International Paper (IP, Financial) is a global leader in the paper and packaging industry with manufacturing operations in the North America, Europe, Latin America, Russia, Asia and North Africa. International Paper, a Fortune 500 company and global leader in paper and packaging products, is known for its commitment to the environment and to the communities it serves.
Its businesses include industrial and consumer packaging along with uncoated papers and pulp. Headquartered in Memphis, Tenn., the company employs approximately 58,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2014 were $24 billion.
International Paper produces top-quality coated and uncoated paperboard used by others in a wide variety of packaging and commercial printing applications. End uses for paperboard include packaging for food and beverages, pharmaceuticals, cosmetics, candy, food items, tobacco products and juice and milk cartons.
Looking at the numbers
Quarterly net sales were $5.7 billion during the second quarter of 2015 (which was $5.5 billion $5.9 billion during the prior year quarter).
Business segment operating profits before special items during the second quarter of 2015 were $663 million, (which was $686 million during the prior year quarter).
Free cash flow was $511 million during the second quarter. Cash from operations was $115 million.
Industrial Packaging operating profits during the second quarter of 2015 were $528 million.
Printing Papers operating profits were $101 million in the second quarter of 2015.
Consumer Packaging operating profits were $34 million ($47 million including special items) in the second quarter of 2015.
International Paper recorded Ilim joint venture equity earnings of $67 million in the second quarter of 2015.
Net corporate expenses, excluding non-operating pension expense, during the second quarter of 2015 were $8 million.
The effective tax rate before special items and non-operating pension expense for the second quarter of 2015 was 33%.
Special items in the second quarter of 2015 included a net pre-tax loss of $194 million ($125 million after taxes) for Restructuring and other charges. $23 million for the tax impact of the 2015 cash pension contribution of $750 million and a tax expense of $5 million for other items.
Dividend
The company recently declared a regular quarterly dividend of $1.00 per share for the period from July 1 to Sept. 30, inclusive, on the cumulative $4.00 preferred stock of the company. This dividend is also payable on Sept. 15 to holders of record at the close of business on Aug. 14.
(Source: Company’s Website)
Strong attributes of the second quarter
- Strong earnings and cashflows.
- North American Industrial Packaging business performed very well on seasonally higher sales and increased margins.
- Operations around the globe ran well.
Focus at the moment
- Continued strong cost savings
- Free cash flow productivity
- Product innovation
- Improvement in top-line growth
- Operating profit margin expansion
- Sales growth
Being in the news
IP again has been named by FORTUNE magazine as one of "America's Most Admired Companies." This is International Paper's 12th time in the last 13 years to make the list. It has been recognized as one of 2015's World's Most Ethical Companies by the Ethisphere Institute, an independent centre of research that promotes best practices in corporate ethics and governance. The World's Most Ethical Companies designation recognizes those organizations that have had a material impact on the way business is conducted by fostering a culture of ethics and transparency at every level of the company. This is the ninth straight year that International Paper has been honored with this award, which recognizes organizations that continue to raise the bar on ethical leadership and corporate behavior.
It recently announced plans to invest $135 million to expand fluff pulp production at its Riegelwood, N.C., Mill. The investment will convert the mill to 100% fluff and softwood pulp production, adding an incremental 400,000 tons of capacity, with ongoing flexibility to shift between the two products. When the conversion is complete, the company will have the capability to produce up to 1.4 million tons annually of high-quality fluff. The new fluff pulp capacity is expected to ramp up mid-year 2016.
In North America, IP broke ground on a 250,000-square-foot expansion of its foodservice plant in Kenton, Ohio, and expects it to be operational in mid-2015. The expansion supports customers’ organic growth in response to increasing consumer demand for renewable fiber-based packaging.
On a concluding note
2014 was a successful year for International Paper as it generated $2.1 billion of free cash flow, record cash from operations and record earnings from industrial packaging business. It completed the successful spin-off of xpedx business (International Paper's distribution solutions business), from which it received more than $400 million in cash payments. Its foodservice business and Ilim joint venture (in October 2007, International Paper and Ilim [ILIM] Holding formed a 50:50 joint-venture, Ilim Group, which is the largest foreign-domestic alliance in the Russian forest sector)Ă‚ each generated record revenue, and our global papers business also posted much-improved revenue year over year.
It is one of the most successful companies in the paper industry. The company is committed to deliver strong results and remain focused on long-term value creation for the shareholders. Its transformation over the past decade has positioned IP well to compete successfully in global packaging, paper and pulp markets. It is continually adapting itself to the changing world economy. The company is now in a position to fully optimize the system in alignment with its strategy to selectively grow industrial packaging business globally in attractive markets. This company is a buy.
