Investor Roadshow February 23, 2017

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) changes in our estimates for the costs and insurance coverage associated with the recent incident at our Pensacola, Florida mill and for the time required to resume full operations at the mill; (vi) whether we experience a material disruption at one of our other manufacturing facilities; (vii) risks inherent in conducting business through joint ventures; (viii) the failure to realize the expected synergies and cost-savings from our purchase of the cellulose fibers business of Weyerhaeuser Company; and (ix) 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 Long-Term Value Creation Vision To be among the most successful, sustainable and responsible companies in the world Strategy Fiber-based Packaging, Pulp and Paper Advantaged positions in advantaged markets Shareholder Value Strong and sustainable Free Cash Flow Increase value creation Exceed shareholders TSR expectations 6

7 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 7

8 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 8

9 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 9

10 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) 10

11 $ 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 #69 for a reconciliation of cash provided by operations to Free Cash Flow. 11

12 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] 12

13 IP Focus Areas For 2017 Deliver strong free cash flow and Adjusted ROIC 10% Integrate newly acquired pulp business and drive synergies to bottom line; improve Global Cellulose Fibers product mix Drive N.A. Industrial Packaging earnings improvement Continue strong operations and cost reduction initiatives Conversion of Madrid Mill Continue strong performance at Ilim JV Allocate capital to create value with focus on near-term debt reduction 13

14 Business Overview

15 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 15

16 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) 16

17 Strong Domestic Market Positions Revenue by Business 1 67% 5% 19% 9% Industrial Packaging GCF Global Cellulose Fibers Uncoated Freesheet Consumer Packaging North America EMEA 3 Russia 1 st 1 st* 2 nd 2 nd 1 st 1 st GCF Ilim Pulp Latin America 1 st Brazil 7% Russia 4% EMEA 6% % Total EBITDA 2 North America 83% India * Fluff pulp & specialties grades 1 Based on 2016 sales; GCF based on 2016 combined business pro-forma sales 2 From continuing operations before special items and non-operating pension expense; does not reflect equity earnings from Ilim JV 3 Excludes Russia 17

18 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 18

19 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% 19

20 N.A. Industrial Packaging Track Record of Success Growth and Margin Expansion through Strategic Acquisitions and Successful Integrations Adj. EBITDA % 25% 20% 15% 10% 5% 0% 9% 13% % 15% 0.8 Weyco Packaging Acquisition & Integration Global Recession 19% 18% 20% 19% 22% TIN Acquisition & Integration % 24% % 2.4 Business Adj. EBITDA ($B) IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes 20

21 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 # 69 for a reconciliation of cash provided by operations to Free Cash Flow 21

22 4Q16 Financial Results 4Q15 3Q16 4Q16 Sales ($B) $5.4 $5.3 $5.4 Adj. EBIT 1 ($MM) $616 $613 $498 Adj. Operating EPS 2 $0.87 $0.91 $0.73 Operating EPS impact of Ilim F/X 3 IP Share ($0.05) $0.01 $0.01 Adj. EBITDA 1 ($MM) $930 $927 $826 Adj. EBITDA Margin % 17.6% 15.4% Free Cash Flow 4 ($MM) $501 $575 $467 Solid results in N.A. Industrial Pkg driven by strong demand and increasing prices Higher input costs ($17MM) unfavorably impacted earnings Impact from Hurricane Matthew Continued solid operational performance across businesses Strong performance at Ilim JV continued with adjusted operational EBITDA of $180MM Closed acquisition of Weyco pulp business and integrating as new Global Cellulose Fibers business 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 ~$0.6B at end of 4Q16) 4 See slide #69 for a reconciliation of cash provided by operations to free cash flow 22

23 Appendix

24 Appendix - Table of Contents Slides Industrial Packaging Global Cellulose Fibers Printing Papers Consumer Packaging IP Russia & Ilim Group Financial & Other Contact Information...87

