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International Paper benefits from strong demand in Q3

The fiber-based packaging provider expects seasonal demand for corrugated packaging to remain strong into the fourth quarter of this year.

October 27, 2021

International Paper (IP), a Memphis, Tennessee-based global producer of fiber-based packaging, pulp and paper products, reports that strong corrugated packaging demand helped to boost its earnings in the third quarter of the year.

According to IP’s third-quarter earnings report, the company achieved third-quarter earnings of $864 million, or $2.20 per diluted share, compared with $432 million, or $1.09 per diluted share, in the second quarter of the year and $204 million, or 52 cents per diluted share, in the third quarter of 2020. The company says its third-quarter net earnings include a net after-tax gain of $350 million, or 89 cents per diluted share, on the sale of IP’s mill in Kwidzyn, Poland.

“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,” says Mark Sutton, chairman and CEO of International Paper. “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.

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

IP reports that its Industrial Packaging segment operating profits hit $429 million in the third quarter of the year compared with $408 million in the second quarter of the year. In North America, IP reports that earnings increased due to higher sales prices for corrugated boxes and containerboard as well as lower planned maintenance outage expenses. The company says these benefits were partially offset by higher wood fiber, recovered fiber and energy costs.

According to IP’s third-quarter earnings report, the company replenished containerboard inventories in the latter part of the third quarter, but the company adds, supply chains remain stretched with constraints limiting the company’s ability to capture the full opportunity of the strong demand environment. In Europe, IP says earnings were lower, reflecting seasonally lower volumes primarily in Morocco as well as lower average sales margins driven by higher containerboard costs and higher recovered fiber and energy costs.

The company’s Printing Papers segment achieved operating profits of $106 million in the third quarter compared with $76 million in the second quarter of the year. In North America, IP says 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 in this segment, despite only having about one month of the Kwidzyn, Poland, mill results. The company completed the sale of its Kwidzyn mill Aug. 6 as well as the spinoff of its global papers business into a stand-alone, publicly traded company named Sylvamo Corp. Oct. 1.