![]() First Quarter 2008 Review April 30, 2008 First Quarter 2008 Review April 30, 2008 Tim S. Nicholls Senior Vice President & Chief Financial Officer John V. Faraci Chairman & Chief Executive Officer Exhibit 99.2 |
![]() 2 Forward-Looking Statements Forward-Looking Statements These slides and statements made during this presentation contain forward-looking statements. These statements reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ relate to: (i) industry conditions, including but not limited to changes in the cost or availability of raw materials and energy, transportation costs, the company's product mix, demand and pricing for its products; (ii) global economic conditions and political changes, particularly in Latin America, Russia, Europe and Asia, including but not limited to changes in currency exchange rates, credit availability, and the company's credit ratings issued by recognized credit rating organizations; (iii) natural disasters, such as hurricanes and earthquakes; (iv) the company's ability to realize anticipated profit improvement from its transformation plan, and (v) unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations and to actual or potential litigation. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. These and other factors that could cause or contribute to actual results differing materially from such forward looking statements are discussed in greater detail in the company's Securities and Exchange Commission filings. |
![]() 3 First Quarter 2008 Results Summary First Quarter 2008 Results Summary Volumes – Weakened in North America – Held up outside North America Prices – Improved globally Input Costs – Escalated globally Improved free cash flow Lower Forest Products earnings Ilim’s 4Q07 earnings on track $0.30 $0.41 $0.37 $0.15 $0.28 $0.04 1Q07 4Q07 1Q08 Forest Products EPS Operating Business EPS $0.45 $0.41 $0.69 Earnings from continuing operations before special items |
![]() 4 0.37 .45 .21 .01 .07 0.04 (.24) (.03) .01 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 1Q '07 Price Volume Cost/Mix Materials & Freight Interest Ilim Shares 1Q '08 $ / Share $ / Share IPG .05 CPG .02 P&C .09 Europe .05 Fiber (.06) Chemicals (.08) Energy (.08) Freight (.02) NA Papers .03 Outages .04 1Q08 vs. 1Q07 EPS Higher Costs, Higher Prices, Lower Forest Products Earnings 1Q08 vs. 1Q07 EPS Higher Costs, Higher Prices, Lower Forest Products Earnings .30 .15 .04 Earnings from continuing operations before special items Forest Products Earnings .41 |
![]() 5 Global Sales Volumes 1Q08 vs. 1Q07 Global Sales Volumes 1Q08 vs. 1Q07 0 500 1,000 1,500 2,000 2,500 Printing Papers Pulp Container board Coated Paperboard Container xpedx Revenue 1Q07 1Q08 0% 5% 28% 2% 3% 19% xpedx includes the addition of Central Lewmar revenues |
![]() 6 Increasing Global Input & Freight Costs $161MM, or $0.24/Share Impact vs. 1Q07 Increasing Global Input & Freight Costs $161MM, or $0.24/Share Impact vs. 1Q07 Input costs for continuing businesses Percentage change reflects North American input costs N.A. 24% 26% 3% 6% (16) (40) (52) (53) ($60) ($50) ($40) ($30) ($20) ($10) $0 Energy Chemicals Fiber Freight North America Outside North America |
![]() 7 Recovering North American Input Cost Increases Recovered via Price Increases Recovering North American Input Cost Increases Recovered via Price Increases North American Papers & Packaging ($200) ($100) $0 $100 $200 $300 $400 $500 2003 vs. 2002 2004 vs. 2003 2005 vs. 2004 2006 vs. 2005 2007 vs. 2006 1Q08 vs. 1Q07 Price Increases / Decreases Input Cost Increases |
