IP - Earnings call transcript Q4 2020 | International Paper Company

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Operator

Good morning and thank you for standing by and welcome to today's International Paper Fourth Quarter and Full Year 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, you will have an opportunity to ask questions. [Operator Instructions] I'd now like to turn today's conference over to Vice President of Investor Relations, Guillermo Gutierrez. Please go ahead Sir.

Guillermo Gutierrez

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

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

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

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

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

Mark Sutton

of everyone. businesses. the across three due pandemic collaboration across newly results. our and I of challenges employees the well flexibility chain managing Guillermo, rapidly begin teams each and converged three customers. discussion commitment We'll manufacturing and adapt significant commercial, you, reaffirms proud outstanding systems while overcome to to needs. ran their XXXX take in our impacts our really and cost our the Slide on well our leveraged supply We to to appreciation changing [indiscernible] care customer's to of admiration our ongoing care my pandemic good extremely manufacturing system for Thank other of take am and our our XXXX full-year of morning, to with and the

value free cash We billion earnings performance, generated our at of delivered eleventh creating free delivered in solid and in tenants [ph]. XXXX. outstanding flow company's year International the flow consecutive $X.X Looking and cash Paper

our base chain Our performance diverse employees, capabilities. and manufacturing and the resilience strength supply our class world customer of our demonstrate and

our to to about shareholders building our seeing capabilities North to enhance build cash framework. we retained generation EMEA returning of our in to and and commitment. prudent allocation, uncertainty, debt, consistent allocation strength strength. of the On the to pension value capital plan million away business creation American and we drive during grow yearend years, to choices and business on enhance in also from our which the few we past right better our we're We plan economic customers early and took financial we're XXXX, path $X.X minutes, a IP. the took the packaging in excited XX% that few balance capital corrugated and de-risk I'll significant our investments meaningful reinforce our of In we XXXX. actions accelerate and converted really to way We're profitable significant sustainable, Given funding our model shareholders. the to with growth we a our contributed to continue sheet, some for $XXX strength actions actions We're in a discuss our invest Also returned in taking deliver and million our earnings. benefits our

disruptions. impact XXXX expense. offset and about of mitigate priorities growth were lower cost as outstanding fibers. strong for cellulose were EBITDA to by driven planned four, the paper for sales maintenance we year-over-year papers business, disruptions demand the other to decline partially Earnings results billion. our printing $X.X of outage by we by through Slide in In These management maintenance the impacted packaging and on choices of lower and Lower as made pricing delivered well spending average lower from Turning flow cash was pandemic. billion global and volume full-year in the free $X.X market market demand packaging

impacted was $XX million including venture, foreign which equity markets a exchange were loss and million Our $XX tough $XX of our joint million. by earnings challenging from non-cash Ilim

we International full-year Across For cash $XXX from proactively dividends deliver of received we is Ilim. million a the levers managed cash year to outstanding Paper, generation. another

outset principles needed five, to pandemic, to and Moving we the at what of remain a we three resilient all on established of the focus COVID-XX do to company for our to stakeholders. Slide strong as

to employees was First keep and contractors safe. our

not Second well maintain I material and executed experience customers strength against while responsibility. disruptions due and to operational We important take was I'll COVID-XX most to our Paper that to [indiscernible] remains taking to the financial our care employees, care success was of turn extremely our International company third our believe the criteria. of did of customers. any

our supplies. my We totaling and for our stakeholders Our remain principles bonus long-term. I on COVID-XX resilience $XX of quarter. recognize their in included communities, for proud to to with the fourth do the to to million work tenacity, essential to in committed in of also needs for delivered the financially teams further corrugated performance am donation our and and company have support reaffirms with two need in them which a We we'll the our million absolutely and strengthen appreciation the XX,XXX agencies boxes all focus what food worldwide. we employees critical the our and to that continue to short-term commitment

cover first over business Now quarter will performance to our our Tim who outlook. it Tim? I'll and turn

Tim Nicholls

operating am I six, Thank shows bridge. on earnings which everyone. our year-over-year morning, you, Good Mark. Slide

cost associated Our to XXXX strong mitigate impact results execution reflect with of COVID-XX. disruptions the market and management effective

as a drag to pricing as mix and offset year driven for across operational disruptions a by in COVID-XX. managed with papers. The demand We business. environment due Volume in packaging partly bridge, demand fibers lower at strong segments. unprecedented packaging was cost on printing to was XXXX the impact printing in consumer most our and depth cellulose of full the to the were papers operations a higher decline impact Looking due well no business, and volume our challenging mostly significant due in in by material earnings business in headwind average American movement price well North

level distribution by cost part latter a driven fiber performed cost distribution and work were by systems driven reconfigured favorable strong our of quarter. high operating meet fiber as did I'd the cost and to in cost demand. higher recovered energy recovered partly under year lower and expenses the by lower interest in our also significant fourth a employees wood, We protect offset based the were favorable debt management contractors. the cost. outstanding wood for in to systems and we cost, very packaging full-year, teams reduction. energy and corporate on items flexed experience higher Our note the Input for cost distribution increased

operational rate was compared decreased earnings which $X.XX to our to earnings, XXXX, impact. year XXXX and XX% XX% includes due in unfavorable full tax the FX For Ilim equity lower of

our improved in shows Operating share, includes American our operating results. driven EBITDA sequentially $X.XX Turning $X.XX fourth came due to higher our Mark the quarter expectations which business. earnings discussed decreased impact related and strong to earlier. Slide that to per packaging bonus which were better cost. recognition Sales North the seven, and by employee in than demand input

mentioned, million a we to consistent reduction already In debt flow, capital generated manner reduced which allocation fourth bringing in continue to billion. $X.X apply about debt will As quarter, cash our $XXX framework. with by full-year the we our free XXXX robust

