PresentationGeorge StaphosBofA Securities, Research Division Our next guest is presenting today. We have Andy Silvernail, Chief Executive Officer of International Paper. It's been kind of an interesting time last couple of weeks. What have you Andy. Also in the audience is Lance Loeffler, Chief Financial Officer of the company. He's been with the company since 2025 and also from the Investor Relations effort, Michele Vargas and Mandi Gilliland, who heads up Investor Relations. So welcome, everybody. Thanks ...

International Paper (NYSE:IP) 2026 Conference February 26, 2026 08:15 AM ET Company ParticipantsAndy Silvernail - CEOModeratorOur next guest is presenting today. We have Andy Silvernail, Chief Executive Officer of International Paper. It's been kind of an interesting time last couple of weeks. What do you say, Andy?Andy SilvernailYeah.ModeratorYeah, also in the audience is Lance Loeffler, Chief Financial Officer of the company. He's been with the company since 2025, and also from the investor relations effo ...

DS Smith, an International Paper company, and a leading global supplier of fibre-based and sustainable packaging solutions, announces the first results of its partnership with Apilab, a world leader in bee biomonitoring.Launched in 2025, the scientific partnership is transforming bees into environmental sentinels at thirteen packaging facilities across France. The bees provide early warning signs of changes in their ecosystem.Apilab: innovation is key to biodiversity.Apilab has developed a unique methodolog ...

Core Viewpoint - International Paper plans to split its business into two independent, publicly traded companies, focusing on distinct regional operations [1][2][5] Group 1: Business Structure - The North American operations will retain the International Paper name and will include assets from both International Paper and DS Smith [1][2] - The EMEA packaging businesses will be spun off into a separate entity, combining assets across 30 countries [2][3] Group 2: Management and Leadership - Andy Silvernail will continue as chairman and CEO of International Paper, while Tim Nicholls will become CEO of the new EMEA-based company [2][3] - David Robbie is expected to serve as chairman of the board for the new entity [3] Group 3: Strategic Goals - The split aims to allow each company to operate with its own management structure and investment approach, enhancing focus on regional opportunities [2][5] - The transaction is expected to be a spin-off, with International Paper retaining a "meaningful" shareholding in the new company [3][4] Group 4: Market Position and Future Plans - The new company plans to seek listings on both the London Stock Exchange and the New York Stock Exchange [4] - Completion of the separation is targeted within 12-15 months, pending regulatory approvals [4]

Financial Data and Key Metrics Changes - The company achieved approximately 37% year-over-year adjusted EBITDA growth in 2025, with adjusted EBITDA for North America at $560 million for the fourth quarter of 2025 [28][34] - Full year 2025 net sales for the standalone IP business exceeded $15 billion, with approximately $2.3 billion of adjusted EBITDA expected to accelerate rapidly over the next 24 months [17][21] - The company expanded adjusted EBITDA margin by 230 basis points in 2025, despite facing $958 million of accelerated depreciation due to footprint optimization and higher depreciation related to the DS Smith acquisition [29][30] Business Line Data and Key Metrics Changes - North America saw significant progress with a run rate cost benefit of approximately $510 million, including $110 million related to footprint optimization in 2025 [28][29] - EMEA's standalone business is projected to have full year 2025 net sales of approximately $8.5 billion and adjusted EBITDA of around $800 million, with ongoing transformation expected to yield benefits in 2026 [21][24] Market Data and Key Metrics Changes - North America is characterized by a high degree of supply integration and steady demand growth, while EMEA has more localized dynamics with relatively higher demand growth [12][13] - The market remains soft but broadly stable in EMEA, with continued pressure on board pricing [43] Company Strategy and Development Direction - The company plans to create two publicly traded, scaled, regional packaging solution leaders in North America and EMEA, aiming to maximize long-term value for shareholders [6][11] - The 80/20 performance system will continue to guide the company's operations, focusing on simplifying, segmenting, resourcing, and growing to drive sustainable value creation [8][15] - The separation will allow each business to tailor its strategies to meet distinct customer expectations and regional opportunities [11][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory for 2026, projecting enterprise net sales of $24.1 billion to $24.9 billion and adjusted EBITDA of $3.5 billion to $3.7 billion [47] - The company anticipates that the separation will enhance each business's ability to make organic and inorganic investments, further improving cost positions and customer experiences [22][24] Other Important Information - The company plans to invest approximately $400 million in EMEA throughout 2026 to support ongoing transformation and 80/20 implementation [28] - The separation is expected to be completed within 12-15 months, with the transaction structured as a spin-off of the EMEA Packaging business to shareholders [26][27] Q&A Session Summary Question: Can you provide assumptions behind the Free Cash Flow guidance of $300 million-$500 million? - The company confirmed that price is not included in the guidance and has issued a price letter to customers [51][52] Question: Will the spin-off provide an opportunity to review the dividend policy? - The company will maintain its current dividend policy through 2026 and will evaluate it in conjunction with shareholders post-spin [56][57] Question: Why is the separation process expected to take 12-15 months? - The timeline is due to the accounting complexities involved, although the company aims to expedite the process [68][70] Question: How confident is the company in achieving the projected growth in the second half of 2026? - Management expressed confidence based on actions already taken and the expected accumulation of benefits from ongoing initiatives [74][76] Question: What is the relative profitability of new volume wins compared to lost business? - The company indicated that new volume wins have been at quality levels consistent with market pricing discipline, contributing to expanding margins [86][88]

