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IP reports strong containerboard demand in Q1

The packaging producer says it achieved overall healthy earnings for the first quarter of the year.

 

April 29, 2021

Author: Megan Smalley

International Paper (IP), Memphis, Tennessee, says demand for corrugated and containerboard has been strong this year in its first-quarter earnings report April 29.

“International Paper delivered solid earnings and strong cash generation in the first quarter,” says Mark Sutton, chairman and CEO at International Paper. “Operationally, we performed well to mitigate the significant impact of the winter storm and support strong customer demand in our packaging business. Looking ahead, we see momentum continuing to build in our three businesses. We expect continued strong demand for corrugated packaging and absorbent pulp, and we’re seeing a much better supply/demand backdrop for printing papers, all of which contributes to a more favorable outlook in 2021.”

According to IP’s first-quarter earnings report, the company achieved earnings of $349 million, about 88 cents per diluted share, compared with earnings of $153 million, or 39 cents per diluted share, in the fourth quarter of 2020 and compared with a loss of $141 million in the first quarter of 2020. The company says first-quarter 2020 net earnings included an after-tax charge of $337 million, or 85 cents per diluted share, for the impairment of net assets and write-off of foreign currency translation adjustment following the announcement of the sale of IP’s Brazil Packaging business.

IP reports that adjusted operating earnings were $299 million, or 76 cents per diluted share, compared with $296 million, 57 cents per diluted share, in the first quarter of 2020. First-quarter 2021 adjusted operating earnings include a pretax earnings impact of an $80 million loss related to winter storms that affected locations in the South.

According to the company’s earnings call, input costs for the first quarter of the year were “unfavorable” in part because of the winter storm that affected much of the southern U.S. in February and overall higher costs of recovered fiber. The company said it expects recovered fiber costs to remain high in the second quarter as well.

"We expect continued strong demand for corrugated packaging and absorbent pulp, and we’re seeing a much better supply/demand backdrop for printing papers, all of which contributes to a more favorable outlook in 2021.” -- Mark Sutton, chairman and CEO, International Paper.

In Q1 2021, IP says it monetized about $400 million of investment in Graphic Packaging to bring its ownership to 7.4 percent.

Packaging and Papers segments

In IP’s Industrial Packaging segment, operating profits in Q1 2021 were at $447 million compared with $431 million in Q4 2020. In North America, earnings were solid as higher sales prices for boxes and export containerboard were offset by a $75 million loss from the winter storm that affected many states in the South in February. According to the company’s first-quarter earnings call April 29, IP lost 145,000 tons of containerboard production because of the storm in February. The company reported that 30 plants in the southern U.S. were affected by winter storms, affecting box shipments in the quarter.

Within the Industrial Packaging segment, IP says planned maintenance outages also were higher in Q1 2021.

In Europe, IP says earnings in this segment improved, reflecting seasonally higher volumes in Morocco and lower operating costs, partially offset by lower average sales margins driven by higher containerboard costs.

IP reports that its Printing Papers segment achieved operating profits of $80 million in the first quarter of 2021 and in the fourth quarter of 2020. In North America, IP says earnings were lower, driven by higher input costs for wood and energy and higher planned maintenance outage expenses partially offset by lower economic downtime costs.

In Brazil, IP says earnings improved as seasonally lower sales volumes and higher input costs were offset by higher average sales prices, lower operating costs and favorable foreign currency impacts mostly offset by lower average sales prices, an unfavorable geographic mix and higher input costs.

“We see momentum building,” Sutton said during the earnings call. “We see strong demand for corrugated packaging and containerboard in North America and Europe.”

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