International Paper said it will sell its global cellulose fibers business to American Industrial Partners for $1.5 billion https://t.co/aZxW0jkNzY ...

Newly independent Global Cellulose Fibers business will be wholly focused on delivering industry-leading absorbent fluff pulp used primarily in personal care products NEW YORK, Aug. 21, 2025 /PRNewswire/ -- American Industrial Partners ("AIP"), a focused industrials investor, today announced its affiliate has signed a definitive agreement to acquire the Global Cellulose Fibers division ("GCF") of International Paper (NYSE: IP). GCF is the leading global producer of high-quality absorbent fluff pulp for a wi ...

Core Viewpoint - International Paper is undergoing significant strategic changes, including the sale of its Global Cellulose Fibers business to American Industrial Partners for $1.5 billion, aimed at enhancing its focus on sustainable packaging solutions and improving its cost position [2][3]. Group 1: Sale of Global Cellulose Fibers Business - The sale of the Global Cellulose Fibers (GCF) business is valued at $1.5 billion, with adjustments including preferred stock issuance of $190 million [2]. - The GCF business generated $2.8 billion in revenue in 2024 and employs 3,300 people across nine manufacturing facilities [3]. - The transaction is expected to close by the end of the year, pending regulatory approvals [2]. Group 2: Strategic Changes in North America - International Paper is investing $250 million to convert the 16 machine at the Riverdale mill in Selma, Alabama, to produce containerboard [6]. - The company will permanently close the Savannah containerboard mill, Savannah packaging facility, and Riceboro mills, resulting in a net reduction of approximately one million tons in annual containerboard capacity [7]. - These changes will impact around 1,100 hourly and salaried positions, with the company committed to providing severance packages and outplacement assistance [4][5]. Group 3: Management Insights - The CEO of International Paper expressed confidence in the transition of GCF to AIP, highlighting the business's alignment with strategic customers and its potential for long-term success [3]. - AIP's partner noted GCF's strong position for future growth, supported by sustainable resources and long-term customer relationships [3].

Group 1 - The decline in corrugated cardboard sales is seen as a non-traditional economic indicator, suggesting potential retail demand adjustments in the near future [1] - U.S. cardboard shipments have reached their lowest second-quarter level since 2015, with a reported 5% year-over-year decline in daily shipments from International Paper [1] - Smurfit Kappa Group reported a 4.5% drop in North American corrugated cardboard sales, the largest decline across all its operational regions [1] Group 2 - The seasonal nature of the cardboard industry allows it to reflect real-time purchasing and manufacturing activities, serving as an early warning signal for retail spending [2] - The uncertainty surrounding tariffs has led companies to hesitate in stockpiling large volumes of packaging materials, impacting packaging demand [2] - FedEx and UPS have not updated their annual guidance due to the unclear situation, with UPS noting that consumer confidence is at a near historical low [2] Group 3 - There is a lack of organic growth in consumer goods, with promotions like "buy two, get one free" indicating weak demand [3] - Low housing transaction volumes are leading to decreased purchases of large items that require packaging, such as refrigerators and sofas [3] - The surge in packaging demand during the early COVID-19 pandemic was a temporary phenomenon, and the industry continues to face challenges from high costs and outdated facilities [3] Group 4 - The closure of a factory by International Paper has significant local economic impacts, including school closures due to reduced tax revenue [4] - There is hope that a revival in U.S. manufacturing could boost local product transportation and packaging demand, but this is contingent on offsetting the effects of reduced imports [4] - The overall outlook for cardboard manufacturers remains pessimistic, with all tracked indicators pointing towards a challenging environment [4]

