IP - Earnings call transcript Q2 2020 | International Paper Company

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the International Paper Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Guillermo Gutierrez, Vice President Investor Relations. Please go ahead sir.

Guillermo Gutierrez

Laurie. you, Thank thank XXXX and joining Paper's International Good call. you quarter earnings second morning, for

Our are President this the including and Officer. speakers certain morning is beginning Tim Executive and There on Nicholls, Officer; of Chief legal the Senior slide information disclaimers. Vice important and presentation Financial Mark Chief at Sutton, X, Chairman

including forward-looking subject to are example, this the of For impact that during call, statements we COVID-XX. and will uncertainties make risks

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

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

Mark Sutton

Thank you, Guillermo, and morning everyone. good

X. unlike half outstanding flow free exactly as performance, stakeholders us the see cost results the pandemic strong again of in on remain our first commercial the Paper. year, as And solid our short demonstrating will term. COVID-XX International to do our billion resilient what second we strong all $X continues on cash strong requires the well as term earnings doing. of businesses. management delivered can and of the free and we're the The well long Through quarter, We generated as and experienced to that's cash flow through and strength across be operational of from slide for to to we you we've need all We discussion in our what begin as focus anything

recovery trends would backdrop. pulp to consumer be and by expect, outpacing would the demand for and is resilient general vary expect end-use greatly fluff corrugated continues you in in what packaging economic As you demand segment. Overall, business and

and year to strong for the flat we fluff second demand quarter Our pulp. last box in were shipments America saw North compared continued

geographic doing However, to to this that of with and chain our strong a system to demand from a are operational to and in leverage home supply and all continue teams due needs. regions substantial across Against changing scale Papers we've work seen manufacturing their disruptions. And commercial decline tremendous the job we backdrop, our customers our businesses. teams for Printing our costs our optimize performance ensure meet flexibility deliver across and school

company's second the to $X.XX the the now, teams solid of I'll job non-cash a $X.XX All quarter the Ilim our did turn FX and quarter. Overall, through X performance second environment. this current the Operating specifics slide of earnings results. this managing favorable of included in tremendous a impact some of shows to quarter. share were contributed in our which per

the the year. sequential free said sales, generated majority I Looking the the of for cash to at half bringing attributed flow billion decrease quarter, strong in of earlier, we demand is first Papers. decline flow for Printing the the $X second as in to cash free And

framework, to allocation a invest return value. to and We capital cash maintain shareowners with continue create balance consistent cash apply strong to our sheet, to

We how in as the generation thoughtful cash to we will focused use uncertainty. manage ongoing continue remain cash and we be through on

Turning to slide X.

again to entered proud take to of ability Paper pandemic starts with essential proud of them high each employees. not to to that International commitment -- with and opportunity care their perform once position it also practices. boxes critical our teams of we're deliver the of frontline that level perform strength needs especially health quarter, donation agencies last highest customers. at of want a including our really our reconfigured to our to corrugated all doing a environment agencies and to with challenging take align communities said to other for I only work COVID-XX food thank the the in and to even first but and As the really our COVID-XX this ongoing their I supplies. support the I'm in adapt work -- systems I'm

taking continue care ensuring times As we're impact the begin the magnitude starting crisis. some the a focused financial on strong customers and reopen. the COVID-XX and our our of recovery We'll the that, by to we staying uncertain of look said Having that ahead, of around company markets economies through phase duration these navigate the has health to and as in regarding world well-being see persists. of to uncertainty of our foundation economic each employees,

Now, third quarter I'll as our Tim, it as who over to cover outlook. performance, will well business turn Tim? our

Tim Nicholls

Thank You, Mark.

to resilient Volume quarter-over-quarter favorable, to $X.XX the export as later a of on demand flatter the costs, drop containment business fixed demand by was unfavorable we Demand COVID-XX slide impacted our mix down as first control. part Papers, by across bridge our was stepped and as even well pulp the all operating geographic X, with unabsorbed we earnings from Price costs Operations the earnings customers' production pulp corrugated levels. per mostly business regions $X.XX share matched substantial we in pricing due measures. by we largely quarter. greatly trends Moving In due demand. things we for packaging fluff papers experienced in and improved fluff and surge to to from improved and demand on varying trough in to that region. was containerboard in our and Printing executed initial were

we did are and costs. operating, noncash partly delivering currency and converting at Given operational in rate mills tax planned. fiber managing I'd sequentially costs quarter-over-quarter, wood was favorable and by that our excluding control, second higher-recovered the at as energy the an offset well the is facilities. significant earnings And quarter downtime the business. were our excellent the equity By the lastly, this note favorable, Maintenance were lower as areas outage partly translation executing environment of effective Paper's costs, we we the in quarter performance strong offset lower job gain costs outage lowest were favorable our business and impact costs even unfavorable in were which expenses expected. maintenance Input Ilim. with after economic year. Corporate

