IP - Earnings call transcript Q4 2019 | International Paper Company

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and thank you for standing by. Welcome to today's International Paper fourth-quarter and full-year 2019 earnings conference call. [Operator Instructions] I'd now like to turn today's conference over to Guillermo Gutierrez, vice president, investor relations. Please go ahead.

Guillermo Gutierrez

Thank you, Christie. you call. International thank full-year fourth-quarter and earnings XXXX morning, for Paper's joining and Good

this are president speakers beginning certain and officer. Our legal morning is of Tim executive and There Slide Nicholls, officer; our chief disclaimers. presentation senior X, at vice information and on financial Mark chief the Sutton, including chairman

For this call, that risks to subject example, we statements during and are will make uncertainties. forward-looking

financial non-US certain figures will financial is A reconciliation our present those GAAP We of to US website. information. GAAP measures on available also

website the now measures provide Our also slides. fourth-quarter earnings on presented the press investments joint also turn the venture Packaging I to over call statistical we to X, context presentation those entities. today's around Mark XXXX on contains copies Slide Sutton. Graphic and the of release financial will Relative Ilim and and information

Mark Sutton

Guillermo, Thank free call. discussion begin our and everyone. joining solid for and morning, X. delivered our you, XXXX. Thank We'll flow Paper in earnings Slide good on you International cash outstanding

Our of the in our of and flexibility well the navigate to company environments. strength demonstrates challenging the cash generation performance even

backdrop, that While our inventory headwinds tensions economy through exports. managed significant chain. the broader optimizing trade Against remains US and our on healthy, we we this full-value focused impacted

We and returned framework. continue repurchases. us ran our XX%, we're we grew $X.X choices mill cost capital. allocation, of allowed of XXXX, converting value their our our making through to shareowners with shareholders and we which our with our with On in customers the an grow which We dividends who to billion is above nearly share of well flexibility are ROIC all for manufacturing consistent segments. capital and In respective market leaders leveraged system well, to system, of

reinforcing We balance a of repaid XX% our sheet. tenth flow. of sustainable and for to free payout also maintain year, strong of debt policy we $X XX% consecutive billion to dividend a our of cash strong the increased And

We continue we our targeted strengthen business. to our investments In Industrial invest Packaging strategically to XXXX, U.S. made in

reinforce position and capabilities our enhance our to the fastest-growing segments. in business strong box

made our Graphic decision also also investment Madrid packaging European start our some our around monetizing to network I around converting want announced The was combining our by We in expand to context with selective to original of to earlier we the Packaging. Packaging, business share in around Packaging our acquisitions Graphic mill. which the week. business the American thinking this maximize Consumer structure North value it

in The IP, Packaging the the Consumer to of Packaging us investment significant the structure. the in Ultimately, addition Consumer we that determined of benefits combined evaluate a role business time not a America provided strategic our priority. participating North tax-efficient in for while is portfolio to space a

makes capital sense capital start framework. to investment deploy So allocation with and that monetizing it our consistent our

X results. Slide to Turning and full-year

outstanding billion and We to delivered due and flow cash X% containerboard free volumes. about Revenue export of the and $X.X lower pricing of EBITDA lower $X.X decrease impact billion. of pulp did average

a less expertise chain joint impacted our which Despite manufacturing commercial and in businesses. managing delivered of advantage challenging Our million favorable equity $XXX healthy million, our margins our our $XXX well and earnings venture, pulp XX% including we was by of in from environment costs supply XXXX, also by about Ilim taking markets. were three

look Now free at flow. next and a let's to the closer turn take slide cash

levers in includes managed compared in in operations $X.X reflecting million was Paper generation. capital. generated billion, $X.X to $X.X to working cash the lower Cash a billion mitigate puts $X.X As five-year We and cash average you in which XXXX can of improvement strong and impact see our company earnings and flow commitment. to free the exceed full-year on billion from cash XXXX, $XXX flow billion our Slide proactively free sustainable X, across International our cash at

$X.X Capital and expenditures resilient than about billion cash free IP's discussed We've flow. million strong $XXX or XXXX. were in often lower

deliver even ability once XXXX, our cash outstanding think conditions. generation, demonstrates as we more again I to difficult manage market through

turning now Slide So to X.

return return year with of solid a invested another on average five-year of XX%. capital delivered We

Our portfolio. the our reflects of performance strength

delivering making performance commitments. the investment our are I'll will who as to segments, our it business We right outlook. as over choices turn cover on and those Tim, the now across well

Tim?

Tim Nicholls

in on Good Thank clearly challenging especially earnings a to you, per shows by Mark. in $X.XX what decreased earnings I'm year-over-year our which the bridge. environment, share outside morning, everyone. Slide U.S. Operating X, XXXX $X.XX operating was

as our and said, as systems matched ability needs. Mark results, to marginal our mill costs we production converting and manage customers' Our reflect our our to optimize

packaging to a to bridge, normalize. inventories high mostly unusually customer well drag index was quarters about as business. headwind, American of due as largely enter earnings and Looking Export price Volume export and XXXX, the price markets. pulp was took markets, significant to in movements it a at the impact on North due our by impacted three containerboard in and challenging pressure containerboard price mix we export were as

in year, significant our and slowed costs packaging by costs actually though as half favorable by on second supply they in improved on favorable, reliability. system and North mostly the shipments were velocity interest expense XXXX. offset impacted Operations American were year were reduced were higher And fiber of and half downtime, expense even cost moderated corporate in, drag we chain All first and the the energy the significant partly lower especially of and in in driven corporate a the Input export XXXX. for economic earnings with inventories recovered by full tax items across year, lower wood costs.

