International Paper (IP) Q4 2023 earnings summary

Executive summary

• Lower demand and cost inflation pressured FY23 results; Building a Better IP delivered $260MM in benefits, exceeding its annual target.

• FY23 adjusted operating earnings were $755MM, or $2.16 per diluted share; Q4 adjusted operating earnings were $142MM, or $0.41 per diluted share.

• FY23 GAAP net earnings were $288MM, including a $540MM pre-tax mill strategic-actions charge; the Ilim JV sale was completed.

Financial highlights

• FY23 net sales were $18.916B versus $21.161B in FY22; adjusted EBIT was $1.2B versus $1.8B, and adjusted EBITDA was $2.2B versus $2.9B.

• FY23 adjusted EBITDA margin was 11.8% versus 13.5%; free cash flow was $692MM, including a $193MM final IRS settlement for Timber Monetization.

• Q4 net sales were $4.601B versus $5.133B in Q4 2022; adjusted EBIT was $268MM, adjusted EBITDA was $535MM, and free cash flow was $187MM.

• Q4 GAAP net loss was $284MM, or $0.82 per diluted share, versus a $318MM loss in Q4 2022.

Outlook and guidance

• 2024 outlook cited demand growth across served markets, continued recovery, stronger e-commerce and distribution, improving food and beverage, and ongoing fluff pulp recovery as inventories normalize.

• Industry box demand is expected to grow ~3% in 2024; stronger demand is linked to higher OCC costs.

• FY24 guidance: corporate expense of $60MM–$80MM, interest expense of ~$240MM, tax rate of 24%–26%, and maintenance outages of $548MM.

• FY24 maintenance and regulatory capex target is $1.05B; cost-reduction target is $800MM–$1.0B, with accelerated operations and supply-chain efforts.

• Q1 outlook included an estimated ~$40MM impact from January's winter freeze across volume, operations, and inputs; higher OCC and energy costs were expected.