Forward-Looking Statements

Transcription

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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 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 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 other manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; (vii) the failure to realize the expected synergies and costsavings from our purchase of the cellulose fibers business of Weyerhaeuser Company; and (viii) our ability to achieve the benefits we expect from all other 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. 2

3 Statements Relating to Non-GAAP Financial Measures During the course of this presentation, certain non U.S. GAAP financial measures will be presented, such as Adjusted Operating EPS, Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Adjusted ROIC. A reconciliation of all presented non-gaap measures (and their components) to U.S. GAAP financial measures is available on the company s website at internationalpaper.com under Performance/Investors. 3

4 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. 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

5 Investment Thesis

6 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 6

7 IP Investment Thesis About Us Who We Are We are one of the world s leading producers of fiberbased 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. 7

8 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 longterm value for all IP stakeholders. Mark S. Sutton, Chairman and Chief Executive Officer 8

9 IP Investment Thesis Leveraging Selective Choices Strategy Fiber-based Packaging, Pulp and Paper Advantaged positions in advantaged markets Channels to Market Strong market positions Sell products in markets where they are valued Winning with the right customers and segments Renewable Natural Resources Availability and access to low-cost, sustainable fiber in key manufacturing regions Cost Positions Low-cost asset base Mill footprint on cost curve Disciplined capital investment Sustained low-cost positions through operational excellence and optimization 9

10 IP Investment Thesis Delivering Shareholder Value Shareholder Value Strong and sustainable Free Cash Flow Increase value creation Exceed shareholders TSR expectations Capital Allocation Strong and sustainable free cash flow to: Fund dividends (40-50% of FCF) Maintain healthy balance sheet and credit rating Enable opportunistic share buybacks Reinvest in the businesses and strengthen portfolio Value Creation Levers Improve what we have: Manufacturing excellence efforts Commercial optimization Targeted investments (IRR>WACC): Integrate newly-acquired pulp business and deliver synergies N.A. Industrial Packaging projects Madrid mill acquisition / conversion 10

11 Capital Allocation IP s Balanced Use of Cash Systematically Return Cash to Shareholders Trough-Tested Sustainable Dividend (40% 50% of FCF) Effective Capital Spending Maintenance & Regulatory Needs High Return, Cost Reduction Projects Opportunistic Share Repurchases Selective Reinvestment Value-Creating, Healthy Spread Above Cost of Capital Improving Competitive Position Cash From Operations Maintain Strong Balance Sheet & Credit Rating Appropriate Liquidity & Debt Coverage Proactively Manage Pension Plan 11

12 Strengthening Our Balance Sheet Intend to make $1.25B voluntary pension contribution by September 15 th Funded partially with proceeds from recent debt offering Viewed as debt reduction by rating agencies Contribution is tax deductible and locks in cash benefit prior to potential tax reform Improved plan funding level provides significant PBGC 1 premium savings Will take additional steps to de-risk pension plan in 2H 2017 No required contributions expected during the next five years We continue to target available cash for debt reduction needed to support investment grade credit rating 1 Pension Benefit Guaranty Corporation 12

13 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 2017 Will take additional measures to reduce risk in our pension plan 2H 2017 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 Exploring other risk mitigation options 1 Liability Driven Investment 13

14 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 Strategically Reinvest in Business Annualized Dividend Share Buybacks $1.76 $1.85 $1.60 $1.40 $1.20 $1.05 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 $1.5B share buyback (September 2013) Additional $1.5B authorization (July 2014) 14

15 $ Billions Strong, Sustainable Free Cash Flow $2.5 Global Economic Recession 5-Year Average $1.8 Billion $2.0 $1.5 Transformation: $0.5 Billion (average) $1.6 $1.8 $2.1 $1.8 $1.9 $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, 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 $31MM cash paid for pension plan contribution and $30MM cash received from Guaranty Bank insurance reimbursements. For 2014 onward, see slide #75 for a reconciliation of cash provided by operations to Free Cash Flow. 15

16 Expanded Spread of Adj. ROIC 1 Above Cost of Capital Increasing Shareholder Value Global Economic Recession 5-Year Average 9.6% 11.0% 7.5% 8.1% 9.5% 8.3% 9.3% 9.2% 9.9% 6.3% 6.5% 4.5% 5.0% WACC for Adjusted ROIC = Adjusted Operating Earnings before Interest / Average Invested Capital [Equity (adjusted to remove pension related amounts in OCI, net of tax) + Interest-bearing Debt] 16

17 Full Year Outlook Positioned for Strong Second Half Performance Key drivers of margin expansion Healthy demand outlook in Industrial Packaging and Global Cellulose Fibers Realization of recent price increases Solid operational performance and cost reduction initiatives Significantly lower maintenance outage expense Global Cellulose Fibers synergies and momentum Allocate capital to create value with a near-term focus on debt reduction Remain confident in upside to full year view of 10%+ YoY EBITDA growth 17