![]() 8 Global Input & Freight Costs by Segment $161 Million Global Impact 1Q08 vs. 1Q07 Global Input & Freight Costs by Segment $161 Million Global Impact 1Q08 vs. 1Q07 Consumer Packaging ($27) Industrial Packaging ($45) Printing Papers ($89) ($90) ($80) ($70) ($60) ($50) ($40) ($30) ($20) ($10) $0 Wood Energy Chemicals Freight OCC |
![]() 9 Corporate Items 10% Reduction 1Q07 vs. 1Q08 Corporate Items 10% Reduction 1Q07 vs. 1Q08 $164 $148 $201 $56 $37 $127 $21 $145 $127 $0 $50 $100 $150 $200 $250 1Q07 4Q07 1Q08 Business Corporate |
![]() 10 Printing Papers Earnings 1Q08 vs. 1Q07 Printing Papers Earnings 1Q08 vs. 1Q07 185 167 15 2 11 (10) $0 $50 $100 $150 $200 1Q07 North America Paper North America Pulp Europe Brazil 1Q08 |
![]() 11 Average IP price realization (includes the impact of mix across all grades) $28 €44 $69 $62 Price/ton 46% (1%) (5%) (7%) Volume 1Q08 vs. 1Q07 Price/ton 1Q08 vs. 4Q07 (7%) 2% (14%) (1%) Volume ($20) Brazilian Uncoated Papers (€7) European Uncoated Papers $26 U.S. Pulp $24 N.A. Uncoated Papers Business $185 $1,715 1Q08 $243 $1,720 4Q07 $167 $1,540 1Q07 Earnings Sales $ Million Printing Papers Printing Papers |
![]() 12 Printing Papers Earnings 1Q08 vs. 1Q07 Printing Papers Earnings 1Q08 vs. 1Q07 NA 22 Europe 4 Brazil (1) NA 58 Europe 31 Brazil 2 185 167 91 25 (89) (9) $0 $50 $100 $150 $200 $250 $300 1Q '07 Price Materials & Freight Cost / Mix Volume 1Q '08 |
![]() 13 97 73 3 21 $0 $20 $40 $60 $80 $100 1Q07 North America Europe 1Q08 Industrial Packaging Earnings 1Q08 vs. 1Q07 Industrial Packaging Earnings 1Q08 vs. 1Q07 |
![]() 14 Average IP price realization (includes the impact of mix across all grades) €63 $47 $43 Price / Ton (4%) Flat 29% Volume 1Q08 vs. 1Q07 €4 1% European Container 1Q08 vs. 4Q07 (2%) 10% Volume $21 N.A. Container $19 N.A. Containerboard Price / Ton Business $97 $1,445 1Q08 $109 $1,390 4Q07 $73 $1,235 1Q07 Earnings Sales $ Million Industrial Packaging Industrial Packaging |
![]() 15 97 73 28 10 31 (45) $0 $25 $50 $75 $100 $125 $150 1Q '07 Price Volume Cost / Mix Materials & Freight 1Q '08 Industrial Packaging Earnings 1Q08 vs. 1Q07 Industrial Packaging Earnings 1Q08 vs. 1Q07 Outages 24 Mix 14 Cost (10) |
![]() 16 Average IP price realization (includes the impact of mix across all grades) *Excludes a special item of ($5) million related to the reorganization of Shorewood’s Canadian operations NA Price $31 Price/Ton 4% Revenue 4% Volume 1Q08 vs. 1Q07 Price Revenue Business 1Q08 vs. 4Q07 (7%) 1% Volume NA Converting Businesses $12 U.S. Coated Paperboard Price/Ton Business $14* $770 1Q08 $15 $780 4Q07 $40 $715 1Q07 Earnings Sales $ Million Consumer Packaging Consumer Packaging |
![]() 17 $0 $10 $20 $30 $40 $50 $60 1Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Consumer Packaging Earnings 1Q08 vs. 1Q07 Consumer Packaging Earnings 1Q08 vs. 1Q07 (13) 14* 14 2 (27) (2) 40 *Excludes a special item of ($5) million related to the reorganization of Shorewood’s Canadian operations Cost (6) Mix (6) Outages (1) |
![]() 18 $16 $1,985 1Q08 $28 $2,045 4Q07 $20 $1,675 1Q07 Earnings Sales $ Million xpedx xpedx Operating earnings up slightly from 1Q07 – Including incremental bad debt expenses – Including Canadian unit start-up costs Earnings decline since 1Q07 due to changes in overhead allocation |
![]() 19 Forest Products Forest Products 13,000 61,000 30,000 Acres Sold $1,871 $2,750 $2,659 Price / Acre $25 $25 1Q08 $171 $190 4Q07 $97 $85 1Q07 Earnings ($ Million) Sales ($ Million) |