Equity lower earnings. earnings to Ilim decreased due

billion quarter in well margins and Fibers, X year-over-year pricing by EBITDA decline with fourth fourth XX%. The in revenue India lower $X of Slide quarter. is the mostly divestment our Global driven impact and was as Cellulose earlier of the packaging the results. to Turning as

quarter proactively Free and cash as the spending to again capital. was flow in capital continue strong we manage working

by debt reduced quarter, fourth $XXX nearly we million. the During

X. quarter-over-quarter were at Moving bridge to on $X.XX. the Slide earnings unchanged Operating earnings

seasonal improved prior to a in costs was the as packaging. favorable and as and quarter Operations in well containerboard. in American demand quarter prices to and the Global containerboard costs. to lower mix costs offset Latin expected, index exports American stronger Fibers were as were by were as also or Cellulose input and and movements earnings in due in improved equity flat. maintenance due higher well due essentially Corporate Volume headwind North as lower costs the outage items and packaging, export European papers the Price wood chemical favorable

and turn segments, we'll XX. I'll So start to Industrial on Slide the Packaging with

the America segment, impact was price a Across prior containerboard well. as movement to index unfavorable outage the the and fourth earned business maintenance mix impact performed as quarter. in business of in with due exports million The higher mix well $XXX we quarter XX% margins and North America, of the Our light of expected. North as nearly

normalized in may by with is improved double-digit year. customer well regions. stronger strong inventory Staying had the have exports, containerboard be as levels across business. exports, our e-commerce. enter It select packaging most in and seasonal healthy this we America, sequentially, low we In on North side in even Volume as growth driven demand containerboard European areas as demand

ramp of and foods broader perform in the is Demand X% X%. segment coming to we is we our discussed a the strength the off to January last while through The growth pretty And continue quarter trend U.S. good fourth well recent to in a start expected at lag durables plus business for to economy. as processed up continued as us quarter, wins. protein the

demand. including meet for as onetime performance stronger LIFO and increase the fourth items, the inventory Economic Operations were and about downtime favorable by favorable of cost benefited chemicals. wood a segment, quarter decreased was production adjustment. we $XX Operational costs favorable. lower also to significantly Input costs also by in across driven million

we Cellulose XX. prices on have due severity challenging regions condition. impacted market cycle. material the by The Fourth-quarter demand of has Global and in Fibers mix near-term a business. pulp the our to Slide pulp faced in of the Turning been fluff of were supply across have business all very results a more commodity resulted to in higher lower supply and pulp It headwinds

performance item of the full of million, the outlook, $XX and impaired our light have goodwill the we in business current of quarter. which special In a in the amount the is

challenging earnings from XXXX to expenses. as the higher enter we flow-through and impact maintenance Customer prices and better have of due of XXXX. XXXX of first outage very inventories the is fluff the expect We improving. normalized half fundamentals demand We in do see underlying

supply improving demand market fluff our the beyond profitably Looking pulp mix. grow is reduce to to in pulp conditions, our strategy

total structural about bring a pace good feel to and XX% to fluff pulp, fluff to continue X% volume contract demand We had XXXX. is our growth to mix are on of focus. season X% which in the specialty successful and We with

half second the of positions this improvement year. in us an for the All of

the to North $XXX America. quarter. lower business export Printing our well regions. and exports delivered Slide price Latin Papers pricing North on the to as from earnings in due as Across improved volume business, of across segment, The the from mix mix higher America and of Looking Volume for paper XX. all American sequentially decreased mostly impact million

partially geopolitical customer American cut Brazil in our seasonally in but was was new environment. expected, Latin Demand by stronger In in to as offset size business, due performance had North strong the we countries American business. weaker demand with

the business challenging commercial solid printing. Mill the conditions segment. performance to in was across However, weak due was roll

secular the North at inventory and to uncoated of charge about we due North Input through forward of Printing in Papers, in adjustments influence line a $XX Brazil Operations the at to some sheet as were long-term mostly the Staying industry charges. inventory X.X%. cost continue and cost in lower two-year America. average year. pulp going on conversion to with costs in flows across execute purchase we by of with was though, the in see hardwood Fundamentally, improved the the LIFO about over onetime past other impacted volatile years few related free shipments sector hardwood and the X%, XXXX trade decline noncash lower prices million, America Riverdale

million per offset Equity no the which was a earnings by price quarter, gain debt or fourth of include IP's venture improved Ilim $X.XX at and the on portion results in on in earnings foreign dollar-denominated planned share. outages maintenance flow-through. with $XX as US quarter. The Volume net Looking exchange in XX. $X was Ilim's million after-tax equity joint Slide delivered expected, negative

