International Paper Reports Third Quarter 2023 Results
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International Paper (NYSE: IP) today reported third quarter 2023 financial results.
THIRD QUARTER 2023 HIGHLIGHTS
• Net earnings of $165 million ($0.47 per diluted share); Adjusted operating earnings (non-GAAP) of $224 million ($0.64 per diluted share)
• $75 million of earnings achieved from Building a Better IP initiatives, bringing year-to-date to $195 million, exceeding full-year targets
• Cash provided by operations of $468 million, bringing year-to-date to $1.3 billion
• Returned $160 million to shareholders in dividends, bringing year-to-date to $679 million in share repurchases and dividends
• Completed the sale of our Ilim Joint Venture interest for $508 million
"Our third quarter results came in as expected, and we are encouraged by continuing demand recovery across our portfolio," said Mark Sutton, Chairman and Chief Executive Officer. "We exceeded our full-year target for Building a Better IP through commercial and process improvement initiatives. Our operations continue to perform reliably with a focus on controlling costs. However, in this challenging macro environment, we are not satisfied with our absolute results. We are taking actions to structurally reduce fixed costs in our mill system, while optimizing our supply chain and investing in our box capabilities to grow with customers."
SEGMENT INFORMATION
Industrial Packaging operating profits (losses) in the third quarter of 2023 were $325 million compared with $304 million in the second quarter of 2023. In North America, earnings improved despite lower sales prices for containerboard and corrugated boxes and an unfavorable geographic mix. The earnings improvement was driven by higher sales volumes for containerboard, lower planned outage costs and favorable adjustments related to employee benefit costs. Economic downtime was lower, improving mill operating costs. Input costs increased, primarily for energy, freight and recovered fiber. In EMEA, earnings were lower, driven by seasonally lower volumes, an unfavorable product mix and lower containerboard sales prices.
Global Cellulose Fibers operating profits (losses) in the third quarter of 2023 were $27 million compared with $30 million in the second quarter of 2023. Earnings were slightly lower as lower pulp pricing was mostly offset by lower distribution, input and operating costs, including favorable adjustments related to employee benefit costs. Sales volumes improved as seasonality was more than offset by an improving market environment.
EQUITY METHOD INVESTMENT - ILIM JOINT VENTURE
The Company completed the sale of its investment in the prior Ilim joint venture in the third quarter of 2023 for proceeds of $508 million ($472 million net of transaction costs). All current period and historical results have been adjusted to reflect Ilim as a discontinued operation.
CORPORATE EXPENSES
Corporate expenses, net was expense of $20 million for the third quarter of 2023 compared with expense of $8 million in the second quarter of 2023.
EFFECTIVE TAX RATE
The reported effective tax rate for the third quarter of 2023 was 17%, compared to 13% in the second quarter of 2023. The lower tax rate in the second quarter reflects a tax benefit related to the closure of the 2015-2016 IRS audit.
The operational effective tax rate was 18% for the third quarter of 2023 compared to 22% in the second quarter of 2023. The lower operational effective tax rate in the third quarter was primarily due to increased U.S. research and development tax credits and lower than estimated U.S. income taxes on foreign earnings.
The operational effective tax rate is a non-GAAP financial measure and is calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items and non-operating pension expense (income). Management believes that this presentation provides useful information to investors by providing a meaningful comparison of the income tax rate between past and present periods.
EFFECTS OF SPECIAL ITEMS
Net special items in the third quarter of 2023 amount to a net after-tax charge of $22 million ($0.06 per diluted share) compared with a benefit of $27 million ($0.08 per diluted share) in the second quarter of 2023 and a benefit of $551 million ($1.53 per diluted share) in the third quarter of 2022.
