Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Third Quarter 2014 Earnings | November 4, 2014
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014 2
Forward-Looking Statements
Certain statements in these slides and made during this presentation may be considered forward-looking
statements. These statements reflect management's current views and are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or implied in these statements.
Factors which could cause actual results to differ include but are not limited to: (i) the level of our
indebtedness and increases in interest rates; (ii) industry conditions, including but not limited to changes in
the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and
changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and
political changes, including but not limited to the impairment of financial institutions, changes in currency
exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future
pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated
expenditures related to the cost of compliance with existing and new environmental and other governmental
regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our
manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; and (vii) our ability
to achieve the benefits we expect from all strategic acquisitions, divestitures and restructurings. These and
other factors that could cause or contribute to actual results differing materially from such forward-looking
statements are discussed in greater detail in our Securities and Exchange Commission filings. We undertake
no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non-U.S. GAAP financial information
will be presented.
A reconciliation of those numbers to U.S. GAAP financial measures is available on
the company’s website at internationalpaper.com under Investors.
3
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Ilim JV Information
All financial information and statistical measures regarding our 50/50 Ilim joint
venture in Russia (“Ilim”), other than historical International Paper Equity Earnings
and dividends received by International Paper, have been prepared by the
management of Ilim. Ilim management has indicated that the financial information
was prepared in accordance with International Financial Reporting Standards and
extracted from Ilim’s financial statements, but International Paper has not verified or
audited any of this information. Any projected financial information and statistical
measures reflect the current views of Ilim management and are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied by such projections. See “Forward-Looking Statements.”
4
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
$441 $377
$696
3Q13 2Q14 3Q14
Free Cash Flow1 ($MM)
Third Quarter 2014 Results
1 See slide #21 for a reconciliation of cash provided by operations to free cash flow
xpedx is reflected as a Discontinued Operation in all periods presented
5
Record quarter for EBITDA and Free
Cash Flow
Outstanding performance from NA
Industrial Packaging group
Strong performance in other key
businesses
Continuing pressure from input costs
IP 14% dividend increase to $1.60/share
Share buyback program purchases of
more than $1.4B through October
Ilim dividend of $56MM received
Solid operating results at Ilim;
unfavorable F/X impact of ($0.19) EPS
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
3Q14 Financial Results
3Q13 2Q14 3Q14
Sales ($B) $6.0 $5.9 $6.1
EBIT1 ($MM) $711 $686 $835
EPS2 $1.01 $0.93 $0.95
EBITDA1 ($MM) $1,108 $1,041 $1,193
EBITDA Margin1 18.5% 17.6% 19.7%
Free Cash Flow3
($MM) $441 $377 $696
1 From continuing operations before special items and non-operating pension expense 2 EPS based on Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) 3 See slide #21 for a reconciliation of cash provided by operations to free cash flow
xpedx is reflected as a Discontinued Operation in all periods presented
$1,108 $1,041
$1,193
3Q13 2Q14 3Q14
EBITDA1 ($MM)
6
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
.93 .95 (.01)
(.26)
.02
.21 .01 .01 .04
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland Closure
Tax & Interest Ilim JV 3Q14
7
3Q14 vs. 2Q14 EPS
Operating Earnings
0
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
534 569
(6) (22) (3)
65 1
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs 3Q14
8
