By the numbers: Q1 2024
Net sales: $4.62B
Up 0.4% from Q4 2023, but down 8% year over year
Industrial packaging net sales: $3.81B
Down 0.9% from Q4 2023, and down 6.7% year over year
Corrugated packaging sales volume: 2.23M short tons
Down 4% from Q4 2023, and down 6.3% year over year
- Company in transition: The first quarter of 2024 proved to be one of change for International Paper. In March, it announced that Andrew Silvernail would be its new CEO come May 1, upon current CEO Mark Sutton’s retirement. And this month it announced an all-stock deal to acquire DS Smith; executives on Thursday’s earnings call declined to discuss the matter further and chose to keep the focus on Q1 earnings.
- Sutton’s exit: After 40 years with the company, Sutton helmed his final IP earnings call on Thursday. “It has been a privilege to be part of the IP family for my entire career,” Sutton said. “While I enjoyed all the various roles and opportunities, I'm truly humbled and honored to have served as IP's leader for the past decade.”
- Ups and downs: IP reported stable-to-improving demand in Q1, although that was offset by lower seasonal volumes; executives said the company typically experiences its lowest shipment volumes in the first quarter. The company experienced $38 million in negative impacts from a deep freeze that gripped much of the country in January and $14 million from a February fire at its Ixtac box plant in Mexico.
- Containerboard updates: Executives touted positive effects of the company’s box go-to-market strategy, which “contributed approximately $110 million of earnings benefit from improved margins and mix,” said CFO Tim Nicholls. Jay Royalty, senior vice president of containerboard and recycling, described how the cost to produce containerboard has “increased dramatically over the last couple years” and impacted Q1 earnings.
- Pricing: As with Packaging Corporation of America’s earnings call earlier this week, IP executives fielded analysts’ questions about ongoing controversy over fiber price increases in 2024 in light of Fastmarkets RISI’s monthly price index not fully recognizing companies’ announced price hikes. While IP announced a $70 per ton price increase, the market only recognized a bump of $40 per ton. Sutton wouldn’t comment on forward-looking pricing other than to say, “that will flow through the next few quarters.” After a question about whether IP could leverage other tools to get a higher increase, Chief Commercial Officer Tom Hamic said, “If you think back to previous price increases, you should feel confident that it's going to flow through the same way.”
- Outlook: IP anticipates demand will continue to improve in 2024, putting overall industry box demand growth around 2% to 3%. But Nicholls said IP expects to trail competitors in unit volume growth in the coming quarters. IP expects higher volumes in Q2 to increase earnings by $55 million, while operations and cost are expected to decrease earnings by $70 million.