XX% in Ilim's powerful XXXX. a performance million. $XXX $XXX operational and $XXX make For represents a margin. global dividends and receive pulp was although it which Full-year Ilim in the million, we full a to from adjusted million And low-cost were earnings across generator, about challenging equity system year XXXX cash year, strong was EBITDA markets, expect

you you what Starting can provide on On allocation expect to in actions the moment clarity balance International sheet. with Slide a and in our on capital update from want XXXX. take XX, to I Paper XXXX

unchanged. Our is commitment

with rating basis. X.X credit target investment-grade and times on sheet debt-to-EBITDA X.X balance a of strong a Moody's a maintain will We to

XXXX, repaid billion we our by of and $XXX In $X decreased million. debt gap pension

actions Our part Returning which allocation we is prior our pension is good X.X derisk a the in, cash plan framework. All times flat meaningful really year. plan. sufficiently and shareholders feel to the taken we've we leverage, closed funded, XXXX at with to about capital was of

In over returned shareholders the we $X.X or and years, past five of through billion XX% And to billion repurchases. $X.X cash XXXX, about nearly share flow. dividends to returned free shareholders we've

to a As free for a of Mark commitment flow. cash year, earlier, XX% dividend to of dividend and increased XXXX, reinforcing sustainable competitive in tenth our we said our consecutive XX%

share to repurchases. to and ahead debt will dividends after continue to flow XXXX, cash be Looking reduction free directed

capital our would Graphic the do business. The transaction value. We scale at permitted Graphic announced we create targeted M&A taxes in $XXX period to and and And to to that as initial maintain round interested our would we capabilities our not packaging under we strengthen from we each be of Packaging, Looking smaller Packaging opportunities manage the which the regard week, proactively in are pay maximum expect this systems with types investments, cash on invest out is continue this received world-class earlier we million transaction. amount in spending to agreement.

path. interest us is now ownership Packaging puts XX.X%. Our transaction on a Graphic approximately monetization in This

full on billion. $X.X outlook billion the year $X.X full-year We're our Slide to company of XX. to Moving EBITDA projecting for

This as impact as well the is full-year driven from by of price January the containerboard carryover index XXXX movement.

higher maintenance cost to a We related XXXX, also completed put in compared planned system this we context, cold as about Riverdale To cold this we fixed for in cycle. outage execute conversion two outages $XX million the XXXX impact of of in across $XX our plan expense anticipate year. And of outage cost. we high lastly, the unabsorbed cold including XXXX, million eight outages to in about

spending capital be $X.X allocation at be to framework. capital proactively a billion. with Proceeds Packaging will expected will monetization, we all the is our billion, like cash, flow put through cash and of from cap Free manage our $X of Graphic

XX Packaging. Slide quarter Turning I'll outlook. to first Industrial and start with our

$XX earnings flow-through $XX We to on in is expect North America. down quarter. million and related movements lower by be Operations due Volume demand adjustments price America. index the are Included is on in million Riverdale million, mix of of unabsorbed to North million the million to of favorable be $XX the fourth fixed in in lower the to expected prior conversion. expected down $XX nonrepeat partly costs to and $XX costs seasonal LIFO mill this

on and expected $XX Industrial with to expected outage million. is costs maintenance movement. staying Packaging, million fluff to higher Global to Fibers, Operations million, lower volume. input be increase improve million million. on by is In and impact costs Cellulose down And and $X of price $XX we earnings index $XX Volume prior about be are expense by expected expect are to by to seasonally by expected mix improved the $XX

Maintenance expected $XX is outage inputs expected are to stable. expense to increase million remain and by

Moving to seasonal be on in $XX expected Printing down mix. mostly Papers. demand offset Volume flow-through by Brazil. Price was improved is to geographic lower million,

are of Maintenance fixed quarter costs cost expense mostly million, improve fourth to improved in America. million, outage $XX charges the expected remain expected and $XX North to due stable. nonrepeat the in are expected by costs and to Operations absorption is by input increase to and LIFO

shared, in segment first increase expected quarter all-in quarter. appendix. maintenance are included by details noted the are to Details million As in $XXX and just by the in business the I outages

Mark. under lastly, turn equity Ilim me our earnings, see outlook you for And will to that, With back venture. the let joint over it

Mark Sutton

on Slide Tim. Thanks, I'm XX.

on generate of practically ability past through and year, performance our about flow any quarterly I've strong it succeed set reflect on in these I often our Paper. As my reaffirms commented this confidence calls to conditions. cash International

I that's And exactly out. think how XXXX played

most we'll earnings headwinds XXXX, pulp manage working that as we flow-through continue and of commercial free delivering earnings in are capital and XXXX. our fundamentals at price are of wins enter As packaging strong headwinds despite we generate spending to we cost, flow already to to solid. due tightly capital that cash related cyclical. occurred have fluff that And from are these The business are actions our and look

financial we'll through has for the us position momentum customers, position, continue questions. as positive we'll we and choice our the Paper for strong the to year. best framework system I levers operational in International value make and as long-term consistent people, with creation. and navigate best commercial allocation With the up it capital think Our the best order to a drive open that,

Operator

from Our first Pettinari Instructions] Citigroup. question of [Operator comes Anthony

Anthony Pettinari

customers, if shaken to year. your of the improvement some is has market impact China, this saw maybe unfolding? pulp end in situation the side seeing the understanding at I wondering the kind beginning of signs We last of Hi. China you're was in year, kind of guess, what up. The I pulp talk and coronavirus about you of obviously on could things