Company Overview - International Paper is the global leader in sustainable packaging solutions with headquarters in Memphis, Tennessee, and EMEA headquarters in London, UK [3] - The company employs over 65,000 team members and operates in more than 30 countries [3] - Net sales for 2024 were reported at $18.6 billion [3] Recent Developments - CEO Andy Silvernail will present at the Jefferies 2025 Industrials Conference on September 4, 2025, at 8:10 a.m. Eastern Daylight Time [1] - A question-and-answer session will follow the presentation [1] - Interested parties can listen to the webcast via the company's website, with a replay available approximately three hours after the presentation [2] Strategic Moves - In 2025, International Paper acquired DS Smith, enhancing its position as an industry leader in the North American and EMEA regions [3]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q2 2025 and 2024, detailing the DS Smith Plc acquisition's impact and segment reorganization [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Presents core financial statements, highlighting significant increases in net sales and total assets due to the DS Smith acquisition, alongside a net loss Condensed Consolidated Statement of Operations (Six Months Ended June 30) | Indicator (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net Sales | $12,668 | $9,353 | | Cost of products sold | $9,135 | $6,784 | | Earnings (Loss) Before Income Taxes | $(19) | $291 | | Net Earnings (Loss) | $(30) | $554 | | Diluted Earnings (Loss) Per Share | $(0.06) | $1.57 | Condensed Consolidated Balance Sheet (As of) | Indicator (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $9,499 | $6,424 | | Total Assets | $42,376 | $22,800 | | Total Current Liabilities | $7,121 | $4,258 | | Long-Term Debt | $9,694 | $5,368 | | Total Equity | $18,617 | $8,173 | Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30) | Indicator (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Cash Provided By Operations | $188 | $760 | | Cash Used For Investment Activities | $(38) | $(446) | | Cash Used For Financing Activities | $(253) | $(365) | | Change in Cash and Temporary Investments | $(35) | $(64) | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations for financial statements, covering basis of presentation changes, acquisition accounting, and the company's new three-segment reporting structure - Following the acquisition of DS Smith Plc on January 31, 2025, the company reorganized its reporting segments into: **Packaging Solutions North America**, **Packaging Solutions EMEA**, and **Global Cellulose Fibers**[21](index=21&type=chunk)[137](index=137&type=chunk) - The acquisition of DS Smith was completed on January 31, 2025, for a total purchase consideration of approximately **$9.9 billion**[42](index=42&type=chunk)[43](index=43&type=chunk) Disaggregated Revenue by Segment (Six Months Ended June 30, 2025) | Segment (In millions) | Net Sales | | :--- | :--- | | Packaging Solutions North America | $7,562 | | Packaging Solutions EMEA | $3,841 | | Global Cellulose Fibers | $1,271 | | **Total** | **$12,668** | Provisional Purchase Price Allocation for DS Smith Acquisition (In millions) | Category | Provisional Fair Value | | :--- | :--- | | Total assets acquired | $18,145 | | Total liabilities assumed | $8,236 | | **Net assets acquired** | **$9,909** | | Goodwill | $4,091 | | Intangibles | $3,998 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 financial results, highlighting a $75 million net income driven by price increases and DS Smith's operations, and provides a Q3 2025 outlook [Executive Summary and Outlook](index=34&type=section&id=Executive%20Summary%20and%20Outlook) Q2 2025 net earnings reached $75 million, improving from Q1, driven by price increases and the DS Smith acquisition, with a generally positive Q3 outlook Q2 2025 Key Earnings Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Earnings (Loss) (in millions) | $75 | $(105) | $498 | | Diluted EPS | $0.14 | $(0.24) | $1.41 | | Adjusted Operating Earnings (in millions) | $105 | $101 | $193 | - The company is pursuing strategic options for its Global Cellulose Fibers business, but there is no assurance that this process will result in a transaction[159](index=159&type=chunk) - On June 30, 2025, the company completed the required divestiture of five European corrugated box plants to Palm Group of Germany for **€125 million** as a condition of the DS Smith acquisition[50](index=50&type=chunk)[160](index=160&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Analyzes consolidated income statement and segment performance for Q2 2025, showing net sales growth to $6.77 billion driven by DS Smith, and varied segment profitability Business Segment Operating Profit (Loss) - Q2 2025 vs Q1 2025 (in millions) | Segment | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Packaging Solutions North America | $277 | $142 | | Packaging Solutions EMEA | $(1) | $46 | | Global Cellulose Fibers | $(4) | $17 | - PS North America's Q2 profit improvement was driven by higher average sales prices for boxes and seasonally higher volumes[189](index=189&type=chunk)[191](index=191&type=chunk) - PS