investor roadshow | 3q 2014s1.q4cdn.com/597881801/files/doc_downloads/... · $1.4b net sales $3.1b...
TRANSCRIPT
Investor Roadshow | 3Q 2014
Investor Roadshow | November 5, 2014
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 increases 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 all 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
Investor Roadshow | November 5, 2014
Statements Relating to Non-GAAP Financial Measures
During the course of this presentation, certain non-U.S. GAAP financial information
will be presented.
A reconciliation of those numbers to U.S. GAAP financial measures is available on
the company’s website at internationalpaper.com under Investors.
3
Investor Roadshow | November 5, 2014
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. Ilim management has indicated that the financial information
was prepared in accordance with International Financial Reporting Standards and
extracted from Ilim’s financial statements, but International Paper has not verified or
audited any of this information. 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
Investment Thesis
Investor Roadshow | November 5, 2014 5
IP Investment Thesis | Why IP Will Outperform
Vision
Leadership position
Attractive markets
Low-cost assets
Generating…
Strong FCF
Returns above cost-of-capital
• Global packaging and paper platforms
• Leadership positions in scale businesses
• Operational excellence
• Operate in key markets where we can grow profitably
ROIC Consistently >WACC FCF Strong Sustainable Improving Capital Allocation ✔ Value Creation ✔ Return Cash to Shareholders
Strategy Shareholder Value
Investor Roadshow | November 5, 2014 6
Why Invest in IP?
Strong Management Team
ROIC Above WACC
with Further Margin Expansion
Strong, Healthy Balance Sheet Enables Greater
Commitment to Return Cash to Shareholders
Robust, Improving Free Cash Flow Generation
Less Cyclical Business Results
from Refocused Portfolio
Investor Roadshow | November 5, 2014
Global Economic
Recession
Returns on Invested Capital1 above our Cost of Capital
7
4.5%
6.3%
7.5%
6.5%
5.0%
8.1%
9.5%
8.3%
9.3%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2005 2006 2007 2008 2009 2010 2011 2012 2013
ROIC WACC
2010 – 2013
8.8% (average ROIC)
1 ROIC = Operating Earnings before Interest / Average Invested Capital [Equity (adjusted to remove pension related amounts in OCI, net of tax) + Interest-Bearing Debt]
Investor Roadshow | November 5, 2014
Global Economic
Recession
Strong, Sustainable Free Cash Flow
Free cash flow, based on data in the 10-K for each year at the time of filing.
Excludes net cash pension contributions impacting 2006, 2010, 2011 & 2013, 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 2010. 2012 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. 2013 excludes $31MM cash paid for pension plan contribution and $30MM cash received from Guaranty Bank insurance reimbursements.
Transformation:
$0.7 Billion (average)
Excluding land sales:
$0.4 Billion (average)
2010 – 2013
$1.7 Billion (average)
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2005 2006 2007 2008 2009 2010 2011 2012 2013
$ B
illi
on
s
8
Investor Roadshow | November 5, 2014 9
Delivering Results
2012 2013 Near-term
Target
EBITDA ($Billion) 3.7 4.1 5.1
Free Cash Flow1,2 ($Billion) 1.6 1.8 2.2
ROIC 8% 9% 12%
From continuing operations before special items and non-operating pension expense 1 2012 excludes $120MM cash paid for Temple-Inland change-in-control agreements, $44MM cash paid for Temple-Inland pension plan contribution, $80MM
cash paid for Guaranty Bank settlement, and $251MM cash received from unwinding a timber monetization. 2 2013 excludes $31MM cash paid for pension plan contribution and $30MM cash received from Guaranty Bank insurance reimbursements.
Near-term Target as of Investor Day 2012 excludes similar items.
