International Paper (IP) has reported second quarter 2018 net earnings attributable to International Paper of $405m ($0.97 per diluted share) compared with $729 million ($1.74 per diluted share) in the first quarter of 2018 and net earnings of $80 million ($0.19 per diluted share) in the second quarter of 2017.

Net earnings in all periods include the impact of special items, if any, non-operating pension expense and discontinued operations.

Adjusted operating earnings in the second quarter of 2018 were $498 million ($1.19 per diluted share) compared with $395 million ($0.94 per diluted share) in the first quarter of 2018, and $274 million ($0.66 per diluted share) in the second quarter of 2017.

Net sales were $5.8 billion in the second quarter of 2018 compared with $5.6 billion in the first quarter of 2018 and $5.4 billion in the second quarter of 2017.

Business segment operating profits were $697 million in the second quarter of 2018 compared with $512 million in the first quarter of 2018 and $157 million in the second quarter of 2017.

Cash provided by (used for) operations was $801 million in the second quarter of 2018 and $645 million in the second quarter of 2017.  Free cash flow (non-GAAP) was $361 million in the second quarter of 2018 and $355 million in the second quarter of 2017.

“International Paper delivered a very strong second quarter and year-over-year earnings growth,” said Mark Sutton, Chairman and Chief Executive Officer.

“We had outstanding commercial performance, with sequential volume growth and price realization across our three businesses.  Operationally, our global team members performed well in a heavy maintenance outage quarter and continue to work aggressively to offset higher distribution and continuing input cost pressure.  We see healthy demand across our global operations and are confident in our commitment to deliver a second consecutive year of strong earnings growth.”

SEGMENT INFORMATION The performance of the Company’s business segments is measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items (non-GAAP). Second quarter 2018 business segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits in the second quarter of 2018 were $537 million ($569 million excluding special items) compared with $437 million ($464 million excluding special items) in the first quarter of 2018. In North America, continued strong box and export containerboard demand and higher sales prices across all channels drove improved earnings. Input costs were favorable in the quarter driven by lower recovered fiber.

Global Cellulose Fibers operating profits in the second quarter of 2018 were $66 million ($69 million excluding special items) compared with $11 million ($15 million excluding special items) in the first quarter of 2018.  Earnings were favorably impacted by continued price realization for fluff and commodity grades across all regions, lower planned maintenance outage expense and lower operating costs.

Printing Papers operating profits in the second quarter of 2018 were $94 million versus $64 million in the first quarter of 2018. In North America, improved earnings were driven by higher sales volume, continued price realization, better geographic mix, improved mill operations and lower input costs, which were partially offset by higher distribution and planned maintenance outage expense. In Brazil, earnings improved driven by price realization and favorable foreign currency impacts which were partially offset by the impact of a truckers’ strike. In Europe and Russia, higher sales prices and favorable mix were offset by lower sales volumes due to higher planned maintenance outages and by higher input costs.

EQUITY METHOD INVESTMENTS Ilim joint venture equity earnings were $57 million in the second quarter of 2018 compared with $92 million in the first quarter of 2018. Operationally, sales prices and volumes increased, but were offset by higher input and operating costs.  The Company recognized a non-cash after-tax foreign exchange loss of $39 million in the second quarter of 2018 ($0.09 per diluted share) compared with a loss of $0.4 million in the first quarter of 2018 ($0.00 per diluted share), primarily due to Ilim’s U.S. dollar denominated net debt.

nternational Paper recorded equity earnings of $15 million in the second quarter of 2018 on its 20.5% ownership position in Graphic Packaging compared with $2 million in the first quarter of 2018. The Company also received a $6 million cash dividend during the quarter.

Special items in the second quarter of 2018 included a pre-tax charge of $26 million ($18 million after taxes) included in  Restructuring and other charges related to the optimization of our EMEA Packaging business.  Special items also included a pre-tax charge of $12 million  ($9 million after taxes) for costs associated with our proposal to acquire Smurfit Kappa, pre-tax charges of $9 million ($7 million after taxes) related to the removal of abandoned property at our mills and a tax expense of $9 million due to state income tax legislative changes.

Special items in the first quarter of 2018 included a pre-tax charge of $22 million ($17 million after taxes) for Restructuring and other charges related to the optimization of our EMEA Packaging business. Special items also included pre-tax charges of $9 million ($7 million after taxes) related to the removal of abandoned property at our mills and a pre-tax charge of $9 million ($7 million after taxes) for a legal settlement.

Special items in the second quarter of 2017 included a pre-tax gain of $16 million ($11 million after taxes) for Restructuring and other charges.  Included within Restructuring and other charges were a pre-tax gain of $14 million ($9 million after taxes) related to the sale of our investment in ArborGen and a gain of $2 million (before and after taxes) for other items. Special items also included a pre-tax charge of $354 million ($219 million after taxes) related to the settlement of the Kleen Products antitrust class action lawsuit, a pre-tax loss of $9 million ($4 million after taxes) for the impairment of the assets of our Foodservice business in Asia, a pre-tax loss of $5 million ($3 million after taxes) for integration costs associated with the 2016 acquisition of the Weyerhaeuser pulp business and a net charge of $1 million (before and after taxes) for other items. Also included in special items is a net tax benefit of $47 million primarily due to income tax refund claims.

International Paper is a leading global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa, Russia and India.

We produce corrugated packaging products that protect and promote goods, and enable worldwide commerce; pulp for diapers, tissue and other personal hygiene products that promote health and wellness and papers that facilitate education and communication.

Source: Company Press Release