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 manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; and (vii) our ability to achieve the benefits we expect from 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 the Company s 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, Cash Conversion 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 and GPK 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 ( GPK ), other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim and GPK, respectively. Any projected financial information and statistical measures reflect the current views of Ilim and GPK 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 Attractive 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 Riverdale 15 conversion 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 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 $1.90 $1.60 $1.40 $1.20 $1.05 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 $1.5B share buyback (September 2013) Additional $1.5B authorization (July 2014) 12

13 $ Billions Strong, Sustainable Free Cash Flow $2.5 Global Economic Recession 5-Year Average $1.9 Billion $2.0 $1.5 Transformation: $0.5 Billion (average) $1.8 $2.1 $1.8 $1.9 $2.0 $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 #64 for a reconciliation of cash provided by operations to Free Cash Flow. 13

14 Expanded Spread of Adj. ROIC 1 Above Cost of Capital Increasing Shareholder Value 5-Year Average 10.0% Global Economic Recession 8.1% 9.5% 8.3% 9.7% 9.2% 11.4% 10.0% 9.9% 6.3% 7.5% 6.5% 4.5% 5.0% WACC for 2017 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) + Interest-bearing Debt] 14

15 2018 Outlook Momentum Continues Confident in Another Year of 10%+ Growth in EBITDA Demand Strong outlook in core businesses Adjusted EBITDA 1 ($MM) Margin Full-year price flow through of 2017 increases $3.7 10%+ Catalysts Cost reduction initiatives GCF optimization Madrid Mill start-up Free Cash Flow Strong cash generation and conversion E 1 From continuing operations before special items and non-operating pension expense 15

16 Business Overview

17 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 Franklin Fluff Pulp Conversion Turkey Olmuksan Pkg. TIN Bldg. Products Sale Valliant PM3 xpedx Spin-Off Riegelwood Fluff Pulp Conversion Madrid mill Acquisition Sun JV & Asia Box Sale N.A. Consumer Pkg Transfer Weyco Pulp Business Acquisition 17

18 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 EMEA & Russia $3.0B Net Sales India $0.2B Net Sales $2.2B 1 Ilim JV Total Sales Brazil $1.2B Net Sales Full-year 2017 net sales data 1 Ilim JV total sales are not consolidated (IP owns 50% of JV) 18

19 Strong Domestic Market Positions Revenue by Business 1 69% 12% 19% Industrial Packaging Global Cellulose Fibers Printing Papers North America EMEA 3 Russia 1 st 1 st* 2 nd 1 st 1 st Ilim Pulp Latin America 1 st Russia EMEA 3% 5% Brazil 8% % Total Adjusted EBITDA 4 North America 84% India * Fluff pulp & specialties grades 1 Based on 2017 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 2017 Adj. EBITDA Margins 19

20 N.A. Exports Leveraging Strategic Export Opportunities % of export volume shipped to select regions ~40% ~50% Fluff Pulp (~90% of N.A. production) Containerboard (~10% of N.A. production) ~45% EMEA Asia ~40% ~10% ~15% Latin America 20

21 Brazil & Russia Exports Leveraging Strategic Export Opportunities % of export 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% 21

22 N.A. Industrial Packaging Track Record of Success Growth and Margin Expansion through Strategic Acquisitions and Successful Integrations Adj. EBITDA % Weyco Packaging Acquisition & Integration TIN Acquisition & Integration 25% 20% 15% 10% 9% 13% 15% 15% Global Recession 19% 18% 20% 19% 22% % 24% % 22% Business Adj. EBITDA ($B) 5% 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 22

23 Full-Year 2017 Highlights $3.9 2 Adjusted EBITDA $3.5 2 $3.9 2 ~16% year-over-year increase in Adjusted EBITDA 1 Excellent commercial performance Successful integration and synergies in Global Cellulose Fibers Delivered Adjusted ROIC ~10%, 8th consecutive year above cost of capital $3.7 1 $3.2 1 $3.7 1 Strategic investments for growth in Industrial Packaging Strategic move in Consumer Packaging Strengthened our balance sheet Sixth consecutive dividend increase Another strong year of performance from Ilim 1 From continuing operations before special items and non-operating pension expense 2 Adjusted EBITDA inclusive of N.A. Consumer Packaging, which is treated as a Discontinued Operation in our financial statements from 2013 onward 23