Financial Data and Key Metrics Changes - The company achieved approximately 37% year-over-year adjusted EBITDA growth in 2025, with adjusted EBITDA margin expanding by 230 basis points [28][29] - Full year 2025 net sales for the North American business exceeded $15 billion, with adjusted EBITDA of approximately $2.3 billion [17] - The EMEA Packaging business reported full year 2025 net sales of approximately $8.5 billion and adjusted EBITDA of around $800 million [21] Business Line Data and Key Metrics Changes - North America experienced significant progress with a run rate cost benefit of approximately $510 million, including $110 million related to footprint optimization in 2025 [28][29] - EMEA implemented 20 site closures affecting about 1,400 roles, with ongoing discussions for an additional 7 sites impacting 700 roles, expected to deliver run rate cost savings of over $160 million [44][45] Market Data and Key Metrics Changes - North America is characterized by a high degree of supply integration and steady demand growth, while EMEA has more localized dynamics with relatively higher demand growth [12][13] - The company expects to outperform the industry growth in North America by approximately 2% in 2026, with the market anticipated to grow flat to up 1% [36][104] Company Strategy and Development Direction - The company plans to create two publicly traded, scaled regional packaging solution leaders in North America and EMEA, enhancing focus on distinct regional opportunities [6][11] - The 80/20 performance system will continue to guide the company's operations, focusing on simplifying, segmenting, resourcing, and growing to maximize long-term value for shareholders [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory for 2026, projecting enterprise net sales of $24.1 billion to $24.9 billion and adjusted EBITDA of $3.5 billion to $3.7 billion [47] - The company anticipates that the separation will enable both businesses to accelerate progress toward maximizing long-term profitable growth through greater speed, agility, and differentiation [11][49] Other Important Information - The separation of the EMEA Packaging business is expected to be completed within the next 12-15 months, with plans for the company to be listed on both the London and New York Stock Exchanges [26] - The company plans to invest approximately $400 million in EMEA throughout 2026 to fund ongoing transformation and 80/20 implementation [28] Q&A Session Summary Question: Can you provide assumptions behind the Free Cash Flow guidance of $300 million-$500 million? - The company confirmed that price is not included in the guidance and has issued a price letter to customers [51][52] Question: Will the spin-off provide an opportunity to review the dividend policy? - Management stated that the current dividend policy will be maintained through 2026, with a review process in conjunction with shareholders post-spin [56][57] Question: Why is the separation process expected to take 12-15 months? - The company explained that the timeline is due to the accounting complexities involved, although they aim to expedite the process [68][70] Question: How confident is the company in achieving the projected second half performance in 2026? - Management expressed confidence based on actions already taken and the expected accumulation of benefits from ongoing initiatives [74][76] Question: Can you discuss the relative profitability of new volume wins versus lost business? - Management indicated that the new volume wins in North America are of high quality and have been achieved without chasing bad business, maintaining pricing discipline [86][88]