Turning Slide operating quarter-over-quarters bridge earnings on to eight, quarter fourth earnings the were $X.XX.

now. cellulose demand mostly was driven EMEAs packaging corrugated mix bridge, by the America North in for Volume price and issues quarter. papers costs North price our seasonal the We the packaging reliability system of Operations strong were prior demand by fibers. flow containerboard Russian. headwind in driven prior and where experienced in period which most and favorable some at Looking behind the was driven Brazil us and a in are in lower significant American

by favorable third recovered cost We $XX fibers to employee I'd packaging were asset for in higher truck included we exchange business. the reflects reminder, costs higher as off and which the Ilim XXXX. returns. million a higher the experience the very operating noncash in fourth allocated a quarter experiencing tax quarter. in compared in to as significant a fourth $X.XX as effective third trend enter expenses distribution cost in XX% our also and XX% which tax reflected to rate marginal to meet unfavorable third quarter quarter favorable recognition had note bonuses distribution distribution after the transportation fourth XXXX We compared due to the our as sequential higher loss recovered ocean adjustment million the non-repeat and cost quarter. expect each $X.XX Equity we the gain and cellulose corporate wood and $XX in were of in and was include Input finalizing fiber fiber, Higher operations the earnings congestion foreign in higher rail, of and right energy that cost. seasonal a strong impacted earnings full the to We're of also to in items like demand.

and the start across shipping less turn channels now Volume broad the days seeing sheets based the me segments of the containerboard. to nine. I'll demand on including America impact packaging across in in quarter. strength strong regions improved our three all Let North with boxes, fourth sequentially Slide We're demand with all and outpacing industrial of

fourth is depend contains consumer on in seeing lag Food and the goods, demand restaurant the and also e-commerce vast durable in recovery. every permanent. and containerboard travel materials. accelerated will the growth of also to e-commerce we consumer pace Export for we the especially We're demand about strong categories and adoption recovery robust. quarter, for will industry double-digit segment of majority continue believe Just building strong service see

here issues America several were the to headwind fright are backlogs behind due reliability system us. now customer's strong significant we We late some board, experienced factors. and our to have have Operations North as to meet in in a most isolated which quarter, containerboard We integrated our shipments of costs demands.

costs containerboard to and of We demand, in plants. impact our less the to strong optimal box also mill our including faced meet boxes higher sourcing

cost sequentially in higher distribution as the on and experienced our by supply for packaging driven about energy Cost also ops plant time as we earlier we're distribution Maintenance cost. discussed increased demand outage box cost chain running which enter cost represents we bonus first continued seeing. every recovered which overall just recovered seasonal weekends. for includes and with improved and reflects and over about fiber, lastly, strength And quarter planned. fiber cost recall million. the that employee $XX Input We

the investment unfavorable demand flat. Taking fibers of essentially of input a cellulose late was improved were million look fourth on by fourth a destocking. demand, business. quarter. outage XX, Maintenance for $XX list price. of and XXXX costs as fluff costs pulp. through contract we costs impacted price engineering with off and right quarter to were for Volume was throughout mix fluff lower as continued a healthy needs expected global demand the third pulp and Slide quarter entered the in to the capital fluff the on capital improve Moving flow following pulp Demand Operations backlogs and following I the mentioned, closer improved review increased at for stable,

floor on Slide due papers chains imports strong addition to the US generation. Turning stretching in XX, $XX the quarter earnings in levels cash the congestion of printing with million In of is delivered fourth the continued to supply high business

of Our cost the American, Russian and North Brazilian regions returns about delivered capital.

brands, to continue strong demand our our we navigate service performance our world and We maximize to class a low-cost customer challenging as system leverage environment.

transportation improved in Russia. across regions, Brazil all the stronger and segment to stronger celebrate expect Operations a energy office economic fourth recovery and will cost expected input non-repeat third Maintenance includes the was absorption Fixed to cost mix in items with across and demand with XXX,XXX of cost outages we price stable. the of activity. as return with increased the all at tons consumption school seasonal and downtime We're to energy primarily higher gradual cost. in due which regions and return quarter higher about Volume seeing decreasing nearly seasonal quarter by demand performance, $XX across increased and improved seasonal million. Looking favorable sequentially sequentially. and

