Investor Roadshow I November 6, 2018

Transcription

1 Investor Roadshow I November 6, 2018

2 Forward-Looking Statements Certain statements in this presentation may be considered forward-looking statements. Words such as expects, anticipates, estimates, believes and similar expressions identify forward-looking statements. The forward-looking statements include, but are not limited to, information regarding the ability of International Paper to complete the transaction, the timing of an offer by International Paper, the nature of International Paper s offer including whether or not a secondary listing will be made and potential synergies and benefits for the combined company. 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 indebtedness and changes 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 faced, cyclicality and changes in consumer preferences, demand and pricing for International Paper 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 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 International Paper experiences a material disruption at one of its manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; (vii) our ability to achieve the benefits expected from strategic acquisitions, divestitures, restructurings and capital investments; and (viii) other factors that can be found in International Paper s press releases and U.S. Securities and Exchange Commission (the SEC ) filings. 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 International Paper s SEC filings. International Paper undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Statements Relating to Non-GAAP Measures During the course of this presentation, certain non-u.s. GAAP financial measures may be presented. A reconciliation of all presented non-gaap measures (and their components) to U.S. GAAP financial measures is available on IP s website at internationalpaper.com under Performance/Investors. Ilim JV and Graphic Packaging Investment Information All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia ( Ilim ) and our 20.5% ownership interest in a subsidiary of Graphic Packaging Holding Company, other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim and Graphic Packaging Holding Company, respectively. Any projected financial information and statistical measures reflect the current views of Ilim and Graphic Packaging Holding Company 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. Investor Roadshow I November 6,

3 Investment Thesis Investor Roadshow I Q

4 IP Investment Thesis Our Vision To be among the most successful, sustainable and responsible companies in the world Our Mission To improve people s lives, the planet and our company s performance by transforming renewable resources into products people depend on every day Investor Roadshow I November 6,

5 IP Investment Thesis About Us Who We Are We are one of the world s leading producers of fiber-based packaging, pulp and paper What We Do We transform renewable resources into recyclable products people depend on every day How We Do It We do the right things, in the right ways, for the right reasons, all of the time. Investor Roadshow I November 6,

6 IP Investment Thesis The IP Way Forward The IP Way Forward is how we go beyond just doing the right things; it s how we create long-term value for all IP stakeholders. Mark S. Sutton, Chairman and Chief Executive Officer Investor Roadshow I November 6,

7 IP Investment Thesis Strategic Framework Strategy Fiber-based Packaging, Pulp and Paper Advantaged Positions Attractive Markets Shareholder Value Low cost, competitive assets Operational excellence Availability and access to low cost, sustainable fiber Capability to provide differentiated and innovative value propositions Opportunity for optimization and productivity gains Good market growth rates Customers and markets that value our products and innovations Strong growing supply positions Access to the best global customers and segments Renewable Natural Resources Delivers strong and sustainable free cash flows Increases intrinsic value with return spreads above our cost of capital (ROIC > WACC) Supports policies to return cash to shareholders Maintain strong balance sheet Investor Roadshow I November 6,

8 IP Investment Thesis Capital Allocation Framework to Maximize Value Creation Invest to to Create Value Strategic fit Compelling Value Disciplined Cost Reduction Capex Strategic Capex Selective M&A Return Cash to Shareholders Sustainable dividend at 40 50% of FCF Systematic share repurchases Maintain Strong Balance Sheet Target Debt to EBITDA 1 2.5x to 2.8x 1 Moody s methodology is used to calculate Adjusted Debt To EBITDA ratio. Moody s adjusts debt to include balance sheet debt, operating leases/deferred tax liability and debt issuance expense, and pension gap. EBITDA is adjusted to include lease and pension adjustments Investor Roadshow I November 6,

9 Delivering on Our Commitments For Value Creation Running our businesses well and generating strong FCF; Returns consistently above cost of capital Robust Capital Allocation Strategy Return Cash to Shareholders Maintain Strong Balance Sheet Invest in Strategic Growth Businesses Annualized Dividend Share Repurchases $1.05 $1.20 $1.40 $1.60 $1.76 $1.85 $1.90 $2.00 Additional $1.5B authorization (July 2014) Additional $2.0B authorization (October 2018) 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 Investor Roadshow I August 6, 2018 Investor Roadshow I November 6,

