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INTERNATIONAL PAPER CO /NEW/ (IP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $5.90B, up 27.6% year over year on consolidation of DS Smith and pricing actions but below Wall Street consensus of ~$6.22B; GAAP diluted EPS was $(0.24) with adjusted EPS $0.23, missing the consensus ~$0.37, driven by $271M accelerated depreciation and restructuring related to the Red River mill closure. Bold misses: revenue and EPS vs estimates. [functions.GetEstimates*]
  • Segment mix shifted materially: Packaging Solutions EMEA net sales rose to $1.55B (from $0.35B in Q4) with $104M DS Smith EMEA EBITDA contribution in 2 months; North America delivered price realization but saw seasonally lower volumes and $193M accelerated depreciation; Global Cellulose Fibers recovered to a modest $17M segment profit.
  • Free cash flow was $(618)M and cash from operations $(288)M, temporarily impacted by ~$670M transformation and DS Smith transaction costs and annual incentive payout; management reaffirmed FY 2025 free cash flow range of $100–$300M.
  • Near-term outlook: management guides Q2 to flat adjusted EBITDA and higher EPS sequentially, with additional ~$25M NA price realization, three full months of EMEA results, and heavier planned outages; medium-term catalysts include DS Smith synergies ($600–$700M), North America commercial win-rate improvements, and 80/20 cost-out acceleration.

What Went Well and What Went Wrong

  • What Went Well

    • DS Smith accretion: “This year’s first quarter results reflect higher sales and earnings, primarily driven by the DS Smith acquisition, sales price increases, and cost out.”
    • Commercial progress: North America closed ~500 bps of its volume gap to market, with improved local share wins and best-in-class Net Promoter Score from service reliability investments. “Our Packaging Solutions business in North America continued to improve commercially, closing our volume gap to market by approximately 500 basis points.”
    • EMEA momentum and incentives: Two months of DS Smith legacy EMEA contributed $1.2B net sales and $13M segment profit; IP legacy EMEA benefited from energy incentives at Madrid.

  • What Went Wrong

    • Demand softness: “Industry demand in North America was down 2%... we expect that level to continue into the second quarter. Demand across the European markets were soft... we’re very cautious about the outlook given the strong negative consumer and business sentiment.”
    • Heavy non-GAAP charges and depreciation: GAAP loss driven by $271M pre-tax accelerated depreciation and restructuring related to Red River plus purchase accounting inventory step-up and UK stamp tax (DS Smith).
    • Free cash flow trough: FCF of $(618)M, with ~$670M cash impact from transformation and incentive payouts; heavier planned outages expected in Q2 (NA +$33M; GCF +$36M).

Financial Results

MetricQ1 2024 (oldest)Q4 2024Q1 2025 (newest)
Net Sales ($USD Billions)$4.62B $4.58B $5.90B
Diluted EPS (GAAP)$0.16 $(0.42) $(0.24)
Adjusted Operating EPS (non-GAAP)$0.17 $(0.02) $0.23
EBITDA ($USD Millions)432*604*533*
EBITDA Margin (%)9.35%*13.19%*9.03%*
Net Income (GAAP) ($USD Millions)$56 $(147) $(105)
Net Income Margin (%)1.21%*(3.21%)*(1.78%)*

Values with asterisk (*) retrieved from S&P Global.

SegmentQ1 2024 (oldest)Q4 2024Q1 2025 (newest)
Packaging Solutions North America – Net Sales ($MM)$3,486 $3,539 $3,702
Packaging Solutions North America – Operating Profit ($MM)$192 $228 $142
Packaging Solutions EMEA – Net Sales ($MM)$348 $357 $1,550
Packaging Solutions EMEA – Operating Profit ($MM)$24 $19 $46
Global Cellulose Fibers – Net Sales ($MM)$704 $662 $643
Global Cellulose Fibers – Operating Profit ($MM)$(47) $(250) $17
KPIsQ1 2024 (oldest)Q4 2024Q1 2025 (newest)
Cash from Operations ($MM)$395 $397 $(288)
Free Cash Flow ($MM)$144 $137 $(618)

Versus Wall Street Consensus (S&P Global):

MetricQ1 2024 Actual vs EstimateQ4 2024 Actual vs EstimateQ1 2025 Actual vs Estimate
Revenue ($USD Billions)$4.62B vs $4.50B* (beat)$4.58B vs $4.76B* (miss)$5.90B vs $6.22B* (miss)
Primary EPS (Adjusted/Reported)$0.17 vs $0.22* (miss)$(0.02) vs $0.03* (miss)$0.23 vs $0.37* (miss)

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ2 2025—Flat sequentially vs Q1 2025 New directional guide
EPS (Adjusted)Q2 2025—Higher sequentially vs Q1 2025 New directional guide
Price Realization (NA Packaging)Q2 2025—+$25M expected realization from prior index moves New
Planned Maintenance Outages (NA)Q2 2025—+$33M higher outage costs New
Planned Maintenance Outages (GCF)Q2 2025—+$36M higher outage costs; ~80% outage schedule done in 1H New
DS Smith EMEA Contribution (EBITDA)Q2 2025—+$85M incremental (third month) New
Free Cash FlowFY 2025$100–$300M (Investor Day) Reaffirmed $100–$300M Maintained
Dividend (Common)Q2 2025—$0.4625 per share declared, payable June 13 Affirmed dividend policy