18 Business Overview

19 IP Transformation Timeline/Plan Transformation Plan Divestitures & Strategic Reinvestment Global Recession IP Achieves Cost of Capital Returns $11B Asset Sales Coated Papers Wood Products Forestland Kraft Paper Chemicals Beverage Pkg. China Sun JV Russia Ilim JV Brazil VCP Land / Mill Swap China SCA Pkg. N.A. Weyco Pkg. Acquisition India APPM Acquisition Brazil Grupo Orsa Pkg. N.A. TIN Acquisition Turkey Olmuksan Pkg. TIN Bldg. Products Sale Franklin Fluff Pulp Conversion Valliant PM3 xpedx Spin-Off Sun JV & Asia Box Sale Riegelwood Fluff Pulp Conversion Weyco Pulp Business Acquisition Madrid mill Acquisition 19

20 International Paper 2016 Global Portfolio in Packaging, Pulp and Paper Positioned in attractive markets with low-cost assets that can generate strong free cash flow and returns that can exceed our cost-of-capital $16.5B Net Sales North America EMEA & Russia $2.8B Net Sales India $0.2B Net Sales $1.9B 1 Ilim JV Total Sales Brazil $1.1B Net Sales Full-year 2016 net sales data 1 Ilim JV total sales are not consolidated (IP owns 50% of JV) 20

21 Strong Domestic Market Positions Revenue by Business 1 64% 10% 18% 8% Industrial Packaging Global Cellulose Fibers Printing Papers Consumer Packaging North America EMEA 3 Russia 1 st 1 st* 2 nd 2 nd 1 st 1 st Ilim Pulp Latin America 1 st Russia EMEA 3% 6% Brazil 8% % Total Adjusted EBITDA 4 North America 83% India * Fluff pulp & specialties grades 1 Based on 1H17 sales 2 From continuing operations before special items and non-operating pension expense; does not reflect equity earnings from Ilim JV 3 Excludes Russia 4 Based on 2016 Adj. EBITDA Margins 21

22 N.A. Exports Leveraging Strategic Export Opportunities % of exports volume shipped to select regions ~40% ~50% Fluff Pulp (~90% of N.A. production) Containerboard (~10% of N.A. production) ~50% EMEA Asia ~35% ~10% ~15% Latin America 22

23 Brazil & Russia Exports Leveraging Strategic Export Opportunities % of exports volume shipped to select regions Softwood Pulp (~50% of Russia production) EMEA ~20% ~80% Asia Latin America ~40% ~55% Uncoated Freesheet (~50% of Brazil production) ~5% 23

24 N.A. Industrial Packaging Track Record of Success Growth and Margin Expansion through Strategic Acquisitions and Successful Integrations Adj. EBITDA % 25% 20% 15% 10% 9% 13% 15% 15% Weyco Packaging Acquisition & Integration Global Recession TIN Acquisition & Integration 19% 18% 20% 19% 22% % 24% % 2.4 Business Adj. EBITDA ($B) 5% 0% H17 Run Rate IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes 24

25 Full-Year 2016 Financial Results $ Billion (Except as noted) Sales $23.6 $22.4 $21.1 FCF 4 ($MM) Adj. EBIT 1 $2.7 $2.6 $2.3 Adj. Operating EPS 2 $3.00 $3.65 $3.35 Operating EPS impact of Ilim F/X 3 IP Share ($0.63) ($0.18) $0.06 Adj. EBITDA 1 $4.1 $3.9 $3.5 Adj. EBITDA Margin 17.5% 17.6% 16.6% FCF 4 $2.1 $1.8 $1.9 Year-End Debt $9.4 $9.3 $11.3 $2.1 $1.8 $1.9 Cash Balance $1.9 $1.0 $ 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 ~$0.6B at year end 2016) 4 See slide #75 for a reconciliation of cash provided by operations to Free Cash Flow 25

26 Second Quarter 2017 Results Adj. Operating EPS 1 $0.92 $0.60 $0.65 Healthy box and containerboard demand driving N.A. Industrial Packaging performance Positive momentum in Global Cellulose Fibers Record fluff pulp sales Synergies being realized faster Recent price increases being implemented and realized across key businesses OCC cost averaged $20/ton higher than 1Q17 Executed seasonally heavy maintenance outage schedule; ~75% of outages completed in 1H17 Strong Ilim operational results; equity earnings negatively impacted by non-cash FX 2Q16 1Q17 2Q17 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) 26

27 2Q17 Financial Results 2Q16 1Q17 2Q17 Sales ($B) $5.3 $5.5 $5.8 Adj. EBITDA 1 ($MM) Adj. EBIT 1 ($MM) $635 $431 $499 Adj. Operating EPS 2 $0.92 $0.60 $0.65 Operating EPS impact of Ilim F/X 3 IP Share $0.01 $0.06 ($0.04) Adj. EBITDA 1 ($MM) $936 $776 $ Adj. EBITDA Margin % 14.1% 14.8% Free Cash Flow 4 ($MM) $527 $259 $355 2Q16 1Q17 2Q17 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 ~$0.8B at end of 2Q17) 4 See slide #75 for a reconciliation of cash provided by operations to free cash flow 27

