IP earnings dip for Industrial Packaging business unit in Q1

International Paper (IP), a Memphis, Tennessee-based packaging producer based, reports a solid financial performance in the first quarter of its fiscal year despite some challenges in the macroeconomic environment.

According to IP’s first-quarter earnings report, the company achieved first-quarter net earnings of $172 million, or 49 cents per diluted share, as well as first-quarter adjusted operating earnings of $185 million, or 53 cents per diluted share.

During the company’s first-quarter earnings call April 27, Tim Nicholls, senior vice president and chief financial officer at IP, said the company experienced overall higher costs for recovered fiber, energy, chemicals and distribution in the first quarter of the year, and expects those higher costs to continue in the second quarter of the year.

RELATED: Box demand, output plummets

IP reports its Industrial Packaging business unit achieved operating profits of $322 million in the first quarter of the year compared with $416 million in the fourth quarter of 2022. Earnings decreased sequentially as lower input costs, primarily for recovered fiber and energy, were offset by lower revenue and higher planned maintenance outage expenses.

The company adds that revenue for this business unit decreased sequentially due to lower sales prices for corrugated boxes and containerboard, which IP says was offset by some additional volume benefit from having four additional shipping days in the quarter.

The company’s U.S. box shipments are down 8.5 percent year over year.

On the company’s earnings call, Nicholls said volume was flat for the Industrial Packaging business in the first quarter. “We lost 145,000 tons of containerboard production due to a winter storm," he said. "Although our mills and box plants recovered quickly, the storm did impact sales in the quarter. We had nearly 30 box plants in Texas, Louisiana and Mississippi affected by the storm, which impacted our box shipments in the quarter. … We did defer about $30 million of maintenance outages from the first to the second quarter due to the significant production loss resulting from the winter storm. We expect to complete about 75 percent of our planned maintenance outages for packaging in the first half of the year.”

Looking ahead to the second quarter of the year, Nicholls added that both domestic and export containerboard demand will be strong, with low inventories in all regions.

“We see momentum building, continuing to build across our three businesses with very strong demand for corrugated packaging and containerboard and solid demand for absorbent pulp," CEO Mark Sutton said during the earnings call. "In papers, we’re seeing an improved supply-demand backdrop in all of our key geographies.

“Looking ahead, we expect the demand environment to improve throughout the year as customer inventory destocking runs its course. We remain focused on serving our customers’ needs while optimizing our system to drive out high marginal costs and maximizing value for our stakeholders.”