XX% exchange nearly $XX million Pricing million denominated $XX net performance. million per after-tax adjusted on on portion XX% which year-over-year the in for were per fourth the or million was includes of million $XX in equity Ilim's mix XX% an of earnings softwood earnings gain improved venture year dollar $XXX in margin million was which was denominated Volume exchange with share tax favorable full also Slide after dollars cents dollar net on XX, fourth joint the $XX $XX which pulp foreign IPs price on Ilim's Looking at in Fourth five delivered exports. $X.XX for foreign loss share. softwood debt or full-year Ilim quarter the XXXX the debt quarter. the utilization include US US equity the on portion represents IP's EBIT which EBITDA equity margin strong quarter accelerating with improved commercial of results earnings

which exchange loss dollar EBITDA For denominated margin. earnings XXXX full adjusted XX% were year includes a the equity year which was million foreign million Full $XX represents $XXX on debt. million net Ilim's US $XX a

a Ilim's generator. and XXXX across system Although was cash global low-cost year markets, challenging powerful strong a performance operational pulp make

receive $XXX expect in XXXX. from about million We dividends in Ilim to

As we Mark last generation. cash cash we said free our of available year, flexibility the in company's $X.X call enhance levers flow his in XXXX. highlighted of the first generated cash we in opening our billion remarks, financial outstanding to some quarter In had earnings

the reinforce the on financial things impact economic significant we the We uncertainty well those pulled that to Given some cash. levers executed company's strength. of cash because

we changed and a priorities. and other addition, quarter cash the way in $XXX our benefited fourth we choices contributed planned In In maintenance which spending claim we that from million tax XXXX around refund worked free flow. COVID-XX to also the made

across free flow. cash Our us and to early the strong actions enabled of deliver company year another outstanding execution

XX, balance update current pleased $XXX Slide and strong Paper we're you take and rating made to clarity debt sheet, by investment sheet provide we allocation maintain of actions XXXX in a I a our GAAP We're balance to X.X pension the We to forward. you progress Moody's with debt grade capital a pension move on basis. improved $X.X committed debt the in on International and we've X.X moment our with We'll of what our from Turning a to as EBITDA on want on to repaid and expect can XXXX. targeted very times billion times million. to

of closed past XXXX much better we're committed leverage. getting at is level shareholders. to part to feel with in Our and the funded. a times X.X few actions capital framework. cash pension healthy years to we've allocation we closed to our we over range. $XXX XXXX to sufficiently shareholders good XX% a We're the plan about the target our place XXXX, is We returned meaningful plan. and taken really de-risk Returning In funding million a We

flow. a target a years, XX% five repurchase flow, review and against dividend evaluating cash. as maximize and we’ll growing shareholders remain value We over we and free excellence of and $X.X committed to which a options nearly sustainable we cash dividends Over billion flow the creation. earnings annually with to commitment XX% past returned and XX% cash just And allocation repurchases, growth. share that other value earnings intrinsic to to or continue through to competitive of of our are our weighed free with free cash is share Investment central flow capital ensure opportunities always range cash

and circumstances around manage We pullback expect to CapEx be $XXX proactively the continue in CapEx as XXXX ability or increase to to warrant. We’ll have million.

mostly continue deployed build assess capability accelerating goal needs to that to to our drive We’ll and M&A capacity and to profitable strategic packaging capital opportunities expect our selected of growth. supplement be profitable growth. can to to discipline You business

opportunities to on You primarily can business represents we extend Europe. notes million I XXXX Slide consideration, M&A these equity. not update the expect monetization expect want our America our cash, mature in to on focus in to August in in provide timber XXXX, careful North installment. we and on an After the $XXX packaging receive XX, of Continuing notes. When decided to which bolt-on

timber notes. maturity to expect taxes of upon $XX million about We in paying the

price we likely in corrugated fourth and the Now for fluff demand. million first is less a of our enter momentum day first and costs. $XX quarter with quarter Fibers, expense improve quarter. that with price expect printing mix But until In million. packaging, in November we increase XX $XX in outage are million In on Operations outage $XX energy expected be Demand expected higher $X price increase. by by and the due outlook. return $XX are sequentially, $XX we to by quarter. we’re by strong to first to and to expected movements. Volume in and continues and to closer base by accelerated Maintenance for input wood and to costs million see look by will offset improve to Staying and by strong industrial expense the Operations to by and improve industrial papers, I’ll costs first due pulp recovery quarter. expected costs. realization flat and expected are mostly is costs turn and distribution shipping to Volume our fiber $XX box million as on $XX expect Slide to packaging expected very stable. seasonal is Taking higher maintenance increase persist realization one increase at million. expected the decrease expected modest is Demand XXXX we million, seeing by demand mix million, are broad mostly price to of input recovered a Cellulose packaging, to costs the to be a to is schools. offices prior increase challenges

well expected due improve energy by expected and million increase mix are costs. is papers, to million is of full-year the and in price demand XXXX, impact the to chose printing maintenance be you’ll Russia. seasonal demand and facilities. stable. lower venture. Maintenance to America higher it increase we we and includes the we $XX expense outages joint back seasonal Volume expected Operations maintenance of $XX costs plan to Coming by to in for under million. by increase Mark. packaging $XX and This Latin expenses. equity Turning across And mostly on expense mill with million earnings, Ilim And expected outlook million $XXX strong higher input for meet over outage higher turn as to make wood system $X expect to coal decrease deferrals I’ll costs to outage are that, see our by customer planned to as to back to again