28 IP Key Pricing Activity Setting the Stage for Strong Second Half 4Q16 1Q17 2Q17 3Q17 4Q17 N.A. Industrial Packaging Global Cellulose Fibers Nov RISI Pub: $40/ton Export Containerboard CBD and Box Jan RISI Pub: $15-$20/ton NBSK, SBSK Feb RISI Pub: $20-$25/ton April RISI Pub: $50/ton Varies by Region NBSK, SBSK, Fluff Mar RISI Pub: $20-$35/ton NBSK, SBSK, Fluff Containerboard and Box April RISI Pub: $20-$30/ton NBSK, SBSK, Fluff Global Cellulose Cumulative Run Rate NBSK +$110 SBSK +$120 Fluff +$115 Printing Papers N.A. Consumer Packaging Announced Effective March 1: 10.9% Brazil Domestic Effective March 1: 5.0% EMEA Eurozone & Poland May RISI Pub: $20-40/ton NBSK, SBSK, Fluff Effective May 1: 7.0% Latam Export Effective May 15: 5.0% EMEA Eurozone April RISI Pub ($20 of announced $50) May RISI Pub (Additional $10 for cupstock) SBS 28

29 Appendix

30 Appendix - Table of Contents Slides Industrial Packaging Global Cellulose Fibers Printing Papers Consumer Packaging IP Russia & Ilim Group Other Financial Information Global Citizenship Contact Information...96

31 N.A. Containerboard Supply Positions 1995 Producer Position Top 5 = 43% 2017 Producer Position Top 5 = 75% Stone 13% Smurfit 7% Others 26% IP 32% Others 50% TIN 7% GP 9% WY 7% IP 7% KapStone 4% PCA 9% GP 10% WRK 19% Source: 2017 estimated effective containerboard capacity based on RISI Capacity Reports, SEC Filings, and IP data and analysis 31

32 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 Containerboard ~13.1 Million Tons Other Uses 1 ~0.4 Million Tons IP Box Plants ~80% Open Market ~20% U.S. ~91% Non-U.S. ~9% Domestic ~45% Export ~55% EMEA ~40% Lat Am ~45% Asia ~15% 1 Includes Saturating Kraft /Gypsum Liner Source: 2017 estimates based on IP data and analysis 32

33 Global Containerboard Industry Total Containerboard Trade Flows Estimated 2017 Global Demand = 179MM tons Europe 4.9MM Europe 5.4MM C America 2.5MM S America 1.1MM Source: 2017 RISI trade estimates and IP Analysis N America 4.9MM Africa 1.6MM S America 0.4MM Countries with Net Import or Export greater than 100M tons Net Export, Tons Net Import, Tons Mid East 0.9MM Africa 0.4MM ` Asia 1.1MM Oceania 0.9MM 33

34 Mansfield Valliant Prattville Savannah Cedar River Red River Pine Hill Bogalusa Rome Orange Springfield Pensacola Vicksburg Maysville Newport Henderson Xalapa Thousands Tons IP N.A. Containerboard Mill System ~13.5 Million Tons Capacity 2,000 1,800 1,600 1,400 1,200 1, Source: 2017 estimates based on IP data and analysis; chart includes Saturating Kraft & Gypsum liner 34

35 Manufacturing Costs ($/Ton) Linerboard Global Cost Curve 99.6% of N.A. Capacity in 1st Cost Quartile $1,200 $1,000 Cash Costs + Delivery to Chicago $800 $600 Pine Hill Campti Mansfield Springfield Pensacola Rome Bogalusa Henderson $400 $200 $0 Valliant Orange Prattville Cedar River Vicksburg Maysville Savannah Xalapa 0 20,000 40,000 60,000 80, ,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 1Q17 data 35

36 N.A. Industrial Packaging Relative Adj. EBITDA Margins 22.8% 22.6% 18.7% 19.3% TTM % 20.6% 22.0% TTM % 18.3% 15.9% 18.8% TTM % IP PCA WestRock 2Q16 1Q17 2Q17 1 Trailing Twelve Months IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes Competitor Adjusted EBITDA margin estimates obtained from public filings and IP analysis 36

37 IP Well-Positioned in Attractive Customer Segments IP Box Shipments by Segment Market Segment IP Mix Industry Mix Food & Beverage 59% 49% 24% Processed Food Protein 17% 59% 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 Note: IP Mix, Industry Mix, Source: IP Analysis 37

38 N.A. Industrial Packaging Building Upon a Great Business Key levers contributing to IP s track record of success Commercial execution World-class, low-cost assets Engaged and talented workforce Innovation & value-added capabilities Breadth of footprint Manufacturing/supply chain excellence Disciplined, targeted capital investment 38