Financial Data and Key Metrics Changes - In 2025, the company achieved approximately 37% year-over-year adjusted EBITDA growth in North America, with adjusted EBITDA for the fourth quarter reaching $560 million [23][26] - The full year 2025 net sales for the standalone International Paper are projected to exceed $15 billion, with approximately $2.3 billion of adjusted EBITDA expected to accelerate rapidly over the next 24 months [14] - The company expanded adjusted EBITDA margin by 230 basis points in 2025, despite facing $958 million in accelerated depreciation due to footprint optimization and higher depreciation related to the DS Smith acquisition [25] Business Line Data and Key Metrics Changes - North America saw significant progress with a $510 million run rate cost benefit achieved through the 80/20 plan, while EMEA is in the early stages of transformation with 20 site closures impacting approximately 1,400 roles [23][24] - The standalone EMEA Packaging business is projected to have full year 2025 net sales of approximately $8.5 billion and adjusted EBITDA of around $800 million [17] Market Data and Key Metrics Changes - North America is characterized by a high degree of supply integration and steady demand growth, while EMEA has more localized dynamics with relatively higher demand growth [11] - The company expects to outperform the industry in both regions, with North America projected to grow 3-4 percentage points above the underlying market [23][41] Company Strategy and Development Direction - The company plans to create two publicly traded, scaled regional packaging solution leaders in North America and EMEA, aiming to maximize long-term value for shareholders [5][10] - The 80/20 performance system will continue to guide the company's operations, focusing on simplifying, segmenting, resourcing, and growing to drive sustainable value creation [6][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory for 2026, projecting enterprise net sales of $24.1 billion to $24.9 billion and adjusted EBITDA of $3.5 billion to $3.7 billion [41] - The company anticipates that the separation will enable both businesses to accelerate progress toward maximizing long-term profitable growth through greater speed, agility, and differentiation [10][43] Other Important Information - The separation of the EMEA Packaging business is expected to be completed within 12-15 months, with plans for the new company to be listed on both the London and New York Stock Exchanges [20] - The company plans to invest approximately $400 million in EMEA throughout 2026 to fund ongoing transformation and 80/20 implementation [22] Q&A Session Summary Question: Can you provide details on the Free Cash Flow guidance? - The Free Cash Flow guidance of $300 million to $500 million does not include price impacts, and a price letter has been sent to customers [46][47] Question: How should we think about corporate costs relative to the guidance? - The guidance includes corporate costs, and there will not be a significant overall increase in corporate costs post-separation [58][61] Question: Why is the separation process expected to take 12-15 months? - The timeline is due to the accounting complexities involved in the separation, which is primarily an accounting exercise [64][66] Question: What confidence does the company have in achieving the second half targets for 2026? - The company has confidence due to actions already taken and the expectation that costs will normalize, leading to improved performance [70][72] Question: Can you discuss the relative profitability of new wins versus lost business? - The company has maintained pricing discipline and is confident that the new volume wins are of high quality and profitability [81][83]

Core Viewpoint - International Paper plans to create two independent, publicly traded companies focused on sustainable packaging solutions in North America and EMEA, aiming to enhance value creation and operational efficiency [1][3][8]. Group 1: Company Strategy and Structure - The separation will result in two distinct companies: one for North America and another for EMEA, each with tailored management and investment strategies [1][3]. - International Paper's North American business will focus on sustainable packaging solutions, leveraging both legacy IP and DS Smith assets to serve various industries [4][5]. - EMEA Packaging will operate as a standalone entity, emphasizing innovative customer solutions and sustainability, while reallocating resources for enhanced service [8][11]. Group 2: Financial and Operational Goals - The separation is expected to strengthen International Paper's position in North America, allowing for targeted capital allocation and improved operational focus [4][6]. - Following the separation, International Paper aims to accelerate investments in organic growth, productivity, and strategic acquisitions while maintaining a strong balance sheet [6][11]. - EMEA Packaging will continue to execute its 80/20 roadmap to optimize costs and drive innovation, with a focus on meeting evolving market demands [9][10]. Group 3: Leadership and Governance - Andy Silvernail will remain as Chairman and CEO of International Paper, while Tim Nicholls will lead the new EMEA Packaging company [7][12]. - The new EMEA company will have a robust investment-grade balance sheet and a dividend policy to support operational delivery and investment flexibility [11]. Group 4: Transaction Details - The separation is expected to be structured as a spin-off, with International Paper retaining a meaningful ownership stake in the new EMEA company [13]. - The completion of the separation is anticipated within 12-15 months, subject to customary conditions and approvals [14].