Investor Roadshow | November 5, 2014 10
Long-Term Runway
Strategically
Consistent,
Accretive M&A
High Return
Capital Projects
Profitable Growth in
Emerging Markets
Continued Optimization
of Strong NA Platforms
Mogi Guacu Biomass Boiler
Investor Roadshow | November 5, 2014 11
Delivering on Our Commitments
Strategically
Reinvest in Business Return Cash to
Shareholders
Maintain a Strong
Balance Sheet
Disciplined Capital Allocation Strategy
$1.05 $1.20
$1.40
$1.60
4Q11 4Q12 4Q13 4Q14
Annualized Dividend Share Buybacks
$1.5B share buyback (September 2013)
Additional $1.5B
authorization (July 2014)
Running our businesses well and generating strong FCF;
Returns consistently above cost of capital
Investor Roadshow | November 5, 2014 12
What Makes IP Different? | Key Levers and Runway
Enterprise
• Manufacturing expertise with low-cost assets
• People capability
• EBITDA growth based on IP specific initiatives
• Ramping dividend and sizeable share repurchase program
• Attractive FCF yield with improving FCF
• Strong positions – best margins
• Industrial Packaging optimization
• Consumer Packaging foam to paper cup conversions
• Papers repositioning post Courtland
• Leveraging global platform for profitable growth
• Coated Paperboard quality project at Kwidzyn
• Packaging synergies at Orsa
• Ilim ramp up
North America Global
Business Overview
Investor Roadshow | November 5, 2014
2005 - 2007 2008 - 2010
2011+
IP Transformation Timeline/Plan
Transformation Plan
Divestitures & Strategic
Reinvestment
Global Recession IP Achieves Cost of Capital Returns
NA Weyco Pkg.
Acquisition
Russia
Ilim JV
India APPM
Acquisition China
Sun JV
Brazil
VCP Land / Mill Swap
Coated Papers
Wood Products
Forestland
Kraft Paper
Chemicals
Beverage Pkg.
$11B
Asset Sales
China
SCA Pkg.
Brazil
Grupo Orsa Pkg.
NA TIN
Acquisition
Turkey
Olmuksan Pkg.
13
Franklin
Fluff Pulp
Conversion
TIN Bldg.
Products
Sale
xpedx
Spin-Off
Investor Roadshow | November 5, 2014 14
North America
Brazil
EMEA & Russia
India
Asia
North America
Recognized Leader in Core Segments:
Corrugated Pkg. Uncoated Papers
Coated Paperboard
Emerging Markets Build Leading Positions in Fiber-based Packaging
& Paper Segments in High-Growth Markets
Positioned in attractive markets with low-cost assets that can generate strong free cash flow and returns that can exceed our cost-of-capital
$16.8B Net Sales
$1.4B Net Sales
$3.1B Net Sales
$1.9B Net Sales
$0.2B Net Sales
Full-year 2013 net sales data (xpedx is reflected as a Discontinued Operation in all periods presented.) 1 Ilim JV total sales are not consolidated (IP owns 50% of JV)
International Paper | Global Portfolio in Packaging and Paper
$1.9B1 Ilim JV Total Sales
Investor Roadshow | November 5, 2014
Repositioned & Well-Positioned | Leading Global Positions
15
1st in NORTH AMERICA in corrugated packaging & coated paperboard
2nd in NORTH AMERICA in uncoated freesheet
1st in LATIN AMERICA in uncoated freesheet
PULP
1st in RUSSIA in paper & pulp
Source: RISI
Investor Roadshow | November 5, 2014
EBITDA Margin
2005 2013
Industrial Packaging
North America1 9% 22%
Brazil – 8%
Printing Papers
North America2 10% 12%
Europe & Russia3 16% 18%
Brazil 33% 31%
Consumer Packaging
North America4 14% 13%
Europe 26% 32%
Segment operating profit before special items 1 Includes Corrugated Packaging, Saturating Kraft & Bag businesses; excludes Recycling business and revenue from trade volumes 2 Includes Bleached Kraft (excludes Pulp) 3 Uncoated Papers (excludes Pulp) 4 Includes Foodservice business
16
Repositioned & Well-Positioned | Primary Integrated Mill Business Margins
Investor Roadshow | November 5, 2014 17
Global Segment Profile | 2013 EBITDA1
Printing
Papers
24%
Industrial
Packaging
66%
Consumer
Packaging
10%
North America
79% Brazil 9%
Europe 7%
Russia 4%
Asia 1%
1 From continuing operations before special items and non-operating pension expense
Does not reflect equity earnings from Ilim JV
xpedx is reflected as a Discontinued Operation in all periods presented.