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Demand & MacroModerately improving box demand; higher prices; seasonality headwinds Transformation year; 2025 acceleration planned NA demand down ~2%; EMEA soft; cautious sentiment; prepared for scenarios Softer near-term; defensive posture
DS Smith IntegrationAnticipated close early Q1 2025 Expect close Jan 31, 2025 Two months EMEA and NA contributions; launching 80/20; synergies $600–$700M Executing integration; synergy ramp
PricingHigher prices across portfolio Box & containerboard price realization mentioned NA price realization +$44M in Q1; +$25M expected in Q2; EMEA two increases proposed, first embedded, second cautious Realization continuing; EMEA lag
Cost-Out/FootprintOrganizational restructuring; closures 80/20 realignment; mill strategic actions $1.9B cost-out target by 2027; accelerated depreciation for Red River; ability to pull forward actions if demand weakens Accelerating execution
Global Cellulose Fibers (GCF) StrategyImproved pricing/mix Georgetown closure impact; $(250)M in Q4 Strategic options process ongoing; improved sequential price/mix and operations; outages heavier in Q2 Portfolio action; operational improvement
Regulatory/Divestments——Exclusive negotiations to divest five EMEA plants to satisfy EU commitments post-DS Smith Remedy actions progressing

Management Commentary

  • CEO Andrew Silvernail: “We deployed 80/20, focusing on our most valuable customers... launched key initiatives to drive step-change improvement... welcomed our DS Smith colleagues and outlined our strategic direction at our Investor Day.”
  • On demand and earnings targets: “At current demand levels, we can deliver for the year... we are prepared for 3 very different scenarios... with our transformational initiatives... IP is well positioned to navigate various macro environments.”
  • On commercial progress: “Closing our volume gap to market by approximately 500 basis points... we expect to close this gap and grow at or above the market by the fourth quarter of this year.”
  • CFO Lance Loeffler on bridges/outlook: “First quarter adjusted operating EPS was $0.23 vs $(0.02) in 4Q... operations and costs favorable by $0.05 per share... DS Smith legacy business accounted for $0.04 per share... additional price realization of approximately $25 million in 2Q.”

Q&A Highlights

  • Demand scenarios and EBITDA range: Management expects landing in $3.5–$4.0B EBITDA for FY if demand stays around down ~2%; would be mid-to-lower end, with cost-out acceleration if weakness persists.
  • Tariffs exposure: Direct tariff impact limited; pulp most sensitive with mid-single-digit top-line risk; second-order effects on demand, prices, inflation are the main concern.
  • NA share gains: Local customer share improving due to service reliability and segmentation; not overly concentrated in small accounts; focus remains on 80 customers across sizes.
  • 1H to 2H bridge: Second-half uplift driven by cost-out realization post-asset wind-down, price mechanics, lower maintenance outages; first-half includes low quality nonrecurring items in Q1.
  • EMEA pricing tailwinds: First containerboard price increase embedded; second contingent on demand; longer lag in Europe from paper to box pricing.

Estimates Context

  • Q1 2025: Revenue $5.90B vs $6.22B consensus; Adjusted EPS $0.23 vs $0.37 consensus. Both misses driven by softer demand and sizable non-GAAP charges (accelerated depreciation, DS Smith integration costs). [functions.GetEstimates*]
  • Q4 2024: Revenue $4.58B vs $4.76B; Adjusted EPS $(0.02) vs $0.03. Misses tied to mill closures (Georgetown) and severance/other strategic initiative costs. [functions.GetEstimates*]
  • Q1 2024: Revenue $4.62B vs $4.50B (beat); Adjusted EPS $0.17 vs $0.22 (miss). [functions.GetEstimates*]

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Integration accretion with DS Smith is visible in EMEA and NA; synergy realization and 80/20 deployment underpin 2H earnings ramp despite near-term demand softness.
  • Revenue and EPS both missed consensus in Q1; watch Q2 execution on price realization (+$25M NA), three full months EMEA, and the nonrepeat of accelerated depreciation.
  • Free cash flow trough in Q1 driven by ~$670M transformation/incentive payments; management reaffirms FY FCF $100–$300M, implying a recovery trajectory into 2H.
  • Demand risk remains the swing factor; management outlined levers (cost-out pull-forward, footprint optimization) to protect earnings and dividend through volatility.
  • EMEA pricing has potential tailwinds, but realization depends on demand; first increase is embedded, second is cautious.
  • Regulatory remedy divestments progressing (five EMEA plants), reducing integration friction and enabling focus on core assets.
  • Near-term trading: sensitivity to demand headlines, tariff discourse, and price indices; medium-term thesis hinges on synergy capture, NA commercial share gains, and cost-out pacing.
Notes: Values marked with * are retrieved from S&P Global.