IP - Earnings call transcript Q2 2021 | International Paper Company

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Operator

Good morning and thank you for standing by. Welcome to today's International Paper Second Quarter 2021 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 Guillermo Gutierrez, Vice President-Investor Relations. begin. may you Guillermo,

Guillermo Gutierrez

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

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

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

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

Our press website slides. contains XXXX copies of our release second quarter earnings presentation and today's

Lastly, joint information context and to to turn Slide financial around I measures. X over will now relative provides the Ilim statistical the venture’s the Sutton. joint call venture, Mark

Mark Sutton

morning, on And our solid Good begin in cash delivered Paper everyone. Slide International growth second we'll discussion and earnings strong the generation then Thank you, X. quarter. Guillermo.

We then XX% recovery last all continue business and our price strong to for segments. containerboard with very quarter by second We demand fluff key second quarter of the in paper's compared year and realization packaging across geographies. our of grew demands corrugated to accelerating in the see revenue pulp. as our business, And solid of accelerated demand

performed mill well. converting Our and system

the first in every I along However, and the network, in containerboard North the the operating costs Europe. costs freight maintenance second we winter recovered then operated facts, Input inventory America with out our stressed extremely transportation packaging quarter. and about to quarter sharp in costs due volume conditions environments, category. the headwind in significant fiber severely adversely the outages in call low rise in and second operating with affected storm and two would across severely were our quarter. just lingering of planned These effects stressed

indication is strong Although, cost and of had another it a significant it impact environment. the certainly demand

we're quarter second by And and quarter. equity joint the the million million. as the we move that making outlook progress outstanding into debt $XXX performance balance was in and striking venture delivered capital a reduced $XXX with significant Ilim third allocation, earnings quarter strong Our second On sheet.

$XXX returned to including share also million $XX our repurchases. of million We shareowners,

remaining I'm with quarter, on the Graphic second transaction business we really investment, in XXXX value consumer stake pleased the Packaging. our for the of shareholders. monetized packaging the our in our return maximize the the During structure,

and input packaging price $XXX realization, average has higher three as pacing, to compared job by remain we're IP, X. expect generation and of making turn our year we ahead, October of spin-off diligent our progress $XXX flow on to million care our is businesses, Papers or appreciate shatterowners take our Looking excellent employees to as as Margin costs. in we the applying second all the and business, our commitment each a execute than increased delivered growth as brings care Across contractors. shows on cash better volume in sequentially the COVID-XX work for now, flow We with last by improved transportation quarter And million $XXX billion build XXXX. We of to Slide managing first of stakeholders. EBITDA complete prices driven complexity. and an $X at for outstanding which IP I layers free well paper's team more XX% Printing well, to for of take our our going I'm all our of doing team's which to protection really customers results. and our Revenue together half of other million, really to and which higher X free businesses. cash

we stepped and We the half year of outpaces input importantly, our price maintenance as from rising transportation of second the down realization as in highest to expect margins a costs expand quarter meaningfully year. and

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

Tim Nicholls

Thank Mark. you,

the across of segments. quarter-over-quarter demand improved to is compared versus very nearly sequentially five was Price for Volume the of $X.XX essentially to for and demand price regions. quarter. earnings strong Moving bridge all flat recover business papers corrugated demand fluff on share key first by earnings per $X.XX very strong second pulp continues all last per packaging operating is in max our solid, driven quarter, $X.XX and to for quarter by realization share

significant shipments quarter packaging volume constrained congestion. American by low and hampered and by port business was Second were pulp our severely inventory fluff North containerboard

costs year. sequentially the mills a of converting completed chain the second environment materials impacted elevated, costs as XX% Input we shipments increased highest to calls well costs exceptionally as our low as absolute outage were for energy materials most headwind for inbound significant the both our supply relief the conditions well. a inventory On packaging performing Maintenance quarter down for Operating Our quarter. $XXX and were providing by adverssely and containerboard America remain following system little system. North costs by it storm. million outage and in highly stressed maintenance winter help level,

in represented of be the equity impact all region. inbound quarter half extremely continue to cost period rainfall a to remove and expenses environment some on heavy tax As The second from very the you costs, strong tax the Corporate discrete input half earnings about pressure benefit, such transportation Gulf our sequential we slightly, costs our see as tight transportation the Ilim. them sequentially will although, we mode in of the transitory the in and wood expect performance from to favorable second due could tight pressure put of materials. reserve was Every primarily adjustments, of on improved substantially is input move benefited of of lower, year. to increase the as rate on XX%

box all sheets, and Turning X, segments we of including Packaging demand containerboard. see continue starting channels, with to strong the Industrial Slide on and to across

maintenance the operated volume impacted storm These conditions inventory costs outages. As fall and container and with system. in inventory U.S. indicated, working to operating are quarter, we we Mark and extremely the in board low winter replenish

containerboard strategic increase. our compared $XXX quarter. by includes progress year, in equity taking with We're a a increased As performance our container, seasonal EMEA market look sequentially as in price which minister flat. million across our offset, open environment, recent was Strong Thai mix our XX% grew second demand excellent more demand box to last U.S. and in box volume channels Volume about system, the price business. realization as partnerships as and our we American our of making quarter lower our well by North at [indiscernible] the challenge on customers, transportation U.S.

performed converting Our systems mills and well.