Investor Roadshow | November 5, 2014
Global Recession
NA Industrial Packaging | Track Record of Success
18
0.3 0.4 0.5
0.8
1.3 1.3 1.6
2.0
2.5
9%
13% 15% 15%
19% 18%
20% 19%
22%
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Bu
sin
ess
EB
ITD
A ($
B)
Weyco Packaging Acquisition &
Integration
TIN Acquisition &
Integration EBITDA %
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Excludes the Recycling Business and revenue from trade volumes
Growth and Margin Expansion through Strategic Acquisitions
and Successful Integrations
Investor Roadshow | November 5, 2014
$441 $3771
$6962
3Q13 2Q14 3Q14
Free Cash Flow1 ($MM)
Third Quarter 2014 Results
1 Excludes $205MM cash paid for pension plan contribution 2 Excludes $90MM cash paid for pension plan contribution
xpedx is reflected as a Discontinued Operation in all periods presented.
19
Record quarter for EBITDA and Free
Cash Flow
Outstanding performance from NA
Industrial Packaging group
Strong performance in other key
businesses
Continuing pressure from input costs
IP 14% dividend increase to $1.60/share
Share buyback program purchases of
$1.3B through Sept. 30, 2014
Ilim dividend of $56MM received
Solid operating results at Ilim;
unfavorable F/X impact of ($0.19) EPS
Investor Roadshow | November 5, 2014
3Q14 Financial Results
3Q13 2Q14 3Q14
Sales ($B) $6.0 $5.9 $6.1
EBIT1 ($MM) $711 $686 $835
EPS2 $1.01 $0.93 $0.95
EBITDA1 ($MM) $1,108 $1,041 $1,193
EBITDA Margin1 18.5% 17.6% 19.7%
Free Cash Flow ($MM)
$441 $3773 $6964
1 From continuing operations before special items and non-operating pension expense 2 EPS based on Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) 3 Excludes $205MM cash paid for pension plan contribution 4 Excludes $90MM cash paid for pension plan contribution
xpedx is reflected as a Discontinued Operation in all periods presented.
$1,108 $1,041
$1,193
3Q13 2Q14 3Q14
EBITDA1 ($MM)
20
Investor Roadshow | November 5, 2014 21
Summary
Runway from current initiatives
(NA and Global)
Strong FCF and Healthy Balance Sheet drives
increased Capital Allocation opportunities
Pipeline of High Return Capital Projects
Less Cyclical Earnings with Higher Returns
Progress toward near-term goals of
$5.1B EBITDA and $2.2B FCF
Appendix
Investor Roadshow | November 5, 2014
Appendix - Table of Contents
Industrial Packaging……………….……………………………………..23-35
Consumer Packaging……….….………………………….……………..36-44
Printing Papers & Pulp..……….………………………………………...45-64
Ilim Group.…………………………….……………………………………65-71
Financial & Other………………….……………………………………....72-83
Contact Information……………….………………………………………….84
Slides
Investor Roadshow | November 5, 2014
North American Containerboard | Supply Positions
Stone 13%
Smurfit 7%
GP 9%
WY 7%
IP 7% TIN 7%
Others 50%
Note: 2014 producer position based on 2013 RISI capacity reports adjusted for Kapstone and PCA acquisitions and Norampac’s new Niagra Falls PM
1998, 2014 Source: SEC Filings, RISI, IP Analysis
1995 Producer Position
Top 5 = 43%
2014 Producer Position
Top 5 = 75%
IP 34%
RKT 19%
GP 10%
PCA 8%
Norampac 4%
Others 25%
23
Investor Roadshow | November 5, 2014 24
IP North American Industrial Packaging | Balanced Global Strategy
IP’s market access provides choices for maximizing value
NA Mill System Capacity ~13 Million Tons
IP Box Plants ~80%
Open Market ~20%
U.S. ~93%
Non-U.S. ~7%
Export ~55%
Domestic ~45%
EMEA
~35% Lat Am ~45%
Asia ~20%
1 Includes Saturating Kraft /Gypsum Liner
2 Estimated 2014 purchases from divested mills