start segments, with Packaging the and X. to Turning slide on I'll Industrial

and Our normal the Corrugated all the packaging a economic remains whereas Europe strong America. regions resilient higher containerboard partly European and American is in shipping seeing impact is in business the and backdrop, quarter, seasonally well containerboard day we levels and performed well. are America as North North from to North less in prior in This slowed from our outpacing enter geographic inventory business. favorable, demand well costs North indirect converting third in in sequentially our demand customer one was mix export decline quarter movement quarter. and as remained levels we COVID-XX in across measures. by in the strong, slower manage second second was of the mostly higher quarter. and offset Performance in improved demand and decreased as index America. our and very mix elevated direct in demand business as Volume prices segment, the Across Export the price due facilities prices mills was first

outage shifted well million as in third costs about the quarter. We to Maintenance improved start-up also planned. lower costs the as onetime as from start-up in items benefited sequentially $XX we as Riverdale

cost wood, the fiber that we higher system scope part significantly You outages and our may Input in timing with second which of costs. partly further recall conserve by energy unfavorable to as and lower recovered average COVID-XX optimize quarter, maintenance plan. was distribution were adjusted our offset cash our of and costs the

the our We in second did Finally, just quick mill of have mill as planned. American also a Bogalusa have North Row system, an higher million related $XX update the insurance containerboard costs and downtime. back quarter started but on we in quarter, up the recovery to the

in so this between insurance was quarter And finally, And now quarter. about is wash cost. planned completed XX is start-up and incremental later the a Riverdale and conversion it the

in American take July. resilient best We're outlook as corrugated at The X, the states we mind, slide for closer seeing food near-term reopen. to in as demand segments. segments exit environment demand our cities across We're Turning fluid. with service. Keep seeing the greater our current packaging remains near-term a modest look of segments a improvement and also trends is let's slowly view exposure North and corrugated packaging to

normal Within demand demand return Consumer foods as segments, consumers for beef, normalizing to is strong the processed poultry capacity. shopping for frequent plants is returning to are activity. and and processing pork more

activity where have fresh in improvement and We're food overweight protein establish beverage restaurants and seeing a in slowly capabilities. as advantaged position reopened. we've invested We an modest produce service to

consumer as double-digit continue growth We suspending e-commerce channel. see reliance on in increased to strong with very e-commerce,

although a the role challenges with advantaged e-commerce goods, We overweight levels. reach. very from have in The essential low seeing consumers. critical corrugated and deliberate in bring improvement, durable reinforced COVID-XX we're And strategy to products a to capabilities packaging geographic modest of surrounding

North team and supply capabilities understanding success slide box American to We're investing we in company our and challenges plants Packaging plant expand and On box enhance the to means through the to response to segments long our containerboard Greenfield that focused Mexico customers' they the their the such disruptions to our X, our and business. investing as in recent further the box system capacity on through by to strengthen massive Our strategically adapt needs navigate in growing pandemic. position regions partnerships near-term for as that chains converting equity doing creative and capabilities in meeting continue That our remains as and and COVID-XX, Industrial our term. channels. due support investment, we

growing is of channels American All profitably. North which our at aimed

feeder recent annually North our me network in ownership range channel providing examples. This by broad to tons increased Let XXX,XXX of of investment through with containerboard America. couple allows plant interest we second a share in us the strong expand a a solutions. In quarter, sales sheet the a by box

North customers value growing clear investments also and converting capital understanding customer the our returns. of is segments that box chain million American consumer. made end with needs this a our that mind, by creation value and view have With to our attractive their capabilities support and to decision starts to objectives through enhance increase to $XX in the commercial investments geographies. about system our capacity year in We It

our EMEA we're in business. update Turning to provide packaging the XX. slide want progress I an to making on

objective above Our to this bring returns back business our sustainable margins and capital. mid-teen cost to of is generate

with this we've by array mill improved of you EBITDA with nearly half see through packaging can first advantage box catalyst. As compared year, an building Southern to world-class provide containerboard by $XX customers integrating the solutions. important lightweight broader recycled of million Madrid a in network our We're Europe last The year. adjusted with is

provide with additional acquisitions Madrid returns Our opportunities ahead meaningful the and in in recent enhanced our converting commercial they've with region. outlook. We're well also the integration importantly, performing box delivering more more also our system and in Europe performance They And our making ahead. of reach opportunity investment mill. capabilities progress geographic are

All The on our commitment are and deliver and across clear. be of our and we're challenging and our operational clear plans have plants path to the resources COVID-XX, leveraging from due objectives the to skills company more commercial commitments. near-term may but

about of improved spending the takes pulp onetime the customers strong first experienced demand In pull half impact look pulp demand. year favorable mix in and to of hygiene the the of fluff tissue overall. we and as offset the outage and Volume customers. half the favorable closer were of resilient demand. Taking of managed the Maintenance cost Global evident by year, chain of non-repeat tissue quarter. destocking and through consumer the toggle Price Turning performance Overall, Strong well and supply as XX% surge our was risk the as quarter. in the mix of XX% second costs normalized towel of all our Through planned first demand items puts management maintenance business. pulp pulp. fluff in COVID-XX demand Cellulose latter needs about consumer to products regions. for consumer supply absorbent work the a across remains at improved stable part unfavorable and some XX. market the in forward and initial as was pricing and as fibers was operational slide and demand chain for with The of some first underlying we for on Operations costs completed in was we planned. support