39 Pensacola Recovery Digester Event Summary Community Outreach Remediation teams began cleaning common areas within 24 hours of the incident Assessment and cleanup of impacted residences initiated within 48 hours Established information line, conducted door-to-door visits, held open house System Efforts to Mitigate Impact Adjustments to maintenance outage schedule Orders redirected to other mills Ability to use spare digester dome from Riegelwood mill Findings Naturally produced pulping gases combined with pressurized air, triggered an event never before experienced in IP Issued an alert to all IP mills to prevent recurrence Shared findings with industry globally Costs & Insurance Recovery Total costs estimated to be ~$80MM, including $16MM of capex Unfavorable 1Q17 earnings impact of $46MM before insurance and mitigation Insurance recovery of $12MM booked for 1Q17 Bottom line impact for 1Q17 mitigated by outage moves and other cost-saving measures Jan 22, 2017 Digester Incident No Injuries Reported Mill Down Jan 23, 2017 Unified Command in place - Initiated clean up efforts Investigation Feb 3, 2017 Fluff Line Start Up Mar 17, 2017 Spare Digester Dome Delivered from Riegelwood April 3, 2017 Containerboard Start Up 39

40 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 U.S. Containerboard Industry Statistics Containerboard Pricing $/short ton 800 Linerboard (List Price) Medium (List Price) Linerboard (OMP) Medium (OMP) $/short ton $800 $700 $600 $ $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 40

41 Indexed 100 = 2001 Economic Indicators and U.S. Box Demand US Box Shipments US Nondurable Industrial Production US GDP US Industrial Production Source: Oxford Economics; RISI North America Containerboard Historical Data 41

42 Shipments (BSF) U.S. Corrugated Packaging Shipments RISI Forecast Historical Data Source: Fibre Box Association : 1.9% CAGR (RISI March 2017, 5-yr forecast) 42

43 Wood / OCC Fiber Breakeven OCC Cost Delivered 1 $/ton Wood Advantaged 2Q17 1Q OCC Advantaged RISI national average OCC price, adjusted for delivery 2 Forest2Market chip equivalent basis index price Wood Chip Cost Delivered 2 $/ton 43

44 Brazil Industrial Packaging Overview 2016 Sales* of US $233 Million Three Containerboard Mills Four Box Plants Manaus Box Plant ~340 Thousand Tons of Containerboard Capacity Sustainable Fiber Supply Corrugated Domestic Supply Position ~7% Rio Verde Box Plant Paulinia Mill Paulinia Box Plant Box plant Mill * As reported: From Dec 15 to Dec 16 (13 months) 1 : 2015 Brazilian Board Association (ABPO) Franco da Rocha Mill Suzano Box Plant Nova Campina Mill Others 47% 3.8MM tons¹ Smurfit Kappa 4% Klabin 17% WRK 8% IP 7% Irani 6% Trombini Penha 6% 5% 44

45 Global Cellulose Fibers Business Overview Current Product Mix 1 ~30% ~70% Fluff Pulp & Specialties Market Pulp Total Capacity ~3.6MM MTPY Targeted Mix Fluff Pulp & Specialties 3.0MM 85% Market Pulp 0.6MM 15% 1 North American production. Combined businesses, with Riegelwood PM18 running SW market pulp 45

46 Annual GDP (USD/capita) Absorbent Hygiene Products (AHP) Outlook Demand and Growth AHP demand linked to GDP growth in emerging markets 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, MEA Asia-Pacific Eastern Europe Latin America Source: Euromonitor, 3Q14 46

47 Global Market Pulp Demand Outlook Bleached Softwood MM MTPY CAGR = 1.3% 26.7MM MTPY CAGR 25 Rest of World Rest of World 2.3% 20 Asia Asia 3.1% Eastern Europe Western Europe Eastern Europe Western Europe 2.8% (1.6%) 5 Latin America Latin America 0.5% 0 Source: PPPC; IP Analysis North America North America (0.2%) 47

48 Global Cellulose Fibers Advantaged Position in Advantaged Markets Well-Positioned to Serve Growing Demand with Global, Strategic Customers Fluff Demand by Region and End Use 6.1MM MTPY CAGR = 4.3% CAGR CAGR Airlaid 11% 3.1% Asia 6.3% Feminine Care 22% 3.1% EMEA 3.6% Adult Incontinence 34% 7.6% Latin America North America 2.3% 1.6% Baby Diapers 33% 2.1% 2017 Column1 Source: Poyry World Fibre Outlook up to 2030, IP Analysis 48

49 IP Global Pulp Capacity Total of 4.1 MM MTPY 1 N. America 3.6 MM Europe / Russia 0.3 MM Ilim JV 2.0 MM L. America 0.2 MM Pulp mill 1 Does not include llim JV 49

50 Global Fluff Pulp Industry Trade Flows 2016 Global Demand = 5.5MM MTPY 87.0% Export 4.8 MM Import (1.2)MM Import (0.8)MM Import (0.5)MM Import (2.3)MM Net Import Locations Net Export Locations Source: PPPC, IP Analysis; Units shown in short tons 50

