate team that's focused in on doing that, right? That's our name for it internally, on working on the spin. For anyone who's been involved in those kinds of things, you're doing your day job, and then you've got to do that job. It's an incredible amount of work, and they're doing a terrific job around that. Secondarily, Lance mentioned this in his comments, if you look at what the Q2 was in terms of workload for the containerboard team, for the mill system, in terms of Riverdale and the amount of outages, what they executed, that's no small feat, right?

Speaker #5: And the corporate team that's focused in on doing that, right? So that's our name for it internally. On working on the spin. And for anyone who's been involved in those kinds of things, you're doing your day job, and then you've got to do that job.

Speaker #5: And it's an incredible amount of work, and they're doing a terrific job around that. Secondarily, Lance mentioned this in his comments, but if you look at what the second quarter was in terms of workload for the container board team, for the mill system, in terms of Riverdale and the amount of outages, what they executed, that's no small feat.

Speaker #5: Right? In moments like this, you kind of move past it pretty quickly. But I really want to note the incredible work and the execution that's happened around that, while keeping a really tight focus on safety above everything else.

Andy Silvernail: In moments like this, you kind of move past it pretty quickly, but I really want to note the incredible work and the execution that's happened around that while keeping a really tight focus on safety. Safety above everything else. Just congratulations to that team. Just more broadly, right? We have gone through a lot of change at IP, and we still have more change to go through, and people have stepped up. I just want to thank everyone for that incredible work. Finally, to our investors, I appreciate your interest and your continued support in what we're building here at IP, and I thank you for that support. Everybody take care, and we'll talk to you in 90 days.

Speaker #5: And so just congratulations to that team and then just more broadly, right? We have gone through a lot of change at IP, and we still have more change to go through.

Speaker #5: And people have stepped up. And so I just want to thank everyone for that incredible work. And then finally, to our investors, I appreciate your interest and your continued support and what we're building here at IP.

Speaker #5: And I thank you for that support. So everybody, take care, and we'll talk to you in 90 days.

Operator: Once again, we'd like to thank you for participating in International Paper's Q2 2026 earnings call. You may now disconnect.

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