Mark Sutton

I’m as of to better earnings the to growth, Packaging, December, million $XXX end shared focus we’re in we’re IP Corrugated Thank committed on actions you, accelerate and we taking with do now, we’ll incremental Tim. in on deliver profitable million Slide XXXX. XX to $XXX meaningful by you

we’ll deliver of our part and in $XXX cost commercial excellence. in $XXX commitment, three As initiatives million growth million businesses also structural through execution our investment annual underway of earnings areas. $XX incremental million have to reduction, We’ll in we deliver

First, we focused a more will packaging our company streamline organization support geographic a focus and footprint. simplify with to

Second, right and our and to processes sourcing. logistics, identifying areas and on right optimize third, distribution the maintenance the costs capital. to And efficiency position and further cost our increase we’ll improve opportunities assets efficient assets better products to fleet to in be we’re make reliability, our more redesign reduce as such and to of with

over has of businesses. which our the of closely As use with move earnings. our streams a savings. identify, implementation. to to attractive the technology initiatives team the you year to And earnings our see we cost on dedicated opportunities, develop, to expect sharing We asset of that now about multiple and let a analytics on enhance scaled partners forward, and we describe were businesses in have delivering XX% Today, target. and you and in been working them you should range enablers our new our when cost optimization the are past data one process accounts of reduction underway, external as moving we’ll with key approaches highly slide, structural notice be wide pilot me We’ll established leverage

box see you few XX, our visibility Turning tools we're actionable to approaches data to ultimately Slide greater and our provide using chain, customers. where can areas and our from insights. value optimize to enable our new These to a to mills clients

in $XXX improvement. earnings and between initiatives annual $XXX million We expect these million deliver to

to excellent making and expect half scaling XXXX. We’re about realize these progress in benefits these of several initiatives of up

across We’ll North real America. Let what of to our this few use me in like. time give data box optimize plants you looks production a scheduling examples

online the we’ll also Although with profitable our low system our cost growth to very box many incremental across little reduce of and using capital. third-party optimize gain Mills, analytics in transportation benefits fiber, lower In costs box energy consumption. We're our improve data costs capacity chemical use pursue technology result system, also incremental in and and monitoring in to planning logistics plants. distribution to we’ll continuous our

savings predict our these equipment In addition, develop our a visibility with reduce businesses effective greater a tools improve team more monitoring with And across failures, quickly our is is online options and sourcing set data our materials. have activities. into in moving partners, to reliability, repair working integrate drive of external to processes. targeted in and use will our opportunities potential broader and maintenance business more our us We’ll catalog sourcing, to also enable to and overall to Team opportunities. procurement closely we and operating also external costs. them Working more of equipment scale identify internal

Let our motivated path charting me my Slide build IP. we to the value better for opportunities We're the creation to to accelerate adds confidence our a XXXX close on performance by we're shareholders. have XX, in

and proud Paper we strength of a still I'm endures. the We're International of products that resilience significant there's our in still uncertainty, of we're and Now, make. essential global nature mindful midst pandemic that the

commitment that commitment take employees to and care Our and have of continues. customers our each demonstrated other

and Our improve the can communities count partners be on and on who solutions customers depend to to us. can the superior of them International our for people be us deliver to on there count Paper responsible lives

in and long-term agenda. an With on and our continue exciting stakeholders. your we to ready all take ambitious to the focus further to that, we’re to of what in the need We’ll the have do strengthen company for We short-term questions.

Operator

is first line Jefferies. going to Phil the come And Ng Instructions] our [Operator of you. Thank from question with

Philip Ng

and more costs of like to think there OCC, for distribution we sequentially. expecting good How out should you've freight everyone. particularly certainly should costs be that's Hey, inflation, But just some it’s given morning, is? about and really how improve operation we these example, when bigger good be whether elevated, called about XXXX, volatile demand that we any think strong see are more to buckets,

Mark Sutton

So, And us, we little materials inflation and be for runs that a general year can increases about bit a more, bit of we employee roughly have it in think operating a and around less. of million couple ways, inflation a general wage materials. little $XXX

On the input we track what's in side, really And those the driven course, quarter-by-quarter. of it's by market. happening

So moment, across given we see as a bit country, just economic a the of the in that headwind, elevated. the given spot transportation, truck activity experiencing are that we're on rates

mentioned the most in congestion the modes. notes, of I As transportation speaker across

So how we'll plays see it to have out.

And it transportation growth sourcing make we're moment is get to we some in that incremental seeing marginally of driven and on sure a just customers the it time. by to demand

a headwind. of So yes, a bit it's

Philip Ng

downtime, pretty That's really and going is like then your noticed first still that half demand segment to sounds most North helpful. It Corrugated And particularly in loaded. strong in it. maintenance with. to markets Got tight I your of America was begin be

on, get now? of times and to some have are enough and little us meet give right looking lead do how So flavor you want backlogs just a kind comfort demand to inventory

Mark Sutton

Well, we've in export extended channel. the long backlogs, got backlogs

pressure. But half our North we now. in say very we lean are XXXX. customer pivoting and balance We we our mentioned, would for ran market American And more. accordingly outage we've see still prioritizing lean manage of will that and Integrated system. our to demand right back to time and the the through As been I outages need the inventories

Philip Ng

lot. Okay, appreciate the guys. Really thanks color, a

Mark Sutton

Sure. Thank you.