cash was experienced impacted stable printing a matched and regions. demand Turning Despite cost across to Printing costs environment. with cut commercial were and Papers Across performance earnings our customers' We on as range XX. well segment size the in working based Operational slide outages business We capital. regions. across our by by production of costs inventories channels. quarter, Operations decrease decline while target positive at and and strong on volume continued focusing challenging impacted the we maintenance price and geographic the executed. and mix all short management to cost unabsorbed exited to flows the the management was both the our all demand a generate current was demand on quarter fixed our

reopens. in to Looking our ahead, can and focus on working customers' capital. uptick recent our order entry principles: focusing needs; our economy for three one America control weeks will three, team we've our meeting as In and customers' North production what guiding changing continue on matching with we the an demand; two, to seen cash

remain all early very depressed but it's the know are longer-term in could too that as significant levels. although impact, to be work soon in unclear. reopening's And of our However, from remains signs There print improvement school drawn measures advertising persist recovery some and is out. also review clearly uncertainty the from papers

other Looking to net improved $XX quarter. mostly China slightly export were costs pulp debt higher slide share. outage China. in includes and sequentially. seasonally This price due quarter. a Wood in We maintenance had softwood non-cash which Ilim's in $X.XX IP's were was on costs pulp in dollar-denominated higher of second $XX improved the at was gain million per exchange and of Average results equity also on for demand after-tax higher softwood sales also markets the U.S. Volume XX. earnings foreign portion million or Ilim

So XX. on now turn to I'll the outlook Slide

in to their a operate as adjust continue uncertain world around purchasing consumption behaviors. We challenging environment consumers the and reopen economies and and

chains at supply sizable As the standpoint, products severely step-up a but service third costs normalize. from for we've pulp, maintenance seen operations consumer across quarter. hygiene from which into businesses destocking an still we pace. Underlying benefit fluff demand depressed a improvement as In Riverdale higher the expect absorbent reopening's, in demand see as remains as although signs plan should modest we packaging, start-up of food inventory move we the quarter, do well Papers, for third resilient some levels. solid From early in Printing we outages for

So Packaging. closer Industrial at taking a look

due In million cost. to movement. lower of $XX impact $X Operations to $XX to due mix $XX fiber million by and increase costs recovered price $XX destocking. due the expected to to one-time to the box Fibers, partly well to and on in earnings to in European mix We by by and America. by non-repeat costs America, and flow-through expect million and input seasonal index costs costs inventory business higher prior price and index million outage prior seasonal with on is million, are the to by expected by and movements demand to of mix million, by are lower unabsorbed of items higher $XX to in expected improve in are impact American price North expected down Cellulose expense million start-up, quarter. increase is Volume on by fixed to the Maintenance earnings lower expect the the is expected input $XX and increase Packaging. costs. mix expected expected increase Volume lower our second North North costs. as to energy costs million higher million as to decrease be $XX costs Operations packaging, is Riverdale are and lower we be expected $XX Staying box Industrial to seasonal Maintenance related chemical expense of in and expected outage due stable. higher

Moving Papers. to Printing

and to $XX expense price costs costs is to to be initial to fixed is on should input and $XX $XX due down demand mostly by on export and to expected million expect stable. $XX channels. be Volume million, by Maintenance outage mix We are absorption. expected earnings improved also improve increase improve Operations million cost million expected recovery.

by the million are are lastly, venture. $XXX Ilim details you see Details appendix. And the As lower and company the I the expected by business about earnings, third will earnings included outages in shared, maintenance under segment to in the outlook joint noted quarter just in our for equity across quarter.

to a choices Slide XX, with allocation capital Debt to our to on Turning repayment priority. in you I quarter. take moment a want is I'll start balance sheet. update the the

During reduced the second we debt $XXX million. by quarter, long-term

later also I'd with agencies. allocation part of this investment-grade our Returning to met $XXX essentially which million end a We expect credit And also will reaffirmed Moody's capital rating. settle we cash month, is meaningful XXXX. of as quarter, we eliminate to through rating framework. recently note another bond called debt all the maturities that of this earlier our the long-term shareholders

the Directors authorized third month. quarter of this Board dividend Our earlier

the With quarter. we about shareholders returned to have third decision, million $XXX through the

We're investments. due of increasing our returns maintenance in as projects XX% with at as full-year to million. mostly of to Rome capital bringing strategic is related our the by to more target business, this funding increase million, $XXX This at Looking year. earlier XXXX box incidents CapEx $XXX well and Bogalusa U.S. than

of to we're As we're I quarter, a million. still are point economic can the XXXX while higher expect funding in eventual to no next we year's approach early to be said capital well recovery. last ensure at And this decisions $XXX for positioned that deliberate capital you the CapEx taking than planning, stages

XX. to Turning Slide

$X.X billion as compared first the at billion cash $X.X the of have of end standby and quarter, liquidity strong with at quarter. the We place of in second liquidity with end the

this the pace flexibility of recovery. it given I'll financial We to the and uncertainty provides over back and our of of Mark. All that with reopening crisis and turn severity the the And economic facilities committed are of unused. like the

Mark Sutton

I'm Thank Slide you, now. Tim. on XX

Tim Nicholls

XX.