Mark Sutton

a It's Anthony. question, great

we issue the coronavirus, on economics. tell. of demand in see improving conditions, system. just and The obviously There situation the inventories a the and on is the early are what kind fluid think it's mentioned, I virus to you both

to tend kind products The our as is that goes market some venture, And business, seen pulp pulp. softwood our well. uses. they joint less discretionary. packaging type of other from cellulose Ilim little more absorbent be that into The fibers our pulp improvements an have market for On from of and GCF, it's products a

all does through. take? question it think contingencies watching they'll get which is, closely virus, But on long different very the and I we're how based think I at looking the

Anthony Pettinari

level guidance And has frame I is be versus what kind that could maybe there a your capex between would that's wondering And pulling investments maintenance discretionary? be the billion. decade. XXXX maybe Okay, capex how below level then below for where might Maybe suggests And don't think of $X in IP's you what versus helpful. billion just capex the normalized we cycle? and a on? you're then been back just split $X I'm

Mark Sutton

number categories. question comment. great to because a it is talk let ask I'll Tim level make a haven't seen. high the me just Well, That's a you about

you periods terms organic lot asset quality, strategic the we're of of a mentioned, obviously, the done last strategic of that same in these time not we've Over investment, the company, investment in amount years. few which

we projects the as those said type every year think, quarter And earlier, I have large on, last call, we period. be don't would of third

all of us allows have to have less. combination periods the So where that we'll

wouldn't Our about time. billion always that been be over guidance has But year. every it $X.X

category? a Tim, little the add to clarity And you to want if

Tim Nicholls

terms Yes, and balance ramp But lower maintenance the XX% and closer in discretionary. on down I the billion that side, you think right, could for $XXX year. you're roughly projects. for the and be could targeted It's covered high that. then about strategic have than be well talking the being $X it to of It million is we regulatory the it

Operator

D.A. is Davidson. Chercover from question Next of Steve

Steve Chercover

quick flow mistaken, was billion question. not above $XXX guidance. If free $X First I'm your cash your million

surplus capital? you mainly was Or can Tim? the to that working due So elaborate,

Tim Nicholls

Yes, estimated items. year. capital One, in timing piece we earlier it. was factors. had had are there that the some a spending several big than on There lower some what We of was

it. up of And things. capital. it is We'll some working We picked keep then Part timing.

Part from probably will XXXX. and in is to of back it year just the come one it next so

Steve Chercover

And you on Graphic to on quote you're Packaging, monetization path. then a

$XXX,XXX debt toward say will bold assumption get a and/or put the to it that that is another reduction? be So you repo

Tim Nicholls

allocation we'll And the the we focus now. right that through capital it put have I that's Yes. primary mean, framework.

So I don't difference. assume any

the every monetize. six million months the a just And clarify, have, $XXX that under to to ability of contract, maximum we

Steve Chercover

dependent, it guess question? the flexibility. some got will GPK some You've Obviously, have influence right? on price valuation be share just I I of timing. your one should Can other ask

Tim Nicholls

It shares. I not think say, don't ourselves we're equity of would as modestly, will, in we but -- investors

So way. the smart to that we're We're market some contracts an trying in have. time stake sure undue to our we the of we're about how we not right trying just through think make the monetize to

Operator

Our next Bank question is George of from Staphos America. of

George Staphos

this morning. about all you're that to spending Hi everyone. details. talk the I maintenance doing wanted Thanks the Good for year.

the be within that year. much year, cold two year of it further you related don't And have done you're when GCF it will are versus to done maintenance, of be already going will that enabled with eight on but projects said this? what is normal capabilities what either Or last systems there numbers, the obviously, the this maintenance? when out outages with the be we're or Away either side those will from this to you've Industrial Packaging Mark, from different be

Mark Sutton

side think I George, is is precision that's on every the a maintenance point and of expense we and better much about one a make how staffs repairs, talk bigger how the we capital, year. are. getting on just we maintenance, they're portion our And portion well-trained key but maintenance, how do just technical

have So failures. we less

ends replacements. major expect which capital in We less resulting for better reliability, up needing

continuing for that's IP. been just story And a

So customers. multiple that is in at fibers that former proposition we've have business that's and facilities, trying we the capital for new to that the a side the we education, the save point. with money do make spend multiple flexibility been strong system sure Weyerhaeuser in What techniques, and so combined products money make that in one business we cellulose can on That's on our training, the the we the containerboard value expense in we side.

for managing or It's terms of marginal great transportation. cost in wood

the is out and worst less in have see we you'll terms variability reliability what this of between facility So best. of capability and the

but lot and are be work have to more less to progress. flexible much There's made do, we So a of both variation. systems going more

that would of And kind have we so the we've can period fruits of normal it's of some where investments kind we enjoy a the of made.

systems. So directly the customers own feeding capability other In box going those who convert plants, In products. plants. to largely and into mill absorbent case, case, across box consistency our one

George Staphos

variable system that, the Would bow on make that further get so of to a environment an in. to part that tying your is or you're fixed, you'll cost you're depending as that the ability opposed fair? in on also be what So