24 Full-Year 2017 Financial Results $ Billion (Except as noted) Sales $20.7 $19.5 $21.7 FCF 5 ($MM) Adj. EBIT 1 $2.5 $2.1 $2.4 Adj. Operating EPS 2 $3.44 $3.09 $3.49 Adj. Operating EPS with Discontinued Operations 3 $3.65 $3.35 $3.66 Operating EPS impact of Ilim F/X 4 IP Share ($0.18) $0.06 $0.04 Adj. EBITDA 1 $3.7 $3.2 $3.7 $1.8 $1.9 $2.0 Adj. EBITDA Margin 17.7% 16.6% 17.2% Equity Earnings ($MM) $117 $198 $177 FCF 5 $1.8 $1.9 $2.0 Year-End Debt $9.3 $11.3 $ 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 #64 for a reconciliation of cash provided by operations to Free Cash Flow 24

25 4Q17 Financial Results 4Q16 3Q17 4Q17 Sales ($B) $5.0 $5.5 $5.7 Adj. EBIT 1 ($MM) $461 $665 $831 Adj. Operating EPS 2 $0.67 $1.01 $1.27 Adj. Operating EPS with Discontinued Operations 3 $0.73 $1.08 $1.34 Operating EPS impact of Ilim F/X 4 IP Share $0.01 $0.02 $0.01 Adj. EBITDA 1 ($MM) $0.8 $1.0 $1.2 Adj. EBITDA Margin % 18.2% 20.5% Equity Earnings ($MM) $47 $45 $64 Record Operating EPS in 4Q17 Healthy industry conditions Record volume in N.A. Industrial Packaging and Global Cellulose Fibers Full realization of first half 2017 price increases Successful realization of Global Cellulose Fibers synergies Strong performance from Ilim; IP equity earnings of $64MM Free Cash Flow 5 ($MM) $467 $624 $732 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 $0.00, $0.00 and $0.09 for 4Q16, 3Q17 and 4Q17, respectively 4 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.9B at end of 4Q17) 5 See slide #64 for a reconciliation of cash provided by operations to free cash flow 25

26 Appendix

27 Appendix - Table of Contents Slides Industrial Packaging Global Cellulose Fibers Printing Papers IP Russia & Ilim Group Graphic Packaging Investment. 62 Other Financial Information Global Citizenship Contact Information

28 N.A. Containerboard Supply Positions 1995 Producer Position Top 5 = 43% 2018 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: 2018 estimated effective containerboard capacity based on RISI Capacity Reports, SEC Filings, and IP data and analysis 28

29 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 ~13.0 Million Tons Other Uses 1 ~0.5 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 29

30 Global Containerboard Industry Total Containerboard Trade Flows Estimated 2018 Global Demand = 189MM tons Europe 4.6MM Europe 5.1MM C America 2.6MM S America 1.1MM Source: 2018 RISI trade estimates and IP Analysis N America 5.1MM Africa 1.6MM S America 0.3MM Countries with Net Import or Export greater than 100M tons Net Export, Tons Net Import, Tons Mid East 1.1MM Africa 0.4MM ` Asia 1.5MM Oceania 0.8MM 30

31 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 ~13.5 Million Tons Capacity 2,000 1,800 1,600 1,400 1,200 1, Source: 2018 estimates based on IP data and analysis; chart includes Saturating Kraft & Gypsum liner 31

32 Manufacturing Costs ($/Ton) Linerboard Global Cost Curve 99.8% of N.A. Capacity in 1st Cost Quartile $1,200 $1,000 Cash Costs + Delivery to Chicago $800 $600 Orange Cedar Rapids Maysville Henderson Rome Bogalusa Savannah Mansfield $400 $200 Pensacola Red River Valliant Vicksburg Pine Hill Prattville Newport Springfield $0 0 20,000 40,000 60,000 80, ,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 3Q17 data 32

33 N.A. Industrial Packaging Relative Adj. EBITDA Margins 19.8% 22.0% 25.5% TTM % 20.6% 24.3% 23.5% TTM % 19.2% 21.4% TTM % 18.9% IP PCA WestRock 4Q16 3Q17 4Q17 1 Trailing Twelve Months IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business, revenue from trade volumes and other non-us sales Competitor Adjusted EBITDA margin estimates obtained from public filings and IP analysis 33