10 Strong, Sustainable Free Cash Flow $ Billions 5-Year Average $1.9 Billion $2.5 Global Economic Recession $2.0 $1.8 $2.1 $1.8 $1.9 $2.0 $1.5 Transformation: $0.5 Billion (average) $1.6 $1.0 $0.5 $ Free Cash Flow, a non U.S. GAAP measure, reflects cash provided by continuing operations for , based on data in the 10-K for each year at the time of filing. Free Cash Flow reflects cash provided by operations for 2012 onward. Excludes net cash pension contributions impacting 2006, 2010, 2011, 2013, 2014, 2015, 2016 & 2017, cash flows under European accounts receivable securitization beginning in 2009 and ending in 2011, and cash received from Black Liquor Tax Credits in 2009 and excludes $120MM cash paid for Temple-Inland change-in-control agreements, $251MM cash received from unwinding a timber monetization, $44MM cash paid for Temple-Inland pension plan contribution, and $80MM cash paid for Guaranty Bank settlement excludes $30MM cash received from Guaranty Bank insurance reimbursements. For 2015 onward, see slide #57 for a reconciliation of cash provided by operations to Free Cash Flow. Investor Roadshow I November 6,

11 Expanded Spread of Adj. ROIC 1 Above Cost of Capital Increasing Shareholder Value 5-Year Average 10.0% Global Economic Recession 11.4% 9.5% 9.7% 9.2% 10.0% 9.9% 7.5% 8.1% 8.3% 2017 WACC 4.5% 6.3% 6.5% 5.0% Years restated to reflect N.A. Consumer Packaging and xpedx as discontinued operations. Years are as reported in the 10-K for each year at time of filing 1 Adjusted ROIC = Adjusted Operating Earnings before Interest / Average Invested Capital [Equity (adjusted to remove pension related amounts in OCI, net of tax) + Interestbearing Debt] Investor Roadshow I November 6,

12 CEO Perspective Confident in full-year EBITDA growth of 15%+ Customers Unique capabilities to deliver solutions to our customers Innovation engine to create value Well positioned to capture growth in packaging and fluff pulp Performance Continued healthy demand Strong earnings growth and margins in all businesses Low-cost, high-quality manufacturing network Value Creation Earnings momentum Strong and sustainable free cash flow Capital allocation to maximize value creation Investor Roadshow I I November 6, 6,

13 Business Overview Investor Roadshow I Q

14 Increasing Shareholder Value Path to Value Creation Transformation Global Economic Recession Sustainable Returns Above Cost of Capital $11B Asset Sales Coated Papers Wood Products Forestland Kraft Paper Chemicals Beverage Pkg. China Sun JV Russia Ilim JV Brazil VCP Land / Mill Swap N.A. Weyco Pkg. Acquisition China SCA Pkg. India APPM Acquisition Franklin Fluff Pulp Conversion Turkey Olmuksan Pkg. Brazil Grupo Orsa Pkg. N.A. TIN Acquisition TIN Bldg. Products Sale Valliant PM3 Sun JV & Asia Box Sale Riegelwood Fluff Pulp Conversion Weyco Pulp Business Acquisition Madrid Mill Conversion NA Consumer Packaging Transfer xpedx Spin-Off Investor Roadshow I November 6,

15 International Paper 2017 Global Portfolio in Packaging, Pulp and Paper Positioned in attractive markets with low-cost assets that generate strong free cash flow and returns that exceed our cost-of-capital $17.6B Net Sales North America $1.2B Net Sales Brazil $3.0B Net Sales EMEA & Russia $2.2B 1 $0.2B Net Sales Total Sales Ilim JV India Full-year 2017 net sales data 1 Ilim JV total sales are not consolidated (IP owns 50% of JV) Investor Roadshow I November 6,

16 Strong Domestic Positions 1 st 1 st* 2 nd Russia 1 st 1 st Ilim Pulp Global Cellulose Fibers 19% 12% Revenue by Business 1 69% Industrial Packaging Printing Papers North America EMEA 1 st India Russia EMEA Brazil 3% 5% 8% % Total Adjusted EBITDA 2 84% North America Latin America Investor Roadshow I November 6, 2018 *Fluff pulp capacity based on Poyry 1 Based on 2017 sales 2 Based on 2017 Adj. EBITDA Margins; From continuing operations before special items and non-operating pension expense; does not reflect equity earnings from Ilim JV 16

17 IP N.A. Exports Leveraging Strategic Export Opportunities Fluff Pulp (~80% of N.A. production) Containerboard (~10% of N.A. production) EMEA ~45% ~45% Asia ~45% ~15% Latin America ~10% ~40% % of exports volume shipped to select regions Investor Roadshow I November 6,

18 Brazil & Russia Exports Leveraging Strategic Export Opportunities Softwood Pulp (~50% of Russia production) % of exports volume shipped to select regions ~20% EMEA ~80% Asia ~55% Latin America ~40% ~5% Uncoated Freesheet (~50% of Brazil production) Investor Roadshow I November 6,