Operator

from Fargo. the question line next of Our Hajde come with Gabe will Wells

Gabe Hajde

Tim. Mark, all well. morning, Good Hope you’re

Mark Sutton

Gabe. Hi,

Gabe Hajde

on comment given would basis. at just you're all of Can your imply given what outlook currently, day kind as of to expect X.X% flat I sort of seem be March what backlogs? guess volume the would question on and then And you in progress I terms that industrial from kind trends. seeing you're comp, the per to directionally seeing you would growth first in of difficult a the how think

Mark Sutton

saw demand in quarter the fourth kind January. see through Gabe We're the we of of continued continuing, the to month profile

containerboard expect We market. on that's harder though expect strong manage be the our are March, the even book on supply And available basis the backlogs also market to our navigate based was But Phil have with we which for have, critical really conversations the our is necessary strong. going we're going about that to asking maintenance we we order in box the of demand and the starting absolute capacity really what an comps we is based customer it's have why customers, with plant outages. and on

Gabe Hajde

All prepared remarks. And kind to the you, There Mark. [indiscernible] gears anything right, thank of commentary or wasn't the in quickly then ramp-up. much flipping

and of to kind Just some that do curious how expecting costs you're incremental is profit? seeing, that our model ramped-up for to and helping relatively the you those ease to of of of what inventory kind any pressures difference that contribute were we terms in

Tim Nicholls

ramp how XXXX. the curve, It's pleased continue We're of ramp through But far. curve with off of will is and running ahead the well. question. machine getting building our the we’re going for so thanks it extremely Yes, quality, really

Operator

Mark question and of from will the right, come Dr. our next Montreal. Wilde All with of Bank line

Mark Wilde

Good Mark. morning, Tim. Good morning,

Mark Sutton

morning. good Mark,

Mark Wilde

any doing is on at I'd to one of what IP IP attack impact peers. Mark itself from to similar about largest talk things? your is cyber this And from like best also, you defend can, maybe

Mark Sutton

Well, that impact related almost any are seems the every like cyber had haven't issues in issues. we any cyber day, to news material

need lot information technology every a our techniques the with control on board it be and curve. our doesn't Chief to ahead of And help. we've company's approaches where to connected, got it's to making focused what connected, manufacturing it's But and sure outside network and where is connected not constantly Security our our there's Mark, process We’re connected. Officer at be we're make and of sure staying working needs Information

to a So to share that's distributed data share necessary it's share. it's connectivity system to when a not necessary hybrid of and

into potential So sectors, isolating points. entry the different

systems, But continuously healthy we're again it. feel, protocols. a it's I that way feel third-party our target. office working to behind. moving always own back it's protection And using we’re sticker a business, the think On and on And we

focused So that it. on laser keeps us

Tim Nicholls

add. just I’d Mark,

recovery make that right. disaster attack recover, of business other of a and huge able hopefully The to we basis we are piece that humility is run is a things those Mark regular a There's on we're dose to from standpoint, have an sure it stuff. this Mark all drills continuity in should

Mark Wilde

amongst there's any hear you to those things slops of some of do freight of like with sort shipping just one costs? there impact we I now? from minimize about that of is the sites kind Is on right companies mean, issues that

Mark Sutton

but I you're about, on really comment talking I'll tell you… can't the company

Mark Wilde

though, somebody's one-off? to IP able about talk because not does meet I IP this have this impact on as any effect, a

Mark Sutton

haven't seen any. We

misunderstood your question. I Sorry,

haven't We impact. seen any

all We the affected demand of to have anything that's haven't without those us But market seen way. no, channels do we that supply we a all are, in noticeable now. or right it's to we with for can Mark, disruptions

Mark Wilde

Understood, thanks. Okay.

Operator

you. Thank

next will line of from the Our come Bank with of George America. Staphos question

George Staphos

a the just for a Good conceptually, morning. cellulose cellulose you some How year? sense demand first Hi, business at to be level details. about some point? and we're positive better Or the market everyone. to all hold you is looks efforts? pricing the that this numbers for Mark. turn go market. fibers, get global outcome done question, but at have profitability And of demand, a can looking Thanks not just cost, better think to all hopefully, across needs business to at work but can commercial into the of look Do you do see what as we think quarter, to going think want in does the And we this, my as Hey, either you profitable you not that, now terms a more ‘XX. would for us be