Mark Sutton

downtime, And at but only George. fair, want That's don't too you taking and gets when because good to usually this that. get saw economic we're up to change years a cost versus show of markets slower, it we marginal are in of containerboard would and earlier. our that saw a experience you kind a LLO few sort prior XXXX, continue. to periods step expect management And a we Again,

cost especially it. structural that cost on variabilizing getting mills, of our to the definitely are some in is issues side some marginal at and our cost GCF So There of part are better not related reliability. management

there's configuration allow future can Just to. related address and and we and will in address there the our things that priorities resources to as us

George Staphos

Okay.

quick. to make it Second question, I'll try

on over You mentioned has your and been has the years to value impressive. value cash of shareholder to your returning your that XX% flow been back the return and to last dedicated cash free shareholders the five performance flow performance

to the need be target more that shouldn't of that would good where looks suggest to and the necessarily amply Given we ratio in you circumstances something down come that bit time, to dividend, it the which risk? might quarter. a to be kind little And is supported conclusion? what has draw guys Or XX% we of over delever? would Thanks XX% luck as that maybe at now, see

Tim Nicholls

we dividend, George, take sustainable. Well, both the is competitive question, and that the for and thanks it's approach the to

and think And we so they business is Board to dividend testing for decide recommendations the ample when we and to outlook perform. make forth put when our trough these providing we we are decisions, going policy, how

a of year. a So end, of the first for need high question range. the still part action trough there, don't your within but taking on in and a the think see the I we're We're I bit

do we choices. our need we I And what flexibility the do across allocation have to think capital to

Mark Sutton

have can the think share point think reduced about also return via when comment, on the we've pure for though as the of capital is is additional and growing just yourself, you dividend for an the we in you combination dividend terms and repurchase, Tim's our near-term raised outlay I out the figure cash of the -- shares not outlay. dividend, actual even outstanding

to the to committed that's way think the sustainable. dividend. got I not doing to shareholders, cash it but we're testing we're recommendations that's getting a has dividend make any So balance being XX% what generating are, in trough, mean, on And sustainable. right in is our cash the not XX% that to in case, of that's focused the sure the We not about company we in talking

Operator

Chip question Next from Dillon Vertical of Research. is

Chip Dillon

and morning all for thanks Good the help.

there If you could talk to corrugated, a little you're bit I about b, And don't might the know that's firstly, you I I keep I that's in just a a possibility? think think, that some chance something going? South targeted be to know would how And know, American M&A looking you actually in exit. a and presence is Brazil business, wanted that I a, mentioned possibilities. to if want if

Tim Nicholls

On packaging?

Chip Dillon

Yes.

Tim Nicholls

we No, this don't than strategic on no. go taken thought. to But We've has talked options. little forever. bit want we longer about a process The

But timing it holidays based gearing I up. think some and just started and slower on

We have made progress.

I position we're we exit a that not-too-distant looking terms options an there's Brazil, packaging outcome. think you that be to looking still nothing talk the But at in for of about business, as in in the future acquisition we're we'll on to how at. in

Mark Sutton

American Madrid a comment Packaging Industrial about we are and there are on was talking That's remarks investments the not and Tim we few packaging allocation targeted if small referring our a near what for primarily mill. right anything packaging, for When did a business bought capital box plants like business, acquisitions, made European to about our he North M&A any, for and his in we targeted those else. few, was

Tim Nicholls

nature terms how it the of packaging. of And like just around and some have, that it improves size brackets business and we put the to it targeted in

Chip Dillon

as lot super like a very a helpful. follow-up. $X That's going look Okay. high environment at which And quick capex million $XXX to been. of sense as flexibility then level billion, keeps immediate down the certainly certainly your to you given and the just it's When makes

a -- should -- of assume that sort Is I some mean, I Riverdale that level capex. include, expense

things a will you that period? So there expect current your to say, 'XX, what Let's footprint? would reason is of be capex should kind the up we in again, guess be capex that better, rise 'XX, given 'XX would capex or get

Tim Nicholls

I of you type, Should cost over it that investment increase the time. identified But capital is I see the those where could situational, an side act them. business The strategic over all a on conditions how think depends time. We bigger think of is get be said, market performing. the I circumstances, from on the reduction like don't there, and it

we projects far we spot some we're think take have. situationally, business. forecast If I return type that out But don't in maintain warrant, time. a we cost So publicly where reduction of in can the to can improve conditions around high level we the advantage

Mark Sutton

Yes.

Madrid our lots North way Temple to I steady We've a the mill, need we to we fibers. about our Riverdale. started doing were been we I think, in and largely to doing talked demand the system need acquisition for this, that capability not got we're and of in improve American purchase the there's post projects Chip, Then the containerboard. also the the XXXX, things all answer, board containerboard where the we way and cellulose we're system thinking built investing about if for mill the you replace capacity business for back the now reasons but all go in foreseeable in future, we the only prior large in

going But and it's cost not individual attention, be structural that of the focus smaller projects. hasn't as forward. so probably a It's level will more same reduction our in as gotten system facilities. large And projects across

we the cost trying time little market. strategic can those bit how like, the order need environment than what you're our structural we based projects much on where bring to depending something projects So on to product on book, a looks reduction better

past different a exact have of mix So the an we've the foreseeable future. focus made that because need projects it'll we be number going don't for We XXXX, will be forward. but make the to investments

Chip Dillon

That's you. very helpful. Thank

Operator

from Markets. is question Mark BMO of Capital Next Wilde

Mark Wilde

thank Mark, morning Good you.

lunch Industrial the owe Packaging you crew think today. I

Mark Sutton

That happens often.