19 Adj. EBITDA % N.A. Industrial Packaging Track Record of Success Growth and Margin Expansion through Strategic Acquisitions and Successful Integrations Weyco Packaging Acquisition & Integration TIN Acquisition & Integration 25% Global Economic Recession 22% 24% 24% 22% 22% 20% 15% 10% 5% 9% 13% 15% 15% % 18% 20% 19% Business Adj. EBITDA ($B) 0% IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes Investor Roadshow I November 6,

20 Full-Year 2017 Financials Investor Roadshow I November 6, Sales ($B) $20.7 $19.5 $21.7 Adjusted EBIT 1 ($MM) $2.5 $2.1 $2.4 Adjusted Operating EPS 2 $3.44 $3.09 $3.49 Adj. Operating EPS w/ Disc. Ops 3 $3.65 $3.35 $3.66 Ilim F/X 4 impact to Operating EPS ($0.18) $0.06 $0.04 Adjusted EBITDA 1 ($MM) $3.7 $3.2 $3.7 Adjusted EBITDA Margin % 16.6% 17.2% Equity Earnings ($MM) $117 $198 $177 Free Cash Flow 5 ($MM) $1.8 $1.9 $2.0 Year-End Debt $9.3 $11.3 $11.2 All financials, with the exception of Free Cash Flow, have been restated to reflect N.A. Consumer Packaging as a Discontinued Operation from 2013 onward 1 From continuing operations before special items and non-operating pension expense 2 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense 3 Excluding non-operating pension expense and special items related to discontinued operations of ($0.07) and ($0.02), respectively in 2017 (2016 includes ($0.01) related to xpedx) 4 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.9B at year end 2017) 5 See slide #57 for a reconciliation of cash provided by operations to Free Cash Flow FCF 4 ($MM) 1Q17 1Q18 $1.9 $1.8 $

21 Third Quarter 2018 Results Very strong performance and significant year-over-year earnings growth Solid commercial performance across all three businesses Cost headwinds from distribution and most inputs Adjusted Operating EPS 1 Hurricane Florence impact of $36MM Strong Ilim results $1.56 3Q18 Share repurchases of $200MM in 3Q18 and new authorization of $2B Increased dividend by 5.3% to $2.00/share $1.19 2Q18 1 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) $1.01 3Q17 Investor Roadshow I November 6,

22 Third Quarter 2018 Financials 3Q17 2Q18 3Q18 Sales ($B) $5.5 $5.8 $5.9 Adjusted EBIT 1 ($MM) $665 $706 $853 Adjusted Operating EPS 2 $1.01 $1.19 $1.56 Adjusted EBITDA 1 ($MM) Ilim F/X 3 impact to Operating EPS $0.02 $(0.09) $(0.06) Adjusted EBITDA Margin % 17.8% 20.0% Equity Earnings ($MM) $45 $70 $92 $1,183 3Q18 Free Cash Flow 4 ($MM) $624 $361 $ financials, with the exception of Free Cash Flow, have been restated to reflect N.A. Consumer Packaging as a Discontinued Operation 1 From continuing operations before special items and non-operating pension expense 2 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense 3 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.7B as of September 30, 2018) 4 See slide #57 for a reconciliation of cash provided by operations to Free Cash Flow $1,005 $1,036 3Q17 2Q18 Investor Roadshow I November 6,

23 Appendix Investor Roadshow I Q

24 Appendix Table of Contents Industrial Packaging Global Cellulose Fibers Printing Papers IP Russia & Ilim Group Graphic Packaging Investment...54 Other Financial Information Global Citizenship Contact Information Investor Roadshow I November 6,

25 N.A. Containerboard Supply Positions Others 50% Stone 13% 1995 Producer Position Top 5 = 43% TIN 7% IP 7% Smurfit 7% GP 9% WY 7% KapStone 4% Others 26% PCA 9% 2018 Producer Position Top 5 = 75% GP 10% WRK 19% IP 32% Source: 2018 estimated effective containerboard capacity based on RISI Capacity Reports, SEC Filings, and IP data and analysis Investor Roadshow I I November 6, 6,

26 IP N.A. Industrial Packaging Balanced Global Strategy IP s channels to market provide choices for maximizing value N.A. Mill System Capacity ~13.5 Million Tons Other Uses 1 ~0.5 Million Tons Containerboard ~13.0 Million Tons IP Box Plants ~80% Open Market ~20% U.S. ~90% Non-U.S. ~10% Domestic ~35% Export ~65% EMEA ~45% Lat Am ~40% Asia ~15% 1 Includes Saturating Kraft /Gypsum Liner Source: 2018 estimates based on IP data and analysis Investor Roadshow I November 6,