Mark Sutton

excuse today's XX, We about our conversation XX. first strong performance. me, talking began half

doing job executing staying and Our each care on teams We're great taking focused what and well are a our other. can control. customers of we

have say we about in may just any past and heard me in challenges circumstances set that built company that face. thrive we You the can the of

I think confidence our first is performance company. my really a half reinforces Paper International strong that

right company the strengthen established continue our to products in well ready The great people have we've the with customers questions. we're on day. every employees, And long provide advantages to depend We the that, help we your market while for us are term, serving for the near that channels to term.

Operator

first [Operator Jones the from Debbie line Bank. Instructions] comes of question Deutsche Our of

Debbie Jones

Hi, good taking Thanks question. for morning. my

Mark Sutton

Good morning, Debbie.

Debbie Jones

I hoping about the morning. have was corrugated And business things of in and Good result been that's through how a then re-highlighting a of just kind we much demand and commerce as by kind talking July? could of very how specifically, start become of how part you? for trends has that kind the of business changed

Mark Sutton

couple a So for notable think take segment I at processed The a for packaging corrugated just the most largest of I'll is trends shot us. food.

bit past, stabilized As continued and flow put information has grocery certain the we're through And segment are that. you seeing trends know from part have helped actually in out still channel and overweight that that large in subsegments. a the demand we we of the retail

periods got years last at again, little the mainly One is And in being our into in deal several picking -- On still last order perform production was International again We're we're even the magnitude order very said seeing the particular I above quarter real lot able see protein, Paper double the growth think normal we that issues. of still it's where a bit of segment seeing of invested very, segment solid on. it customers. magnitude be growth. still of we're their to we've us and double-digit over that's A our growth demand up. in in protein solved focused of a positives e-commerce, to because of see customers of large to needs portion very invested has good some that. packaging fiber-based and that strong beginning on now. for And trouble that depend at We're and continuing a I

So still chain. supply on optimistic. There's some food uncertainty largely, we're the service

and produce is to a does starting not quarter, I of -- mentioned think produce cafeterias in that but lot and to of restaurants last some cases. back, come we all go

corrugated and watching International as in that large, still we're again the main So That's segment produce it's in steady, forward we continued But for an and and Paper. food packaging seeing important fresh we slow -- see think we'll segments but go July. improvement by we're closely. continued very for

Debbie Jones

past quite improvement And I order volume was backed here helpful. month then That's on but paper sequentially of as of or realized well. demand you to the I Thanks. industry this predicting Okay. kind in are wanted pickup touch a a seeing weak, million. the that $XX up

seeing relates people just look understand driving it I what's there? that? What better So here schools do we as to need you're What to going going understand cetera? et to to wanted forward back work that to at trajectory reopening

Mark Sutton

treatments. important feel with think that But a with do offices therapeutics partly way careful areas. and hit two of how be in you of we improvement that think Offices question they're the I Debbie to watch they don't, an returning in mainly very out are very, very comfortable in going employees options seeing have we're said learning. when people there'll now I demand bringing with in-person some example to pickup their hybrid that figured see of one. for it a their The another demand open and have school Printing of Even correlation a some Paper lot least back amount that. actually as depends it's are at to to starts on for We'll and to are schools that mark. if those and People places on occur. see to of we And closely do where we because schools. where pandemic, people normal workplace some

Debbie Jones

over. you. Okay. Thank I'll turn it

Operator

of from Montreal. question Mark of comes Wilde Your line of next Bank the

Mark Wilde

Good morning, Tim. good morning, Mark,

Mark Sutton

morning. Good

Mark Wilde

IP your whether your kind into it's like over then if [Indiscernible] white thoughts for it's also operations wondered your large, I maybe could on other get paper -- but America? in industry assets And markets, big paper Mark, just for and in repurposing your and in of Europe particular or and writing pulp the businesses we Brazil packaging. globally whether thoughts North for at printing

Mark Sutton

So can can good good in a repurposing. for Mark. repurpose a you basket, of smart talk large know on question and It's idea can the as a really really it I a it technically, you idea mean potential it's money. wood and use about the a question capital bit when the you be of bad a lot or configuration a of depending be

not to up you IP our And fluff in slowly speak the fiber fiber well specialty world. set boxboard U.S. and folding i.e. we our so pulp if for I'm will do worked papers at of going The it's have that to about well active world-class or southern all of that we've for system availability mostly and locations world low-cost printing the an possibilities serve are business process that paper. business But type the -- product. including that a either got Brazil we printing writing what printing with we've had eucalyptus containerboard. And in very things fiber for for where That's niche in softwood repositioning it's us. Europe with aren't

not be any. we demand permitted the to like decline. much sure for it is how of don't So, We're going IP, if

assets do drawn our in positioned And but this. continued like recovery Tim to customer As out, we the through to our base. options the particular expect manage we're said, particular we for way be we have

Mark Wilde

a talk in are what then can fibers? for going It weak I keys sort for But the that had cellulose question are since and that acquisition me the disappointing pricing. the this is to ago. what issues? of know is global you of And years been improving Weyerhaeuser quite to seems just about it's pulp fairly had Okay. half three performance a years follow-on part beyond that we've be I