Mark Wilde

the recovery pricing had, be good of sounds in in in through a to mix. of like very kind we are question there and we as shift a a I that's performance. the kind of is go conscious pieces the moving need pulp of Well, One performance, kind of it is Listen, couple 'XX. lag the other

I help that? more with you color on just So wondered if us little Tim, a could

Tim Nicholls

follow-on. help as I'll give. as Well, stabilizing. with the think We mean, I you have markets you price I do can begun that see much

And will comes and front. how the so recovery pricing the question fast it be on

based situation, levels on after conditions and individual economies, we think in the as beginning impact XXXX a fundamentals that fairly like they're well to are But went dramatic this place year. inventory we look as improve. tariff into market shifted some think, had have on where But weak we as through we that country price a carry we economies, region

mix grades the market had higher of growth because overall, Southern for fluff our -- mix, of higher cost types bleach, a structure. we factors, pulp on commodity based On in on lower those the side, on have we of a for certain percent soft certainly

in structure good bleach. a have in our very Canada Northern for cost mill We

Southern, and for we impacted were prices have But structure more. cost a higher

well. So that weighed on the business as

over but we our commercial the it's talked that based mix percent about way forward, it about the on year, absorbent doing profit loss in restoring of fluff last a maximizes intelligently specialty that and Going time.

we're just focused simply not So volume. on

the we challenges the business how We're through in working focused and of performance earnings these do macro on moment. improve the

Mark Wilde

I projects sort on can big that I Ilim some update And had plans follow-on, know but there's whether to know us time, about of wondered, are? they've been over where commitment those. just any the for talked don't capital I Mark, you a

update could us. So if you

Mark Sutton

involving projects The Sure. Ilim approved China. containerboard for some some production, primarily Board

existing one facilities, under of debottlenecking And at softwood additional and so the the one way facilities. pulp of that's

those come online are to under get way So are in beginning will year. both projects approved and of and later next

So Ilim as right market stabilized more focus level. business, and anybody the now, softwood normalized to for hopefully, is, looking is the getting in inventory getting a the at the back pulp pricing,

And really everything powerful commodity at results, very, our what business, lower is pulp, pulp price mentioned that's in far Tim really ahead cyclical in that the Ilim a generator. focused. very of these so As Ilim for want it's is which the absorbent still in we even out structure GCF else world do the cash cost to levels

We are points mix. still away XX the from percentage

North target pulp. capacity, Canadian essentially doing which demand as up, with our bleached profitable mill of all just the at to really where softwood of said, we're northern longer it mills, level. on Tim back absorbent nonabsorbent on step mix and the in our China We is a a have American only intelligently, get that And it XX% pulp, economy, to takes

business the we So still it's were a on, and is And right the end-use in path. and but customer setback very all the the terms of path the solid. book it's

Operator

Adam from KeyBanc is of Josephson question next Your Capital.

Adam Josephson

about Good for my successful morning. recovery accelerating on Thanks so season much Slide taking one Tim, contract just year. talk XX, a you pulp. On questions. this your

you is visibility your on wondering growing fluff on secured? market. why case. just what And with just then be than market help Or Can in lower intuitively, pricing is mentioned year? it's just similar rate that I'm that at the would you me a you you just that wondering I just will successfully was pricing be contracts what or to throughout regard? business that pulp renewed know if the

Tim Nicholls

Yes.

East, are we've demand On the in We've countries against think the their moment, growth, had certain unusual the dollar. destruction. have been which have for a consumers, has challenges. their pulp some, underperformed, currencies There economies I big Middle underperformed fluff had some

issue of the through and in China, been which uncertainty. had There's to a caused be tariff lot sorted

around moment. rebalanced be been part inflated pulp. I for to of don't year We we on combination the the think fluff think year that of the structural. some so in And fact a And there's also it's that inventories the last big had the had world destruction demand there's

can of contracts have. you go on can't pricing, I we here, appreciate why that lot really types it's into the whole a detail gamut. On There's different customer the but across

you And on negotiations those that go some happen year. contracts work through annual price with the of as

annual to are the them take. nature of of of Some in amount the they're volume going

market parts have of there's month quarter And quarter. it's then the or the then that along And to we openers way. to month

Adam Josephson

through about after been last quite November, And 'XX flat 'XX. bit U.S. Mark, it demand, just at year then, one box from on least to having a was up

flat or the decade, so. it's Over past

Mark, reason? any last be you term, have will particular what than for we the just, year? year, So guess, what year you but forget this to Do much expecting longer about do think saw reason are this you any different I think, flattish

Mark Sutton

lot model indicators growth International of demand. our box year. nicely Yes. Paper accurate little We at correlate look own a with economic leading this built for was a see reasonably that of internal very We and it year. bit last We

think today a came always I it'll the about largely U.S. way but demand But number economy that and occasionally, it'll the box bit. what track in you out look configured, the lag on you is little think GDP, GDP when at

X% roughly, with end end little the XXXX our from disconnect up end bit inventory issues and looks is about in like that you a was world, 'XX it occurred the talked customers' we year, a for a a So what of that box at GDP. you'll of with demand up