27 Global Containerboard Industry Total Containerboard Trade Flows Europe 5.1MM Europe 4.6MM Estimated 2018 Global Demand = 189MM tons C America 2.6MM N America 5.1MM Africa 1.6MM Mid East 1.1MM Asia 1.5MM Countries with Net Import or Export greater than 100M tons Net Export, Tons Net Import, Tons S America 1.1MM S America 0.3MM Africa 0.4MM Oceania 0.8MM Source: 2018 RISI trade estimates and IP Analysis Investor Roadshow I November 6,

28 Mansfield Valliant Prattville Savannah Cedar River RedRiver PineHill Rome Bogalusa Orange Springfield Vicksburg Pensacola Maysville Newport Henderson Xalapa Thousands Tons IP N.A. Containerboard Mill System ~13.5MM Tons Capacity 2,000 1,800 1,600 1,400 1,200 1, Source: 2018 estimates based on IP data and analysis; Investor Roadshow I November 6, 2018 chart includes Saturating Kraft & Gypsum liner 28

29 Manufacturing Costs ($/Ton) Linerboard Global Cost Curve 99.8% of Capacity in 1 st Quartile $1,200 $1,000 Cash Costs + Delivery to Chicago $800 $600 $400 $200 Orange Cedar Rapids Maysville Henderson Bogalusa Rome Savannah Pensacola Red River Valliant Vicksburg Pine Hill Prattville Mansfield Newport Springfield $0 0 20,000 40,000 60,000 80, ,000 Source: FisherSolve 3Q17 data Cumulative Annual Production (Thousand Tons) Investor Roadshow I November 6,

30 IP Well-Positioned in Attractive Customer Segments Market Segment IP Mix Industry Mix 24% 17% Box Shipments by Segment 59% Food & Beverage 59% 49% Processed Food Note: IP Mix, 2017, Industry Mix 2016 Source: IP analysis Protein Produce Beverage Durable Goods & Distribution 24% 21% Shipping & Distribution Building Materials Other Durables Other Non-Durable Goods 17% 30% Paper Products Chemicals & Pharma Other Non-Durables Investor Roadshow I November 6,

31 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 U.S. Containerboard Industry Statistics Containerboard Pricing $/short ton 800 Linerboard (List Price) Medium (List Price) Linerboard (OMP) Medium (OMP) $/short ton $ $700 $600 $500 $400 $ $200 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan Source: RISI As of Jan 2015, RISI only reports OMP = Open Market Price Investor Roadshow I November 6,

32 Economic Indicators and U.S. Box Demand Indexed 100 = US Box Shipments US Nondurable Industrial Production US GDP US Industrial Production Source: Oxford Economics; RISI North America Containerboard Historical Data Investor Roadshow I Q2 November ,

33 U.S. Corrugated Packaging Shipments Shipments (BSF) RISI Forecast Historical Data Source: Fibre Box Association : 1.8% CAGR (RISI February 2018, 5-yr forecast) Investor Roadshow I November 6,

34 Wood / OCC Fiber Breakeven OCC Cost Delivered 1 $/ton Wood Advantaged Q Q18 2Q RISI national average OCC price, adjusted for delivery 2 Forest2Market chip equivalent basis index price Wood Chip Cost Delivered 2 $/ton OCC Advantaged Investor Roadshow I November 6,

35 Global Cellulose Fibers Business Overview Grand Prairie, Alberta Franklin, VA Eastover SC New Bern, NC Riegelwood, NC Columbus, MS Georgetown, SC Port Wentworth, GA Pensacola, FL Flint River, GA Svetogorsk, Russia Kwidzyn, Poland Gdansk, Poland Saliat, France Market Pulp Mill Fluff Pulp Mill Converting facilities Market Pulp ~25% Total Capacity ~3.6MM MTPY Targeted Mix Fluff Pulp & Specialties 2.7MM 85% Market Pulp 0.9MM 15% 1 North American production. Combined businesses, with Riegelwood PM18 running SW market pulp, figures exclude Kwidzyn Current Product Mix 1 ~75% Fluff Pulp & Specialties Investor Roadshow I November 6,

36 GDP/Capita (USD) Absorbent Hygiene Products (AHP) Outlook Demand & Growth AHP demand linked to GDP growth in emerging markets 12,000 10,000 8,000 6,000 4,000 2, SEA MEA China Latin America Investor Roadshow I November 6, 2018 Source: IHS Global Insights 36

37 Global Market Pulp Demand Outlook Bleached Softwood MM MTPY CAGR = 1.5% 27.6MM MTPY CAGR 25 Rest of World Rest of World 1.0% 20 Asia Asia 3.1% 15 Eastern Europe Eastern Europe 3.3% 10 Western Europe Western Europe (1.3%) 5 Latin America Latin America 1.3% 0 North America North America % Source: PPPC March 2018 Forecast Research Note Investor Roadshow I November 6,