Industrial Packaging | 3Q14 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
NA Industrial Packaging Relative EBITDA Margins
1 Reflects Company’s change in accounting method beginning in 2014
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Excludes the Recycling Business and revenue from trade volumes
Competitor EBITDA margin estimates obtained from public filings and IP analysis
24.4% 22.5%
20.8%
23.7% 21.5%
17.4%
25.5%
21.3% 20.8%
IP PCA RockTenn
3Q13 2Q14 3Q14
23.7%
21.5%
17.7%
TTM
TTM
TTM
9
1
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014 10
Industrial Packaging | U.S. Corrugated Market1
Total Box Volume 3Q YoY
IP +1.1%
FBA Industry +1.7%
West of Rockies 19% of Volume
East Of Rockies 81% of Volume
IP Volume
3Q YoY Absolute
IP +2.3%
FBA +1.9%
3Q YoY Absolute
IP (3.7%)
FBA +0.9%
IP Select Segment
Performance (YoY)
•Poultry
•Shipping &
Distribution
•Beverage
•Processed Foods
•Beef
•Agriculture
(West Coast)
1Corrugator plant sales
Source: Fibre Box Association (FBA), IP Analysis
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
34
79
(4)
11
11
26 1
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs 3Q14
11
Consumer Packaging | 3Q14 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
NA Consumer Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Consumer Packaging operating profit before special items
Competitor adjusted EBITDA margins obtained from public filings and IP analysis; reflects Food & Beverage segment
18.0%
14.0% 12.9%
13.7%
18.6%
15.9%
IP MWV
3Q13 2Q14 3Q14
12
12.1% 13.0%
TTM
TTM
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
118
192
(3)
1
13
42 4
8 9
2Q14 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland FX / Other 3Q14
13
Printing Papers | 3Q14 vs. 2Q14 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
N.A. Printing Papers Relative EBITDA Margins
14.2%
12.0% 12.0% 12.8%
17.9%
14.5%
IP Domtar
3Q13 2Q14 3Q14
IP EBITDA margins based on operating profit from continuing operations before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
EBITDA margins reflect the Printing Papers and Pulp businesses
12.4%
TTM TTM
13.6%
14
Earnings Presentation | Third Quarter 2014 15
Printing Papers | 3Q14 vs. 3Q13 Change in Segment Operating Profit1 ($MM)
1Before special items
Europe
$2
North America
Pulp
$17 North America
Papers
$13
Brazil
$13
India
$7
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Ilim Joint Venture | 3Q14 vs. 2Q14
$ Million 3Q13 2Q14 3Q14
Sales Volume (thousand tons)
707 782 766
Sales $488 $545 $520
Operational EBITDA1 $73 $112 $100
F/X (Impact of USD Debt2) $19 $72 ($210)
IP Equity Earnings(Loss)3 $11 $43 ($70)
Continued solid operational performance following Bratsk outage
$56MM dividend payment
Unfavorable non-cash F/X impact on debt
16
Ilim JV results are on an IFRS basis with the exception of IP Equity Earnings which is US GAAP 1 Before F/X impact 2 3Q14 Ilim JV USD-denominated debt balance of ~$1.5B; Ilim Group’s functional currency is the Ruble (RUB); Non-functional-denominated currency balances are
measured monthly using the month-end exchange rate
3 IP Equity Earnings(Loss) for 3Q13 and 2Q14 include after-tax f/x gains of $8MM and $29MM, respectively; 3Q14 includes an after-tax f/x loss of $82MM.
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014 17
Ilim Joint Venture | Bratsk Project Ramp-Up
63%
75% 82%
89% 94%
4Q13 1Q14 2Q14 3Q14 4Q14F
% o
f F
ull P
rod
ucti
on
Ramp-Up Performance
Steady progress throughout 2014
Significant outage in early 3Q
On track to ramp up to full production by year end
Earnings Presentation | Third Quarter 2014
Fourth Quarter Outlook | Changes from 3Q14
North America EMEA & Russia Brazil Asia1
Volume
Paper Stable Stable Seasonally Stronger
Stable
Packaging 3 Less Days Stable Stable Stable
Pricing / Mix
Paper Seasonal Weakness Slight Decline Stable Stable
Packaging Export Price Weakness Stable Stable Stable
Operations & Other
Paper Stable Stable Stable Stable
Packaging Stable Stable Stable Stable
Inputs & Freight
Paper Stable Stable Stable Stable
Packaging Stable Stable Stable Stable
Mill Maintenance Outages
Paper Increase
$24MM Decrease $1MM Increase $9MM Decrease $1MM
Packaging Increase $34MM N/A Decrease $3MM N/A
ILIM JV Equity Earnings Non-recurring currency
impact2
Other Items Tax rate, in line with full-year outlook of 32%
Interest, flat
Corporate expense, ~$15MM in 4Q2014
1 Includes India 2 Assumes F/X at 3Q14 exit rate