25 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 25

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 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 26

27 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 27

28 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 28

29 Manufacturing Costs ($/Ton) Linerboard Global Cost Curve N.A. Capacity in 1st & 2nd Cost Quartile $1,200 $1,000 Cash Costs + Delivery to Chicago $800 $600 $400 Xalapa Campti Pine Hill Savannah Cedar River Vicksburg Rome Henderson Bogalusa $200 $0 Mansfield Orange Pensacola Maysville Springfield Prattville Valliant 0 20,000 40,000 60,000 80, ,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 3Q16 data 29

30 N.A. Industrial Packaging Relative Adj. EBITDA Margins 22.0% 22.0% 21.3% % 21.5% 20.8% 20.6% % 17.7% 18.2% 15.8% % IP PCA WestRock 4Q15 3Q16 4Q16 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 30

31 IP Well-Positioned in Attractive Customer Segments IP Box Shipments by Segment Market Segment IP Mix Industry Mix Food & Beverage 57% 50% 21% Processed Food Protein 22% 57% Produce Beverage Other Non-Durable Goods 22% 30% Paper Products Chemicals & Pharma Other Non-Durables Durable Goods & Distribution 21% 20% Building Materials Other Durables Shipping & Distribution Note: IP Mix, Industry Mix, Source: IP Analysis 31

32 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 32

33 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 $300 $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 33

34 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 34

35 Shipments (BSF) U.S. Corrugated Packaging Shipments RISI Forecast Historical Data Source: Fibre Box Association : 2.5% CAGR (RISI November 2016, 5-yr forecast) 35

36 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 36

37 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% 37

38 Compelling Strategic Acquisition Strengthening IP Global Cellulose Fibers Business IP has agreed to acquire the assets of Weyerhaeuser s pulp business for $2.2B (announced May 2, 2016) Strengthens IP s position in the growing global fluff pulp markets Adds significant value to IP and for its shareholders Annual run-rate synergies of ~$175MM expected by end of 2018 Additional cash tax benefit of ~$300MM by purchasing assets 3.6X Adjusted EBITDA multiple 1, net of tax benefit and with synergies Newly-acquired pulp business consists of best-in-class assets, outstanding customers and a highly talented workforce Expansive portfolio of value-added, innovative pulp products in addition to fluff pulp will allow IP to offer a broader portfolio of products to customers IP has proven track record of successful large-scale integrations 1 Based on Weyerhaeuser s pulp business 2015 Adjusted EBITDA of $350 Million 38

39 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 Combined businesses, with Riegelwood PM18 running SW market pulp 39

40 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 40

41 Global Market Pulp Demand Outlook Bleached Softwood MM MTPY CAGR = 0.9% 25.8MM MTPY CAGR 25 Rest of World Rest of World 4.3% 20 Asia Asia 2.4% Eastern Europe Western Europe Eastern Europe Western Europe 1.2% (1.5%) 5 0 Source: PPPC Latin America Latin America North America North America % (0.6%) 41

42 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 5.5MM MTPY CAGR = 3.6% CAGR CAGR Other 5.8% Airlaid 11% 2.9% Asia 5.1% Adult Incontinence 30% 3.5% Feminine Care 23% 3.6% EMEA 1.8% Latin America North America 3.0% 1.1% Baby Diapers 36% 4.3% 2016 Column1 Source: Poyry World Fibre Outlook up to 2030, IP Analysis 42

43 IP Global Pulp Capacity Total of 4.1 MM MTPY 1 N. America 3.6 MM Europe / Russia 0.3 MM Ilim JV 1.6 MM L. America 0.2 MM Pulp mill 1 Does not include llim JV 43