38 Global Cellulose Fibers Advantaged Position in Attractive Markets Well-Positioned to Serve Growing Demand with Global, Strategic Customers Fluff Demand by Region and End Use Demand 5.9MM MTPY CAGR CAGR Airlaid 11% 3.1% Asia 6.3% Feminine Care 23% 3.1% EMEA 3.6% Adult Incontinence 33% 7.6% Latin America North America 2.7% 1.5% Baby Diapers 34% 2.1% Source: 1 Price Hanna 2017 Outlook For Absorbent Products, RISI, IP analysis Investor Roadshow I November 6,

39 IP Global Pulp Capacity Total of 3.9MM MTPY 1 Europe/Russia 0.3 MM Ilim JV 2.0 MM North America 3.4 MM Latin America 0.2 MM Pulp mill 1 Does not include llim JV Investor Roadshow I November 6,

40 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Pulp Industry Statistics USD/admt 1,600 Global Pulp Prices 1,400 1,200 1, NBSK (dne) BEK (dne) Fluff (dne) Source: RISI Global pulp prices delivered to Northern Europe; Units shown in metric tons Investor Roadshow I November 6,

41 IP Global Papers Footprint Total of 4.5MM Short Tons 1 North America 2.0 MM Europe 0.8 MM Russia 0.4 MM Ilim JV 0.3 MM India 0.2 MM Brazil 1.1 MM Uncoated paper mill 1 Does not include llim JV Investor Roadshow I November 6,

42 N.A. Uncoated Freesheet Supply Capacity Positions 1998 Producer Position 2018 Producer Position Other 25% Union Camp 9% WY 9% Willamette 9% GP 15% 1998 Producer Position Top 2 = 28% Top 4 = 48% Boise 10% IP 13% Champion 10% Glatfelter 7% GP 10% PCA 10% Other 19% 2018 Producer Position Top 2 = 53% Top 3 = 64% IP 21% Domtar 32% 1998, 2018 Source: Poyry Consulting, Fisher International, IP analysis Investor Roadshow I November 6,

43 Capacity % Grade / Mix N.A. Papers Mill System 1.9MM Short Ton Capacity 100% Uncoated Freesheet Non UFS1 Pulp 80% 60% 40% 20% 0% Paper (M Tons) Pulp (M Tons) Riverdale Ticonderoga Eastover Georgetown Non UFS includes Kraft Bag and Uncoated Bristols Source: IP analysis Investor Roadshow I November 6,

44 Manufacturing Costs $/Ton Uncoated Freesheet Global Cost Curve IP N.A. Capacity in 1 st & 2 nd Cost Quartile $1,800 $1,600 Cash Costs + Delivery to Chicago $1,400 $1,200 $1,000 $800 Eastover Georgetown $600 $400 $200 $0 Riverdale Ticonderoga 0 10,000 20,000 30,000 40,000 50,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 3Q17 data Investor Roadshow I November 6,

45 N.A. Printing Papers Margin History Adj. EBITDA 1 $ MM 1, % Papers Only 20% 19% 19% 18% 22% 18% 17% Adj. EBITDA 1 % 25% 20% % % 12% 13% 12% 15% 10% % Tons (MM) % 1 From continuing operations before special items and non-operating pension expense Investor Roadshow I Q2 November ,

46 U.S. Uncoated Freesheet Demand Million Tons RISI Forecast Historical Data Source: AF&PA : (3.4%) CAGR (RISI January 2018: 5-yr Forecast) Investor Roadshow I November 6,

47 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 U.S. Uncoated Freesheet Industry Statistics Uncoated Freesheet Pricing Trends $/short ton $1,200 $1,200 $1,100 $1,100 $1,000 $1,000 $900 $900 $800 $800 $700 RISI 20# Cutsize RISI 50# Offset $700 $600 $600 $500 $500 Source: RISI Investor Roadshow I November 6,

48 Latin American Uncoated Freesheet Market Top 6 Producers > 80% Supply & Demand Others Other LatAm Smurfit Kappa 14% IP Peru Chile Demand Capacity Ledesma Celulosa Argentina Propal 4% 4% 7% 4% 3.3MM tons 37% Colombia Argentina Brazil ,000 1,500 2,000 2,500 Thousand Short Tons LatAm analysis excludes Mexico Source: Ibá / AFCP / RISI / Fisher / IP Estimates 30% Suzano Demand Latin America is a Net Exporter 88% Op. Rate Net Exports 2.6 MM 2.9 MM 0.2 MM Investor Roadshow I November 6,