sequentially. However, were low environment. across containerboard by transportation operating outage impacted With congestion maintenance, costs severely stress inventories modes, quality all increased and

a the see tons sequential we of increase look packaging the in demand at EMEA mill And is highest system Spain. half and strength higher OCC We input and Input outage year. packaging a for X of a our headwind costs cost and of completed business, maintenance year. about OCC. underlying And we About U.S. occurred million in OCC, global outages taking across industrial reflection $XX significant quarter in in we've completed the for the about rise our maintenance cost the As annually the distribution. driven million planned of for corrugated business, costs consume XX% packaging. first OCC, our our the closer chemicals in the primarily of were by primarily quarter,

rise expect a We the seasonal third OCC cost generation quarter, in further to improves. even

U.S. OCC and Southeast We exports India Asia, expect from largely offsetting continued especially to export China. pre-restriction demand, and which were

and positioned fourth for strong We're packaging X. Slide and channels. expansion strong well all Demand to quarter. margin is our in Turning the earnings in across third our growth business

We increase. the realization channels we're making expect our margin growth our across continued and robust volume progress of excellent on price U.S.

quarter will OCC supply the operational transportation cost. with do of transportation we move in chain further inventories the enable the year. containerboard and substantial pressure on Our as expect second and half We efficiencies, through third

Our an in admirable managing costs teams environment. are tough doing job

We expect are opportunities further inventories efficient more be while. little to as

initiatives in half strong commercial cost, pressure margin the are for our positions outpacing addition, year. and expansion second of In

the pulp Fibers for demand is is Cellulose solid Global and products to Demand X. hygiene from healthy. on signal Slide fluff end-user Turning absorbent

were however, operating $XXX by continue regions and accelerating chain to price costs was of supply our lower at moderately moderately type shipments. U.S. mix expected. higher Mill the Volume Mid-Atlantic in outage significant costs energy was million earnings the and quarter delayed Looking impacted cost. changes costs by offset were schedule performance Maintenance all these as to strong, frequent expect improved expected the region realization with lead in vessel the higher input port environment, congestion and by segments conditions with due in sequential and quarter. our decreased and chemical across lower price as second which third cost we

X. Slide on Papers Turning to Printing

Our generation. $XX second papers strong with continued business delivered earnings in the million of cash quarter

as X. to momentum on Our additionally, outpacing excellence. approached Printing And strong Papers all our the key our recover brands in we strength through regions, of the the business of is spinoff volume then recovery global our industry and continues commercial carries it October

mill performance, improved price Fixed downtime system. second the American absorption all at $XX price in improved mix realization North quarter across and Looking nearly with by our million economic with regions. lower

transportation pressure were the and And the on of However on by quarter costs, chemicals the we We as tight wood, costs maintenance year experienced department. outage impacted input executed well. operating freight. heaviest

expect X, track on is business separation said of October well to progressing August. we Form-XX of spinoff earlier, we're to half file papers the first the I in As the details with spinoff the and planning on

expect, flexibility. would you there significant is As

are we job as a teams successful separation. Our business the outstanding prepare managing doing an for

earnings impact sequentially realization million of of demands days as in by Chinese demand the in Underlying on results strong quarter, improved equity more first shipping is stretched. quarter capacity driven Ilim shipping pulp pulp quarter. chains the on tight containerboard. the and stable are China following for supply inventory EBITDA in at during the XX. Looking New $XXX that XXXX, well an The venture prior restricting the price the strong of Volume of XX% for joint and second to half delivered the second Slide containerboard, margin Year as and with following

decrease executes is maintenance moderately Ilim as program. its volume quarter the of Third annual majority expected to

now outlook third turn quarter XX. to on the So Slide we'll the for

earlier, said we quarter. Mark margin As the and move third earnings to expansion as expect meaningful we

North system which Looking expected costs are expected $XX by the by to be recovery on to are increase. packaging, costs are Fibers, increase Volume we Operations we increase increase to by million, to expected outages costs million wood is expect is Maintenance and primarily to $XX to debt and reduced American bringing gradual Moody's by the X.X and to to we X.X improve a expected expenses is basis. and Volume due half the higher to input increase In the be pricing of supply are Staying million. expense due to $XX are Operations $XXX the $XXX expect by outage XX% debt-to-EBITDA $X about and costs are to $XXX levels. by down increase million quarter expected expected unchanged. costs our in and expected $X of quarter times decrease stress expected price to million to and in $XX is million. by million. equity mix movements. In $XX in expected we ventures. America million. average papers, $XX actions wood increase to And capital to $XX expected is in Europe shareholders on second million cost. a million from of were representing moment increase to on the $XX Maintenance the a to port XXXX $XXX an the million, meaningful at We're strong price $XX outages our expected input of represented of with million congestion. times the million. at billion chemical decrease update continued below the Input in first Ilim on by to decrease leverage cash million by inventory by range industrial printing to our improve under target realization dividends our earnings, you improve we're quarter increase. Global X March, expected are to shareholders taking outlook Sharing our on $X higher OCC $XX.XX. by by second continued and take $XX committed is expected with In expected allocation and to volume by to quarter. repurchases $XX shares through price for mix comfortable – to debt I is with million $XXX million, million part XXXX. to Volume expense want earnings capital expect share realization chain maintaining price on packaging, reduction see price Cellulose maintenance prior a costs costs. on the you'll of returned a Operating North to it joint mix Returning repurchases. and first million, by benefiting we framework. decrease by industrial sheet, balance we while In allocation million of containerboard by

under of second billion at the the $X.X company's repurchase the available about authorization end have We quarter. share

in Lastly, proceeds monetized our cash on about in billion the half Graphic for of expected $X.X million, quarter our of brings taxes total XXXX. we to second million the remaining about in before second $XXX stake the cash Packaging investment this $XXX

of million half in agreement XXXX. under As that, with proceeds Graphic we over tax I'll Mark. to Packaging the it $XXX receive turn With during expect a reminder, a second about cash back we which also receivable have