EMEA's Q2 results were impacted by a soft demand environment, though higher sales prices provided some offset[193](index=193&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations decreased to $188 million due to DS Smith transaction costs, with full-year capital expenditures projected at $1.8-$1.9 billion, while liquidity remains adequate - Cash from operations decreased significantly to **$188 million** in the first half of 2025 from **$760 million** in H1 2024, mainly due to payments for DS Smith transaction costs (**$240 million**), severance (**$80 million**), and other items[199](index=199&type=chunk) - Full-year 2025 capital expenditures are projected to be between **$1.8 billion** and **$1.9 billion**[201](index=201&type=chunk) - The company maintains investment-grade credit ratings of **BBB (S&P)** and **Baa2 (Moody's)** and was in compliance with all debt covenants as of June 30, 2025[203](index=203&type=chunk)[204](index=204&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure since December 31, 2024, with information incorporated by reference from the Annual Report - There have been no material changes in the Company's exposure to market risk since December 31, 2024[222](index=222&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, while integrating DS Smith may lead to future internal control changes - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[223](index=223&type=chunk) - The company is currently integrating the newly acquired DS Smith business into its systems and control environment, which may result in changes to internal controls[224](index=224&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Refers to financial statement notes for details on material legal proceedings, including environmental liabilities, asbestos claims, and antitrust investigations - Material legal proceedings are detailed in Note 13 (Commitments and Contingencies) and Note 20 (Subsequent Events)[227](index=227&type=chunk) - A purported class action complaint was filed on July 29, 2025, against International Paper and other producers, alleging conspiracy to fix prices of containerboard products since November 2020[150](index=150&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the Annual Report, except for updated risks related to legal proceedings and the strategic review of the Global Cellulose Fibers business - The company faces risks from legal proceedings, including an Italian antitrust matter and a new U.S. class action lawsuit alleging price-fixing in the containerboard market[229](index=229&type=chunk)[230](index=230&type=chunk) - There are risks associated with the strategic review of the Global Cellulose Fibers business, including the possibility of no transaction occurring, diversion of management attention, and potential asset impairment charges[232](index=232&type=chunk)[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired 18,748 shares from employees for tax withholding in Q2 2025, with no public repurchases, and **$2.96 billion** remaining authorized Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 14,573 | $53.35 | | May 2025 | 3,708 | $46.96 | | June 2025 | 467 | $50.14 | | **Total** | **18,748** | **N/A** | - All shares purchased were acquired from employees for tax withholding purposes; no shares were bought back under the public repurchase program[235](index=235&type=chunk) [Other Information](index=49&type=section&id=Item%205.%20Other%20Information) Discloses significant management changes effective April 1, 2025, including new roles for Timothy S. Nicholls and the appointment of Lance T. Loeffler as CFO - Effective April 1, 2025, Timothy S. Nicholls was promoted to lead the DS Smith business in EMEA, and Lance T. Loeffler was appointed as the new Senior Vice President and Chief Financial Officer[239](index=239&type=chunk)[244](index=244&type=chunk) - New CFO Lance T. Loeffler's compensation package includes an **$850,000** base salary, a target bonus of **100%** of base salary, a one-time inducement RSU grant of **$1.7 million**, and a 2025 long-term incentive grant of **$3.5 million**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including employment agreements for key executives and Sarbanes-Oxley Act certifications - Filed exhibits include the employment offer letter for new CFO Lance T. Loeffler and certifications from the principal executive and financial officers[257](index=257&type=chunk)

