International Paper Soars 13% After Stunning Q3 Earnings Beat Amid Bold GCF Restructuring Plans

In a strong quarterly performance, International Paper Company (NYSE: IP) has surpassed expectations, reporting adjusted earnings of 44 cents per share for the third quarter. This figure notably exceeds the Zacks consensus estimate of 24 cents by a remarkable 83%. The company generated net earnings of $150 million on revenues of $4.69 billion, reflecting a 0.37% increase over projections, though it marks a decline from last year’s earnings of 64 cents per share.

Despite the solid revenue performance, the industrial packaging segment faced challenges, experiencing a decrease in operating profit that fell to $197 million, down from $291 million in the second quarter. This decline is attributed to seasonally lower sales volumes, rising costs, and one fewer shipping day in the quarter. In contrast, the Global Cellulose Fibers (GCF) segment showed resilience, with profits rising to $40 million, driven by increased fluff pulp sales and lower downtime costs.

In a strategic initiative, International Paper has announced a comprehensive review of its GCF operations, which generated $2.9 billion in revenue in 2023. This review underscores the company’s commitment to sustainable packaging and is being conducted with the assistance of Morgan Stanley as an advisor. The outcome of this review remains uncertain, but it signifies a proactive approach towards optimizing operations.

Additionally, the company revealed plans to permanently close its Georgetown, South Carolina mill by year-end, impacting over 670 employees. The mill's fluff pulp capacity, totaling 300,000 tons, will be redistributed to other facilities, ensuring that overall production capacity remains intact. In a related move, International Paper confirmed an agreement with Sylvamo to terminate their uncoated freesheet supply contract by December 31.

These developments are part of a broader restructuring initiative aimed at reducing workforce levels by approximately 650 positions, with anticipated pre-tax charges ranging between $80 million and $100 million. Moreover, International Paper is advancing its acquisition of DS Smith, planning to list the expanded entity on the London Stock Exchange.

“Our third-quarter earnings have exceeded our expectations,” stated Andy Silvernail, Chairman and CEO. He highlighted that increased pricing across the portfolio and the benefits of a packaging go-to-market strategy have been supported by a moderate improvement in demand for boxes. However, elevated operating costs and reduced volumes due to seasonal factors also impacted results.

Silvernail emphasized that the company is "intently focused" on achieving profitable growth through an "80/20 strategy," which strategically allocates resources to enhance customer relations while minimizing complexity and costs. This strategy includes organizational restructuring, reductions in corporate expenses, and investments in competitive assets, complemented by facility closures to systematically lower operating costs.

As International Paper navigates these changes, it is also assessing strategic alternatives for its Global Cellulose Fibers division, recognizing the complexities involved and providing support to affected team members. Silvernail expressed optimism regarding the upcoming merger with DS Smith, expecting the transaction to finalize early in the first quarter of the following year.

As of 1:51 PM EDT, shares of International Paper surged by 13.13%, reaching $55.47 in New York, reflecting growing investor confidence in the company's strategic direction and financial resilience.

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