51 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 Pulp Industry Statistics USD/admt 1,200 Global Pulp Prices NBSK (dne) BEK (dne) Fluff (dne) 1, Source: RISI Global pulp prices delivered to Northern Europe; Units shown in metric tons 51

52 IP Global Papers Footprint Total of 4.3 Million Short Tons 1 N. America 1.9 MM Europe 0.7 MM ILIM 0.3 MM Russia 0.4 MM India 0.2 MM Brazil 1.1 MM 1 Does not include llim JV Uncoated paper mill 52

53 N.A. Uncoated Freesheet Supply Capacity Positions 1998 Producer Position Top 2 = 28% Top 4 = 48% 2017 Producer Position Top 2 = 50% Top 3 = 60% Other 25% GP 15% IP 13% Other 24% Domtar 31% Union Camp 9% WY 9% Willamette 9% Boise 10% Champion 10% Glatfelter 6% GP 10% PCA 10% IP 19% 1998, 2016 Source: Poyry Consulting, Fisher International, IP analysis 53

54 Capacity % Grade / Mix N.A. Papers Mill System 1.9MM Short Ton Capacity 100% 1 Uncoated Freesheet Non UFS Pulp 80% 60% 40% 20% 0% Riverdale Ticonderoga Eastover Georgetown Paper (M Tons) Pulp (M Tons) Non UFS includes Kraft Bag and Uncoated Bristols Source: IP analysis 54

55 Manufacturing Costs $/Ton Uncoated Freesheet Global Cost Curve IP N.A. Capacity in 2nd & 3rd Cost Quartile $1,800 $1,600 Cash Costs + Delivery to Chicago $1,400 $1,200 $1,000 $800 Eastover Georgetown $600 $400 Ticonderoga $200 $0 Riverdale 0 10,000 20,000 30,000 40,000 50,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 1Q17 data 55

56 N.A. Printing Papers Margin History Adj. EBITDA 1 $ MM Papers Only Adj. EBITDA 1 % 1, % 19% 19% 18% 20% 22% 18% 17% 25% 20% % % 12% 13% 15% 10% % % Tons (MM) From continuing operations before special items and non-operating pension expense 56

57 N.A. Printing Papers Relative Adj. EBITDA Margins TTM % TTM % 13.4% 15.6% 15.5% 17.2% 14.0% 12.7% 13.1% TTM % 11.1% 9.0% IP PCA Domtar 2Q16 1Q17 2Q17 1 Trailing Twelve Months IP Adjusted EBITDA margins based on operating profit from continuing operations before special items Competitor Adjusted EBITDA margin estimates obtained from public filings and IP analysis 57

58 Million Tons U.S. Uncoated Freesheet Demand RISI Forecast Historical Data Source: AF&PA : (1.5%) CAGR (RISI February 2017: 5-yr Forecast) 58

59 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 U.S. Uncoated Freesheet Industry Statistics Uncoated Freesheet Pricing Trends $/short ton RISI 20# Cutsize RISI 50# Offset $1,200 $1,200 $1,100 $1,100 $1,000 $1,000 $900 $900 $800 $800 $700 $700 $600 $600 $500 $500 Source: RISI 59

60 ,000 1,500 2,000 2,500 Latin American Uncoated Freesheet Market Top 6 Producers > 80% Supply & Demand Others Other LatAm Peru Demand Ledesma Celulosa Argentina Propal Smurfit Kappa 4% 4% 4% 7% 14% 3.1MM tons IP 37% Chile Colombia Argentina Brazil Capacity Suzano 31% Thousand Short Tons Latin America is a Net Exporter Demand 91% Op. Rate Net Exports LatAm analysis excludes Mexico Source: Ibá / AFCP / RISI / Fisher / IP Estimates 2.6 MM 2.8 MM 0.2 MM 60

61 IP Brazil Uncoated Freesheet At a Glance Mogi Guacu Luiz Antonio Três Lagoas IP Brazil UFS Paper Machines UFS Capacity (thousand tons) Market Pulp (thousand tons) ,

62 IP Brazil Uncoated Freesheet Historical Financials Adj. EBITDA 1 US $ MM % 33% % 27% 27% 26% 31% 31% 31% % Adj. EBITDA 1 Margin 35% 30% 25% 20% % % 50 5% 0 Tons (MM) % 1 From continuing operations before special items and non-operating pension expense 62

63 IP Global Coated Paperboard Footprint Total of 1.6 Million Tons North America 1.2 Million Tons Europe/Russia 370,000 Tons Reflects repurposing of Riegelwood mill to pulp Coated paperboard mill 63