Mark Sutton

months Yes. in good business. the we a first months had XX post-acquisition -- to of XX combination really It's

of challenge through the If cost to half of been results Pricing flow focus the the absorbent we absorbent that that then meaning our is structure in problems products we products margin at XXXX, has and of softwood and on capital. the disruption end their connection you are both in a ends needs fluff be into in on were pulp area latter some of approaching remember which end market the needed of because pulp. higher segment to general drifting

formula For that that's a margin from level they global and in pricing now added ecosystem we're we right to a which us, need to It's still a we've paused certain buy our absorbent important to the uses. when have things product lower now. continue progress pulp specialty. success and year for place XX% put XX% income probably be need people those disruption in investments a noise is We working off of We're still of in about in to the believe cost on. better is at product overall our right that overall that There before especially a lot Weyerhaeuser. strategies acquired structure, we and get growing. to on are IP -- an the we into system then the innovation, end the And The level. pulps have legacy product, to good is we propositions plans. and need value the and commercial had Fluff better product pricing half growth to a

Mark Wilde

good. very over. turn Okay, I'll it

Operator

Your next Gabe question comes Wells of Hajde from the line of Fargo.

Gabe Hajde

Good Tim. morning Mark,

Mark Sutton

Good morning Gabe.

Gabe Hajde

COVID. markets about accelerated if particular curious something I'm given grocery least thinking more was I it's side more strategic and that CapEx been large guess end a bit I million. is on of scheme the within e-commerce this on about even really of that's I the kind online kind delivery guys specific talked according for $XX projects the read little necessarily at focusing not IP. in of grand But to I you know what

Tim Nicholls

that. North America. Gabe, Hey Yes. it's by depends It's Tim. across of It geography some

in long we're what is to growing segment be that So, obviously Protein term. coming and seems back we rapid pace. to believe do a e-commerce at trying

and So, over the of doing to prepare we of the increment looking to what that next United area-by-area achieve time. States we where facility-by-facility want is expect and for growth we're customer supplement for

these supporting strategic. There's It's equipment. around important upgrades. for But have. So, corrugator preparing that we have very it's customers and some mostly converting segments that we it's

Mark Sutton

just comments. Tim's to add to Then

e-commerce Some of in of some puts segments plants. doing because on growth we're of the what great example. the a It existing pressure is

type targeted this some the little good seen. capability really doesn't just today. solvable line is we've investment a at of the have a add a with growth of all at bottlenecks to So, cases plant process reconfiguration. bit debottlenecking that's been or created that And investment that And particular in because some have of of it

Gabe Hajde

seems any in some there be it's out outside probably I guess system do bigger difficult respond? answer. such might organizations I from we you of a same at kind then And recovery that time other XXXX-XXXX see of or that? in home you world drawn crisis. to are and the speak your you're from how question in sort kind saw mid-XXXX. in work of until like appreciating what we delaying Google here seeing structural the embracing would printing similar of decline printing some same It about again announcements kind thinking picture the Okay. looking what to Can the you paper of to mentioned you paper to guess how And But

Mark Sutton

thinking are it. we about So,

factor return what this out model. after We it which around hard question. have Again, It's life. do robust changed work the return fast at because right But people figure put as into in factors answering sheer to a has and Mark's it. how will they all I in their mentioned, pretty speed to now of those what demand inputs pandemic everybody's

be the a coming a is our options. But and happened time, the the and will same containerboard, in top location that in the of of the system, us And down. was difficult system past predict if paper That's the actually view think there's it a that has very basis. what We do will permanent what the but make a now just this -- big and what's you likely if just on it's some of IP's size at expressed. then, that that level But -- white But decline. becomes we the you I a new step look, past. a we us happen. secular our it tell took mid-teens, of to know about type helped of Recession, physical And Great starts gives just just it is soften out back to the been didn't share of in some part at what We we learned mentioned to blow actually for use total Riverdale. it's as company. but with it's hard percentage capability the

Gabe Hajde

Thank you. luck. Good

Operator

next Staphos Your America. from George of of line of comes the Bank question

George Staphos

the morning. Thanks all details. as what are doing Good everyone. with Thanks COVID you Hi, for well.

Mark Sutton

Thanks.

George Staphos

system can Or buffer about blue have wouldn't fixed cost in you business? would And COVID in guess get as a for that go happening it the other cost the blunting you not sky fixed The question point want quarter the or a result, foreseeable good some variable variable but what's done at be past, either in be managing demand, job, ability very you even there making of seen, two I here, you've companies industrial. been has the what's to and we're I since a what a have as system. normally the with have or year is coming where impact of to the mix, to containerboard the natural limit future? chatted costs, And flex we've I'm happening demand leveraging pricing the the that and level somewhat a where you do since your weaker done began. now frankly variable, able kind sure of to same with because on continue of think company a last your

Mark Sutton

at cost skilled materials inputs and hard our they potentially is, all all as the people at our fortunate largest The that costs happen. percentage that's in the largest. do of material variable, look that's highly costs you asked know. of because are industry we variable our make this of way you not costs. our And look the What people the as we're to our So answer we we are in question all as conceptually that of it. operating as What a don't

chain make supply the run of without all so all to be able flexibility, investments, products to done profitably the this. make the And be beginning designed to the our and we've that to running able same XXXXs and into comes wide facilities we've of since

year lack and first we're This have did actually the downtime of in we we doing demand about the with of high that pretty costs. think variabilize half in year last levels year. what So containerboard high of levels. without order We strong the