18
Earnings Presentation | Third Quarter 2014 19
Executing Well | Driving Shareholder Value
Record quarter for both EBITDA and FCF
4Q outlook - seasonally slower demand, fewer box shipping
days and higher planned outage expenses
Leveraging our strong, well-positioned businesses which we
continue to run very well
Delivering strong, sustainable free cash flow and focused on
executing our capital allocation strategy, which includes:
Three consecutive years of double-digit dividend
increases
Opportunistic buy back of shares
Selective strategic reinvestment
Strong balance sheet
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Appendix Investor Relations Contacts
Jay Royalty 901-419-1731
Michele Vargas 901-419-7287
Media Contact
Tom Ryan 901-419-4333
20
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
$ Million 3Q13 2Q14 3Q14
Cash Provided by Operations $712 $7341 $1,0232
Less Capital Investment ($271) ($357) ($327)
Free Cash Flow $441 $377 $696
Free Cash Flow
1 Excludes $205MM cash paid for pension plan contribution 2 Excludes $90MM cash paid for pension plan contribution
21
Earnings Presentation | Third Quarter 2014
Maintenance Outages Expenses | 2014
$ Million 1Q14 2Q14 3Q14 4Q14F 2014F
Industrial Packaging $69 $91 $26 $47 $233
North America 69 91 23 47 230
Brazil 0 0 3 0 3
Printing Papers Total $31 $60 $16 $47 $154
North America 30 35 14 38 117
Europe 1 24 1 0 26
Brazil 0 1 0 9 10
India 0 0 1 0 2
Consumer Packaging $20 $26 $1 $11 $58
North America 20 19 1 11 51
Europe 0 7 0 0 7
Total Impact $120 $177 $43 $105 $445
22
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
19
127 167
99 88 46
118 123
48
300 49
30
1 70
276 60 58
69
Maintenance Market
Coated Paperboard1
6
22 13 1
24 24 20
53 27
24
59
2
38
18
53
19
58
16 20 1
North American Downtime
1 8 14
21 20 2
15 19
12
Containerboard Uncoated Papers2
Market Pulp
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
1 Augusta PM#2 was permanently shutdown in March 2013 (36000 tons / quarter) 2 Courtland shutdown of two machines in 4Q13; shutdown complete in February 2014
319
49
176
23
197
100
158
322
178 181
117
0
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Special Items Pre-Tax ($ Million) 3Q13 2Q14 3Q14
Industrial Packaging
Acquisition and Integration Costs ($24) $4 ($1)
EMEA Restructuring Costs ($5)
Box Plant Closures $8 $1
Multi-Employer Pension Plan Exit Liability ($35)
Other ($2) ($1) ($2)
Printing Papers
Courtland Mill Shutdown ($51) ($49) ($3)
India Reserve Release $20
Brazil Tax Settlement ($32)
Consumer Pkg. Other ($1) ($2)
Corporate Debt Extinguishment ($15) ($262) ($13)
Other ($5)
Total Special Items Before Tax ($84) ($309) ($77)
24
Special Items Before Tax | Continuing Operations
xpedx is reflected as a Discontinued Operation in all periods presented.
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Special Items Net of Taxes
2Q14 3Q14
$ Million EPS $ Million EPS
Earnings Before Special Items $400 $0.93 $409 $0.95
Special Items Net of Taxes:
Debt Extinguishment Costs ($160) ($8)
Acquisition and Integration Costs $3 ($1)
EMEA Restructuring Costs ($3)
Multi-Employer Pension Plan Exit Liability ($21)
Courtland Mill Shutdown ($30) ($2)
India Reserve Release $20
Brazil Tax Settlement ($17)
Other ($2) ($5)
Total Special Items Net of Taxes ($189) ($0.44) ($37) ($0.08)
Non-Operating Pension Expense ($37) ($0.09) ($33) ($0.08)
Discontinued Operations Net of Taxes ($13) ($0.03) $16 $0.04
Net Earnings $161 $0.37 $355 $0.83
25 Earnings Presentation
xpedx is reflected as a Discontinued Operation in all periods presented.
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Operating Profit $ Million
D & A $ Million
Tons Thousand
EBITDA per Ton
EBITDA Margin
Industrial Packaging
North America1 $571 $176 3,471 $215 25%
Brazil ($2) $7 76 $66 6%
Printing Papers
North America2 $75 $24 513 $192 19%
Europe & Russia3 $44 $17 3034 $201 23%4
Brazil $58 $30 278 $317 33%
India5 ($5) $4 44 ($23) (2%)
North American Pulp $20 $18 355 $107 16%
Consumer Packaging
North America6 $52 $46 396 $247 19%
Europe $27 $5 91 $352 34%
Segment operating profit before special items 1 Includes Corrugated Packaging, Saturating Kraft & Bag businesses, Gypsum & Release Kraft business; excludes Recycling business and revenue from trade volumes
2 Includes Bleached Kraft business 3 Uncoated Papers (excludes Pulp)
4 Excludes JMA sales