64 N.A. Solid Bleached Sulphate Supply Positions Industry Capacity for All Segments Industry Production by IP s Key Segments 1 WRK 31% 19% 15% 9% 11% 24% 21% 5% Nippon 5% 5.6MM Tons IP 22% 42% 17% 60% Clearwater 13% Rank Group 12% GP 14% 22% Folding 2.1 MM tons 39% Cupstock 1.0 MM tons 9% 4% Liquid 1.3 MM tons 1 Does not include Coated Bristols, Platestock, Dish, Tray and others Folding includes tobacco; Liquid Packaging includes Aseptic Source: AF&PA; IP Analysis; Public filings (1-2%) +1.8% (1%) CAGR

65 N.A. Consumer Packaging at a Glance N.A. Consumer Packaging Business ~ $2 Billion Annual Revenue IP Coated Paperboard ~1.2MM Tons IP Foodservice Packaging Food Service Quick Service Specialty Coffee Theater, Convenience, Hospitality Coated Paperboard mill Foodservice plant Packaging includes folding carton, liner and liquid; Foodservice includes cupstock and platestock 65

66 Manufacturing Costs $/Ton Coated Paperboard Global Cost Curve IP N.A. Capacity in 1 st Cost Quartile $1,400 Cash Cost + Delivery to Chicago $1,200 $1,000 $800 $600 Texarkana $400 $200 Augusta $0 0 5,000 10,000 15,000 20,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 1Q17 data 66

67 N.A. Consumer Packaging Historical Financials Adj. EBITDA 1 $ MM % 16% Adj. EBITDA 1 % 18% % 10% 9% 12% 13% 13% 14% 14% 11% 16% 14% 12% 10% % % 4% 50 2% % 1 From continuing operations before special items and non-operating pension expense 67

68 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 U.S. Coated Paperboard Industry Statistics $/short ton $1,250 Folding Cartonboard Prices Bleached Unbleached Recycled $1,150 $1,050 $950 $850 $750 $650 $550 $450 Source: RISI; Series B prices introduced in January 2016 replacing the transaction price series 68

69 U.S. Cup Market Paper hot cups & food containers continue to experience growth, in part due to the foam-to-paper conversion Consumers making different beverage choices Decrease in soda consumption in both fountain & bottle beverages Growth in juice & smoothie beverages, bottled sports drinks, tea & coffee, as well as regular, flavored & carbonated waters U.S. Cup Demand Market Segmentation 49% 51% 52% 17% 19% 20% 33% 31% 28% Foam Plastic Paper Single-Use Foodservice Cup Demand (billions) CAGR CAGR Paper % 2.5% Hot % 5.7% Cold % 0.7% Plastic % 6.1% Foam (3.5%) (3.9%) TOTAL % 1.7% Sources: Technomic Disposables Report 2016; IP Analysis 69

70 IP Russia & Ilim JV Manufacturing Overview Well-Positioned to Serve Target Markets Ilim JV Production Koryazhma Ust-Ilimsk Bratsk Svetogorsk Kazakhstan Mongolia China IP Russia Production 1 Svetogorsk 2016 Total 717 Coated Paperboard 121 Pulp (soft/hardwood) 165 Fine Papers 431 Bratsk Mill Total 1,163 1,257 Softwood bleached pulp Hardwood bleached pulp KLB Koryazhma Mill Total 1,353 1,372 PM7 paper PM7 CFS Pulp (BHKP, UKP) KLB and others Ust-Ilimsk Mill Total Pulp (BSKP, UKP) Total Hardwood bleached pulp Volumes shown in thousand short tons 70

71 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 1 st quartile cost positions with favorable access to China NBSK market Access to significant Russian wood basket $1,000 Cash Cost + Delivery to Beijing, China1 $800 $600 Ust-Ilimsk $400 $200 Bratsk $0 0 5,000 10,000 15,000 20,000 Cumulative Capacity (Thousand Tons) 1 Source: FisherSolve 1Q17 data 71

72 Ilim Joint Venture Full Year Financials Sales Volume (Million tons) Sales ($B) Debt ($B) Adj. Operating EBITDA ($MM) F/X Gain (Loss) 1 ($MM) (80) (674) (188) 63 EBITDA ($MM) 123 (215) Depreciation ($MM) EBIT ($MM) (53) (403) Interest Expense ($MM) 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 ~$0.6B at year end 2016) 72

73 Ilim Joint Venture 2Q17 vs. 1Q17 Sales Volume (thousand tons) $ Million$ 2Q16 1Q17 2Q Sales $473 $449 $546 EBITDA $169 $191 $121 F/X (Impact of USD Net Debt) 1 $15 $58 ($46) Adj. Operational EBITDA 2 $154 $133 $167 IP Equity Earnings (Loss) 3 $46 $50 $21 Seasonally stronger demand and higher pulp pricing drove operational EBITDA improvement F/X loss (non-cash) on USD denominated net debt driven by ruble weakening Seasonally weaker volume expected in 3Q17; equity earnings forecasted to be $35MM 4 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 ~$0.8B at end of 2Q17); Ilim Group s functional currency is the Ruble (RUB); Non-functional-denominated currency balances are measured monthly using the month-end exchange rate 2 Before F/X impact including USD-denominated net debt 3 IP Equity Earnings (Loss) for 2Q16, 1Q17 and 2Q17 include after-tax F/X gains (losses) (primarily on USD-denominated net debt) of $6MM, $23MM and ($18MM), respectively 4 At June 30, 2017 RUB/USD exchange rate 73