34 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 34

35 Riverdale Mill Conversion Investment Overview Strategic Rationale: Supports growth in our strategic markets Enhances world-class mill system and significantly improves our whitetop linerboard cost Improves system flexibility Improves our whitetop linerboard product offering Investment: $300MM to convert No. 15 paper machine from uncoated freesheet to high quality whitetop virgin containerboard; will add 450k tons of capacity Timing: Targeting to complete conversion mid-2019 N.A. Containerboard Mill System 35

36 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 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 36

37 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 37

38 Shipments (BSF) U.S. Corrugated Packaging Shipments RISI Forecast Historical Data Source: Fibre Box Association : 1.8% CAGR (RISI Feb. 2018, 5-yr forecast) 38

39 Wood / OCC Fiber Breakeven OCC Cost Delivered 1 $/ton Wood Advantaged OCC Advantaged RISI national average OCC price, adjusted for delivery 2 Forest2Market chip equivalent basis index price Wood Chip Cost Delivered 2 $/ton 39

40 Global Cellulose Fibers Business Overview Current Product Mix 1 ~25% ~75% Market Pulp Mill Fluff Pulp Mill Converting facilities 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 40

41 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 41

42 Global Market Pulp Demand Outlook Bleached Softwood MM MTPY CAGR = 1.3% 26.8MM MTPY CAGR 25 Rest of World Rest of World 0.5% 20 Asia Asia 2.1% Eastern Europe Western Europe Eastern Europe Western Europe 1.9% (1.2%) 5 Latin America Latin America 0.5% 0 Source: PPPC; IP Analysis North America North America % 42

43 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 6.2MM MTPY CAGR = 4.3% CAGR CAGR Airlaid 11% 3.1% Asia 6.3% Feminine Care 22% 3.1% EMEA 3.6% Adult Incontinence 35% 7.6% Latin America North America 2.3% 1.6% Baby Diapers 32% 2.1% 2018 Source: Poyry World Fibre Outlook up to 2030, IP Analysis 43

44 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 44

45 Global Fluff Pulp Industry 2018 Trade Flows Global Demand = 6.2MM MTPY 89.0% Export 4.7 MM Import (0.9)MM Import (0.6)MM Import (0.5)MM Import (2.7)MM Net Import Locations Net Export Locations Source: PPPC, IP Analysis; Units shown in short tons 45

46 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 Pulp Industry Statistics USD/admt 1,400 Global Pulp Prices NBSK (dne) BEK (dne) Fluff (dne) 1,200 1, Source: RISI Global pulp prices delivered to Northern Europe; Units shown in metric tons 46

47 IP Global Papers Footprint Total of 4.5 Million Short Tons 1 N. America 2.0 MM Europe 0.8 MM ILIM 0.3 MM Russia 0.4 MM India 0.2 MM Brazil 1.1 MM Uncoated paper mill 1 Does not include llim JV. NA includes Uncoated Bristols, Bag and other Non UFS 47

48 N.A. Uncoated Freesheet Supply Capacity Positions 1998 Producer Position Top 2 = 28% Top 4 = 48% 2017 Producer Position Top 2 = 53% Top 3 = 64% Union Camp 9% Other 25% WY 9% Willamette 9% GP 15% Boise 10% IP 13% Champion 10% Glatfelter 7% GP 10% Other 19% PCA 10% IP 21% Domtar 32% 1998, 2017 Source: Poyry Consulting, Fisher International, IP analysis 48

49 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 49

50 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 Ticonderoga $200 $0 Riverdale 0 10,000 20,000 30,000 40,000 50,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 3Q17 data 50

51 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% 12% 15% 10% % % Tons (MM) From continuing operations before special items and non-operating pension expense 51

52 N.A. Printing Papers Relative Adj. EBITDA Margins 16.0% 18.4% 17.3% 15.5% 13.5% 10.2% TTM % 13.3% TTM % 8.7% 8.7% TTM % IP PCA Domtar 4Q16 3Q17 4Q17 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 52