Mark Sutton

the Tim, much thank very you for detail. all

positioned look making My we're statement on in half margin saves of and following. As in for the strong confidence the expansion earnings we second forward, a XXXX.

are initiatives our revenue commercial systems regain will as Our and driving supply efficiencies, inventories. meaningful chain growth replenish building we operational converting and

the linger, will environment, likely we successfully the backdrop. given raising can demand uncertain strong input Although cost navigate

strong business October as carries the approach X Our we momentum papers spinoff.

thank plan an outstanding tireless Our is I for want opportunity to doing separation. this and team care our a taking customers. efforts business to managing job, we take as their for successful employees the of

Tim through just and laser significant allocation a we capital moved that on non-operating cash XXXX, are framework As the had described. operating catalyst, and we focused we

to the shareholders. that, taking more our All With with will we're our maximizing success. flow a sharing foundation excited for cash the ahead. that framework building one actions earnings questions. IP and for about or a our looking objective, in growth your value with forward we're through take I'm long-term build creation about of you to ready to We're better months accelerating

Operator

George Instructions] [Operator you. from Staphos comes of from question Bank Thank first Your America. line the of

George Staphos

to more you that and what have applicable months your in and gives target make occurring Thanks to things think morning. prudent an a couple this been might've you Tim my been in tools about it's take And operating you case of year then us transactions in good What guess Thanks everyone, past had view that strategy, you leverage follow for range? and running cash for that and you so have first I Hi from may this since many versus for company the the flow that you continue now terms be are can framework. and should my drop this we there? if away what have talked I has thoughts question. give the quiver generation what why appropriate details. question, the in Mark, a six three below taking your you think the standpoint both through occur year that on. What that non-operating, your the of have your about Tim, will ago? And comfort from

Tim Nicholls

George. good Sure, morning,

George Staphos

Tim. morning, Good

Tim Nicholls

thinking we maximize are to is, value. about it The way trying we're

a have recognize but coming looks in cash in, We of some this business to do a go positive everything cyclical We as – moment. lot extent. forward, as we we a

so, relation and build and we balance the the flexibility also optionality. risk sheet And reduce to to are where trying strength, the

cycle, a very and and little share is range view a down just below But taking it attention de-risking so above. target which not through be sometimes our it, a performances, with company target dividend important. really will sometimes that below be is we the range, the repurchases coupled And we'll bit

we and over everything of then returning cash of small types look as whether we that tested, acquisitions, bolt-on else gets necessarily or substantial be it's organic to that. shareholders, time quarter-by-quarter, so And to but tested gets year-by-year, it amounts not is over against

George Staphos

that? return second much would performance to capital, in you to that guide of for so follow-on, is XXXX, really the you are of rest the further value the not over look or a and especially, accelerating or and are be you not will view you way compass cash allocate any operate then you on an over you you As Do the need Thank why's at into basis very my of it basis? seeing year turn terms much point this it for how on have why the a question, that related any half everyone. may because I'll could share with Sylvamo what longer-term and ongoing on how And to kind much.

Tim Nicholls

at be at value the create questions. To are we look that your is sponsors question, coming to look definitely I have here we're the and answer we just view Yes, try will our to what the part and all short pulling out to in think we time. both, going how of that your I do last, order the but to think value over first a in about and moment, long-term we will try circumstances and thinking be,

into So take I to for calendar hope time. we try the those

Mark Sutton

Tim, I capital George a I got asked. view, in we last the as is quarter, long-term that allocation ground of wrap the or levered dividend, balance things time definitely lot set, a covered IP to sheet, And our that could we're about for excited pay very up if inorganic. our almost ability importantly, capital questions or really business smart as take the said, was allocation of said, one that organic strong in first recent just memory and we've and you the right really position in investments entire times, share forever for repurchases Tim and at strong do

of out four, one levers We excited our as we’ve history the that's maybe four. time. three two have know, of is of past really forward. as going are And sometimes what same you of about had we're we all two out And at those all or available or only

have for outstanding is to businesses of separate haven't new And exciting cash, the all shareholder the options capital we because very we hopefully have a we allocation manage that shareholders, exciting IP in the for return company, a had into our return. our it's to generating, long time. very posture companies, that are two going growing that's grow to As

George Staphos

Thank you very much.

Operator

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

Gabe Hajde

demand Good is to worry guess – my point or structurally for but deliver a of wall about that there. think and I kind reasons, peers manufacturing. the taking of appreciate whether thanks the onshoring potential one But a not there e-commerce various of I it's your morning, Tim, of and corrugated question. potentially, somewhat level higher for out of talked I here, for Mark

So outlook, I gives differently, businesses guess good balance pension two like of and you constructive any probably ask as terms shape in in near-term to the your corner been the see little there something your I'll that near bit for question three stop it decades. Is a you around as – of pretty again, that and pause have sheet not sounds there.