44 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 44

45 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 tonnes 45

46 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 46

47 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 47

48 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 48

49 Manufacturing Costs $/Ton Uncoated Freesheet Global Cost Curve IP N.A. Capacity in 2nd & 3rd Cost Quartile $1,800 Cash Costs + Delivery to Chicago $1,600 $1,400 $1,200 $1,000 $800 Eastover Georgetown $600 $400 Ticonderoga $200 Riverdale $0 0 10,000 20,000 30,000 40,000 50,000 Cumulative Annual Production (Thousand Tons) Source: FisherSolve 3Q16 data 49

50 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 50

51 N.A. Printing Papers Relative Adj. EBITDA Margins 21.6% 13.5% % 19.1% 18.4% % 15.9% 17.3% 15.0% % 10.8% 9.2% IP PCA Domtar 4Q15 3Q16 4Q16 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 51

52 Million Tons U.S. Uncoated Freesheet Demand RISI Forecast Historical Data Source: AF&PA : (1.7%) CAGR (RISI November 2016: 5-yr Forecast) 52

53 U.S. Uncoated Freesheet Industry Statistics Uncoated Freesheet Pricing Trends $/short ton $1,200 RISI 20# Cutsize RISI 50# Offset $1,200 $1,100 $1,100 $1,000 $1,000 $900 $900 $800 $800 $700 $700 $600 $600 $500 $500 Source: RISI 53

54 ,000 1,500 2,000 2,500 Latin American Uncoated Freesheet Market Top 6 Producers > 80% Supply & Demand Others Other LatAm Ledesma Celulosa Argentina Propal Smurfit Kappa 4% 4% 4% 7% 14% 3.1MM tons IP 37% Peru Chile Colombia Argentina Brazil Demand 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 54

55 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) ,

56 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 56

57 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 57

58 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% Weyco 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

59 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 59

60 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 3Q16 data 60

61 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 61

62 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 62

63 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 63

64 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 64

65 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 $800 $600 $400 $200 $0 Cash Cost + Delivery to Chicago Ust-Ilimsk Bratsk 0 5,000 10,000 15,000 20,000 Cumulative Capacity (Thousand Tons) 1 1 Source: FisherSolve 3Q16 data 65

66 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) 66

67 Ilim Joint Venture 4Q16 vs. 3Q16 Sales Volume (thousand tons) $ Million 4Q15 3Q16 4Q ,349 3,523 Sales $492 $473 $539 $1,931 $1,927 EBITDA $129 $172 $194 $506 $743 F/X (Impact of USD Net Debt) 1 ($48) $6 $14 ($188) $63 Adj. Operational EBITDA 2 $177 $166 $180 $694 $680 IP Equity Earnings (Loss) 3 $34 $46 $45 $131 $199 Record production at all three mills in 4Q and full year Higher sales volume driven by stronger demand Expect modest export price improvement, more than offset by normal seasonality for 1Q 17 Ilim JV results are on U.S. GAAP basis 1 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.6B at end of 4Q16); 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 4Q15 include after-tax f/x losses (primarily on USD-denominated net debt) of ($19)MM, 3Q16 and 4Q16 include after-tax F/X gains (primarily on USD-denominated net debt) of $3MM and $6MM, respectively; FY15 include after-tax f/x loss of ($75)MM and FY16 include after-tax f/x gain of $25MM 67

68 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

69 Free Cash Flow $ Million Q Q16 2Q16 3Q16 4Q Cash Provided by Operations $3,077 $990 $2,580 $620 $605 $341 $912 $2,478 Cash Invested in Capital Projects Cash Contribution to Pension Plan ($1,366) ($489) ($1,487) ($309) ($328) ($266) ($445) ($1,348) $353 - $750 - $250 $500 - $750 Free Cash Flow $2,064 $501 $1,843 $311 $527 $575 $467 $1,880 69

70 $ 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 70

71 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). 71

72 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 72

73 Billion Pension Plan Update As of December 31, 2016 Year-End Funded Status 1 No contribution ; $2.5B contribution $1.1B contribution made in ($1.5) $750MM voluntary contributions for 2016 No contributions required before 2019 ($2.8) ($2.4) ($4.1) ($2.2) ($3.6) ($3.9) ($3.4) 1 Reflects status as of December 31 73