Source: IP analysis
Outside Purchases2
~550M tons
Containerboard ~12.6 Million Tons
Other Uses1 ~0.4 Million Tons
Global Customers
Investor Roadshow | November 5, 2014
Global Containerboard Industry | Total Containerboard Trade Flows - 2013
Net Import Locations Net Export Locations Source: RISI, PPPC
Global Demand = 163MM tons
Import
(3.4)MM
Import
(1.0)MM
3.8% Export
0.2 MM
13.6% Export
5.0 MM
8.6% Export
0.3 MM
30.0% Export
0.7 MM
Import
(1.0)MM
25
Investor Roadshow | November 5, 2014 26
IP NA Containerboard Mill System | 13 Million Tons Capacity
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Va
llia
nt
Ma
nsfi
eld
Pra
ttvil
le
Sa
va
nn
ah
Ce
da
r R
ap
ids
Cam
pti
Ro
me
Pin
e H
ill
Bo
ga
lus
a
Ora
ng
e
Sp
rin
gfi
eld
Vic
ks
bu
rg
Ma
ys
vil
le
Pe
nsa
co
la
New
po
rt
Hen
de
rso
n
Xa
lap
a
Th
ou
sa
nd
To
ns
Source: IP analysis, chart includes Saturating Kraft & Gypsum liner
Investor Roadshow | November 5, 2014
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
0 5,000 10,000 15,000 20,000 25,000 30,000
Ma
nu
fac
turi
ng
Co
sts
($
/To
n)
Cumulative Annual Capacity (Thousand Tons)
Cash Costs + Delivery to Chicago
Rome 2
Global Cost Curve | 85% of Capacity in 1st & 2nd Cost Quartiles
Source: Poyry Costrac 2Q14 42# Global Kraft Linerboard cash cost per ton delivered to Chicago
Prattville 1 Orange 2
Prattville 2
Mansfield 3
Cedar
Rapids 2
Savannah 8
Valliant 1
Savannah 6 Campti 2
Mansfield 1 Springfield 2
Vicksburg 6
Rome 1
Campti 1
Pensacola 5
Bogalusa 7
Maysville 1
Pine Hill 1
Henderson 1
Bogalusa 8
27
Orange 1
Investor Roadshow | November 5, 2014
NA Industrial Packaging Relative EBITDA Margins
1 Reflects Company’s change in accounting method beginning in 2014 2 Does not include unreported 3Q14
IP EBITDA margins based on North American Industrial Packaging operating profit before special items
Excludes the Recycling Business and revenue from trade volumes
Competitor EBITDA margin estimates obtained from public filings and IP analysis
24.4% 22.5%
20.7%
23.7% 21.5%
17.4%
25.5%
21.3%
IP PCA RockTenn
3Q13 2Q14 3Q14
23.7%
21.5%
17.6%
TTM2
TTM
TTM
28
RKT
reports
11/4
1
Investor Roadshow | November 5, 2014
Note: IP Mix, 2013. Industry Mix, 2012.
Source: IP Analysis
IP Well-Positioned in Attractive Customer Segments
58% 27%
15%
IP Box Shipments by Segment
29
Market Segment IP
Mix
Industry
Mix
Food & Beverage 58% 47%
Processed Food
Protein
Produce
Beverage
Other Non-Durable Goods 27% 36%
Paper Products
Chemicals & Pharma
Other Non-Durables
Durable Goods & Distribution 15% 16%
Building Materials
Other Durables
Shipping & Distribution
Investor Roadshow | November 5, 2014 30
Industrial Packaging | U.S. Corrugated Market1
Total Box Volume 3Q YoY
IP +1.1%
FBA Industry +1.7%
West of Rockies 19% of Volume
East Of Rockies 81% of Volume
IP Volume
3Q YoY Absolute
IP +2.3%
FBA +1.9%
3Q YoY Absolute
IP (3.7%)
FBA +0.9%
IP Select Segment
Performance (YoY)
•Poultry
•Shipping &
Distribution
•Beverage
•Processed Foods
•Beef
•Agriculture
(West Coast)
1Corrugator plant sales
Source: Fibre Box Association (FBA), IP Analysis
Investor Roadshow | November 5, 2014
U.S. Containerboard | Industry Statistics
200
300
400
500
600
700
800
$/short ton
Containerboard Pricing
Linerboard Medium
Source: RISI
31
$200
$300
$400
$500
$600
$700
$800
Jan-90 Jan-95 Jan-00 Jan-05 Jan-10
Investor Roadshow | November 5, 2014 32
Economic indicators and US box demand
Source: Global Insight US Short Term Forecast, April 2014; RISI World Forecast- North America, March 2014
