International Paper(IP) - 2025 Q2 - Quarterly Results

Financial Highlights & Outlook International Paper reported Q2 2025 net earnings of $75 million ($0.14/share) and adjusted operating earnings of $105 million ($0.20/share) on net sales of $6.8 billion, with stronger Q3 global revenue and earnings anticipated Q2 2025 Key Financial Results | Metric | Value | | :--- | :--- | | Net Sales | $6.8 billion | | Net Earnings | $75 million | | Net EPS (Diluted) | $0.14 | | Adjusted Operating Earnings (Non-GAAP) | $105 million | | Adjusted Operating EPS (Non-GAAP) | $0.20 | - CEO Andy Silvernail highlighted that Q2 results reflect a full quarter with the combined DS Smith business, with commercial efforts driving revenue and seasonally higher volumes in North America, though margins were impacted by cost headwinds and maintenance outages[3] - The company expects stronger global revenue and earnings in Q3 2025, citing confirmed strategic wins, progress on cost-out initiatives, and fewer planned maintenance outages[3] EPS Comparison (Q2 2025 vs. Q1 2025 vs. Q2 2024) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Earnings (Loss) Per Share | $0.14 | $(0.24) | $1.41 | | Adjusted Operating Earnings Per Share | $0.20 | $0.23 | $0.55 | Select Financial Measures Comparison (in millions) | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | Net Sales | $6,767 | $5,901 | $4,734 | | Net Earnings (Loss) | $75 | $(105) | $498 | | Adjusted Operating Earnings | $105 | $101 | $193 | | Free Cash Flow | $54 | $(618) | $167 | Segment Performance Post-DS Smith acquisition, new segments Packaging Solutions North America, EMEA, and Global Cellulose Fibers show North America's operating profit nearly doubled to $277 million, while EMEA and Global Cellulose Fibers reported losses due to demand and cost pressures - The company has reorganized its reporting segments following the DS Smith acquisition, effective January 31, 2025, with new segments including Packaging Solutions North America, Packaging Solutions EMEA, and Global Cellulose Fibers[8] Business Segment Operating Profit (Loss) (in millions) | Segment | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | Packaging Solutions North America | $277 | $142 | $281 | | Packaging Solutions EMEA | $(1) | $46 | $10 | | Global Cellulose Fibers | $(4) | $17 | $31 | Packaging Solutions North America (PS NA) PS NA operating profit increased to $277 million in Q2 2025 from $142 million in Q1 2025, driven by higher sales prices and volumes, partially offset by increased manufacturing costs and overhead expenses - PS NA operating profit was $277 million in Q2 2025, a significant increase from $142 million in Q1 2025[11] - Performance was driven by higher sales prices for boxes and containerboard and seasonally higher box volumes[11] - Depreciation was lower due to the non-repeat of a $193 million accelerated depreciation charge from Q1 related to a mill closure[13] Packaging Solutions EMEA (PS EMEA) The PS EMEA segment reported an operating loss of $(1) million in Q2 2025, a sharp decline from a $46 million profit, despite increased net sales to $1.9 billion due to the DS Smith acquisition, impacted by soft demand, higher energy costs, and increased depreciation and amortization - PS EMEA reported an operating loss of $(1) million in Q2 2025 compared to a $46 million profit in Q1 2025[14] - Net sales increased to $1.9 billion from $1.2 billion in Q1, reflecting three months of DS Smith results versus two months in the prior quarter[14] - Profitability was negatively impacted by a soft demand environment, higher energy and maintenance costs, and a significant increase in depreciation and amortization from the DS Smith acquisition accounting[14] Global Cellulose Fibers The Global Cellulose Fibers segment posted an operating loss of $(4) million in Q2 2025, down from a $17 million profit, primarily due to lower sales volumes offsetting higher prices, and increased planned outage and operating costs - Global Cellulose Fibers reported an operating loss of $(4) million in Q2 2025, compared to a $17 million profit in Q1 2025[15] - Net sales were lower as higher average sales prices were more than offset by lower volumes[15] - Costs were higher due to planned outages and increased operating expenses[15] Effects of Net Special