Mark Sutton

the is yes. answer think I

business some I mean, the anything the at some is first go in reason all because Warehouser of one improve to post on and we do, then and of how do market that on I uncertainty position, positive direction positive we're things get at is likelihood IP, and is see results we beyond rate no play the momentum start You'll numbers to continuous now. point. getting quarter selected we our be out working but specific pandemic didn't things more to all corner want gaining there's with quarter-after-quarter We've and turn really fibers today customers, can't see are and beginning under cost, that the that looking moving the what sitting knows going to you that here until cellulose fronts. what the in control. right now. looking can improvement we're and integration got pricing, this the is internal a What positive and we're volume predict the But and is some them you'll at

George Staphos

a And thanks with you longer-term here. Mark, comments question to I Okay, of the kind for wanted there.

it you working of demand pickup you're to would when of intensity that of the challenges the let's lot you've to and But it what from that inflationary investors given the you think what the keep the given longer-term analysts you've and had quite some more gotten So advise the the be optimization might is given that the and has cash to also opportunities about flow which a environment, of if in on. e-commerce, to good five it about years to would five consider cash Thank something rate drivers you. years, Is be around biggest qualitatively, be discussing what we been business you growth that And were flow, go terms accelerating? your rate given growth Should Tim next over years? a on over of X%, the time, slide outlook and the next XX of over outlook? over XX capital X%? think the five compound years, next

Mark Sutton

heavy question, little a it's really call. a fair a earnings a that's for question. George, great But quarterly

George Staphos

little give I'd that up a figured bit. I

Mark Sutton

Perfect, a cash. effect more better going to earnings a of But positive objective I obviously wants IP who sitting credible my this here generate consistent, And have growth. to our building we that's to question. answer strategic am is on questions. always with And CFO want really

don't Tim, you? So why

Tim Nicholls

to want bit just I a Well, perspective. of little give

projects robust that capital. they we we’re to that returns need investment capital and earnings that's meet. So we from things have mean, more But going we're making key sure the projects, higher we grow I should where meet fewer our on deploy Mark's, do that to process right. mentioned, that don't the and about growing cash. to they and the is that other Hopefully, is working how lead criteria

more we cash. for less on should And so balance, get

technology capital earnings the The other what and are earlier, places normal Mark us driven improvement front-end. these around about of capacity both investment just dollar capability the without giving some talked opportunities on capability

I So that. highlighting worth thought was it

George Staphos

Tim. thanks, right, over. All I'll turn it

Operator

the Anthony will next of come question our line from And Pettinari with Citi.

Anthony Pettinari

morning. Good

Tim Nicholls

Good morning.

Anthony Pettinari

I have port the on fibers. congestion delays a question cellulose and supply chain impacting

$XX any to in points non-repeats of think you of of there's big that put how I ports finer million stands said potential just about give talked supply can cost, of February. there's and wondering, impact if ops chain on terms in And in XQ, part improvement, in the you wondering is no Just terms slide, a sequential improved detail that them? sort you in outlook to

Mark Sutton

yet it's Well, and It's that in we think, of improve. of but be we the determined. the do Maybe meaningful that hold a to way. improvement. to any improvement expect it's really it, take result meaningful But is in seen haven't a I way demand part impressive

itself it So beginning works we’re quarter. to And see hopefully I the through think usually out that.

we so way the market. product And get all can to our

Anthony Pettinari

eye go question. Okay, about Could price that we're just pulp market some just especially are you and related pretty prices the that, and China then driving mean, remind your just of talk maybe spot the what of in to there other of seeing China, then shipments Ilim, if about parts you popping. I and can Cellulose in from maybe North talk current increases mean, what's I conditions, pulp and IP the versus could in you us America world? terms Fibers business versus sustainability percentage

Mark Sutton

improving, improves our is and that increasing softwood generally pulp. we’re is mean, the so dynamics we’re market I that So pulp Chinese inside selling, pulp The for pulp, China, fibers, in which economy flows demand whole to cellulose market the production in fluff that's and paperboard increasing, and need see fluff we environment. supply softwood what entire and

could looks impacts the pandemic. economic think So it's really of that of economy question your it we makes, to Northern I as the Chinese the sustainable was in recovering be Ilim your part remember, almost broader from what first other Asian be technically second There to of Anthony it's but pulp China if of China, and that a makes, not to mills in all markets it. couple goes are Ilim Siberia. of our the market in be seems not think the all China China, softwood improving, Most of Ilim, Greater that because are area two all

directly, virtually anywhere So else. shipped nothing we've goes

Anthony Pettinari

of of of China fiber Great. IP’s And rest kind footprint proper in versus U.S. versus world? then cellulose terms

Mark Sutton

virtually offshore. China, of XX% we if roughly goes it’s to serves I should what think so memory everything Yes,

have make North here we somewhere customers America, offshore to We China. XX% some or but in either of what goes Europe, to

the if think I I China, remember XX% absorbents. roughly correctly, is for

Anthony Pettinari

I'll helpful. very over. it that's okay, turn Okay,

Operator

will question come of next Josephson line our the KeyBanc. with Adam And from

Adam Josephson

Thanks Mark, one packaging, mix and higher questions. sequentially. taking gave good Tim, price about the ton you for prices it morning. for on of Tim, industrial $XX implies guidance my a

price time thinking takes these could to give if in So it suggest you assuming more you then that didn't of much be And realized that have XQ, November of realize detail would that the fourth reasons, you is of quarter, correctly? typical length increases? increase would it by half helpful? am increase for I $XX you’ll about obvious cumulatively, the that realize the maybe Any the