70
80
90
100
110
120
130
20
01
20
02
20
03
20
04
20
05
2006
2007
2008
20
09
20
10
20
11
20
12
20
13
Ind
exed
10
0 =
20
01
US Box Shipments US Nondurable Industrial Production US GDP US Industrial Production
Investor Roadshow | November 5, 2014
373 378
390 396
405 401
380 379 380
391 391 395
390
374
345
357 359 360 360 365
371 376 373
381
250
275
300
325
350
375
400
425
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
BS
F
RISI Forecast
U.S. Corrugated Packaging | Forecast
33
Historical Data Source: Fibre Box Association
2014-2018: 1.1% CAGR (RISI - 2014 5-yr forecast)
Investor Roadshow | November 5, 2014
Wood / OCC Fiber Breakeven
25
50
75
100
125
150
175
200
225
25 30 35 40 45 50 55 60 65
OCC Cost Delivered 1
$/ton
Wood Chip Cost Delivered 2
$/ton
Wood Advantaged
OCC Advantaged
2012
2Q14 1Q14
3Q14
34
2013
1 RISI national average OCC price, adjusted for delivery 2 Forest2Market chip equivalent basis index price
Investor Roadshow | November 5, 2014
Grupo Orsa | Company at a Glance
35
Paulinia Mill
Manaus Box Plant
Box plant
Mill
Rio Verde Box Plant
Paulinia Box Plant Suzano Box Plant Franco da Rocha Mill
Nova Campina Mill
2013 Sales of US$335 Million
Three Containerboard Mills
Four Box Plants
~400 Thousand Tons of Containerboard
Capacity
Corrugated Supply Position ~8%
Sustainable Fiber Supply
Closed Acquisition on January 15, 2013
Purchased Remaining 25% in April 2014
Investor Roadshow | November 5, 2014
IP Global Coated Paperboard Footprint | Total of 3.5 Million Tons
Coated paperboard mill
North America
1.6 Million Tons
Europe/Russia
370,000 Tons
Asia Sun Paper JV
1.5 Million Tons
36
Investor Roadshow | November 5, 2014
25%
40%
58%
4%
24%
13%
22%
9%
14%
22%
7%
60%
19%
9% 6%
11%
15% 9%
15%
3%
14%
1%
Folding 2.2 MM tons
Cupstock 1.0 MM tons
Coated Bristols
0.4 MM tons
Liquid 1.4 MM tons
Supply Position by Segment
North American Solid Bleached Sulphate Capacity
Folding includes tobacco; Liquid Packaging includes Aseptic
Source: 2012 RISI Capacity (includes Ctd. Bristols); AF&PA; IP Analysis
CAGR Flat CAGR +2% CAGR (4%) CAGR (1%)
IP 25%
MWV 23%
GP 13%
Rank Group 13%
Clearwater 12%
RKT 7%
Weyco 4%
Coated Paperboard 2013 Supply Position (SBS)
6.3 MM Tons
37
Investor Roadshow | November 5, 2014
North American Consumer Packaging at a Glance
• 2013 Sales: $1.5 B
• 1.6 MM SBS sales tons
• 78% external
• 2013 Sales: $0.6 B
• Consumes almost 0.2 MM
tons of IP’s Coated
Paperboard
• Hot and cold cups
• Food buckets & containers
• Lids
Specialty Coffee
Theater, Convenience,
Hospitality
Folding Carton
560m tons
Cupstock 400m tons
NA Consumer Packaging Business
Coated Paperboard
Foodservice Business
Quick Service
Commercial Printing
240m tons
Coated Paperboard mill Foodservice plant
38
Investor Roadshow | November 5, 2014
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
0 2,500 5,000 7,500 10,000 12,500 15,000
Man
ufa
ctu
rin
g C
osts
$/T
on
Cumulative Annual Capacity (Thousand Tons)
Cash + Delivery to Chicago
Coated Paperboard Global Cost Curve | IP NA Capacity in 1st Quartile
Based on Poyry’s 2014 CostTrac model at 2nd Quarter, 2014, Prices and Exchange Rates. 57# Folding Carton Board
Augusta 3 Texarkana 1
Augusta 1
Riegelwood 15
39
Riegelwood 18
Investor Roadshow | November 5, 2014
NA Coated Paperboard Historical Financials
219 200 187 211
251
358
254 263
15%
13%
11%
15% 16%
22%
17%
14%
0%
5%
10%
15%
20%
25%
0
50
100
150
200
250
300
350
400
2006 2007 2008 2009 2010 2011 2012 2013
EBITDA