I come economy. business. have is what of there's some not I open we got we our wide to And materials give lot cost absolute to some absolute only a our to that ability a employees in lot I when limit different of of continuing. IP a So fixed They've that again, successful levers. normal up think variabilize view have like with a We've looks everything, perfect a do see is but to there ways credit. be And there's not, by

George Staphos

Mark helpful. That's Thanks.

ability when challenges. pulp for commodity at where hopefully the now, strong Again back So the were that that to whatever well. a sounds matter that pricing of pricing up company might Mark was to within tough have the do reason or fluff And in the I also a period like to of the back was years low obviously wanted point, pulp. of had and and look it cycle, XXXX again strong pulp. but on Its at a the look was as had. a for irrespective we're global business, terms markets. XXXX demand very XXXX It earnings looking once you at manage system picture the question come versus over for year time, you didn't period company's kind like. pulp teed a for bottom a

be commercial and investments success getting your and You benefits. as reductions, to cost XX% pricing mentioned mix better further value absorbent furthering will formal the your to customers get the and proposition to that so about

If you cost in level you you of added guys. at increment Thank terms be mid-cycle did And of could all power a business? you that the if mid-cycle from levels? to your that to your current What add capital? what be would earnings that would think above up together, do you, the market burning

Mark Sutton

need that And meant our any if I commercial and structure. talked And XX% think structure value I a level or proposition segment lower customer, a straight in that obviously we've is not business the and we product, cost by we margins what then, teens, at by about range is, success it's profitability you Thanks. high like look need of line across.

few back cost track. get inside that can this one a a projection, we still that We taken together. It IP little give our pulp need at right give couple but bit and off develop that to when I'm and a of really we fluff the the going more years by bit high-value I was – was have we back some of that, the company this ago, at number ago But or environment, global eight we products quarters vision an by probably believe, of Weyerhaeuser level grow you put That's little in doing that's track earnings to did capital. not would of. to just And specialty a number business be of range. a ago. quarters the own

George Staphos

will All turn you, right. it I Thank Mark. over.

Operator

of Your Anthony next Pettinari from of Citi. line comes question the

Anthony Pettinari

morning. Good

a XX%, system, it American sort something that it integration the terms those itself? IP? making to raising right? Regarding of the the the which And of in is I if necessarily integration have is converting investments move goal you're important not rate I is rate and forward your that's North needle did think in that in is of Or

Tim Nicholls

that have American profitable more It's so it's most market. through can our our better Tim. goal put North channel Anthony, integrated that to we We the the channel know like we is that's the Hey, we it. that margins our –

we strategy had to funding So, needs simply segments. keep growth segments. looking built customers to long-term from capability up always to and those those is for and in that. We've capabilities around certain ways we're segments, trying innovative supply with we're This that customers' expect our where creative those in do pace the have and capacity we

make fixed constantly most through American but looking to don't we channel hard have put intelligently we integration more our target that's So, North on volume se, the money. where per because a are we

Anthony Pettinari

when even stockpiling headwind? or there kind course And inventories to like That's could you a sort Packaging you at of pulp little of Okay. into pretty of the about look I'm helpful. Or finished consumer are over destocking you in turning wondering, the there? customer the then products, a feel maybe any inventories turn out that stockpiling And inventories do of destocking on is quarter. normal talked bit Industrial side,

Tim Nicholls

No.

on we the in in were containerboard the we're think containerboard for that remarks, squeezed. tied – – mentioned I prepared As our U.S. for based recovery we We're saw. it we

issue right our is that the system. basis weights the there anything places sure we've if got in and the So, making across grades right

of are export the and the side, customer season. for inventories ranges think On roll the in we very stock for time normal year

late around think we're world so And between in should in think shape. inventory in we We levels back And be good agricultural with the September, season shape. seasons August, now. – October, up in right good are the picks inventory season the

Anthony Pettinari

turn very That's I’ll over. helpful. it Okay.

Operator

of line Brian the from of comes question next Your Maguire Goldman Sachs.

Brian Maguire

Hey, guys. good morning,

were two that Just one questions wanted or already asked. to follow-up on

it for is obviously growing while. been has e-commerce of the a company a Just part

might shipments. I your talked it of about think in you box the mix be past XX% or

an now we've of be the stand challenges parts do mix of might you of continuing you Just And, that forward? kind if that have some of part and a the bigger quite growth estimate that could guys going other seen of wondering, to see potential bit figure there to you company? do – a declines any where given in

Tim Nicholls

growing just In them different capabilities No, rapidly. service challenges. XX%, and have we growing that or a like more were today, normal dynamic with and I you say things above was it's one probably it that and under it needs two we when mentioned different point XX%. would we've I customer cater to was great times, probably we the our e-commerce with different mean, think across past platforms. and and position, got set

customers. we So all but setting, yeah, at a it normalized the bigger the type of have I we become continue seen the we customers and segment, and mean, with rate a in those growing high it's of like part not mix. expect that to we like move have of a But dramatic a

Brian Maguire

a the on up kind that to potential you some thoughts the But on investments just And just there? one consolidated term? now just tie equity sheet potential with and out any of your then Graphic then that on sort to with independents equity financials? in partnerships of sort to the do of the finally the And that then, question. multi-part will Okay. partnership U.S. see remain investment the the the feeder in maybe clarify Packaging to of near of more related And sort monetize be