![]() 20 Ilim Joint Venture 4Q07 Results IP’s Share: $17MM or $0.04 EPS Ilim Joint Venture 4Q07 Results IP’s Share: $17MM or $0.04 EPS Strong end-use markets in Russia & China – Solid economic growth – Growing demand for pulp, paper & packaging – Increasing pricing Business performing ahead of plan – Shipments of 663,000 MT – Producing at full capacity – 20%+ EBITDA margins Ilim board of directors has approved $350 million 2008 capital plan • IP’s share of the earnings includes a ($6) million one-time fair market value adjustment to work-in-process and finished goods inventories • Ilim EBITDA margin is on a 100% basis before IP adjustments and IP NA margins excludes Forest Products and xpedx |
![]() 21 Free Cash Flow Improvement Free Cash Flow Improvement $118 ($178) $296 1Q07 $172 Free Cash Flow ($215) Less Capital Investment $387 Cash Provided by Continuing Operations 1Q08 Free Cash Flow ($ Million) |
![]() 22 Weyerhaeuser CBPR Acquisition Update Creating the Premier Global Supplier Weyerhaeuser CBPR Acquisition Update Creating the Premier Global Supplier Compelling Valuation Well-Maintained, Quality Assets Consistent with Transformation Plan Significant Synergies Good Strategic Fit Higher EBITDA Margins and Cash Flow Low Integration Risk Improves Core Business |
![]() 23 Weyerhaeuser CBPR Acquisition Update Improving the Quality of our Earnings Weyerhaeuser CBPR Acquisition Update Improving the Quality of our Earnings 2005 EBITDA - $2.8B 2007 Pro Forma with Weyerhaeuser Assets EBITDA - $3.9B (1) Printing Papers Packaging Forest Products Distribution Arizona Chemical Coated Papers Wood Products Beverage Packaging Printing Papers Packaging Forest Products Distribution (1) Includes $400 million in run rate synergies EBITDA = Operating profit plus depreciation and amortization less special items |
![]() 24 Weyerhaeuser CBPR Acquisition Update Weyerhaeuser CBPR Acquisition Update Filed for Hart-Scott-Rodino Act approval Integration planning in progress Preparing for transition services Targeting to close during 3Q |
![]() 25 2Q08 Outlook Changes from 1Q08 2Q08 Outlook Changes from 1Q08 Non-North America North America Uncertain Better Slight Increase Slight Increase Increase Flat Improving Better Operations Volume Pricing Flat Packaging Improving Paper Uncertain Input & Freight Costs Increase Maintenance Outages Slight Decrease Flat Paper Packaging |
![]() 26 Questions & Answers Questions & Answers Investor Relations Contacts Thomas A. Cleves 901-419-7566 Ann-Marie Donaldson 901-419-4967 Emily Nix 901-419-4987 Media Contact Patty Neuhoff 901-419-4052 |
![]() 27 Appendix |
![]() 28 0.37 .41 0.07 .05 .04 (.04) (.02) (.14) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 4Q '07 Price Volume Cost/Mix Materials & Freight Corporate / Other Ilim 1Q '08 $ / Share $ / Share Papers .03 Packaging ..02 Cost (.01) Outages (.01) Energy (.07) Chemicals (.04) Wood (.02) Freight (.01) 1Q08 vs. 4Q07 EPS Lower Forest Products Earnings & Increasing Input Costs 1Q08 vs. 4Q07 EPS Lower Forest Products Earnings & Increasing Input Costs .28 .04 .41 .69 Earnings from continuing operations before special items Forest Products Earnings |
![]() 29 Printing Papers Earnings 1Q08 vs. 4Q07 Printing Papers Earnings 1Q08 vs. 4Q07 185 243 15 (2) (14) (55) $0 $50 $100 $150 $200 $250 $300 4Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Cost (13) Mix 4 Outages (5) (2) |
![]() 30 97 109 2 8 9 (23) (8) $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 4Q '07 Price Volume* Cost / Mix Materials & Freight Other 1Q '08 Industrial Packaging Earnings 1Q08 vs. 4Q07 Industrial Packaging Earnings 1Q08 vs. 4Q07 Cost 15 Mix 3 Outages (16) *Excludes trade volume |
![]() 31 $0 $5 $10 $15 $20 4Q '07 Price Volume Cost / Mix Materials & Freight Other 1Q '08 Consumer Packaging Earnings 1Q08 vs. 4Q07 Consumer Packaging Earnings 1Q08 vs. 4Q07 1 14* 4 (4) (12) 10 15 Outages 14 Cost (8) Mix (5) *Excludes a special item of ($5) million related to the reorganization of Shorewood’s Canadian operations |