$ MM
EBITDA
%
Segment operating profit before special items
40
Investor Roadshow | November 5, 2014
NA Consumer Packaging Relative EBITDA Margins
IP EBITDA margins based on North American Consumer Packaging operating profit before special items
Competitor adjusted EBITDA margins obtained from public filings and IP analysis; reflects Food & Beverage segment
18.0%
14.0% 12.9%
13.7%
18.6%
15.9%
IP MWV
3Q13 2Q14 3Q14
41
12.1% 13.0%
TTM
TTM
Investor Roadshow | November 5, 2014
U.S. Coated Paperboard | Industry Statistics
$450
$550
$650
$750
$850
$950
$1,050
$1,150
$1,250
$/short ton Folding Cartonboard Prices
Bleached Unbleached Recycled
Source: RISI
42
Investor Roadshow | November 5, 2014
Consumer Packaging 2H 2014 Earnings Runway
43
1H2014
• 1Q severe weather
• Volume constrained during
heavy outage period
• Price increases announced
• High input costs
• Kwidzyn project construction
and start-up
2H2014
Lower outages / Volume pickup
Pricing realizations
Incremental cupstock growth due
to shift from foam to paper
Double digit foodservice volume
growth driving solid demand for
coated paperboard
Mix improvements associated with
seasonality (hot cup season)
Input costs remain high,
above expectations
Kwidzyn project ramp-up
Investor Roadshow | November 5, 2014
Paper Cups Replacing Foam | Environmental Benefits of Paper Driving Demand
44
Every 1 Billion Foam & Plastic Cups
Converted to Paper = 15 – 25 Thousand Tons of
Coated Paperboard Demand
Foam 31
Plastic 21
Paper Hot 18
Paper Cold
38
2014 U.S. Cup Demand (Billions of Units)
Source: Technomic 2012 Disposables Study, RISI, AF&PA, IP Analysis
Hold&Go®
Individually
Wrapped Cup
ecotainer®
Investor Roadshow | November 5, 2014 45
IP Global Papers Footprint | Total of 4.4 Million Tons1
1 Does not include llim JV
Brazil
1.1 MM
N. America
2.0 MM
Europe
0.7 MM
Russia
0.4 MM
Uncoated paper mill
India
0.2 MM
ILIM
0.2 MM
Investor Roadshow | November 5, 2014 46
Printing Papers | 3Q14 vs. 3Q13 Change in Segment Operating Profit1 ($MM)
1Before special items
Europe
$2
North America
Pulp
$17 North America
Papers
$13
Brazil
$13
India
$7
Investor Roadshow | November 5, 2014
GP 15%
IP 13%
Champion 10%
Boise 10% Willamette
9%
WY 9%
Union Camp
9%
Other 25%
1998 Producer Position Top 2 = 28%
Top 4 = 48%
2014 Producer Position Top 2 = 57%
Top 3 = 67%
Note: 2014 producer position adjusted for GP Crossett, Boise International Falls, Lincoln Paper, and IP Courtland.
1998, 2014 Source: Poyry Consulting, Fisher International, IP Strategic Planning
NA Uncoated Freesheet Supply | Supply Positions
47
Domtar 38%
IP 19%
PCA 10%
GP 10%
Other 24%
Investor Roadshow | November 5, 2014
0%
20%
40%
60%
80%
100%
Riverdale Ticonderoga Eastover Georgetown Franklin Riegelwood Pensacola
% G
rad
e / M
ix
Pulp Non UFS Uncoated Freesheet Coated Paperboard Containerboard 1
Printing Papers & Pulp Mill System | 3.4MM Tons Capacity
1 Non UFS includes Kraft Bag and Uncoated Bristols
Source: IP Finance
Paper
(M Tons) 650 300 730 320 0 0 0
Pulp
(M Tons) 0 0 110 360 300 475 165
Tenant Mills
Cap
ac
ity
48
Investor Roadshow | November 5, 2014
Uncoated Freesheet Global Cost Curve | 95% of Capacity in 1st & 2nd Cost Quartiles
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000 22,500 25,000 27,500 30,000 32,500 35,000
Ma
nu
fac
turi
ng
Co
sts
$/T
on
Cumulative Capacity (Thousand Tons)
Cash + Delivery to Chicago
Ticonderoga 7
Based on Poyry’s 2013 CostTrac model at 2nd Quarter, 2014, Prices and Exchange Rates.