X% you to without saw probably in I box X.X% against I think demand inventory issue, GDP. that X.X% a think 'XX

reason demand didn't the 'XX We 'XX. the kind customers was well 'XX. to ship our And product into made didn't for I of boxes that stronger of really think some who happen in the is 'XX

Operator

is Your Weintraub Global. next question from of Mark Seaport

Mark Weintraub

First, outlook. on the

pricing it it include necessarily of containerboard impact You price flat mean index and the doesn't XXXX changes, it noted not that other that draw? Or from January is? in conclusion effectively adjustment. potential that Does any so a includes where is kept carryover that to is

Tim Nicholls

go-forward on talk the is a basis. we about pricing Well, don't challenge

in where So we from currently last have are. of to carried carryover we year the all

down course about published the over the how happened. price a that of on We we XXXX. is And view containerboard $XX for that our think have included just range within

Mark Weintraub

the paper, inventory us? I for impact packaging you understand. valuation specify and could in Also, those

Tim Nicholls

as do to year, is. know, are are about year go factors them making with a the we're we estimates of at course of both the the and LIFO. the of what number play through how Yes, And charge LIFO over looking you going out to

up our third we overestimated the papers, the in a actually the had In As case you're and of be end quarter, going to we of were truing you those. all up of the year, to worse ended get in benefit, it position. where earlier thought we

the side. and the we had make containerboard on true-up just opposite So that to

we're we go we've best sure as science, have amount As precise estimates and up a that of And year. appropriate forecast it putting through the our conditions. not [indiscernible] based factors to on the then you year, business the change, to it's make end at the

Mark Weintraub

the share you what can the in in And the with Understood. fourth were adjustments segments? quarter us

Tim Nicholls

it million million Industrial Packaging. in $XX Yes, and papers, did. was around $XX It I think we was in

Mark Weintraub

shipments. box then lastly, the And Great. on

win So X% you destocking that not us inventory having, let it the from is out? also, should sounds the how in you we get -- hopefully, know played had this January range, to would year, any X.X% say? could And

Tim Nicholls

Yes. well, looks I through better? today, between Mark. January how final have and of the know X%. there's in. process shouldn't calls somewhere close we it's and the in actually a late until We're don't know you month a But go lot like you now, X% we really Right and see number say, came shipments

container quarter some through American our we're coming in actually third that we wins in the business. the seeing But of talked North about

So we feel good that. about

inventory in we markets, last low. inventory view year. is levels places, returned side, levels But in the some having On normalized our are export referenced containerboard to that levels late some

good Demand now. right is very

to lower markets, And so normal on the we skew for the levels. think it's in inventory export side

Operator

is from question Mark Stephens of Connelly Inc. next Your

Mark Connelly

you cost have in would Thanks. been past. evident that downtime a take quite lot without obviously We've seen drags of of the sort the

is is you're the on experience getting over I'm the in if And effect, at leading that taking all work if, more more curious working. year efficient clearly, your supply to So changes? the past chain downtime?

Mark Sutton

I is great took before. a level that of it's in taken would haven't short last a question, answer Mark. downtime containerboard We And say yes. year we Well, the

because time more the we efficiently, the of able some frame. to were we So investments 'XX, 'XX 'XX, do in of made primarily it little a

a more bit we going we're also component when little We downtime the wood about to and manage how take know the to better learned component. transportation fiber

make we're was bit I 'XX, learning for customer that open, a actively some there meet enough year. demand our and little ran cases to we to none everything across how think that we serve. done incremental each we channels all wide actually to facilities because multiple couldn't make our So manage output amount. in product work added costs almost of being we And that better

last afforded to I to we in systems noncapital forth us the both in the of the use so try So think all investments and and capital chain. benefits made, an year really opportunity supply

are we would say, do how that learn So yes, to continuing I to better.

Mark Connelly

keep sorry years, a last markets more that's I'm tracking this of commodity more on been one have couple And not the but to question, fluff helpful. That's bugging question pulp, on and in closely and normal. markets lot

happen, you messiness? increase it in term? and volatility. that normal terms get markets longer got say, has Is start going a cleanup medium Sometimes what when because we've to squishy, contract to take So that the contract to get to soft, to back get

Mark Sutton

I think, a question. Mark, that's great

There's small be. is differential shape things terms think similar, because the on with curves market broader I example, pretty still the is a there markets. pulp healthy and of One pricing, fluff the other main of the as for a two, on of commodity going a markets. the still relatively but should two are connection there's market the in fluff between level in between capacity the

move ends have We based lower capacity can the about out about in fluff, million but commodity any same do. happening what's pulp. It's There's XX% don't capacity, of on producer six of in The that choice. tons. or has that of others a

absorbed time, a term. course, contract of probably long not And end have up market kind you that's conditions, will needs any sustainable of then, just be and these that agreements meaningful so with things capacity it's that you better. flex a buffet terms I And Over the think little time grows. to as bit

that So is to has of that, there be some done.

ends this market showing environments make up create absorbent price for side. some just lower softwood lower, to can it enough in meaningful pulp market soft issues enough absorbent that or But for softwood the is margins pulp, capacity demand on up the flexible in or market that at