Core Insights - International Paper reported Q2 2025 results, highlighting the impact of the DS Smith acquisition, with GAAP revenue reaching $6.8 billion, exceeding analyst expectations [1][2] - Non-GAAP EPS of $0.20 fell short of the $0.39 estimate, reflecting challenges from higher costs and integration expenses [1][2] - Net earnings (GAAP) dropped to $75 million from $498 million in Q2 2024, indicating an 84.9% decline [1][2] Financial Performance - Revenue (GAAP) increased by 44.7% year-over-year, from $4.7 billion in Q2 2024 to $6.8 billion in Q2 2025 [2] - Non-GAAP EPS decreased by 63.6% from $0.55 in Q2 2024 to $0.20 in Q2 2025 [2] - Free cash flow (non-GAAP) fell by 67.7% from $167 million in Q2 2024 to $54 million in Q2 2025 [2] Operational Highlights - The integration of DS Smith is now reflected in the North America and EMEA Packaging Solutions segments, with North America segment profit rising to $277 million [5] - EMEA sales reached $2.3 billion, but the segment reported a $1 million operating loss due to integration costs and subdued demand [5] - Global Cellulose Fibers segment sales declined to $628 million, resulting in a $4 million loss, attributed to downtime and higher operating expenses [6] Strategic Focus - The company is concentrating on transforming core operations through the DS Smith acquisition and a strategic 80/20 approach to enhance efficiency and reduce costs [4] - Future success hinges on effective integration of DS Smith, achieving cost savings, and leading in sustainable packaging innovations [4] Shareholder and Debt Information - Shareholders received $488 million in dividends during the first half of 2025, while long-term debt increased to $9.7 billion as of June 30, 2025 [9] - The acquisition expanded the employee base to 65,000, reflecting the scale of the transaction [9] Future Outlook - Management is optimistic about Q3, anticipating increased global revenue and earnings as integration progresses [11] - Caution is advised regarding potential softness in European markets that may limit the benefits of price increases [11] - The company aims to improve full-year EBITDA and achieve synergy and cost-out targets, with a focus on margin recovery and cost efficiencies [12]

Core Insights - International Paper Company (IP) reported second-quarter 2025 adjusted earnings of 20 cents per share, missing the Zacks Consensus Estimate of 38 cents by 47% and reflecting a 64% year-over-year decline [1][10] - Net sales for the quarter reached $6.767 billion, a 42.9% increase from the previous year, but fell short of the Zacks Consensus Estimate of $6.770 billion [2][10] Financial Performance - The cost of sales was $4.88 billion, up 45.1% from $3.36 billion in the same quarter last year, while gross profit increased 37.6% year over year to $1.89 billion, resulting in a gross margin of 27.9%, down from 29% a year ago [3] - Selling and administrative costs rose to $578 million, a 27.6% increase from $453 million in the prior-year quarter, with adjusted operating profit at $105 million, down 45.6% from $193 million in Q2 2024 [4] Segment Performance - Packaging Solutions North America reported sales of $3.86 billion, a 6.4% increase year over year, but operating profit fell 1.4% to $277 million [6] - Packaging Solutions EMEA saw sales rise to $2.29 billion from $0.35 billion due to the integration of DS Smith, but reported an operating loss of $1 million compared to a profit of $10 million in the prior year [7] - Global Cellulose Fibers experienced a 12.4% decline in sales to $628 million, resulting in an operating loss of $4 million, down from a profit of $31 million in the same quarter last year [8] Cash and Debt Position - At the end of the second quarter, cash and temporary investments totaled $1.13 billion, slightly down from $1.17 billion at the end of 2024 [9] - Long-term debt increased to $9.69 billion from $5.34 billion as of the end of 2024, with cash flow from operating activities at $188 million in the first half of 2025, compared to $760 million in the same period of 2024 [11] Stock Performance - The company's shares have increased by 19.6% over the past year, while the industry has seen a rise of 28.5% [12]

Economic Indicators - The Personal Consumption Expenditures (PCE) report for June showed results warmer than expected, with year-over-year PCE reaching +2.6%, which is 10 basis points higher than anticipated [2][5] - Personal Income increased by +0.3%, exceeding expectations by 10 basis points, while Personal Spending fell to +0.3%, down 10 basis points from expectations [3][4] - The overall PCE Index month-over-month was in line with expectations at +0.3%, following an upwardly revised +0.2% the previous month [4] Job Market - Initial Jobless Claims rose slightly to 218K, marking the first increase in seven weeks, but still significantly lower than the 250K seen in early June [7] - Continuing Claims remained stable at 1.946 million, indicating a leveling off after a period of decline [8] - The