53 Million Tons U.S. Uncoated Freesheet Demand RISI Forecast Historical Data Source: AF&PA : (3.4%) CAGR (RISI January 2018: 5-yr Forecast) 53

54 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 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 54

55 ,000 1,500 2,000 2,500 3,000 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% 3.3MM tons IP 37% Chile Colombia Argentina Brazil Capacity Suzano 30% Thousand Short Tons Latin America is a Net Exporter Demand 88% Op. Rate Net Exports LatAm analysis excludes Mexico Source: Ibá / AFCP / RISI / Fisher / IP Estimates 2.6 MM 2.9 MM -0.2 MM 55

56 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) , Source: RISI 56

57 IP Brazil Uncoated Freesheet Historical Financials Adj. EBITDA 1 US $ MM % 33% % % 27% 26% 31% 31% 31% % 31% 297 Adj. EBITDA 1 Margin 35% 30% 25% 20% 15% 10% 5% 0 Tons (MM) % 1 From continuing operations before special items and non-operating pension expense 57

58 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 2017 Total 719 Coated Paperboard 118 Pulp (soft/hardwood) 166 Fine Papers 435 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 Volumes shown in thousand metric tons 58

59 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 / 2 nd quartile cost positions with favorable access to China NBSK market Access to significant Russian wood basket $1,000 $800 Cash Cost + Delivery to Beijing, China1 $600 Ust-Ilimsk $400 $200 Bratsk $0 0 5,000 10,000 15,000 20,000 Cumulative Capacity (Thousand Tons) 1 Source: FisherSolve 3Q17 data 59

60 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) 60

61 Ilim Joint Venture 4Q17 vs. 3Q17 Sales Volume (thousand metric tonnes) $ Millions 4Q16 3Q17 4Q ,195 3,110 Sales $539 $523 $632 $1,927 $2,150 EBITDA $194 $184 $236 $743 $732 F/X (Impact of USD Net Debt) 1 $14 $18 $7 $63 $37 Adj. Operational EBITDA 2 $180 $166 $229 $680 $695 IP Equity Earnings (Loss) 3 $45 $48 $64 $199 $183 Higher pricing and strong sales volume in 4Q17 F/X gain (non-cash) on USD denominated net debt driven by ruble strengthening 1Q18 equity earnings projected to be $80M-$90MM 4 on continued strong, demanddriven market fundamentals 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 ~$0.9B at end of 4Q17); 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 4Q16, 3Q17 and 4Q17 include after-tax F/X gains (losses) (primarily on USD-denominated net debt) of $6MM, $7MM and $3MM, respectively 4 At December 31, 2017 RUB/USD exchange rate 61

62 Investment in Graphic Packaging Overview 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 Transaction 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 Transaction 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 Earnings neutral to slightly accretive Financial Considerations Dividends to IP of ~$25 million annually (based on current GPK dividend per share) Leverage neutral No current cash taxes expected on transaction Closing Closed January 2 nd, 2018 Ownership interest to be 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 62

63 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 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

64 Free Cash Flow $ Million Q Q17 2Q17 3Q17 4Q Cash Provided by Operations $2,580 $912 $2,478 $633 $645 ($709) $1,188 $1,757 Cash Invested in Capital Projects Cash Contribution to Pension Plan Kleen Products Settlement ($1,487) ($445) ($1,348) ($374) ($290) ($271) ($456) ($1,391) $750 - $ $1,250 - $1, $354 - $354 Free Cash Flow $1,843 $467 $1,880 $259 $355 $624 $732 $1,970 64

65 $ Billion Balance Sheet Financial Strength Moody s Target: Adjusted Debt < 3X Adjusted EBITDA 4.0x 2017 Highlights 3.2x $3.6 Pension Gap $9.3 Balance Sheet Debt $3.4 Pension Gap $11.3 Balance Sheet Debt [3.2x] 2 3.3x $2.0 Pension Gap $11.2 Balance Sheet Debt [3.0x] 3 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) Attractive $1.0B debt issuance partly funded pension contribution [2.4x] 1 $ 1.0B cash balance at year end $0.5 Op. Lease Adj. $0.5 Op. Lease Adj. $0.5 Op. Lease Adj 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 65

66 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 1 Primarily foreign debt (intended to be rolled over or refinanced). 66

