International Paper Reports Full-Year and Fourth Quarter 2020 Results

International Paper reported full-year and fourth quarter 2020 financial results.

Full-Year and Fourth Quarter 2020 Highlights

– Full-year and fourth quarter net earnings (loss) attributable to International Paper of $482 million ($1.22 per diluted share) and $153 million ($0.39 per diluted share), respectively, compared with $1.2 billion ($3.07 per diluted share) for full-year 2019, $204 million ($0.52 per diluted share) in the third quarter of 2020 and $165 million ($0.42 per diluted share) in the fourth quarter of 2019

– Full-year and fourth quarter adjusted operating earnings* (non-GAAP) of $1.1 billion ($2.80 per diluted share) and $296 million ($0.75 per diluted share), respectively, compared with $1.8 billion ($4.43 per diluted share) for full-year 2019, $280 million ($0.71 per diluted share) in the third quarter of 2020 and $430 million ($1.09 per diluted share) in the fourth quarter of 2019

– Fourth quarter cash provided by operations of $789 million, bringing full-year 2020 to $3.1 billion compared with $3.6 billion for full-year 2019. Full-year 2020 free cash flow (non-GAAP) of $2.3 billion, compared with $2.3 billion for the full-year 2019

– Fourth quarter debt reduction of $611 million, bringing full-year 2020 to $1.7 billion

“Our performance while navigating through the impacts of the pandemic in 2020 reaffirms my admiration and appreciation for our employees and their on-going commitment to take care of each other and our customers,” said Mark Sutton, Chairman and Chief Executive Officer. “Above all, the health and safety of our employees remains our most important responsibility.”

Sutton added, “In terms of results, International Paper delivered solid earnings and outstanding cash generation in the fourth quarter and full-year 2020. Our performance demonstrates the strength and resilience of our employees, our diverse customer base and our world-class manufacturing and supply chain capabilities. In 2020, we returned $800 million to shareholders and reduced debt by $1.7 billion to enhance our financial strength, while continuing to strengthen our packaging business through targeted investments. As we enter 2021, we anticipate continued strong demand for corrugated packaging and pulp and are poised to grow earnings, as we take actions to build a better IP and accelerate value creation for our customers and shareholders.”

Segment Information

Industrial Packaging operating profits (losses) in the fourth quarter of 2020 were $431 million compared with $469 million in the third quarter of 2020. In North America, earnings decreased as higher sales volumes for boxes and lower planned maintenance outage expenses were more than offset by increased operating, distribution and input costs. In Europe, earnings increased driven by higher sales volumes, reflecting seasonality in Morocco and continued COVID-19 pandemic related demand recovery in all regions. Average sales margins increased, primarily driven by continued improvement in Turkey. Operating costs were higher.

Global Cellulose Fibers operating profits (losses) in the fourth quarter of 2020 were $(114) million compared with $(59) million in the third quarter of 2020. The fourth quarter was impacted by seasonally higher operating costs and higher planned maintenance outage expenses, partially offset by lower economic downtime. Average sales prices were lower. Operating costs were negatively impacted by the non-repeat of favorable one-time items in the third quarter of 2020.

Printing Papers operating profits (losses) in the fourth quarter of 2020 were $80 million compared with $63 million in the third quarter of 2020. In North America, earnings decreased driven by seasonally higher operating costs and higher input costs, partially offset by lower economic downtime and higher sales volumes reflecting continued improvement from the negative demand impact of the COVID-19 pandemic. Average sales margins were slightly lower, reflecting an unfavorable mix. Planned maintenance outage expenses were lower. In Brazil, earnings increased due to higher sales volumes and lower economic downtime reflecting seasonality and continued recovery from the negative demand impacts of the COVID-19 pandemic. Average sales margins improved driven by a favorable geographic mix. In Europe and Russia, earnings improved driven by higher sales volumes, lower economic downtime and lower planned maintenance outage expenses, partially offset by higher operating costs.

Equity Method Investments

Ilim joint venture equity earnings (loss) were $53 million in the fourth quarter of 2020 compared with $(33) million in the third quarter of 2020. Operationally, earnings improved driven by higher export sales prices for softwood pulp and containerboard. Sales volumes increased, reflecting higher production volumes compared with the third quarter of 2020 which was impacted by maintenance outages. The Company recognized a non-cash after-tax foreign exchange gain of $22 million in the fourth quarter of 2020 ($0.05 per diluted share), compared with a loss of $55 million in the third quarter of 2020 ($0.14 per diluted share), primarily due to Ilim’s U.S. dollar denominated net debt.

Graphic Packaging equity earnings on our 15.0% ownership position were $11 million in both the fourth and third quarters of 2020.

Corporate Expenses

Corporate expenses (income) were $(16) million for the fourth quarter of 2020, compared with $(20) million in the third quarter of 2020.

Effective Tax Rate

The reported effective tax rate for the fourth quarter of 2020 was 28%, compared to a 2020 third quarter effective tax rate of 18%. The reported effective tax rate in the fourth quarter is higher due to tax expense related to a non-deductible impairment of our EMEA Packaging business in Turkey, which is offset by a tax benefit related to the closure of the 2013-2014 IRS audit. The reported effective tax rate in the third quarter reflects tax benefits recognized after the finalization of the 2019 U.S. Federal income tax return. The tax benefits recorded in the third quarter are primarily related to increased U.S. research and development tax credits and lower than estimated U.S. income taxes on foreign earnings.

Excluding net special items and non-operating pension expense, the operational effective tax rate for the fourth quarter of 2020 was 26%, compared with 19% for the third quarter of 2020. The operational effective tax rate is lower in the third quarter as a result of tax benefits recognized after the finalization of the 2019 U.S. Federal income tax return. The tax benefits recorded in the third quarter are primarily related to increased U.S. research and development tax credits and lower than estimated U.S. income taxes on foreign earnings.

For the full fourth quarter results, click here.

About International Paper

International Paper (NYSE: IP) is a leading global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa and Russia. We produce corrugated packaging products that protect and promote goods, and enable world-wide commerce; pulp for diapers, tissue and other personal hygiene products that promote health and wellness; and papers that facilitate education and communication. We are headquartered in Memphis, Tenn., employ approximately 48,000 colleagues and serve more than 25,000 customers in 150 countries. Net sales for 2020 were $21 billion. For more information about International Paper, our products and global citizenship efforts, please visit internationalpaper.com.

Source: International Paper Company