Core Insights - International Paper reported a significant loss from continuing operations of $2.84 billion for the full year 2025, which includes $0.63 billion in restructuring charges, $0.96 billion in non-cash accelerated depreciation, and a $2.47 billion pre-tax non-cash goodwill impairment charge [1][3] - The company plans to create two independent public companies focused on packaging solutions in North America and EMEA, aiming to enhance operational efficiency and financial performance [1][2] Financial Performance - Full-Year 2025 Financial Summary: - Net Sales: $23.634 billion, up from $15.835 billion in 2024 - Loss from Continuing Operations: $2.84 billion compared to a profit of $725 million in 2024 - Adjusted EBITDA: $2.976 billion, up from $1.636 billion in 2024 [1][5] - Fourth Quarter 2025 Financial Summary: - Net Sales: $6.006 billion, compared to $3.922 billion in Q4 2024 - Loss from Continuing Operations: $2.363 billion, down from a profit of $88 million in Q4 2024 - Adjusted EBITDA: $758 million, compared to $443 million in Q4 2024 [1][5] Segment Information - The company operates through two segments: Packaging Solutions North America (PS NA) and Packaging Solutions EMEA (PS EMEA) - PS NA reported net sales of $15.175 billion for the full year 2025, while PS EMEA reported $8.451 billion [2][3] - PS NA's operating profit for Q4 2025 was $319 million, while PS EMEA reported a loss of $223 million [2][3] Strategic Initiatives - The company is executing a profitable growth strategy, focusing resources on areas with the highest potential for success, resulting in a 37% year-over-year adjusted EBITDA improvement in North America [1][2] - The separation into two independent companies is expected to be completed within 12-15 months, contingent on customary conditions [2][3] Impairment Charges - A significant non-cash goodwill impairment charge of $2.47 billion was recorded for the PS EMEA segment as of December 31, 2025 [3][6] - The company also reported net special items in Q4 2025 amounting to a net after-tax charge of $2.32 billion, compared to $53 million in Q4 2024 [3][6] Future Outlook - For 2026, the company anticipates adjusted EBITDA of $3.5 billion to $3.7 billion, with a first-quarter target of $740 million to $760 million [1][2] - The targets are based on above-industry growth but do not account for future price realization [1][2]

Core Insights - International Paper plans to split into two independent, publicly traded companies based on geography, following the acquisition of DS Smith in January 2025 [4][6] - The North American business will retain legacy assets from both International Paper and DS Smith, while the EMEA business will encompass legacy assets from both companies in that region [6] - The spinoff is expected to be completed within 12 to 15 months, pending necessary board and regulatory approvals in the U.S. and U.K. [6] Financial Performance - International Paper reported $15.2 billion in sales for its North American business and $8.5 billion for its EMEA business in 2025 [4] - The company experienced an overall loss of $2.84 billion for the year [4] Leadership Changes - Andy Silvernail will continue as CEO of International Paper, while Tim Nicholls will serve as CEO of the new publicly traded EMEA packaging company [5] - The leadership team will remain in their current positions, including CFO Lance Loeffler and President of Packaging Solutions North America Tom Hamic [5] Strategic Goals - The separation aims to optimize the company's footprint, reduce costs, and enhance innovation leadership, with expected benefits starting in 2026 [6] - The new company is anticipated to have enhanced capabilities for both organic and inorganic investments [6]