49 IP Brazil Uncoated Freesheet Historical Financials Adj. EBITDA 1 US $ MM % 33% % % 27% 26% % 31% 31% 29% % 297 Adj. EBITDA 1 Margin 35% 30% 25% 20% 15% % 50 5% % 1 From continuing operations before special items and nonoperating pension expense Tons (MM) Investor Roadshow I November 6,

50 IP Russia & ILIM JV Manufacturing Overview Well-Positioned to Serve Target Markets Ilim JV Production tonnes Koryazhma Ust-Ilimsk Svetogorsk Bratsk Kazakhstan Mongolia China IP Russia Production 1 Svetogorsk 2017 Total 719 Coated Paperboard 118 Pulp (soft/hardwood) 166 Fine Papers Volumes shown in thousand metric tons Bratsk Mill Total 1,140 1,162 Softwood bleached pulp Hardwood bleached pulp KLB Koryazhma Mill Total 1,244 1,270 PM7 paper PM7 CFS Pulp (BHKP, UKP) KLB and others Ust-Ilimsk Mill Total Pulp (BSKP, UKP) Total Hardwood bleached pulp Investor Roadshow I November 6,

51 Manufacturing Costs ($/Ton) ILIM Joint Venture Well-Positioned to Serve Growing Pulp Markets China will account for more than 60% of world s incremental market pulp growth 1st and 2 nd quartile cost positions with favorable access to China NBSK customers Access to significant Russian wood basket $1,000 $800 $600 Cash Cost + Delivery to Beijing, China1 Ust-Ilimsk $400 $200 $0 Bratsk 0 5,000 10,000 15,000 20,000 Cumulative Capacity (Thousand Tons) 1 Source: FisherSolve 3Q17 data Investor Roadshow I November 6,

52 ILIM Joint Venture Full Year Financials Sales Volume (Million metric tonnes) Sales ($B) Debt ($B) Adj. Operating EBITDA ($MM) F/X Gain (Loss) 1 ($MM) (80) (674) (188) EBITDA ($MM) 123 (215) Depreciation ($MM) EBIT ($MM) (53) (403) Interest Expense ($MM) $88 Net Income / (Loss) ($MM) (72) (359) IP Equity Earnings / (Loss) ($MM) (46) (194) Dividends (to IP) ($MM) Ilim JV results are US GAAP basis 1 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.9B at year end 2017) Investor Roadshow I November 6,

53 ILIM Joint Venture 3Q18 vs. 2Q18 $ Million 3Q17 2Q18 3Q18 Sales Volume (thousand metric tonnes) Sales $523 $698 $655 EBITDA $184 $209 $239 F/X (Impact of USD Net Debt) 1 $18 $(98) $(58) Adj. Operating EBITDA 2 $166 $307 $297 IP Equity Earnings (Loss) 3 $48 $57 $74 Ilim JV results are on U.S. GAAP basis 1 Represents F/X impact including amounts related to Ilim JV USD-denominated net debt (balance of ~$0.7B as of September 30, 2018); Ilim Group s functional currency is the Ruble (RUB); Non-functional-denominated currency balances are measured monthly using the monthend exchange rate 2 Before F/X impact including USD-denominated net debt 3 IP Equity Earnings (Loss) for 3Q17, 2Q18 and 3Q18 include after-tax F/X gains (losses) (primarily on USD-denominated net debt) of $7MM, $(39)MM and $(23)MM, respectively Strong commercial and operating performance Lower volume due to heavy planned maintenance outages in 3Q18 F/X loss (non-cash) on USD denominated net debt Investor Roadshow I November 6,

54 Investment in Graphic Packaging Overview Transaction Combined IP s N.A. Consumer Packaging business with Graphic Packaging Created leading consumer packaging company with $6 billion of revenue IP contributed N.A. Consumer Packaging business into Graphic Packaging subsidiary 2-year lock-up IP cannot sell any of its ownership interest 5-year standstill IP cannot increase its ownership interest No IP involvement in operation or governance of the business Valuation Valued at $1.8 billion at an 8.6X EBITDA multiple 1 IP has 20.5% ownership in GPK subsidiary 2 valued at $1.14 billion Financial Considerations Closing Earnings neutral to slightly accretive Dividends to IP of ~$25 million annually (based on current GPK dividend per share) Leverage neutral No current cash taxes expected on transaction Closed January 2, 2018 Ownership interest reflected in IP s equity earnings 1 Based on adjusted 2017 estimated EBITDA of $210 million 2 Subsidiary of Graphic Packaging Holding that will hold combined assets of the business Investor Roadshow I November 6,

55 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 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Adj. Operating EPS Impact of Mineral Rights Gain Final Land Sale as originally reported adjusted for elimination of the Ilim JV reporting lag Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings xpedx is reflected as a Discontinued Operation from 2010 onward N.A. Consumer Packaging is reflected as a Discontinued Operation from 2013 onward Investor Roadshow I November 6,