Eastover 2
Eastover 1
Riverdale 15
Riverdale 16
Georgetown 1
Ticonderoga 8
50# Roll Offset
49
Investor Roadshow | November 5, 2014
317
575
657 657
513 539
598
499
310
10%
16%
19% 19% 18%
20%
22%
18%
12%
0%
5%
10%
15%
20%
25%
0
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
EBITDA %
EBITDA $ MM Paper Only
North American Printing Papers | Attractive Margins & Cash Flow
Tons (MM)
4.0 4.1 3.9 3.5 3.0 2.8 2.7 2.7 2.6
Segment operating profit before special items
50
Investor Roadshow | November 5, 2014
N.A. Printing Papers Relative EBITDA Margins
14.2%
12.0% 12.0% 12.8%
17.9%
14.5%
IP Domtar
3Q13 2Q14 3Q14
IP EBITDA margins based on operating profit from continuing operations before special items
Competitor EBITDA margin estimates obtained from public filings and IP analysis
EBITDA margins reflect the Printing Papers and Pulp businesses
12.4%
TTM TTM
13.6%
51
Investor Roadshow | November 5, 2014
NA Uncoated Freesheet Consumption | Developed World Convergence
North America
Japan
W. Europe
High Broadband Countries1
NA UFS MM
Tons
9
7
BRIC Countries
1 Korea, Singapore, Denmark, Netherlands, Switzerland
Source: Poyry Consulting, IP Strategic Planning
16
52
0
5
10
15
20
25
30
35
40
45
50
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
UF
S C
on
su
mp
tio
n K
g p
er
Cap
ita
North America
Japan
W. Eur. w/o Greece
High Broadband
BRIC Avg.
Investor Roadshow | November 5, 2014
U.S. Uncoated Freesheet Demand
Historical Data Source: AF&PA
2014 – 2018: -3.1% CAGR (RISI 2014 5-yr Forecast)
11.6 12.2 12.4
13.3 13.0 13.2
13.7 13.6 14.0 13.9
12.6 12.4 12.3 12.6
12.0 12.3
11.9
10.9
9.7 9.6 9.3
8.9 8.7 8.3 8.1 7.8
7.5 7.3
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
RISI Forecast
Mil
lio
n T
on
s
UFS Shipments
53
Investor Roadshow | November 5, 2014
U.S. Uncoated Freesheet | Industry Statistics
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
$/short ton
UFS Pricing Trends
RISI 20# Cutsize RISI 50# Offset
Source: RISI
54
Investor Roadshow | November 5, 2014
35%
30%
6%
4%
4%
3%
18%
Latin American Uncoated Freesheet Market
0
50
0
1,0
00
1,5
00
2,0
00
2,5
00
Brazil
Argentina
Colombia
Chile
Peru
Venezuela
Other …
Thousand Metric Tonnes
Demand
Capacity
Latin America is a Net Exporter
Demand Capacity @
91% Op. Rate* Net Exports
2.7 MM 2.8 MM 0.1 MM * Excluding Mexico
Supply & Demand
55
Source: Bracelpa/ AFCP / RISI/ Fisher/ IP Estimates; Units shown in metric tonnes
Top 6 Producers > 80%
Others
Smurfit
Kappa
Ledesma
Celulosa
Argentina
Propal
IP
Suzano
Investor Roadshow | November 5, 2014
IP do Brasil | At a Glance
Mogi Guacu Luiz Antonio Três Lagoas IP Brazil
Paper
Machines 4 2 1 7
UFS
Capacity (Thousand MT)
424 367 234 1,025
Market Pulp (Thousand MT)
8 103 0 111
56
Units shown in metric tonnes
Investor Roadshow | November 5, 2014
IP do Brasil | Historical Financials
57
280
320
230
300 320
293
334
33% 33%
24%
27% 27% 26%
31%
0%
5%
10%
15%
20%
25%
30%
35%
0
50
100
150
200
250
300
350
400
450
2007 2008 2009 2010 2011 2012 2013
EBITDA
US$ MM EBITDA
Margin
Segment operating profit before special items