Items The company recorded a net after-tax charge from special items of $34 million ($0.06 per share) in Q2 2025, significantly lower than Q1 2025, including DS Smith combination costs, severance, and a gain on European box plant sales Net Special Items Summary (After Tax, in millions) | Item | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | :--- | | DS Smith combination costs | $29 | $183 | $17 | | Severance and other costs | $34 | $63 | — | | Net (gain) on sale of business | $(40) | — | — | | Total special items, net | $34 | $204 | $(297) | - A gain of $51 million (pre-tax) was recognized from the sale of five European box plants to satisfy regulatory commitments for the DS Smith combination[17] Financial Statements Unaudited financial statements reflect significant changes due to the DS Smith acquisition, with a net loss of $30 million on $12.7 billion net sales for H1 2025, substantial balance sheet expansion, and decreased cash from operations Consolidated Statement of Operations For Q2 2025, International Paper reported Net Sales of $6.8 billion and Net Earnings of $75 million, compared to Q2 2024's $4.7 billion sales and $498 million earnings, with 2025 results impacted by DS Smith combination costs Consolidated Statement of Operations Highlights (in millions) | Line Item | Q2 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | | Net Sales | $6,767 | $4,734 | | Cost of products sold | $4,876 | $3,360 | | Earnings Before Income Taxes | $116 | $206 | | Net Earnings (Loss) | $75 | $498 | Consolidated Balance Sheet As of June 30, 2025, the balance sheet expanded significantly due to the DS Smith acquisition, with Total Assets growing to $42.4 billion from $22.8 billion, driven by increases in Goodwill, Intangibles, and PP&E, and Long-Term Debt rising to $9.7 billion Balance Sheet Comparison (in millions) | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $9,499 | $6,424 | | Goodwill | $7,531 | $3,038 | | Intangibles, Net | $4,406 | $145 | | Total Assets | $42,376 | $22,800 | | Long-Term Debt | $9,694 | $5,368 | | Total Equity | $18,617 | $8,173 | Consolidated Statement of Cash Flows For H1 2025, cash provided by operating activities was $188 million, down from $760 million in H1 2024, with investing activities using $38 million and financing activities using $253 million, primarily for dividends Six-Month Cash Flow Summary (in millions) | Activity | H1 2025 (in millions) | H1 2024 (in millions) | | :--- | :--- | :--- | | Cash Provided By Operating Activities | $188 | $760 | | Cash Provided By (Used For) Investment Activities | $(38) | $(446) | | Cash Provided By (Used for) Financing Activities | $(253) | $(365) | | Change in Cash | $(35) | $(64) | Non-GAAP Reconciliations The company provides reconciliations for non-GAAP measures like Adjusted Operating Earnings and Free Cash Flow to their GAAP equivalents, aiding investors in assessing operational performance - Management uses non-GAAP measures like Adjusted Operating Earnings and Free Cash Flow to focus on ongoing operations and believes they are useful for investors in assessing performance and comparing results[29][37] Reconciliation of Net Earnings to Adjusted Operating Earnings For Q2 2025, GAAP Net Earnings of $75 million are reconciled to non-GAAP Adjusted Operating Earnings of $105 million by adding back net special items and accounting for non-operating pension income Q2 2025 Reconciliation of Net Earnings to Adjusted Operating Earnings (in millions) | Line Item | Q2 2025 (in millions) | | :--- | :--- | | Net Earnings (Loss) | $75 | | Add back: Non-operating pension expense (income) | $(5) | | Add back: Net special items expense (income) | $35 | | Income taxes - Non-operating pension and special items | $— | | Adjusted Operating Earnings | $105 | Reconciliation of Cash Provided by Operations to Free Cash Flow In Q2 2025, cash from operating activities of $476 million, after subtracting $422 million for capital expenditures, resulted in Free Cash Flow of $54 million, a decrease from Q2 2024 Free Cash Flow Reconciliation (in millions) | Line Item | Q2 2025 (in millions) | Q2 2024 (in millions) | | :--- | :--- | :--- | | Cash Provided By (Used For) Operating Activities | $476 | $365 | | Capital expenditures | $(422) | $(198) | | Free Cash Flow | $54 | $167 |