Tim Nicholls

backwards that and great wasn't we strategic if said think We Graphic I'll partnership. can. run business. earlier we work decided I We it International Paper. to the a year start with Yeah. like they this On Graphic,

have so of started repeatedly first said position that puts a the tranche us selling with and we clearly path. our And we that on monetization

So, again. we're window in now the

to not thoughtful that just about maximizing try value not traders indefinitely. here continue to We and sure we're hold we're it We we're make to range. and that make within be a want that, sure to

that next there the And for specific you quarters. few how takes over I place. our path monetization a terms on monetization understand agreement requirements clearly in So, that think are of

we're months, back the window $XXX we every since now next in And us. to so max in six available did and of basically January million a it's

of -- was part sorry. what the I'm your the question? other of The… terms In

Brian Maguire

Sorry. a Yes. were couple there. in There

earnings now? So any those And consolidate just potentials? equity clarify one the you investment to other then investment on will to sheet feeder start just

Tim Nicholls

because others have but with the won't holders. look we And we level a to have can No, opportunities do. and won't and consolidated, for the excited about creative a opportunity that service the relationship that Yes. equity be we're from capability things position, we'll and it we're or maybe minority do other

of specifics, to in all the North about how we market. not the and creative be speak to segments participate thoughtful I'm of want going so American we And but

Brian Maguire

Thanks. it turn Okay. over. I’ll

Operator

question next Davidson. the of D.A. of comes Chercover Your Steve line from

Steve Chercover

Thanks. Good morning everyone.

be So, the stake yes, was also how thoughtful. you'll my question on first and Graphic

is ratios own your only for also valuation? you're therefore not when process it sell, to whether financial Graphic's needs, but considering iterative the on and implications cash So the

Tim Nicholls

decisions Paper's investors and Well, International on make stakeholders. we based

cash really have. position to our facilities the cash flow liquidity and remarks, committed from we mentioned us think I so that prepared and feel we position that in And available good the cash I about through

that choices So decisions making across our we it's trying can entire looking to allocation the right and really before cash capital have be and to at about thoughtful down we allocation apply framework. then different capital

Steve Chercover

you going then Okay. the to I'm second never which my that really question, say Asbestos. heard, word would is Thanks. And

being more is mean, I'm that I it's situation. Asbestos us you've taking XXX-year-old sure bigger a isn't time little company? a got I phase think the the I reserve. this give color? recall first a you you hopefully Can of first

Tim Nicholls

Yes. just No, Products. it's going matter a it. we're acquisition reserve. approach mostly It's with related of that And establishing this took we dealt Champion the think to in be we're we've -- around extremely being we conservative to conservative and

we XX-year there And excluded. the so we of second time long like took charge the in think that period be That a very could quarter. reflects a

Steve Chercover

love streak, your final my a than a And more winning keep street ability I really alive. I question. hope luck. Good of so dividend you've Okay. to comment financial got is

Tim Nicholls

Thank you.

Mark Sutton

Steve. Thanks,

Operator

question comes of the of from next Your Josephson KeyBanc. Adam line

Adam Josephson

Mark and are you families and Tim, Hope well. your morning. good

Mark Sutton

Adam. Thanks,

Adam Josephson

you don't up July, Two the is that demand giving if you July? questions. what asked the think you if for whatever gave were I July your quarter? mind us Tim, for of Debbie number a And balance number Would about it. in for think roughly expectation I is

Tim Nicholls

where month strong to in we second similar very June we what it's mean relative the can you I Yes. a as earlier in imagine were quarter. experienced June. was And to

a like top have is a my head, June's number off July but I copy the carbon of So results. of don't

that The well, segments economies So reopen, so. how are we that well the about seeing performed we perform feel to quarter across we're very other normalization have starting. and remarks prepared provided in continuing color segments as is good

Adam Josephson

numbers? the regions have to effectively COVID, it by sounded Mark talked corrugated not difference you got do economic right, has differences so it. you two in I obviously, it more we packaging about like. in than Thanks. attribute case but given what Got outpacing the U.S., the particularly that the in backdrop judging And the much handled heard you earlier Europe between Europe If

Mark Sutton

Yes.

traditional better in of the and does. because our comment outpacing the backdrop think performing difficult I the is what product lot particular is mainly a other given the economic all product GDP indicators, a

European is I think pandemic that how where think and bit U.S. little chain be a country-by-country. And because approach not we to play a I quicker. I the out Europe's we've the is and the for what Europe in may the economy and compare indicators, done U.S. than supply some probably the on comparison opening of in robust see thing in is or our about maybe little little bit U.S. the market. all It to the you do think the gone things a to the economy correct managing they've more may but faster

Adam Josephson

and Tim, if more may ops on ask cost. just I one

were costs? you what detail expecting. there go -- expecting? Industrial. I of of a Thank little than just much was you in about can A about so just was in I was to you. more better the the Can less much little more unabsorbed so a that and ops you were you specifically were assume you think what demand ops and talk in quarter But a lot more more was favorable $XXX into favorable bucket better overhead. million better had cost little related than

Tim Nicholls

across and it's lot Yes. things Sure. the a of board. It's

All of business is well. our performing

So reliability has given this been very good environment.

been managed reliability back managed moving very And performed mark system have outages, Mills chain a made The well the fewer while of with can disruptions We about But ones our that operations against has executed to were downtime complex the had has taken, haven't that comments it very they very large been we've we've you has operational maintenance had going cost. well. the where good. way Supply the economic we've variabilizing well we've major sometimes. are lot parts. them.