upcoming Employment Situation report for July is expected to show 100K new jobs, which is a decrease of 47K from the previous month [9] Q2 Earnings Reports - AbbVie reported Q2 earnings of $2.97 per share, surpassing projections of $2.89, with a year-to-date increase of +6.5% [10] - CVS Health exceeded earnings estimates with $1.81 per share, resulting in an earnings beat of +23.13% and a year-to-date increase of +38.8% [10] - Mastercard's earnings of $4.15 per share beat expectations by 10 cents, with a year-to-date increase of +6% [10] - Bristol Myers-Squibb had a notable earnings beat at $1.46 per share, exceeding estimates by +36.45% [11] - International Paper reported a significant earnings drop to $0.20 per share, missing expectations by -47.37% [11] - Sirius XM missed estimates with earnings of 57 cents per share, resulting in a -27.85% earnings surprise [12] Market Outlook - The Chicago Business Barometer (PMI) report is expected after the market opens, with no further scheduled announcements [13] - Anticipation surrounds upcoming earnings reports from major companies such as Apple and Amazon, with expectations of modest gains for Apple and high-single-digit growth for Amazon [14]

Financial Data and Key Metrics Changes - The second quarter revenue met expectations, with a goal of achieving $6 billion in EBITDA by 2027 [6][7] - Adjusted operating earnings per share for the second quarter was $0.20, down from $0.23 in the first quarter [27] - Free cash flow for the second quarter was $54 million, with expectations for the full year ranging from $100 million to $300 million [25][27] Business Line Data and Key Metrics Changes - In Packaging Solutions North America, on-time delivery improved from 92% to 97% [15] - Volume in Packaging Solutions North America was seasonally higher, while EMEA experienced lower volumes due to market softness [23][36] - The company expects to achieve a run rate of approximately $650 million in commercial excellence benefits by the end of the year [16][20] Market Data and Key Metrics Changes - Industry demand in North America remained stable but softer than the previous year, with expectations for stable box demand in the third quarter [11][12] - EMEA box shipments slowed by approximately 1% in the second quarter, but June showed signs of recovery [13] - The company anticipates a moderate increase in demand in the second half of the year, driven by seasonal growth in fast-moving consumer goods [14] Company Strategy and Development Direction - The company is focused on a transformational journey, deploying the "eightytwenty" strategy to drive improvements and synergies [7][8] - Strategic decisions include closing and selling facilities to reduce complexity and minimize costs [18][20] - The company aims to build a pure play packaging business, emphasizing stability and predictability [67] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing mill reliability issues, attributing them to years of underinvestment and emphasizing the need for consistent capital reinvestment [48][90] - The outlook for North America is positive, with expectations of closing the gap to industry standards by the fourth quarter [12][56] - In Europe, the company is experiencing variability due to market conditions, but remains committed to achieving its EBITDA targets [66][68] Other Important Information - The company has proposed to close five UK plants, which is expected to yield approximately $25 million in savings [19] - The strategic review of the global Southern Fibers business is ongoing, with no changes to the expected timeline [22] Q&A Session Summary Question: Concerns about mill reliability issues - Management acknowledged that mill reliability issues have been building for years due to underinvestment and emphasized the need for consistent capital reinvestment [48][49] Question: Outlook for North America and EMEA - Management expressed confidence in North America, citing improvements in commercial operations and the potential for growth, while acknowledging the challenges in Europe due to market conditions [56][62] Question: July box volumes and customer inventories - Management indicated that the market remains relatively flat, with cautious customer behavior and no significant evidence of restocking anticipated [72][74] Question: Opportunities for accelerating reinvestment in mills - Management stated that while there is a focus on mill reliability, the ability to accelerate reinvestment is constrained by the need to prioritize strategic assets [90][92] Question: Update on exiting non-strategic export markets - Management confirmed progress in exiting non-strategic export markets, emphasizing that not all export is detrimental [94]