IP quarterly revenue down slightly year over year

International Paper (IP) has reported a year-over-year decline in revenue and net income in its first quarter results released April 25, but CEO Mark Sutton says market trends continue to improve and that the company is “well-positioned for its next chapter” as Andy Silvernail assumes the role of CEO on May 1 upon Sutton’s retirement.

“I am confident that his leadership experience and proven track record, paired with the industry expertise of our senior leadership team, will amplify the company’s success going forward,” Sutton says of Silvernail in a statement accompanying IP’s first quarter earnings report.

IP earned $4.62 billion in net sales in the first quarter of 2024, down 8 percent from the $5.02 billion earned in the first quarter of 2023 but essentially flat from the previous quarter. The company’s net income is down considerably this quarter, however, coming in at $56 million compared with $172 million in the first quarter of 2023.

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A winter freeze in January cost IP approximately $38 million while a fire at its box plant in Ixtac, Mexico, cost about $14 million, impacting earnings for the quarter.

“Our first quarter earnings were generally in line with our outlook and represent a trough based on seasonally low volumes, higher OCC [old corrugated containers] costs and the majority impact on the 2023 sales price index declines,” IP Senior Vice President and Chief Financial Officer Timothy Nicholls said during an earnings call April 25.

“Operations and costs were unfavorable by $0.13 per share sequentially. This included approximately $0.07 per share from the January winter freeze and Ixtac box plant fire. The remainder was primarily due to cost inflation, including higher cost of employee benefits. The unfavorable impact of operating costs from seasonally lower volumes was also offset by cost savings from our mill closure and machine shutdowns last year.”

Net sales and operating profit also are down year over year in IP’s industrial packaging and global cellulose fibers business segments, however, the company continued to take less economic downtime across its containerboard system as it has since the third quarter of 2022.

In its industrial packaging segment, net sales were $3.81 billion in the first quarter of 2024 compared with $4.1 billion in the first quarter of 2023, while operating profit was $216 million this quarter compared with $322 million in last year’s first quarter.

First quarter net sales in IP’s global cellulose fibers business were $704 million compared with $811 million last year, and the segment’s operating profit saw a $47 million loss compared with a $16 million loss in the first quarter of 2023.

In terms of downtime, IP has taken significant economic downtime across its containerboard system in every quarter since the third quarter of 2022. The situation peaked in the second quarter of 2023 when IP took 622,000 tons worth of downtime, but in the first quarter of 2024, IP took 132,000 tons of economic downtime—the first time it has been below 200,000 tons since 2022.

Notably, IP’s containerboard sales volume is up year over year. The company sold 739,000 short tons of containerboard in the first quarter of 2024 compared with 544,000 short tons in the first quarter of 2023, and Sutton said during the April 25 earnings call that IP will continue to make investments to strengthen its packaging business.

“We’re encouraged to see positive market momentum as we continue to see signs of demand recovery,” he said.

“Although we expect to trail the industry for the next few quarters when measuring unit volume growth, we fully expect the volume impacts to be temporary as we continue to transition toward our target mix of customers and invest in the business to maximize profitability,” Nicholls added.

“We believe industry box demand will grow approximately 2 percent to 3 percent in 2024. We understand the critical role corrugated packaging plays in bringing essential products to consumers and we believe that IP is well-positioned to grow with our customers over the long term.”

IP’s full earnings report and presentation can be found here.