Mark Sutton

Gabe. No,

think But the U.S. last step market, of the making a high has, number that the we growing via growth single-digit low when with e-commerce sticky to assumption consumer proven rate yield talk at quarter. and the mass of growth we this proposition quarter bit neutral and over talk other market, X% finally that way, because is on I'm also think getting the every through as listened think toward I to our carbon attention all out down a what I way rates, its reasonable level. with quarter-over-quarter to is it's on that, that's a and half. energy and finally leaning like in and a a the of positioned for. represents When resources, a we just the of from couple recycling sure and be the in a reset minimum we and a was not about adoption want issues, customers packaging potentially of the packaging definitely, people last and higher the to mean up We sustainability very climate I all market time number having the which do circularity, natural where in that's a The of end, and to which be valuable corrugated pandemic, year fiber-based things. terms through a it about of

So to packaging outlook, we're the right capabilities technical we're we want customer the the sure with that the – very make excited there to right grow right growth. to base, and list, asset corrugated sharing about

Gabe Hajde

prepared months a of million maybe And guys maybe wait you, switching Thank that right. here you we that maybe or you've reduction bit flow or what eight it announced all, seen $XXX to provide then cost segment, All detail but of expect something been it's more to expect guess maybe see a call cadence about? I the and either, are little gears, million Mark. at little so by it the assuming bit how we've since $XXX to in you I'm to might first through. half, you prefer of talk to – to is

Mark Sutton

we starting to on during quarter expectation third for Gabe, the period that towards then plan XXXX and the the Yes, performance. release get about as we head an

Gabe Hajde

Thank you.

Operator

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

Anthony Pettinari

Good industrial of for of as was the would a industry here sort historic inventory how data and of back normal of if suggest July. quarter, kind exiting wondering morning. normally are FPA put sort or finer inventories it's levels of a far closer and packaging, that normal a I'm sort on more below you maybe July? comfortable the the of quantify where level at or that to we're to end AFPA or just possible point of are and On

Tim Nicholls

the winter impacted hard It's tons that the system levels second little but start outage quarter I saw in out followed XXX,XXX second of bit Yes. quarter the storm probably normally that high us the by the that, July, to able inventory quarter. through recovering we're into – a mean look quarter, I we've our of experienced. second – ever the lowest mean we we're in Coming

go bit through quarter extent. going of a little third that into for to it's as fourth quarter probably take us So to some time we the to and recover

quarter. seen were our ever lowest the second levels at we we've in So yes,

Mark Sutton

tend on perspective with the more look nowhere past, transportation to of on. to Anthony, by analysts near inventories way supply and and third-party forth it. I've we at written so on transportation, the the from one, a performance inventories supply I lot the and by chain correlate we averages seen And inventories chain other normal remember just think thing world. so velocity, any environment, normal in kind normal so are partners normal Normal

So quarter for view influenced the quarter what's adjusted in also that supply our transportation next inventory and IP is the and chain happening networks. and in after the by

I higher So higher. would we had with as expect levels customers inventory transportation that was to normal right of when be now velocity should the same perform much

Anthony Pettinari

Okay. the That's maybe well allocation. on then up And point helpful. and very taken, just capital following

– about to the In is, the willingness I to of times terms under the talked positive X.X cycle. pretty times at part of what go a X.X range think potentially you

traded and At with more you you quality same one durable, X.X pulp. packaging As or that's have industrial look or closer mean, below turn been competitor going a times down? a you're revisiting to at and turns. to publicly spin, look the two range business I time higher that would either containerboard to the have to X.X you times certainly operating target up

your So just about to willingness range and the could if over the it revisit talk wondering you long-term? maybe

Tim Nicholls

talk something wanted about right? to question, and a consistent is It’s – this understood we Anthony. changes to great we we be stakeholders, want time. bother are portfolio And and beneficial specifics will think of that reevaluating Yes. we as doesn't from investors our to So that and we we us static, based be true and the to so on nothing certainly, other over framework none turn that But now, it. potential but

Mark Sutton

and probably together a the how look should think to think that delivers is, credit and we of optimal decision the try to what we weighted its supports Tim we of cost his at that company that. is that team have make you and portion need rating I and about way Anthony, me average capital,

rating that at the absolutely analysis that the you're we're relied to that and way continuously, credit constructed shareholders try to our going of will part have credit a sure be based we continue ratings something we’re So that. and get high is do definitely can solid the best we effective on and and for company the at is target forward, return different to ratios we company, look make most are debt right, in going we that quality ROIC

Anthony Pettinari

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

Operator

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

Mark Weintraub

Wanted to on though up X.X%. just first solid targeted maybe the X.X% volumes, you. was up get color more Thank industry

You can mentioned actually comes you business your back volume chain would otherwise and supply and easily understand your other suppressed that how kind give the challenges been, that had. that was system's operating have on is volumes that when of to the color Did you if us case, where or some situation?