![]() 32 Global Sales Volumes 1Q08 vs. 4Q07 Global Sales Volumes 1Q08 vs. 4Q07 0 500 1,000 1,500 2,000 2,500 Printing Papers Pulp Container board Coated Paperboard Container xpedx Revenue 4Q07 1Q08 (1%) (7%) 9% 0% (2%) (3%) Containerboard includes the addition of Pensacola linerboard capacity xpedx includes the addition of Central Lewmar revenues |
![]() 33 Increasing Global Input & Freight Costs $90MM, or $0.14/Share Impact vs. 4Q07 Increasing Global Input & Freight Costs $90MM, or $0.14/Share Impact vs. 4Q07 Input costs for continuing businesses Percentage change reflects North American input costs N.A. 12% 11% 2% 4% (9) (15) (25) (41) ($50) ($40) ($30) ($20) ($10) $0 Energy Chemicals Fiber Freight North America Outside North America |
![]() 34 .16 .30 .34 .27 .20 .17 .04 .12 .30 .47 .45 .52 .57 .69 .41 .45 .02 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2004 2005 2006 2007 Diluted EPS from Continuing Operations before Special Items Diluted EPS from Continuing Operations before Special Items A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at presentations $0.82 $0.70 $1.33 $2.22 FY 2008 |
![]() 35 $0.31 ($0.04) $0.35 ($0.06) $0.41 1Q08 Net Earnings Discontinued Operations Earnings from Continuing Operations Special Items Earnings from Continuing Operations & Before Special Items Diluted Earnings per Share Special Items & Discontinued Operations Special Items & Discontinued Operations |
![]() 36 Special Items & Discontinued Operations 1Q08 Special Items & Discontinued Operations 1Q08 Earnings per Share $ Million Special Items (net of tax & minority interest) ($3) Shorewood Canadian Reorganization ($25) Legal Reserves $3 Restructuring & Corporate ($0.06) ($25) Total Special Items ($1) Wood Products ($16) Beverage Packaging ($0.04) ($17) Total Discontinued Operations Earnings per Share $ Million Discontinued Operations (net of tax) |
![]() 37 30% $206 $297 $1.1 $1.3 2007 1 32 - 33% $140 - $160 $340 - $360 $1.1 $1.1 2008 Estimate 3 29% $276 $521 $1.2 $1.1 2006 1 Effective Tax Rate 2 Corporate Items ($ Million) Net Interest Expense ($ Million) Depreciation & Amortization ($ Billion) Capital Spending ($ Billion) 1 Excludes discontinued operations and Coated Papers 2 Before special items and excluding Ilim 3 Not including Weyerhaeuser Key Financial Statistics Key Financial Statistics |
![]() 38 ($60) ($10) ($26) ($24) Impact ($ Million) Total Impact Consumer Packaging Industrial Packaging Printing Papers 2Q08 Forecast vs. 1Q08 Actual (85,000) (5,000) (55,000) (25,000) in Maintenance Outages (Tons) Maintenance outages and dollar impacts are estimated and are subject to change Incremental Maintenance Outages Incremental Maintenance Outages |
![]() 39 $36 $9 $2 $25 3Q08E $113 $11 $50 $52 2Q08E $44 $17 $11 $16 4Q08E Total Impact Consumer Packaging Industrial Packaging Printing Papers $ Millions $53 $1 $24 $28 1Q08 Planned maintenance outages are subject to change Planned Maintenance Outages Planned Maintenance Outages |
![]() 40 $732 $206 $0 $13 $38 $86 $127 $262 2007 $0 $0 $0 $0 $0 $8 Other $188 $56 $3 $10 $22 $31 $66 3Q07 $746 $276 $47 $31 $79 $122 $183 2006 $164 $37 $3 $9 $21 $30 $64 1Q07 $201 $56 $3 $11 $25 $35 $71 4Q07 $63 $61 Printing Papers $179 $57 $4 $8 $18 $31 2Q07 $21 Unallocated Corporate Items $11 Distribution $2 Forest Products $148 Total $30 Industrial Packaging $21 Consumer Packaging 1Q08 $ Million Corporate Items Revised Allocations for 2006 & 2007 Corporate Items Revised Allocations for 2006 & 2007 |