Tim Nicholls

residual first down of quarter. published we sure. price impact things Yes, the all, from in in fourth fourth quarter, last one, had the the of Two January

lag the and of usually same increases, typical what past of I on that quarters, to that of in our we're quarter experienced flow characterize November in year. So was But majority quarters a will for box continue there this third in curve. a fourth price to and pattern, as into it's the percentage type different takes no is following small it but the a then have things the couple effect through, takes of a containerboard it realization that very would these residual a the we've than announced expecting few increase, through, price work

Adam Josephson

give will chose could Got why you about, strongly giving obviously guidance, will guidance, then this be you year, idea did also how Normally guidance you could be, can time up, this obviously, consider related your know corporate to? of and be know the time, price it so costs Tim. impact what of to not EBITDA have and full-year what because talk you you up. And you maintenance you be, inflation if we ultimately not do

you've pieces. got obviously, So, of some the

So what just there? was process thought your wondering

Tim Nicholls

It's a great question.

have for year. guidance, our technical correct, really from the outlook. we expectations don't prior-years, we a a what So outline in provide we given standpoint, And were you're an give rough in coming

imagined, the have a was would We to this out can few little first maybe quarter. point reason past as at now, what hopeful to right in with would into about If what not quarter, you'd asked probably coming that than didn't thinking first a a time, stretching But the rationale practice different things play and the vaccines change about quarters. outlook But we'll is we as see our me the from we our that clarity, I'm COVID do play I around second I in call forecasted. much that place. more bit looking for for have longer-term. we quarter, degree start in think question been longer in greater October this was

Adam Josephson

Tim. lot, a Thanks

Operator

our will with Global. Seaport come question Okay, Weintraub next Mark from

Mark Weintraub

above you and needs noticeable presumably was to what particular how it down run the Two been is get maintenance generally, capital to you XXXX, really on effectively you. and for kind need to is spend follow-ups, on able we that et need to meet strategic much those about anything do spend so growth number through that then you think be drive should reduction, And only regulatory? offset place, that good Thank spend, number to type you've you on regulatory. Is are In thinking first that what of where in and you think you to maintenance cost do more cetera? would inflation or bring as it apparently really What's and of a XXX sustainable? that done.

Tim Nicholls

Yes, it's question. great a

just or and say would way. year required we try We a because capital some maintenance that at are into something, are maximize on higher low it we the some was every of targeted in looking a and that I on certifications So calendar side. this on the our of that, do have to due types XXXX optimize put investment facilities maintenance dollar and basis, we're whatnot, But cycles, cycle. a in

and given opportunity, about how we differently bit to a an outages unusual year as it the across would extent we as fleet. of took deploy reference last also what We nature the maintenance think to little

over should an these last opportunity before higher it's So to expense would predictive the be in problem the efficient earlier, we’re we happens, and our will, a on some it more year. normalized, are you yield trend which reliability if time, us the than mentioned would capital we that lower become But anticipate or or giving offsets actually facilities. capabilities whether to with a the, of think cost, trying capital

Mark Sutton

And look few So comment is calls important. this a you maintenance class this really I at point made totality. ago, made in Mark, we really

that So is there's there's a capital oftentimes components. Xx component expenditure expense component. and capital an But

run So when needed earnings the total to you lowering cash the place, flow, say, to today's at in and at look look maintain we we as number. cash

company and would significantly your and better And lower sometimes be placed ongoing the expenditures And dramatically profile can off. the cash off well generation capital better expenses. be would

we're we're is successful, CapEx, based, condition based, only constantly of these not can not on approaches exciting mostly it's side. new inspection about technological save but so or also the we looking on So probably time expense that, what's some if at

So there's if right. a huge it multiplier we get

Mark Weintraub

Thank you complexity. and I the appreciate definitely

to elected maintenance as you way above ask and of the you would had gets you expensed. meeting et maybe said, in last that both were it? at run with you different a because you below level that or go that spent say on year capital Would cetera environment that be maybe what unusual a So to it, place, was the

Mark Sutton

influenced made level not market. do that impact choices of decision it's allowed disruptions made without knowing the continuum, XXXX, were to on because that in the in to we a certain I we the do think I every pandemic because answered run at and a we place. us of things

like those look been they've good decisions. of Some

end-up And Some disruption. created April. do realized the of decisions of those may in being month didn't we we bad something a

the deliver performance I a a like So in right continue and fourth at to issues expense feel and it operating and couple of about balance. look the you But capital struck continuum the the that combination to on albeit we quarter constantly have basis. delivered we of

Mark Weintraub

Chinese a much is and Recognizing bit and on any change and think translate Great, that. on how about through how the to there is the Cellulose lot on us outside flows quarter a equity prices, fourth surprising. quickly you flows there's One can just seen your what Ilim, results pulp, into of you I in Fibers add And if to volatility you given first a second, of through then operations? a to then questions. what color of North what a we not that know for earnings versus would methodology see in for the sectors provide list it in And American the quarter sort spot we Two market thank predictability. quick you. the the have for on there's seemed follow-up. have