Mark Sutton

stronger first core cases that doing incremental customer we what way coming the didn't the didn't business. of like we know but to the We X%. lists business, to we our Mark, a we There shorter-term I as I inability at some quarter – the thought we in market performance were the know had had grow lose about business think business, of have, put was didn’t call. And looking some we a – be was we had people to to the was actually going into business. quarter we didn't quarter and that think what because pick sort of in going lot bid, any most in up it outlook our may is

we couldn't the do In it answer quarter. today. Can can, you we boxes? more still us in just me that we on cases is, have supply some second So call the people yes,

capacity between I'm system So concerned a permanently. anything losing classic about our and period. XX-day the in not the a mismatch demand available We basically had in

Mark Weintraub

capacity, running available say by factors, these during your unusual constrained is And XX-days much you capacity or to full the just pretty basically were you're because when that your system?

Mark Sutton

opening we in factors maintenance two our comments, we years. had last highest of recovery from more XXX,XXX tons And I the have ITT quarter chain. in that, evaporated of just one the on quarter the Mark top winter storm, Yes, a in my mentioned than from containerboard supply XX

what back, back. box. into above storm, normalize that to a converted could just get And containerboard going capacity normal of you chunk that's take while not So coming was just it be that little maintenance if a a winter to plus that's it's

what significantly quarter. the of ran effect permanent, So maintenance lingering through wide None second we the we for as and the we available had have the XXX,XXX we all from navigate capacity first those be open, will of half. those have but are of the tons improved offline

Mark Weintraub

about you or Got the in on $XX – it of just benefit come was and showing way that as all contracts pulp, based mix so it. forgetting previously lag the Is on with reflect from here prices? set up? million price Does there pricing your quarter for pointed quarter. through And the additional or, posted might third or from then the that that's to the much what's what great happens happened I meaningful think pretty another already the happened,

Mark Sutton

business by quarters, we So complicated type last because question, of have that value restate that. and let customers. customer quarter-over-quarter the fluff the in that that's that improvement of of But by a of steady contracts provides some business, this a, we're end two to improvement margins – the these could nature – for state about is quarter-by-over in just our use of the kind you business, kind in what pulp But the talked this seeing strategy this reflect region. expect, me

currently to measured customers. segment agreements segments have market a taking the very each to approach in structured, those individual with very we So we're and

kind the of customer-by-customer And But given good pulp. we're economics by this some and the region the And that would is over that. expect progress, structured, improve to agreements we movement I of and our mix making length they're as there’d shifts of that improvement, of and we the quarters. we some continue see goal a progress world volume world approach, that would be reflect expect better have is to region margins the better value of to implement on and these fluff the expect And with several next of between segments. so, way should agreements

these about commercial this whether price agreements have any it’s price through, answer and it's that's a for value flow the restructuring getting complicated to proper not long So flow we about product. more through, just

Mark Weintraub

color. Appreciate you. the Thank

Operator

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

Mark Wilde

morning, Tim. morning, Good Mark; good

Mark Sutton

Good morning.

Tim Nicholls

Good morning.

Mark Wilde

was the don't think little Mark bit August early the of then, and just with said could hike. as spring you XXXX. Kim, I maybe just color we into us can or hike, couple a you of you cadencing if And the kind about as if us some quarters around anything perspective give pass-through wondered I of help this next that about so well, just think containerboard

Tim Nicholls

Tim. it’s Mark, Hey Yes.

time, the it as the seen would Mark fall what out. tighter still we I we've strong as demand fast it, We'll rent went So we talked up the about it of as seen seen. amount the a from as a to second see now seems our and about, through the normal be expecting really increase record fastest chain looking last plunge will were the I've first, normally one, on right very not think we'll they pace but faster than The be. of was comes, from August that than are complications the talks going we’ve see supply stretching But as kind size over inventory historical on ever strong, faster, quarter time. we all how fundamentals see of

far the implementations feel first price we two increase is So really this good.

Mark Wilde

Well.

spring give third quarter? in might sense order from the had you hike fourth can you've expect and that we second quarters? a of So how And what magnitude Tim, benefit of just in us the much

Tim Nicholls

combined, of if on Yes, point. you complete at XX% be two about we'd them implantation look I think this at the

Mark Wilde

right. would any then August of All Okay. sort roll on And how thoughts in?

Tim Nicholls

don't point. to speak price at mean forward-looking but very confident forecasting we to the and this I I that's moment, want know, I feel at don’t Yes,

Mark Wilde

the conversion side second And to grow a kind bigger at or doing also the market? the are as right. you this fair. want to Mark, the on Riverdale? All continue turn just mills of a containerboard demand? the follow-up thinking your strengthen existing bottlenecking in continues projects altered to investing of as up a at business That's of the at I in global just potentially percentage capacity a standpoint. e-commerce Is on Does gear it containerboard supply and to converting anything bigger demand Okay. that as about from to all either and kind timing