74 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 1Q17 2Q17 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

75 Free Cash Flow $ Million Q Q17 2Q17 Cash Provided by Operations $3,077 $2,580 $605 $2,478 $633 $645 Cash Invested in Capital Projects ($1,366) ($1,487) ($328) ($1,348) ($374) ($290) Cash Contribution to Pension Plan $353 $750 $250 $ Free Cash Flow $2,064 $1,843 $527 $1,880 $259 $355 75

76 $ Billion Balance Sheet Financial Strength Moody s Target: Adjusted Debt < 3X Adjusted EBITDA 3.2x $3.9 Pension Gap $9.4 Balance Sheet Debt [2.3x] 1 3.2x $3.6 Pension Gap $9.3 Balance Sheet Debt [2.4x] 2 3.9x $3.4 Pension Gap $11.3 Balance Sheet Debt [3.2x] Highlights Pension gap decreased by $0.2B Made $750MM voluntary pension contribution Year-end discount rate decreased from 4.4% (2015) to 4.1% (2016) Attractive debt financing 10 year and 30 year debt to finance Weyco pulp acquisition $ 1.0B cash balance at year end $0.8 Op. Lease Adj. $0.5 Op. Lease Adj. $0.5 Op. Lease Adj Moody s methodology: Adjusted Debt reflects gross balance sheet debt plus pension gap and operating leases Moody s methodology: 2016 Adjusted EBITDA of $3.9B incorporates pension and lease expense adjustments 1 Simple Debt Coverage: Balance Sheet Debt / 2014 IP s Adjusted EBITDA of $4.1B 2 Simple Debt Coverage: Balance Sheet Debt / 2015 IP s Adjusted EBITDA of $3.9B 3 Simple Debt Coverage: Balance Sheet Debt / 2016 IP s Adjusted EBITDA of $3.5B 76

77 Million Debt Maturity Profile Maturities as of December 31, 2016 $1,200 $1,000 $800 $600 $400 $200 $ Debt Maturities Other Debt Commercial Paper 1 1 Primarily foreign debt (intended to be rolled over or refinanced). 77

78 Capital Spending $ Million $1,500 % of Depreciation ~$1, % $1, % $900 75% $600 $300 50% $ E 25% Maintenance Regulatory Strategic Cost Reduction % of Depreciation Reflects continuing operations 78

79 Billion Pension Plan Update As of December 31, 2016 No contribution ; $2.5B contribution Year-End Funded Status 1 $1.1B contribution made in $750MM voluntary contributions for 2016 ($1.5) ($2.4) ($2.2) No contributions required before 2019 ($2.8) ($4.1) ($3.6) ($3.9) ($3.4) 1 Reflects status as of December 31 79

80 Million Pension Plan Update 1 As of December 31, 2016 $600 $450 $300 Annual Pension Expense 2 Key Variables E Assumed Rate of Return 7.75% 7.75% 7.50% Discount Rate 4.40% 4.10% 4.10% Average Annualized Returns % Past Five Years 8.7% Past Ten Years 6.4% $150 $ E Portfolio Asset Allocation at Target Actual Equity 43% - 54% 51% Bonds 25% - 35% 27% Real Estate 7% - 13% 10% Other 8% - 17% 12% and onward include Temple-Inland pension plan 2 Non-cash expense for U.S. plans only 3 Through December 2016 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 80

81 Maintenance Outages Expenses 2016 Actual $ Million 1Q16A 2Q16A 3Q16A 4Q16A 2016A Industrial Packaging $73 $80 $44 $36 $233 North America Brazil Global Cellulose Fibers 1 $50 $9 $16 $3 $78 Printing Papers Total $16 $41 $11 $28 $96 North America Europe Brazil India Consumer Packaging $19 $3 $2 $11 $35 North America Europe Total Impact $158 $133 $73 $78 $ Q 16 and FY 16 includes Dec 16 maintenance outages expenses from newly-acquired pulp business 81

82 Maintenance Outages Expenses 2017 Forecast $ Million 1Q17A 2Q17A 3Q17F 4Q17F 2017F Industrial Packaging $71 $100 $47 $32 $250 North America Brazil Global Cellulose Fibers $50 $44 $8 $11 $113 Printing Papers $23 $43 $2 $13 $81 North America Europe Brazil India Consumer Packaging $0 $35 $0 $4 $39 North America Europe Total Impact $144 $222 $57 $60 $483 82

83 Thousand Tons Thousand Tons Thousand Tons Thousand Tons IP North American Downtime Containerboard Cellulose Fibers Uncoated Papers Coated Paperboard Maintenance Economic 83