74 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 74

75 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 75

76 Maintenance Outages Expenses 2017 Forecast $ Million 1Q17F 2Q17F 3Q17F 4Q17F 2017F Industrial Packaging $94 $95 $47 $48 $284 North America Brazil Global Cellulose Fibers $50 $49 $27 $10 $136 Printing Papers Total $36 $42 $9 $12 $99 North America Europe Brazil India Consumer Packaging $0 $31 $0 $11 $42 North America Europe Total Impact $180 $217 $83 $81 $561 76

77 Thousand Short Tons Thousand Metric Tons Thousand Short Tons Thousand Short Tons North American Downtime Containerboard Uncoated Papers Coated Paperboard Global Cellulose Fibers Maintenance Economic 77

78 Total Cash Cost Components FY 2016 Chemicals 8% Fiber 35% Overhead 10% Energy 8% North American mills only Labor 12% Freight 12% Materials 15% 78

79 U.S. Mill Wood Delivered Cost Trend 4Q16 Average Cost Down 1% vs. 3Q IP cost Indexed to January 2007 values 79

80 U.S. OCC Delivered Cost Trend 4Q16 Average Cost Up 4% vs. 3Q IP cost Indexed to January 2007 values 80

81 U.S. Natural Gas Cost Trend 4Q16 Average Cost Up 6% vs. 3Q IP cost Indexed to January 2007 values NYMEX Natural Gas closing prices 81

82 U.S. Fuel Oil Cost Trend 4Q16 Average Cost Up 3% vs. 3Q IP cost Indexed to January 2007 values WTI Crude prices 82

83 U.S. Chemical Composite Cost Trend 4Q16 Average Cost Up 3% vs. 3Q IP cost Indexed to January 2007 values Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid excludes WY PKG 83

84 2017 Global Consumption Annual Purchase Estimates for Key Inputs Commodity U. S. Non U. S. Natural Gas (MM BTUs) 75,000,000 11,000,000 Energy Fuel Oil (Barrels) 350, ,000 Coal (Tons) 130, ,000 Fiber Wood (Tons) 52,000,000 8,000,000 Old Corrugated Containers / DLK (Tons) 4,800, ,000 Caustic Soda (Tons) 320,000 70,000 Starch (Tons) 370, ,000 Chemicals Sodium Chlorate (Tons) 160,000 50,000 LD Polyethylene (Tons) 40,000 - Latex (Tons) 10,000 6,000 Data does not include newly-acquired pulp business 84

85 Global Citizenship Planet Water GHG Emissions Forest Stewardship Developing a global water stewardship strategy to use water sustainably Generating more than 70% of energy needs from renewable fuels Improved energy efficiency by 4.7% since 2010 Reduced GHG emissions by 16% since 2010 Increased thirdparty certified fiber by 28% since 2010 IP only accepts fiber that is legally harvested and has known origins 85

86 Global Citizenship People Safety Ethics & Compliance Stakeholder Engagement Reduced serious injuries by 60% since 2010 Reduced Lost Work Day Incident Rate by 8% since 2010 Named for the tenth consecutive year as one of the World s Most Ethical Companies by the Ethisphere Institute Stakeholder dialogue allows us to collaborate with communities and continue to improve For more information visit internationalpaper.com/sustainability 86

87 Investor Relations Contact Information Jay Royalty Vice President, Investor Relations Michele Vargas Director, Investor Relations Betty Groom Financial & Administrative Analyst

88 International Paper Awards & Recognitions 1 2 FORTUNE S World s Most Admired Companies 2016 Commercial Appeal s Top Workplace 2016 Ethisphere Institute s World s Most Ethical Companies 2016 Institutional Investor s Most Honored Company 2016 IDG s Computerworld 100 Best Places to Work in IT 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