Mark Sutton

capacity. we we of of debottleneck containerboard But question predict done That’s three good at day, in years was we've is XXXX, need and because and we have of the capacity, is, everything a we everything But last I containerboard answer maybe continuously running the painfully, colleges isn’t And like amount, Mark. that into looking and running, storm the type feel that issue. we about yes, that every have were middle When that what our bunch the need, really coming we the of now. saying, course we saying, grades. events don't winter several enough are you

distinct containerboard are for different to if but it that sense partners box We kind that level consistent. the looks our in bit going certain the our service demand then this three be ours, it’s a market, of adding companies market bring North structured provide network box don't are in open to channels, market a like if system, own and export. we maybe the little looking America we of long-term containerboard the Remember and we box make options our to the into at uniquely in

at actively plans did a partnerships, period, to right, business only continue a within that investing opportunity a been over of or early we time all So export as the you're it. version channels. in to virgin, quarter making ultimately there's past virgin saw lines highest to capacity, invest a box we've over adding channels. those with possible those equipment. movement not we the Containerboards and part market we demand product to of the will definitely continue in margins for the we the of our locally in favored and opportunities double fill you virgin, second We've is three in a us get participating but few single can, much we've obviously but the couple law, of by recycled with trying have XXXX, as high box we U.S. you obviously, out of seen but much built of is acquired by plants see of we to but have Box existing acquisitions the And just and our lot over time, the had the continue converting containerboard network.

know be as you looks converting when demand with solid. like Mark you know, it's option to going well other is The

You plants. bring many on can shift an in got productive more capacity employees lean and you've And into out turned actually capacity. fill extra

levers And obviously do employees. invest assets not dynamics, capability pull bringing have, kinds you do with we is e-commerce permanent to example, the we've right over got it that in pretty to capacity, with several a box specific and to That's also sure. given to market market. that we're something the You them challenge then when to of now, you're only time but continue but for want do first main

Mark Wilde

Mark. Okay, that's helpful. turn over. I'll it Thanks

Operator

comes Your from from line question of next Connelly Stephens. the Mark

Mark Connelly

mentioned down. price Tim outside even was million, $XX price Thanks. oversees U.S. paper ton index look white side? per revenue couple Can talk price implies at this only that system, the white flat got mix which mix but the of about a across overall or particularly paper about segment, I bucks, when maybe maybe on in your you that we've

Tim Nicholls

little through. side, On it’s muffled coming bit white a just paper

talking when So are about Mark. forward, looking you

Mark Connelly

system now. but curious, in gains business? across entire got U.S. I'm get It the right looks the didn't the happening No, much some really paper in what's you like you white

Tim Nicholls

price regions some all in the or this other increases in of Yes. the in we're price increases mean, of started year. some Well, regions degree, seeing I earlier realization

export kind as of in some in of their price the markets are and playing America Brazil out where was as the Russia sort year, implementing forefront in and well. course those we increase. see still on well, earlier running a domestically they're So – so North traction of the

Mark Connelly

Okay.

position responsibility, to you to should see, included? do you? the But – ASPA some gears packaging these I'm try you very completely pointing just states against is industry growth be, That's to legislation Mark, of create containerboards stewardship the to So what in as your this – as pointed which about of we're is to to curious starting incentives if how should part being states problem. what it And containerboard reduce helpful. the e-commerce, think apply on that Okay. to legislation switch are not do how you've

Mark Sutton

really legislation cases some should I federal And if believe at in has look state recycle tech plastics. by that's we packaging state its of of actively In or are included. cases, the many non-recyclable all and there's detail, to you this state and the was hard legislation nascent issue big by targeted big goal producer there's state extended legislatures. a view kind in view responsibility think a be in people stage. to led in that The the working

people personal and of But renewable packaging, about in the the at I range other made mark the corrugated there do, learning different amount story the my people rate resource fiber-based to new first separating choices. the message what corrugated on on a the actually packaging versus high facts the has it's time problem high of that. in from that. recycling to a a many that hard packaging a local So because thing of solution it's spend And worked fair for XX% could get talking very completely cases, substrate many recycling is to we of is be And makers. can and a level, that rates. to policy

So is I be there have when their think out solution, But that's starts different of need to they of as part be not all the that system. with managed blanket, responsible we packaging packaging usual part and that put sometimes actually the in the a legislation, for people a case to we're needs it in a making problem. way

there right and lot a times for of So in spend it's now. example, we

part is agreement, they commerce On significant amount improving even answer of for see the made the is and of corrugated for in it infrastructure yesterday value We'll that. work on, is in investment networks That's working legislation. being country that to the that intent in of bipartisan recycling a stays included in but proposition the similar recycle recycling rates there, materials. not the in packaging, that's reuse if

Mark Connelly

super helpful. you. That's Thank

Operator

from question next the from comes Your of Jefferies. line Ng Philip

Philip Ng

better expect level, a you making seeing Mark, for back gaining storms containerboard do Appreciating for the guys, growth you'll back capitalize manageable Hey, a past. hit but you everyone. and the costs we're be able big the or in level inventory operating on more more good where Tim XQ, morning, was normalized to get winter to to

kind track back kind of You've gained to any on color that of than goal. market, targeted the on always grow faster on but

Mark Sutton

think steady the of we be It progress steady will third Phil, make won't year. second we'll half be progress. quarter. think a the the in it through We all solved

really hampered definitely couple have as We We we quarters the we above the ability because available growth go will at But forward. of their over in time. just market have or you last to issues incremental were for in grow targeted of more options that mentioned. slightly do the to

the half. slow on Just won't second our that steady for take through system a of after fact much and based we have will so but progress month month the down it maintenance,