![]() 41 Operating Profits by Industry Segment from Continuing Operations before Special Items Operating Profits by Industry Segment from Continuing Operations before Special Items $198 $439 $606 Earnings from continuing operations before income taxes, equity earnings & minority interest $17 $0 $0 Equity Earnings, net of taxes - Ilim ($21) ($56) ($37) Corporate Items $296 $5 ($61) $403 $6 $97 $20 $40 $73 $167 1Q07 ($41) $4 ($81) $337 $0 $25 $16 $14 $97 $185 1Q08 $4 Special Items $0 Other Businesses $566 Operating Profit ($79) Net Interest Expense $4 Minority Interest / Equity Earnings Adjustment $171 $28 $15 $109 $243 4Q07 Forest Products Distribution Consumer Packaging Industrial Packaging Printing Papers $ Million |
![]() 42 Geographic Business Segment Operating Results from Continuing Operations before Special Items Geographic Business Segment Operating Results from Continuing Operations before Special Items Operating Profit Sales $ Million $28 $4 $7 $4 $0 $19 $90 $1 $27 $61 $53 $101 4Q07 $20 $1 $14 $25 $1 $15 $57 $0 $15 $18 $40 $94 1Q07 $3 $95 $85 $75 Asian $16 $9 $2 $0 $18 $79 $0 $4 $33 $42 $106 1Q08 $1,985 $75 $600 $80 $315 $1,050 $5 $165 $225 $435 $885 1Q08 $2,045 $75 $620 $85 $300 $1,005 $5 $180 $255 $415 $865 4Q07 $1,675 $70 $570 $45 $265 $925 $5 $155 $140 $355 $885 1Q07 Asian Industrial Packaging North American European Asian Distribution European North American Consumer Packaging U.S. Market Pulp Brazilian European North American Printing Papers Excludes Forest Products |
![]() 43 2008 Earnings from Continuing Operations 2008 Earnings from Continuing Operations 1 Assuming dilution 2 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at presentations $16 $0 $16 Equity Earnings $0.35 ($0.06) $0.41 Diluted EPS² 423 39% ($25) $0 $16 ($41) 1Q08 Earnings from Continuing Operations 423 30% $150 ($5) ($59) $198 1Q08 $175 Net Income $MM 31.5% Estimated Tax Rate ($5) Minority Interest $MM Special Items $239 Pre-Tax $MM 423 ($75) 1Q08 Before Special Items Average Shares¹ MM Tax $MM |
![]() 44 Business Segment Price Realization Business Segment Price Realization $846 $554 1Q08 $646 $950 1Q08 $825 $536 4Q07 $621 $925 4Q07 $799 $511 1Q07 $577 $888 1Q07 Average Selling Price Realizations Industrial Packaging ($/ton) Printing Papers ($/ton) Containerboard Corrugated Boxes Pulp Uncoated Freesheet Average IP U.S. selling price realizations (includes the impact of mix across all grades) |
![]() 45 0 50 100 150 200 250 Jan Apr July Oct Jan Apr July Oct Jan Apr Jul Oct Jan 2005 2006 2007 NYMEX Natural Gas closing prices Index: Jan 2005 Natural Gas Costs = 100 Natural Gas Costs Natural Gas Costs 2008 |
![]() 46 90 95 100 105 110 Jan Apr July Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan U.S. Mill Wood Costs U.S. Mill Wood Costs Index: Jan 2005 Wood Costs = 100 2005 2006 2007 2008 Delivered cost to U.S. facilities |
![]() 47 75 100 125 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 2005 2006 2007 2008 Index: Jan 2005 Caustic Soda Costs = 100 Delivered cost to U.S. facilities U.S. Caustic Soda Costs U.S. Caustic Soda Costs |
![]() 48 40 60 80 100 120 140 160 180 200 220 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2006 2007 Index: Jan 2006 Corn Starch Costs = 100 Delivered cost to U.S. facilities U.S. Corn Starch Costs U.S. Corn Starch Costs 2008 |
![]() 49 110,000 350,000 Corn Starch (Tons) Chemicals Fiber Energy 50,000 240,000 Sodium Chlorate (Tons) - 40,000 LD Polyethylene (Tons) 4,000 24,000 Latex (Tons) 230,000 1,300,000 Coal (Tons) 8,200,000 43,000,000 Wood (Tons) 60,000 300,000 Caustic Soda (Tons) 310,000 600,000 Old Corrugated Containers (Tons) Commodity 500,000 15,000,000 Non – U. S. 3,000,000 # 6 Fuel Oil (Barrels) 28,000,000 Natural Gas (MM BTUs) U. S. Global Consumption Annual Purchase Estimates for Key Inputs Global Consumption Annual Purchase Estimates for Key Inputs Includes only continuing businesses; does not include Asian consumption |