5 Includes adjustment for minority ownership share 6 Includes Foodservice business
3Q14 EBITDA | Integrated Mill Business Margins
26
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Operating Profits by Industry Segment | Continuing Operations
$ Million 3Q13 2Q14 3Q14
Industrial Packaging $517 $534 $569
Printing Papers $144 $118 $192
Consumer Packaging $73 $34 $79
Operating Profit $734 $686 $840
Net Interest Expense ($146) ($164) ($152)
Noncontrolling Interest / Equity Earnings Adjustment ($3) $2 ($2)
Corporate Items ($20) ($2) ($3)
Non-Operating Pension Expense ($78) ($61) ($54)
Special Items ($84) ($309) ($77)
Net Earnings from continuing operations before income taxes, equity earnings & noncontrolling interest
$403 $152 $552
Equity Earnings(Loss), net of taxes – Ilim $11 $43 ($70)
27
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Geographic Business Segment Operating Results
$ Million Sales Operating Profit
3Q13 2Q14 3Q14 3Q13 2Q14 3Q14
Industrial Packaging
North America $3,190 $3,210 $3,210 $516 $523 $570
Europe $305 $339 $310 ($2) $10 $4
Brazil $95 $97 $88 $1 $1 ($2)
Asia $165 $154 $146 $2 $0 ($3)
Printing Papers
North American $660 $500 $529 $62 $33 $75
Europe $355 $380 $365 $46 $20 $44
Brazil $265 $262 $266 $45 $53 $58
Asia / India $70 $60 $58 ($12) ($2) ($5)
N.A. Pulp $205 $219 $235 $3 $14 $20
Consumer Packaging
North America $505 $505 $528 $51 $22 $52
Europe $95 $85 $94 $25 $11 $27
Asia (Sun JV) $285 $253 $254 ($3) $1 $0
Does not reflect total company sales
28
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2014 Operating Earnings
Pre-Tax $MM
Tax $MM
Non-controlling
Interest $MM
Equity Earnings
Net Income $MM
Average Shares
MM Diluted EPS1
Operating Earnings
1Q14 $416 ($127) $4 ($33) $260 436 $0.60
2Q14 $522 ($166) $3 $41 $400 432 $0.93
3Q14 $683 ($208) $6 ($72) $409 429 $0.95
Non-Operating Pension Expense
1Q14 ($44) $17 $0 $0 ($27) 436 ($0.06)
2Q14 ($61) $24 $0 $0 ($37) 432 ($0.09)
3Q14 ($54) $21 $0 $0 ($33) 429 ($0.08)
Net Special Items
1Q14 ($511) $190 $0 $0 ($321) 436 ($0.74)
2Q14 ($309) $120 $0 $0 ($189) 432 ($0.44)
3Q14 ($77) $40 $0 $0 ($37) 429 ($0.08)
Net Earnings from Continuing Operations
1Q14 ($139) $80 $4 ($33) ($88) 436 ($0.20)
2Q14 $152 ($22) $3 $41 $174 432 $0.40
3Q14 $552 ($147) $6 ($72) $339 429 $0.79
1 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Investors tab at Webcasts and Presentations
xpedx is reflected as a Discontinued Operation in all periods presented.
29
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Operating Business EPS
2005-2006 as originally reported
2007-2011 adjusted for elimination of the Ilim JV reporting lag
2005-2010 Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings
xpedx is reflected as a Discontinued Operation from 2010 forward.
30
.36 .31
.29
.12 .12
.35
.40
.47 .45
.52
.57
.73
.45 .49
.41
.15
.07
.27
.38
.22
.05
.44
.85
.72 .76 .77 .78
.67
.58
.49
.77
.66 .64 .61
1.01
.81
.60
.93 .95
.42
.08
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2005 2006 2007 2010 2008
Impact of Mineral
Rights Gain
2009
.83
2011
.93
Final Land Sale
2012 2013 2014
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
1.01 .95
(.04) (.01)
(.05) (.01)
(.11)
(.18)
.19 .06 .04
.05
3Q13 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland Closure
Corporate & Other Items
Tax Ilim JV Shares 3Q14
31
3Q14 vs. 3Q13 EPS
Operating Earnings
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
517
569 (1) (5) 44 13 1
3Q13 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Other 3Q14
32
Industrial Packaging | 3Q14 vs. 3Q13 $
Mill
ion
Segment operating profit before special items
0
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
3Q14 vs. 2Q14 3Q14 vs. 3Q13
Business Volume Price /
Ton Volume
Price / Ton
U.S. Container1 (2%) $1 Flat $17
European Container (4%) €2 2% (€15)
Average IP volume and price realization (includes the impact of mix across all segments) 1 Corrugator plant sales on FBA shipping day basis
Industrial Packaging | Volume and Pricing Trends
33
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
73 79
(2) (11) 14
2
3
3Q13 Price / Mix Volume Operations & Costs
Input Costs Other 3Q14
34
Consumer Packaging | 3Q14 vs. 3Q13 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Average IP price realization (includes the impact of mix across all grades)
3Q14 vs. 2Q14 3Q14 vs.3Q13
Volume Price/Ton Volume Price/Ton
NA Coated Paperboard 7% $8 (1%) $47