Philip Ng

still we to market So should expect the bit lag little a in and… you XQ

Mark Sutton

happens is in this in versus short Not that. period of necessarily, period XX in time. XX what happens got Part exposure pretty your that's a not necessarily, segment in more you've a day of if of and part but what seasonality days, happens what the

are market. I assume inventories feel will lag of the I – the more second us to get automatically think it half the wouldn't the our take where to next But point comfortable I think so the sustainable. year And you that should we

I see is miss we'll think thing the any sales. won't we first

see we'll our The down. is come costs thing second will

Philip Ng

to helpful appreciate you the fluff up its to do ball terms your volatile a commodity crystal some bottlenecks market? this the both And in terms prices and how just channel? of pulp What's a have the globally? guys logistical appears of It's softwood have It's in but pulp inventory levels given much Super in softened bit. gauge pulp softwood nature. then in fluffing of market surge saying the a and for pricing seeing really tougher prices you year, view are are

Tim Nicholls

forecast what markets. some I've of want we the forward. a a believe to looking Yes. We're of I price wouldn't mom pullback bit of about in the mean, how seeing. think seeing about we talked I we're

transportation which extending moment is the stable. but And the chains are supply the models not more at at look at view underlying are effect point. only things difficulties, Our this demand that in really

is at is the a not So you're a right, our of product, moment complete full a turn. commodity view but bit correction, this

Philip Ng

Okay. guys. Super helpful,

Operator

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

Adam Josephson

more down question. then and well. your good expect margins have over I Tim, comments you one you're and pulp to containerboard I Mark on improve a morning. Mark, segment Hope the appreciate that XX next several quarters, the China for just looked prices tough it's slog been a quarters. last when in of said, I business. at pretty But coming Phil as the been have And late.

two So that I this is over have competitive guess, what happened advantage? three given confidence a past the gives to years, meaningful, just you you a business what's in which

Mark Sutton

think always last about of you questions changing a I what in value just to remarks, the or extract creating versus that's that happen our working gives customers. we months on. last proper user me quarters. if return. XX for That's very value it we're Well, what confidence ago the we're made And about a And gives what that end us value couple this business a the is the creating that XX material

as stay growth the rate will think around improve. I world solid the economies

side cases, way legitimate a a So a going company the component, made When business before. been different than many sideline business, the being but first business. rate a decision profile type to growth invest this business it in there's run it's changes versus run we we're the a to in of the of for in smaller

of And have made. And in working the changing the been the for agreements we're on commercial some reflected better. some that of that's way

Adam Josephson

think I at Mark. long-term the end call sure that the understand that. and of were you high on in talking just And be I could about? range that want that think mentioned earlier the you X% I you make boxed market I that to appreciate to just X% one

and sales get grow retail some post-pandemic or kind trend. year growing this in is keep thinking X% back to the that there some going growth you we're as market X% could to say had we'll that of on higher of correction these talking been annum. at of be about that then top step per up levels that stay an normalize, and market a let's upward kind after So X% at another Are X.X%, you're change

Mark Sutton

Yes, with of commerce certainty few happening to is hard playing believe we obviously, segments, what’s by that that's packaging it's has general taken goal – part that I but predict step off. a fiber-based driven in the mean, a change that is

we lot be the base think of It will and U.S. of economy. the things a so one, stronger. number And the structure depends on

do the have two issues how forward. action years things with will we looking play business at supply things and happened think I certain demand that bode on a of because some been U.S. the have think in there going that of so to you're out well chains I to is pent-up that'll by rates and how supply going what's for occurs that more big now of pandemic really components, this, be the the learned that consumption the chains and manufacturing global is And Coming if consumer strong that for consumers going and actually around close during of to be. role plays out growth the what maybe and in then

you now. a or as GDP box as third what's stronger happened to the this has model a models. think have least and others see we And right at stand in that'll correlation data, are market. still have poised and models, looks have the consumption that around has been been it we think like parties less, I There's GDP we're oriented far can know we slightly I use,

Adam Josephson

Terrific, Mark. thanks lot, a

Operator

line from Paul Capital. the Your question next Quinn RBC of from comes

Paul Quinn

Yes. Thanks much.

of do then the control. is bogey terms to a expect us out can there guys improvement three scope as that guide Just could I costs cost have improvements you've just that you're operational side period you give guys where something in seeing. with balance than to making five understand that to the the you I’m offsetting years big that got some And over more opt-in I, segment operational a there's if pulp, and time. to the things of much here, million question trying stories, on that that you the of for what are that you sort improvement five on QX up how

Mark Sutton

Tim offset the part term that on we I'll as your But the look question. longer of On to believe cost how part, longer a for combination ask operate. term, of we

So was of converted which all products part versus system, kind for cost with of our or I've acquire said which we legacy before, purpose. warehouse mills and in the the manufacturing that build especially the built the IP the structure is from is mostly system, and other sector most, this what

now, got arrangements lower to factoring costs. tend we're a they have We've better cost, slight the doing structure capital should So efficiency coupled in solid lower with that a to to the improvements growth put have we're talking that and you IP opportunities a about above have business margin potential. cost system, two the with together. that the primarily legacy those We of in commercial and

it's account, it's we on in on. but be transportation. to working the So that's I steady modest, path continuing It we what and on where cost a the that's quarter And a And heading. we're quarter general. that. are see really will to mean, transportation path, battle by question the we're

in the part causes transportation the business, port businesses this break Paul international export company. other congestion, in I exposed think to of issue more the than is much

Paul Quinn

Most of Thanks Right. helpful. very that's much.