So performance. it's really the we've seen across good that board

Adam Josephson

of Thanks Best luck. Tim.

Tim Nicholls

Thank you.

Operator

line comes of next question Global. the Seaport of Mark Your from Weintraub

Mark Weintraub

presumably sort Page have in in starting I was happening up in Rome where to I'm of there trying just context what Bogalusa entire absorbing businesses. lay through sheet be wasn't and related your way for you asked -- to little you curious And to some there as understand On of you would of to about system the downtime your get that is you. point well be would the you how now out Thank how for on would specific what's type where growth in talk absorbed the to would of need be treated? demand the think feeder more? that ramping production I be all I'm Riverdale the question just course that this? production would have a how if system assume XX But capability seeing of not the you'd maybe the us one Riverdale and bit quarter, different second outage additional

Tim Nicholls

Yes.

Riverdale in very unique product. a it's So

linerboard So have a and base top. top consume white making a high-quality, products sheet that customer we we're with white

products. And customer on way the in also system same those manage of this focus to so, they terms part we'll we it for rationale facilities that manage rest grades have the for we the the investment and of other demand make. that the of It allows was

a liners gets we gypsum of that it. for capacity to board same because incremental or gets flexed. all the facing up freed certain to produce in or we need customer it's move now there's recycled paper capacity where don't we Riverdale not So have don't facilities flexed other way If it produce and been demand, whether our it's

In to terms unplanned events. Those Bogalusa of specific were and really Rome downtime maintenance events. were those due

it's as this, an part to bit squishy, So of but like earnings. little a in we environment try it's still a little capture bit that the

Mark Sutton

heavy is and this to product it's cost, Riverdale be make to as and questions was about, is, is weight, an we order main that weight we going mills. Tim proposition earlier upgrade at top the the Riverdale light high-quality medium to Mark, be on business. new to leer in that's it's existing not that and book. what make point variabilizing facilities value And we for for same think I light going unbleached for we're a product strong that the near winning But not that need going other talking the other the weight the make around

what actually adjust make of value Riverdale for going not part adjust we'll today. to an needed. as as product market non-high-performance we'll white top do e-business, going Riverdale. system. a to and proposition the room the to our system our for as And We're upgrade We're So we

Mark Weintraub

great. Okay,

we part Riverdale of million is it base business, about at any as Industrial of we -- and it's to think from that the can of business? part fair essentially appropriate number look earnings about is North here not so base And other $XXX or assume the some EBITDA for think when the earnings whatever cannibalizing American the and incremental

Tim Nicholls

Yes. course. additional of was benefits And the out investment will a in basis earnings facilities. the other the an increment that of Riverdale of for and that There environment, the be in we normalized related got

Mark Weintraub

you. Thank

Operator

question will Connelly come line of Mark the final Your from of Stephens.

Mark Connelly

you. Thank

European Your Spain, solved in had they're of the U.S. nonintegrated Has the nonintegrated acquisition because a in problem project with your a not really developed your changed all had strategy Madrid one-off understand stuff the of comes was mind? that from or I And experience your just box that really plants. converting you because

Mark Sutton

Mark. Hi,

Madrid little of changed say and the the better bit. I saw more value integration we a regional it think, We I clear mill. this when would had

in France for one model a in business plants Spain, for that we it's was one was Northern case the that even in acquired, one good So or swapped, us. very

European that like market in good versus the box market network U.S. and best homogeneous fact have the that think we IP the is mill an market kind plant the of regionally we more a dense, high-quality model in-country Given for is in segmented,

something whatever other focused on, kind I avenues of in kept growth want we mode call it, could has you So it more versus and there, in us more think bolt very take. learned we the to

Mark Connelly

simple assume year future about And one, $XXX CapEx next potential the a just conversion. in I any terms of of were contemplate super for stuff helpful. talking That's that doesn't of you that the Okay. million

decide So would that million? did if be to like the $XXX you something outside do that,

Tim Nicholls

right, That's Yes. Mark. right. That's

Mark Connelly

you. Super. Very helpful. Thank

Tim Nicholls

you. Thank

Tim Nicholls

International it So very we wrap and want commitment where quarter, confident once reopen. in just thank our even more as up, Paper employees I this as for say manage again, pandemic. We've said I uncertainty I'm ongoing got as conviction. obviously work, extraordinary and we communities live to their the the future. last very, our through again with to But I'll

We're have to deliver and our to a financial count footing, us. us do ethics of we're things. the core all values that going and for right stewardship, guided by We stakeholders our strong and be the of on are stakeholders safety, going depending to on can

So thanks Paper. your interest for this morning and in your International for time

Operator

call. second earnings Paper XXXX conference in Thank the you for International quarter participating

disconnect. may You now

International Paper (IP) 30 Jul 202020 Q2 Earnings call transcript