VOL. 128 | NO. 86 | Thursday, May 02, 2013
International Paper’s Net Earnings Up
By Bill Dries
Memphis-based International Paper Co. reported net earnings Thursday, May 2, of $318 million for the first quarter of 2013, a $130 million increase from a year ago.
International Paper Co., whose headquarters is at 6400 Poplar Ave., reported net earnings of $318 million for first quarter 2013, up $130 million from a year ago.
(Daily News File Photo: Lance Murphey)
Quarterly net sales for International Paper of $7.1 billion were up $400 million from a year ago but the same as for the fourth quarter of 2012.
IP chairman and CEO John Faraci told analysts on a morning conference call the overall performance for the quarter was “muted by seasonally slow demand across our global operations, weak earnings from xpedx and an unfavorable foreign exchange swing at Ilim.”
Ilim is International Paper’s joint venture in Russia with Ilim Pulp, the largest forest products corporation in Russia. It is the largest capital project IP has ever undertaken and Faraci said there will be “significant” start-up costs.
In the first quarter, Faraci described the most significant part of the headwinds for International Paper as “a non-cash foreign exchange swing at our Ilim joint venture to a weaker ruble.”
“Ilim’s got a sizeable amount of U.S. dollar debt,” he added.
The effect was equity losses of $11 million for the quarter in that segment of International Paper compared to $8 million in equity earnings in the last three months of 2012.
For xpedx, IP’s North American paper distribution and commercial printing company, the first quarter of the year showed an operating profit of $2 million compared to $11 million in the fourth quarter 2012.
International Paper executives announced last month the company is in talks with Unisource of Atlanta about a possible merger. Unisource approached IP about the merger, which would create a new spin-off publicly traded company.
Faraci commented for the first time Thursday on the merger talks since both companies announced the talks were underway.
“There is a lot of overlap,” he said in response to a question from an analyst on the conference call. “When there’s a lot of overlap, there’s a lot of redundant functional cost you can take out. There’s a lot of warehouse space that’s going to be consolidated.”
Some of the upside to a merger is reaching goals that seemed simple but that neither company could get to on its own.
“There’s a lot of opportunity here to do some things that are blocking and tackling,” Faraci said. “They are time consuming and they’re not easy but it’s not new stuff.”
The first quarter results reflected the ongoing impact of International Paper’s completion of a long-term review and overhaul of its operations that peaked with the announcement in 2012 of its acquisition of Temple-Inland of Austin, Texas, which had been a major competitor of IP.
The first quarter results also reflected larger global economic trends including excess capacity in Asia where the slowdown in China’s economic growth has continued to affect U.S.-based businesses with a global reach.
In the industrial packaging segment, IP saw higher selling prices for boxes and containerboard in North America that was offset by the slow demand that is normal for the first quarter.
A new biomass boiler at the IP operation in Brazil improved operating costs in printing papers.
Unexpected problems at IP’s Augusta, Ga., coated paperboard mill in January upped operating costs for consumer packaging products.