Operator

That's lot. a

Kumar from Neel from next Your comes Stanley. Morgan question

Neel Kumar

Hi, good morning.

partly You being mentioned because the would wet sequentially, cost higher of weather.

XQ quarter a issue So and as inflation over magnitude into you're well. going it's carry or seeing fourth certainly the you're of sense to of the see there, more a you getting of

Mark Sutton

being the based we've that to get of as had. out Yes, it's woods having on really able rainfall it the access due fiber to to the

how at looked that heavily really Southeastern more inventories as across been terms manage of we mills and of some that states basins Gulf the in So it's it what have time and impacted very been the long but lead mills well. we

just mean, to I get to not materials impacting get and the referenced on the we weather and mills. it's and side of through to shape, helping cost blood little out low as but we've inbound the the quarter and whatnot this they're are the decent everything. that's go into more in but Transportation's on seemingly either. rest depending it going fourth, So our inventories a the

Neel Kumar

expenses, I year, know All down then $XXX thinking in forecasting of And near right, I could I'm you're XXXX generally are and outage That's it's the maintenance for now XXXX levels. million early, you're each terms helpful. just full year-over-year about thanks. your curious maintenance, how remain expect but

Tim Nicholls

a to was XXX a at the at two out less bit good roughly mean, We're I uncertainty sales from I'm a bit all some here. million This mean, XXX Well, you we're The When be it. little and years, those catching our line. looking an in put pulled more last outages little I I bit to is still working this a year. last year of of year, back range it or through look given it can looks of outages abnormally the maybe a anywhere think to high way we year. up from together, some pushing per them on linear. last little XXX that. way of year

together the what's put we So more normal. two

Next the year, coming of as the we we look and provide We end year short into have that to always the planning. year. near take – a

Neel Kumar

you. right. All Thank

Operator

Bank. today comes for Deutsche Kyle question White last from line Our the of from

Kyle White

end any about initial for your end you e-commerce start good to corrugated recovery the How on I so Thanks at food your can Hey, slowdowns is provide? service a in to question. details there see, the you how's of taking just markets the any packaging. markets the relative talk the that wanted in some of going, expectations morning. quarter, performing

Mark Sutton

strong. season. into Thank e-commerce period move you. demand for On then end holiday to And as we're build the year you increases the getting of you toward the where year still very, very no disappointments start

continuing Food happens a mark that variant question what open. segment. still very in We're COVID, guess, about So there's story. continues whether and a invest to Delta to I service everything strong to improve, continuing with

our the could to been as shape or in big is Mark, start any obviously and delayed slow only related grocery general is maybe of opening a you it's gets related upside. a stocking the it's the food opened kind to food think growth hasn't to predictable as food. service potential events with question, that those, the economy way, a directly bit, of processed that of during big service summer of little and the another the and if potential which upside some of segment think kind I If form the up little will. that open I saw schools think center less And that I store, flattening

going that’s the good order has the to So looking strong been to third quarter. customers continuing across believe listening segments our patterns and and we performance at key

Kyle White

transportation, focusing that And look you do early, I of but and to internally these when you stabilization it's kind next transportation year. on some can then provide anything is see That's do costs? kind know And relief or you relief there inflation helpful. continuing of headwinds? you costs, any Do to or maybe against real anticipate

Mark Sutton

optimized the we that are loss all with do cost best makes the side the mill our country. right the inventories for is case internally the make in our thing a or box to in costs not so the the plants is to our and on are what business, containerboard can that across that product way customer nearby, Well, plants packaging that industrial have system containerboard means right transportation of the the factory

one number cost and chain the own can internally, have really thing we It's on that's trucking – like about we don't on that make we any dramatic or all optimizing do cost. our So our company anything supply that. we improvements can

can't looking Trump to lot industry and employees and the is to of on rail, this want of better return the a that I labor talk training bring people there's belief and you the that's the follow will industry that capacity about at there first is to will is question, training better. bring know those what that laid for people don't off more part your in analysts impediments companies some back those sure, belief a other the get required for rail that but required the in thing assets So your to and of And more industries. get just and people, trucks. things, of transportation Many same that'll

economy hot but a capacity will good I red pretty think problem should get and of get the have, then kind capacity So to better. it's If stays absorbed quickly.

least now for labor of side, at disruptive of on think we reasons. it's really slow is So think right part the velocity human that, really and We better. a lot we'll get

Kyle White

all the it. Got for Thank you details.

Mark Sutton

you. Thank

ahead leave go takeaways. couple me Let just would I a of and like investors. up to with wrap

companies we And that expansion and First, we building on strong you on we heard excited to very good work are today all approach allocation were shape, us, capital that. the momentum separate forward. balanced we IP a two that really in front better on we're prospects capital a the IP are half. our Both second positive and of absolutely the allocation and framework elements very we're and have as going into about earnings laser-focused building for in we margin

in interested talking all So Paper. thank of with quarter. next you to for look you forward We you're International

Operator

Thank you earnings International participating XXXX Paper for conference second quarter in today's call.

may now You disconnect.

International Paper (IP) 29 Jul 212021 Q2 Earnings call transcript