56 Free Cash Flow $ Million Q17 2Q18 3Q18 Cash Provided by Operations $2,580 $2,478 $1,757 $(709) $801 $941 Cash Invested in Capital Projects Cash Contribution to Pension Plan $(1,487) $(1,348) $(1,391) $(271) $(440) $(357) $750 $750 $1,250 $1, Kleen Products Settlement - - $354 $ Free Cash Flow $1,843 $1,880 $1,970 $624 $361 $584 Investor Roadshow I November 6,

57 $ Billion Balance Sheet Financial Strength 2017 Highlights Pension gap decreased by $1.4B Made $1.25B voluntary pension contribution Took meaningful measures to further de-risk our pension plan Year-end discount rate decreased from 4.1% (2016) to 3.6% (2017) Moody s Target: Adjusted Debt < 3X Adjusted EBITDA 3.2x $3.6 Pension Gap 4.0x $3.4 Pension Gap 3.3x $3.4 $2.0 Pension Gap Pension Gap Attractive $1.0B debt issuance partly funded pension contribution $ 1.0B cash balance at year end $9.3 Balance Sheet Debt [2.4x] 1 $11.3 $11.2 Balance Sheet Debt Balance Sheet Debt [3.2x] 2 [3.0x] 3 Moody s methodology adjusted to exclude N.A. Consumer Packaging in Simple Debt Coverage: Balance Sheet Debt / 2015 IP s Adjusted EBITDA of $3.9B 2 Simple Debt Coverage: Balance Sheet Debt / 2016 IP s Adjusted EBITDA of $3.5B 3 Simple Debt Coverage: Balance Sheet Debt / 2017 IP s Adjusted EBITDA of $3.7B $0.5 Op. Lease Adj. $0.5 Op. Lease Adj $0.5 Op. Lease Adj Investor Roadshow I November 6,

58 Million Debt Maturity Profile Maturities as of December 31, 2017 $1,200 $1,000 $800 $600 $400 $200 $ Debt Maturities Commercial Paper Other Debt 1 Investor Roadshow I November 6, Primarily foreign debt (intended to be rolled over or refinanced). 58

59 De-Risking the Company Contributions 2014 $353MM 2015 $750MM 2016 $750MM 2017 $1.25B IP is taking meaningful and deliberate steps to de-risk our pension plan De-Risking 2004 Pension plan closed to new entrants 2014 Decision made to freeze defined benefit pension plan for active salary participants effective 12/31/ Voluntary term-vested buy out program reduced plan size by ~10% and introduced new LDI 1 policy Continue to assess if there are attractive opportunities to further de-risk pension plan on a structural basis Making changes to the plan's asset allocation to emphasize more fixed income Reallocating the plan s fixed income investments to longer duration maturities Expanding certain hedging strategies Transferred ~$1.3B of pension benefit obligations to Prudential (2H 2017) Transferred ~$1.6B of pension benefit obligations to Prudential (2H 2018) 1 Liability Driven Investment Investor Roadshow I November 6,

60 Billion Pension Plan Update As of December 31, 2017 No contribution ; $2.5B contribution Year-End Funded Status 1 $1.1B contribution made in $750MM voluntary contributions for 2016 $1.25B voluntary contribution for 2017 No contribution required in 2018 ($1.5) ($2.4) ($2.8) ($4.1) ($2.2) ($3.4) ($3.6) ($3.9) ($2.0) 1 Reflects status as of December 31 Investor Roadshow I November 6,

61 Million Pension Plan Update 1 As of December 31, 2017 Key Variables E $ Annual Pension Expense 2 Assumed Rate of Return 7.75% 7.50% 7.50% Discount Rate 4.40% 4.10% 3.60% $450 $ Average Annualized Returns % Past Five Years 9.4% Past Ten Years 7.2% $150 $ E Portfolio Asset Allocation at Target Actual Equity 42% - 53% 49% Bonds 32% - 44% 36% Real Estate 7% - 13% 10% Other 3% - 8% 5% and onward include Temple-Inland pension plan 2 Non-cash expense for U.S. plans only 3 Through December 2017 Pension expense reflects service cost, interest cost, amortization of actuarial losses and expected return on plan assets For the past 10 years, IP Pension Plan performance ranked in the top decile of the State Street Bank Corporate and Public Master Trust Universe of approx 200 observations Investor Roadshow I November 6,

62 $ Million Capital Spending $1,500 % of Depreciation ~$1, % $1, % $900 75% $600 $300 50% $ E 25% Reflects continuing operations Maintenance Regulatory Strategic Cost Reduction % of Depreciation Investor Roadshow I November 6,

