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International Paper Reports Third Quarter 2021 Results

General News
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International Paper reported third quarter 2021 financial results.

Third Quarter 2021 Highlights

-Third quarter net earnings (loss) attributable to International Paper of $864 million ($2.20 per diluted share), compared with $432 million ($1.09 per diluted share) in the second quarter of 2021 and $204 million ($0.52 per diluted share) in the third quarter of 2020. Third quarter 2021 net earnings include a net after-tax gain of $350 million ($0.89 per diluted share) on the sale of our Kwidzyn, Poland mill.

-Third quarter adjusted operating earnings* (non-GAAP) of $532 million ($1.35 per diluted share) compared with $421 million ($1.06 per diluted share) in the second quarter of 2021 and $280 million ($0.71 per diluted share) in the third quarter of 2020

-Third quarter cash provided by operations of $645 million and year-to-date of $1.9 billion compared with $2.3 billion year-to-date in the same period of 2020. Third quarter 2021 cash generation also includes pre-tax sources of $737 million (net of cash divested) related to the sale of the Kwidzyn, Poland mill and $630 million related to the unwind of timber monetization notes.

-Ilim equity earnings of $95 million, bringing year-to-date to $245 million

-Debt reduction of $235 million, bringing year-to-date to $1.1 billion

-Share repurchases of $212 million, bringing year-to-date to $398 million

“In the third quarter, International Paper grew revenue, earnings and margins despite significant input cost and supply chain challenges, and continued to generate strong cash from operations,” said Mark Sutton, Chairman and Chief Executive Officer. “Widespread supply chain constraints impacted our ability to capture the full opportunity that comes with the strong level of demand we’re seeing. Input costs also rose far more than we anticipated and we expect this inflationary environment to continue for the foreseeable future.”

Sutton added, “Looking ahead, we expect strong seasonal demand for corrugated packaging in the fourth quarter, with additional margin expansion from previous price increases.”

Industrial Packaging operating profits (losses) in the third quarter of 2021 were $429 million compared with $408 million in the second quarter of 2021. In North America, earnings increased driven by higher sales prices for corrugated boxes and containerboard and lower planned maintenance outage expenses. These benefits were partially offset by substantially higher wood fiber, recovered fiber and energy costs. We replenished containerboard inventories in the latter part of the third quarter, however, supply chains remain stretched with these constraints limiting our ability to capture the full opportunity that comes with the strong demand environment. In Europe, earnings were lower reflecting seasonally lower volumes primarily in Morocco, and lower average sales margins driven by higher containerboard costs, as well as higher recovered fiber and energy costs.

Global Cellulose Fibers operating profits (losses) in the third quarter of 2021 were $96 million compared with $10 million in the second quarter of 2021. Earnings improved significantly driven by higher average sales prices, lower operating costs and lower planned maintenance outage expenses. These benefits were partially offset by higher distribution costs, reflecting the challenging export supply chain environment, and higher costs for wood, chemicals and energy.

Printing Papers operating profits (losses) in the third quarter of 2021 were $106 million compared with $76 million in the second quarter of 2021. In North America, higher average sales prices and lower planned maintenance outage expenses were partially offset by higher input costs. In Brazil, earnings were stable as higher average sales prices and an improved geographic mix were mostly offset by higher planned maintenance outage expenses and input costs. In Europe and Russia, earnings were stable, despite only having approximately one month of the Kwidzyn, Poland mill results. Higher average sales prices, higher sales volumes and lower planned maintenance outage expenses were offset by higher operating and input costs. We successfully completed the sale of our Kwidzyn, Poland mill on August 6, 2021 and the spin-off of our global papers business into a standalone, publicly traded company named Sylvamo Corporation on October 1, 2021.

Equity Method Investments

Ilim joint venture equity earnings (loss) were $95 million in the third quarter of 2021 compared with $101 million in the second quarter of 2021. Operationally, earnings were slightly lower as higher export and domestic sales prices for softwood pulp, hardwood pulp and containerboard were more than offset by higher maintenance outage expenses and lower sales volumes related to scheduled maintenance.

Corporate Expenses

Corporate expenses were $12 million for the third quarter of 2021, compared with $7 million in the second quarter of 2021.

Effective Tax Rate

The reported effective tax rate for the third quarter of 2021 was 16%, compared to a 2021 second quarter reported effective tax rate of 24%. The tax rate in the third quarter was lower primarily as a result of tax benefits recognized after the finalization of the 2020 U.S. Federal income tax return, and the impact of lower tax expense associated with the sale of our Kwidzyn, Poland mill. As a result of the sale of the Kwidzyn, Poland mill, the Company incurred approximately $10 million of tax expense in relation to the net $360 million gain.

Excluding special items and non-operating pension expense, the operational effective tax rate for the third quarter of 2021 was 18%, compared with 21% for the second quarter of 2021. The lower operational effective tax rate in the third quarter was primarily due to discrete tax benefits recognized after the finalization of the 2020 U.S. Federal income tax return, including increased U.S. research and development tax credits and lower than estimated U.S. income taxes on foreign earnings.

For the complete press release, click here.

About International Paper

International Paper (NYSE: IP) is a leading global producer of renewable fiber-based packaging and pulp products with manufacturing operations in North America, Latin America, North Africa and Europe. We produce packaging products that protect and promote goods, and enable worldwide commerce, and pulp for diapers, tissue and other personal hygiene products that promote health and wellness. We are headquartered in Memphis, Tenn. and employ approximately 38,000 colleagues. Net sales for 2020 were $21 billion*. In Russia, the company has a 50/50 joint venture, Ilim Group, the country’s largest integrated manufacturer of pulp and paper and its largest foreign-domestic alliance in the forestry products sector. For more information about International Paper, our products and global citizenship efforts, please visit internationalpaper.com.

Source: International Paper Company