84 Total Cash Cost Components 2Q17 YTD Chemicals 7% Fiber 34% Overhead 10% Energy 8% Labor 12% North American mills only (excludes newly acquired pulp business) Freight 12% Materials 17% 84

85 U.S. Mill Wood Delivered Cost Trend 2Q17 Average Cost Down 2% vs. 1Q IP data, cost Indexed to January 2007 values 85

86 U.S. OCC Delivered Cost Trend 2Q17 Average Cost Up 10% vs. 1Q IP data, cost Indexed to January 2007 values 86

87 U.S. Natural Gas Cost Trend 2Q17 Average Cost Down 6% vs. 1Q IP data, cost Indexed to January 2007 values NYMEX Natural Gas closing prices 87

88 U.S. Fuel Oil Cost Trend 2Q17 Average Cost Down 13% vs. 1Q IP data, cost Indexed to January 2007 values WTI Crude prices 88

89 U.S. Chemical Composite Cost Trend 2Q17 Average Cost up 1% vs. 1Q IP data, cost Indexed to January 2007 values Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid excludes WY PKG 89

90 2017 Global Consumption Annual Purchase Estimates for Key Inputs Commodity North America Non North America Natural Gas (MMBTUs) 85,000,000 11,000,000 Energy Fuel Oil (Barrels) 450, ,000 Coal (Tons) 95, ,000 Fiber Wood (Tons) 60,000,000 8,000,000 Old Corrugated Containers / DLK (Tons) 4,800, ,000 Caustic Soda (Tons) 470,000 70,000 Starch (Tons) 390, ,000 Chemicals Sodium Chlorate (Tons) 200,000 60,000 LD Polyethylene (Tons) 40,000 - Latex (Tons) 10,000 6,000 90

91 Global Citizenship The IP Way Forward 91

92 Global Citizenship Sustaining Forests Our entire business depends upon the sustainability of forests. We will continue to lead the world in responsible forest stewardship to ensure healthy and productive forest ecosystems for generations to come. 500,000 acres certified in our Forest Management Group 31% increase in certified fiber volume since 2010 $7.5MM invested in Forestland Stewards since

93 Global Citizenship Improving our Planet We tackle the toughest issues in our value chain, reduce our environmental footprint and promote the long-term sustainability of natural capital. 11% reduction in waste to landfills 19% reduction in greenhouse gas emissions 23% reduction in air emissions 28% improvement in effluent water quality Statistics indicate progress from a 2010 baseline 93

94 Global Citizenship Investing in People We make sustainable investments to protect and improve the lives of our employees and mobilize our people, products and resources to address critical needs in the communities where our employees live and work. 39% reduction in serious safety incidents Completed 2016 without a fatal injury $17.3MM donated to charitable organizations in 2016 Statistics indicate progress from a 2010 baseline 94

95 Global Citizenship Progress Toward our Vision 2020 Goals FIBER CERTIFICATION PROGRESS 31% increase in certified fiber volume FIBER EFFICIENCY PROGRESS 0.79% fiber loss from reporting mills GHG EMISSIONS PROGRESS 19% reduction in greenhouse gas emissions RECYCLING PROGRESS 17% increase in recovery of OCC ENERGY EFFICIENCY PROGRESS 6.4% improvement in purchased energy efficiency AIR EMISSIONS PROGRESS 23% reduction in air emissions (PM, SO 2, NO x ) SAFETY PROGRESS 39% reduction in serious safety incidents SUPPLY CHAIN PROGRESS Established baseline supply chain performance and implemented improvement plans WATER QUALITY PROGRESS 28% improvement in effluent water quality COMMUNITY INVOLVEMENT PROGRESS $17.3 million donated to charitable organizations in 2016* WATER STEWARDSHIP PROGRESS Mapped water use and risk by location, identified priority mills and initiated annual stakeholder and facility assessments SOLID WASTE PROGRESS 11% reduction in manufacturing waste to landfills * Includes $3 million raised through employee giving and fundraising 95

96 Investor Relations Contact Information Guillermo Gutierrez Vice President, Investor Relations Michele Vargas Director, Investor Relations Betty Groom Financial & Administrative Analyst

97 International Paper Awards & Recognitions 1 2 FORTUNE S World s Most Admired Companies 2017 Commercial Appeal s Top Workplace 2016 Named by the Ethisphere Institute as one of the World s Most Ethical Companies 2017 IDG s Computerworld 100 Best Places to Work in IT 2017 Institutional Investor s Most Honored Company 2017 in the Paper & Packaging sector 2015 AF&PA Better Practices, Better Planets 2020 Sustainability Award International Paper Brazil Graphic Paper Manufacture From FORTUNE Magazine, March 1, Time Inc. Used under license 2 From Commercial Appeal (Memphis, TN) International Paper Russia Corporate Social Responsibility Award 2015 International Paper India Parivartan Award 2015