63 2018 Capital Investment Optimizing Advantaged Assets Maintenance & Regulatory Maintaining world-class, low-cost, advantaged assets Cost Reduction Creating value through pipeline of high return projects 30% IRR Strategic Reinvesting in core businesses with higher growth profile $0.9B $0.2B $0.1B $0.4B $0.5B $1,200 $1,000 Cash Cost (Delivered to Chicago) IP N.A. Containerboard Mills $800 $600 $400 $200 Source: IP Analysis, FisherSolve 2Q17 data $0 0 50, ,000 Cumulative Annual Containerboard Global Production (Thousand Tons) Madrid Mill Conversion Investor Roadshow I November 6,

64 Maintenance Outages Expenses 2017 Actual $ Million 1Q17A 2Q17A 3Q17A 4Q17A 2017A Industrial Packaging $71 $102 $38 $28 $239 North America Europe Europe Coated Paperboard Brazil Global Cellulose Fibers $50 $44 $7 $9 $110 North America Europe Printing Papers $23 $43 $1 $10 $77 North America Europe Brazil India Total Impact $144 $189 $46 $47 $426 Investor Roadshow I November 6,

65 Maintenance Outages Expenses 2018 Forecast $ Million 1Q18A 2Q18A 3Q18A 4Q18F 2018F Industrial Packaging $107 $116 $65 $8 $296 North America Europe Europe Coated Paperboard Brazil Global Cellulose Fibers $63 $37 $24 $27 $151 North America Europe Printing Papers $37 $50 $6 $9 $102 North America Europe Brazil India Total Impact $207 $203 $95 $44 $549 Investor Roadshow I November 6,

66 North American Downtime Thousand Tons Thousand Tons Thousand Tons Containerboard Cellulose Fibers Uncoated Papers Maintenance Economic Investor Roadshow I November 6,

67 Total Cash Components 2017 Chemicals 8% Fiber 35% Overhead 10% Energy 8% Labor 12% North American mills only (Excludes Newly Acquired Pulp Business) Freight 12% Materials 15% Investor Roadshow I November 6,

68 U.S. Mill Wood Delivered Cost Trend 3Q18 Average Cost Up 1% vs. 2Q IP data, cost Indexed to January 2007 values Investor Roadshow I November 6,

69 U.S. OCC Delivered Cost Trend 3Q18 Average Cost Up 9% vs. 2Q IP data, cost Indexed to January 2007 values Investor Roadshow I November 6,

70 U.S. Natural Gas Cost Trend 3Q18 Average Cost Up 2% vs. 2Q IP data, cost Indexed to January 2007 values NYMEX Natural Gas closing prices Investor Roadshow I November 6,

71 U.S. Fuel Oil Cost Trend 3Q18 Average Cost Up 4% vs. 2Q IP data, cost Indexed to January 2007 values WTI Crude prices Investor Roadshow I November 6,

72 U.S. Chemical Composite Cost Trend 3Q18 Average Cost Down 2% vs. 2Q IP data, cost Indexed to January 2007 values Delivered cost to US facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid excludes WY PKG Investor Roadshow I November 6,

73 2017 Global Consumption Annual Purchase Estimates for Key Inputs Commodity North America Non North America Natural Gas (MMBTUs) 80,000,000 11,000,000 Energy Fiber Chemicals Fuel Oil (Barrels) 450, ,000 Coal (Tons) 85, ,000 Wood (Tons) 55,000,000 8,000,000 Old Corrugated Containers / DLK (Tons) 4,900, ,000 Caustic Soda (Tons) 420,000 70,000 Starch (Tons) 340, ,000 Sodium Chlorate (Tons) 170,000 50,000 LD Polyethylene (Tons) - - Latex (Tons) - 10,000 Investor Roadshow I November 6,

74 Global Citizenship Investor Roadshow I November 6,

75 Contact Information Guillermo Gutierrez Vice President, Investor Relations Michele Vargas Director, Investor Relations Betty Groom Financial & Administrative Assistant Investor Roadshow I November 6,

76 International Paper Awards & Recognitions FORTUNE S World s Most Admired Companies Named by the Ethisphere Institute as one of the World s Most Ethical Companies 2018 Commercial Appeal s 2 Top Workplace 2017 IDG s Computerworld 100 Best Places to Work in IT 2017 Institutional Investor s Most Honored Company 2017 in the Paper & Packaging sector 2018 Woman s Choice Award Best Companies to Work For Millennials International Paper Brazil Graphic Paper Manufacture 2015 International Paper Russia Corporate Social Responsibility Award 2015 International Paper India Parivartan Award 2015 Investor Roadshow I November 6, From FORTUNE Magazine, March 1, Time Inc. Used under license 2 From Commercial Appeal (Memphis, TN) 76