Revenue Price Revenue Price
Foodservice 4% NA 15% NA
Consumer Packaging | Volume and Pricing Trends
35
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
144
192 (24)
(3)
(10) (6)
55 21 15
3Q13 Price / Mix Volume Operations & Costs
Maintenance Outages
Input Costs Courtland Other 3Q14
36
Printing Papers | 3Q14 vs. 3Q13 $
Mill
ion
Segment operating profit before special items
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
3Q14 vs. 2Q14 3Q14 vs. 3Q13
Business Volume Price / Ton Volume Price / Ton
NA Paper 6% ($7) (26%) $74
NA Pulp1 6% $11 7% $40
European Paper2 (3%) ($30) (5%) ($34)
Average IP volume and price realization (includes the impact of mix across all grades) 1 Reflects Fluff and Market Pulp combined 2 Excludes JMA sales
Printing Papers | Volume and Pricing Trends
37
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
$ Million 3Q13 2Q14 3Q14
Sales $265 $262 $266
Earnings $45 $53 $58
EBITDA Margin 28% 32% 33%
3Q14 vs. 2Q14 3Q14 vs. 3Q13
Business Volume Price/Ton Volume Price/Ton
Uncoated Freesheet 2% $1 (4%) $37
Domestic 14% $6 (3%) $56
Export (8%) ($5) (5%) $18
Segment operating profit before special items
IP Brazil results are reported in the Printing Papers segment
Average IP Brazil price realization (includes the impact of mix across all grades)
Printing Papers | IP Brazil
38
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Ilim Joint Venture | Volume and Pricing Trends
3Q14 vs. 2Q14 3Q14 vs. 3Q13
Business Volume Price/Ton Volume Price/Ton
Pulp Flat ($22) 6% $7
Containerboard (3%) ($24) (3%) ($52)
Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)
39
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
Total Cash Cost Components | 3Q14 YTD
Fiber 31%
Freight 16%
Materials 14%
Labor 12%
Energy 10%
Overhead 9%
Chemicals 8%
40
North American mills only
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
($1)
$6
$2
($1)
Fiber Energy Chemicals Freight
North America Outside North America
$1
$4
$1
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
Input costs ($MM) for continuing businesses
41
Global Input Costs vs. 2Q14 | $6MM Favorable, or $0.01/Share
Wood
OCC
Wood
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
($16)
($7) ($8)
Fiber Energy Chemicals Freight
North America Outside North America
($5)
($10) ($11)
Industrial Packaging
Printing Papers
Consumer Packaging
Energy Wood Chemicals Freight OCC
By Business By Input Type
42
Global Input Costs vs. 3Q13 | $26MM Unfavorable, or $0.05/Share
Wood
OCC
Wood
Input costs ($MM) for continuing businesses
$5
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
2012 2013 2014
U.S. Mill Wood Delivered Cost Trend | 1% Increase vs. 2Q14 Average Cost
Cost Indexed to January 2007 values
43
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
2012 2013 2014
Cost Indexed to January 2007 values
U.S. OCC Delivered Cost Trend | 5% Decrease vs. 2Q14 Average Cost
44
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2007 2008 2009 2010 2011 0
50
100
150
200
250
2012 2013 2014
NYMEX Natural Gas closing prices
Natural Gas Costs Trend | 11% Decrease vs. 2Q14 Average Cost
Cost Indexed to January 2007 values
45
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2007 2008 2009 2010 2011 40
90
140
190
240
290
340
2012 2013 2014
U.S. Fuel Oil Trend | 4% Decrease vs. 2Q14 Average Cost
Cost Indexed to January 2007 values
WTI Crude prices
46
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2007 2008 2009 2010 2011 75
100
125
150
175
200
2012 2013 2014
U.S. Chemical Composite Index Trend | 1% Decrease vs. 2Q14 Average Cost
Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2006 - 2008 excludes WY PKG Cost Indexed to January 2007 values
47
Earnings Presentation | Third Quarter 2014 Earnings Presentation | Third Quarter 2014
2014 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 65,000,000 11,000,000
Fuel Oil (Barrels) 880,000 400,000
Coal (Tons) 490,000 700,000
Fiber Wood (Tons) 52,000,000 9,000,000
Old Corrugated Containers / DLK (Tons) 4,500,000 430,000
Chemicals
Caustic Soda (Tons) 370,000 95,000
Starch (Tons) 430,000 102,000
Sodium Chlorate (Tons) 180,000 45,000
LD Polyethylene (Tons) 40,000 -
Latex (Tons) 16,000 5,000
Does not include Asia or volume consumed by joint ventures (Sun JV, Ilim JV) Estimates are based on normal operations and may be impacted by downtime Excludes annual consumption related to Courtland operations terminated in 1Q14
48