67 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 Taking additional measures to reduce risk in our pension plan 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) 1 Liability Driven Investment 67

68 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 ($1.5) $1.25B voluntary contribution for 2017 ($2.8) ($2.4) ($2.2) ($2.0) No contribution required in 2018 ($4.1) ($3.4) ($3.6) ($3.9) 1 Reflects status as of December 31 68

69 Million Pension Plan Update 1 As of December 31, 2017 $750 $600 $450 $300 $150 $0 Annual Pension Expense 2 Key Variables Assumed Rate of Return 7.75% 7.50% 7.50% Discount Rate % 4.10% 3.60% Average Annualized Returns % Past Five Years 9.4% Past Ten Years 7.2% Portfolio Asset Allocation at Target Actual Equity 42% - 53% 49% Fixed Income 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. qualified and nonqualified plans 3 Through December Rate used to calculate pension expense 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. 125 observations 69

70 Capital Spending $ Million $1,500 % of Depreciation ~$1, % $1, % $900 75% $600 $300 50% $ % Maintenance Regulatory Strategic Cost Reduction % of Depreciation Years continuing operations only 70

71 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 $0.1B $0.2B $0.5B $0.4B $1,200 $1,000 Cash Cost (Delivered to Chicago) IP N.A. Containerboard Mills $800 $600 $400 $200 Source: IP Analysis, FisherSolve $0 0 20,000 40,000 60,000 80, ,000 Cumulative Annual Containerboard Global Production (Thousand Tons) Madrid Mill Conversion 71

72 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 72

73 Maintenance Outages Expenses 2018 Forecast $ Million 1Q18F 2Q18F 3Q18F 4Q18F 2018F Industrial Packaging $87 $122 $77 $22 $308 North America Europe Europe Coated Paperboard Brazil Global Cellulose Fibers $61 $44 $9 $36 $150 North America Europe Printing Papers $45 $50 $4 $9 $108 North America Europe Brazil India Total Impact $193 $216 $90 $67 $566 73

74 Thousand Tons Thousand Tons Thousand Tons North American Downtime Containerboard Cellulose Fibers Uncoated Papers Maintenance Economic 74

75 Total Cash Cost Components 2017 Chemicals 8% Fiber 35% Overhead 10% Energy 8% Labor 12% Freight 12% Materials 15% North American mills only (Excludes Newly Acquired Pulp Business) 75 2/27/2018

76 U.S. Mill Wood Delivered Cost Trend 4Q17 Average Cost Up 1% vs. 3Q IP data, cost Indexed to January 2007 values 76

77 U.S. OCC Delivered Cost Trend 4Q17 Average Cost Down 25% vs. 3Q IP data, cost Indexed to January 2007 values 77

78 U.S. Natural Gas Cost Trend 4Q17 Average Cost Down 2% vs. 3Q IP data, cost Indexed to January 2007 values NYMEX Natural Gas closing prices 78

79 U.S. Fuel Oil Cost Trend 4Q17 Average Cost Up 16% vs. 3Q IP data, cost Indexed to January 2007 values WTI Crude prices 79

80 U.S. Chemical Composite Cost Trend 4Q17 Average Cost up 3% vs. 3Q 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 80

81 2017 Global Consumption Annual Purchases for Key Inputs Commodity North America Non North America Natural Gas (MMBTUs) 80,000,000 11,000,000 Energy Fuel Oil (Barrels) 450, ,000 Coal (Tons) 85, ,000 Fiber 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 Chemicals Sodium Chlorate (Tons) 170,000 50,000 LD Polyethylene (Tons) - - Latex (Tons) - 10,000 Annual purchases exclude N.A. Consumer Packaging 81

82 Global Citizenship Sustainability throughout the Value Chain 82

83 Global Citizenship The IP Way Forward 83

84 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 84

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

86 International Paper Awards & Recognitions 1 FORTUNE S World s Most Admired Companies Commercial Appeal s Top Workplace 2017 Named by the Ethisphere Institute as one of the World s Most Ethical Companies 2018 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 2015 International Paper Russia Corporate Social Responsibility Award 2015 International Paper India Parivartan Award From FORTUNE Magazine, March 1, Time Inc. Used under license 2 From Commercial Appeal (Memphis, TN)