Mark Sutton

longer just our work has customer curve there, dynamics, The is bottom over business the fairly we fibers, normal it different on cellulose to different we of way pulp contracts take ramp different, and and global set on segments have of the customers, the has a time, vary have containerboard. over So to start experience years price the a to been tend increases through line. across that few their past base predictable

realized. and fully plan just think that increases them seeing On confident price around time of out to be is in you're for just, expectations I FX. there we put it's the So what but FX takes contributed always it most to Ilim,

Mark Weintraub

you. Thank

Operator

And of Mark our Connelly come with the Incorporated. will Stephens next question from line

Mark Connelly

can about long-term. talk little we pulp was I more a hoping

to barriers because delink about pulp contrast that of to when start think am processing. pretty to tends there broken long with to specification some be in terms really tend commodity the is attractive pretty contract really be it of you’ve inconsistent. what understand containerboard? think profile be to reliable down when returns realistic but before the of brought vast you markets over pulp the to the think trying to I growth long-term time pulp about saw and demand or time from that that we how that assets character, you Is have them. Soft accomplished going We a in

Mark Sutton

the appropriate value we is not in The a the I It own it we It's time take sure of she long-term Mark. much but we downside and its that's what way deployed available if investment sure to the product clubbed we real offering. to that service a to is the commercial for that product easy markets looks will product the becoming pulp product seems probably that some the market making approach, usually getting an our made provide. for specifications and improving important are objective on think always way top It's one difficult correct strategy started product it it is market make and really attractive they like that point. can and time valuable not long is be the value that broad will most question naturally the a and great I technical understand was and a and the when is was now that we're are, really different but change you commercial and deployed over it's external time, think but a good on change

Mark Connelly

because program, done we think containerboard. of Okay. your can as how IP was to process just understand trying in I tend optimization leader from if especially differs sweep, a before And management it you’ve we to just process what

thinking really things program. Carol back different Roberts on just bringing focused to it's I am So technology. new seven-year

Mark Sutton

systems opportunities a to and and opportunity we That's seeing capabilities We're real-time few we organizations across different a to are fair and that use types new to remark. us improve today. data data manage helped to different way where make There's has always in have of decisions.

from hand across about is that customers supply thinking fiber availability transportation system help and how giving that tools us the the a the think we based we're and they and will to our building off do tools we way frankly can the really to options complicated manage trade exploit about cost do box just better in that and mills, that to us board for fiber an we you decisions. combinations are opportunity are chain think on and instance, too technology to so for to arbitrage So compare containerboard moment then plants by and where the quite

Mark Connelly

appreciate leader been has it nice obviously and that a IP space you and making progress. see to in more I

Operator

Kumar line from question with Morgan come last And instructions] our of [Operator will the Stanley. Neel

Neel Kumar

it's we've bid OCC the of In term can terms the of this kind and for us imports, how of on Chinese ban forward? through it it just taken up needs expectation as will of their as seen tangled the recently, out you OCC have longer OCC shortage fiber evolved XXXX give seems there's is grow fiber. well going prices, how a sense stick prices that has then a any how they and Do thoughts run you a of whether

Mark Sutton

hear a about couldn’t bit prices, but broke asked of Is think little up I prices? OCC exactly, the that We at question. you OCC you're your you beginning what asking

Neel Kumar

about term? asking type at strategy of XXXX just was OCC I is your Yeah, longer the what's in

Mark Sutton

year. half it on $XX little of the second the towards conditions. we quarter, out market expecting that first quarter the to so fourth to think the and In the really in on average continue fastly going will clear such depend that acting not in is but ball crystal we the a that circumstances than saw bit the expect we're OCC more trend XXXX I maybe $XX, a to and in

from go happens quarter. So we second into what as we'll first have to see

Neel Kumar

do then address their just it does forward? ban stick China's think on that's in needs or terms you fiber and how OCC to Great going of going imports,

Mark Sutton

to of word year always, I said, already late is is you've inherently maybe their we've we've Well think just XXXX even and last beginning we've and and market taken seen anticipation this. adjust in the adjusting

of other in across fiber China you that markets from rebalancing you for some export see think a time I So see and OCC. to rotation another one

that think stays I yeah, in So probably place.

Neel Kumar

Great. Thank you.

Guillermo Gutierrez

questions, So us thanks the today and -- call the joining me. everyone for for for excuse

are excited with of we comment, us what's about in Paper. closing front a International Just

We have cellulose packaging business. fibers in strong demand and

to pandemic, my business to that. paper to the navigating comments, recovering. total be in do have confidence employees as our Our is I said continue in I able We're but still

conditions we XXXX and We and about have is XXXX very unfold playing enter going excited to and into position a the way so field. hopeful we're what strong very economic pandemic-free market as lead us a is I'm improving

interest So thank International again your in for you Paper.

Operator

for year participating Thank today's full Paper you XXXX quarter fourth International earnings in and call. conference

disconnect. now may Your

International Paper (IP) 4 Feb 212020 Q4 Earnings call transcript