Operator

Your next Brian Sachs. of question from Goldman Maguire is

Brian Maguire

with couple the fiber the around recent goodwill capital a Obviously, pulp cellulose they're the the in Just and reallocation. off market. writing challenges acquisition,

your of think the more in some on like EBITDA likely just set that, doing to higher alluded large I comments sort guidance focusing M&A? leverage that deals. about Just to less lower related make move the sort smaller or a wondering, then seems of XXXX. in with aggregate, little just gun-shy bolt-on does And really to it you of bit is

we that assume to the near-term sheet more like that? and on is as the should So the kind focus, for things balance repurchase preserving of the priority share opposed

Mark Sutton

this I to for necessary think ability the on profitably improve we businesses optimize Brian, International right the focus have. grow the a large We've for now target and time it's the lot a it's don't require not question, We've first past, the Paper. is We've great in M&A. part which businesses, got to to got of because large M&A done and not of M&A us now company. a the your large

framework cash. it So to channel the that constant year and through our I second our the we'll discussion in see debt put part of we is allocation the which plays how think your I on think company out. a But chart, repayment combination, share of question, about flow the capital repurchase

outlook. We the January, out. We're in here know sitting turn have really how to an going we year is but don't

happens. make could maintaining be absolute be the sheet, as as Tim is it could we'll better decisions. sure flow that we we'll balance make not that and obviously, But the priority, to an said, good, or grade, cash it need And investment adjustments and make

Tim Nicholls

to and only thing our about been that. manage about have would very been returning how We've balance clear the And is approach shareowners. the cash would commitment we very we Yes. our I add clear sheet to to

Mark's right. think I

It's dynamic.

see markets and could be there of out. to X.X be time. that have We times would the X.X XXX% always we to So that thought within play how we reasons. the results We viewed never

But don't we long. we be to for and be want wide there those, to extremely want of don't

we very that have. strong to have rating credit commitment the And so a we support

making It'll also to we looking We and are dynamic. value sure at share that are repurchase returning be shareowners.

Brian Maguire

term, depressed. XXXX more is a an of bit question. a open-ended question longer just a cyclically of then my And bit last EBITDA is Obviously,

You're cutting growth productivity a on the of in capex back projects. bit, some

pricing don't I from XXXX, about increases. drivers higher movement earnings coming in the words, beyond if think be other where the where we XXXX, growth question beyond of we from should is, In beyond get growth price earnings guess any there? would

Mark Sutton

market from as the investments over moves for come statement commercial well is beyond a box dose growing we've products, segments business our new and And cellulose And I the made earnings are at growing in the true fibers mix business time. any think growth a of will as on and there's business. pricing improving healthy that our that our better most. constantly looking structure then our that's cost the

Operator

Jones of Deutsche question final Bank. today Our from for Debbie comes

Debbie Jones

feel Just two and have how questions. you then targeting their characterize the relate you any they in as efforts? Europe about of current I'm going to way could you you it. I'm them I ask your secondly, happy together. just European sustainability earlier, outlined to footprint? differences aren't but And know major overall US versus curious that any Are major you're customers that needs your the position with M&A with seeing there your as you

Mark Sutton

do first or happy the sort So we're yes, with the we format are we we is that which for But good There to is, in not so footprint. have Turkey, business example, trying large like the cyclical, we they're are like out I around the have, that over some and market think structural in been our mix. now time. which issues has good a whether answer high-performance mill

core. its to to continuing business improve we're from so And look that

this good think due I mindfulness But and carbon is with our Europe prepare very is resources, story and but Europe we of is the partly role regulation that neutral got then And fact we is for lot partly the and segments just sustainability energy might are indicator But well our heavily playing customers natural biomass the I or later. a largely of tends that recyclable to it's and playing and initiatives, market year sustainability here, learn a for there, on from in of the that various just very, it generated renewable packaging to be consumer. be two -- year helping we've with think ahead in products think their sustainability, leading the market due a or able to a consumer two to I things fiber in customers.

up So talked sign want just points key couple about. to we a wrap we that before of off, I

for ways slightly to discussed you this investments free IP of today by delivering we a side. a different innovation, focus flow. commercial is count lot the looking from wins. Our by but get on what year on can equipment, on, that's it. We've what generate year talent, flow is We're commercial made and free We'll cash levers the approaches, strong focused cash to year the deliver to and year, beyond in we're on at

our long-term of in future. that We cyclicality. fluff paper We're plays But we fundamentals. fundamentals and core believe businesses our pulp some always in in boxes make we believe and seeing of the role business be we the what solid the make now. There'll what are and our have them solid that some for

some talked investments as feel think the I year balance sheet, are the a company, I of through we XXXX. as And give us about we navigate about strong And good things as today, commercially, said momentum the can of operationally, I we free where And share investors, customers that and our the flow, outstanding XXXX show a year. stronger cash every we make like ability us generate smart gets people. still outstanding and strong year company it to with for

turn you. I'll Guillermo, with over back So that to it

Guillermo Gutierrez

joining for Paper's call. International fourth-quarter earnings again, you, Thank

you. available As questions. always, be for will Michelle and Thank your follow-up I

Operator

Year in Conference today's XXXX participating Call. for Paper International you Earnings Thank Full and Quarter Fourth

You may now disconnect.

International Paper (IP) 31 Jan 202019 Q4 Earnings call transcript