Tons (MM)
0.9 1.0 1.2 1.2 1.3 1.3 1.3
Investor Roadshow | November 5, 2014
Margin Improvement From Geography Shift
58
Europe & Others Other Latin America Brazil
~3.5X
~1.8X
Improve Geographic Mix from 75% to 100% in Latin America
2013
U.S. $
EBITDA / ton Avg FX 2.15
U.S. $132 U.S. $252 U.S. $455
Investor Roadshow | November 5, 2014
India Will Become #2 Global Market in Uncoated Freesheet
Total Uncoated Freesheet
Consumption 2009
Total Uncoated Freesheet
Consumption 2015
Total Uncoated Freesheet
Consumption 2025
13,100
10,400
6,800
3,950
3,800
3,700
1,400
1,350
1,350
1,250
1,000
China
NA
WE
Japan
Rest of Asia
India
LA exc. BZ
Brazil
Indonesia
CIS inc. Ru
C&EE
19,700
8,500
7,450
5,950
4,400
2,850
2,600
2,580
2,200
1,950
1,200
China
India
NA
WE
Rest of Asia
Japan
Brazil
LA exc. BZ
Indonesia
CIS inc. Ru
C&EE
15,650
9,200
6,500
5,400
4,000
3,600
1,750
1,750
1,650
1,475
1,100
China
NA
WE
India
Rest of Asia
Japan
LA exc. BZ
Brazil
Indonesia
CIS inc. Ru
C&EE
Source: IP Study w McKinsey, India update : IP Study w Poyry
59
Investor Roadshow | November 5, 2014
Global Market Pulp | Bleached Softwood Pulp
North America North America
Latin America Latin America
Western Europe Western Europe
Eastern Europe Eastern Europe
Asia Asia
Rest of World Rest of World
0
5
10
15
20
25
30
2013 2017
Mil
lio
n M
etr
ic T
on
ne
s
2013 – 2017
CAGR
3.7%
3.0%
1.2%
(2.3%)
(2.9%)
1.0%
Source: PPPC; Units shown in metric tonnes
Global Demand = 23.9 → 24.4MM mtpy
CAGR = 0.5%
60
Investor Roadshow | November 5, 2014
Global Market Pulp | Fluff Pulp Demand
North America North America
Latin America Latin America
Western Europe Western Europe
Eastern Europe Eastern Europe
Asia
Asia
Other
Other
0
1
2
3
4
5
6
7
2013 2017
Mil
lio
n M
etr
ic T
on
ne
s
2013 – 2017
CAGR
4.7%
6.1%
2.3%
1.7%
1.1%
2.2%
Source: IP analysis; Units shown in metric tonnes
Global Demand = 5.0 → 5.8MM mtpy
CAGR = 3.6%
61
Investor Roadshow | November 5, 2014
Pulp mill
62
IP Global Pulp Capacity | Total of 3.1 Million Metric Tonnes
Ilim JV
1.5 MM
Europe / Russia
0.3 MM N. America
1.2 MM
L. America
0.1 MM
Investor Roadshow | November 5, 2014 63
Global Fluff Pulp Industry | Trade Flows – 2013
Net Import Locations Net Export Locations
Global Demand = 5.0MM mtpy
Import
(0.8)MM
86.7% Export
4.3 MM
Import
(0.4)MM
Import
(0.5)MM
Import
(2.0)MM
Source: PPPC, IP Analysis; Units shown in metric tonnes
Investor Roadshow | November 5, 2014
Pulp | Industry Statistics
0
200
400
600
800
1,000
1,200
USD/admt Global Pulp Prices
NBSK (dne) BEK (dne) Fluff (dne)
Source: RISI
Global pulp prices delivered to Northern Europe; Units shown in metric tonnes
64
Investor Roadshow | November 5, 2014 65
Ilim Joint Venture | Low-Cost, Well-Positioned
Corrugated
Packaging Kotlas /
Koryazhma
Ust-
Ilimsk
Bratsk
Investor Roadshow | November 5, 2014
World Demand for Global Market Pulp | 1995-2025
66
0
10
20
30
40
50
60
70
80
1995 2000 2005 2010 2011 2015 2020 2025
Mil
lio
n M
etr
ic T
on
ne
s
Western Europe
North America
China
Rest of Asia
Eastern Europe
Forecast
0
5
10
15
20
25
2011-2025
China
14.7 MM
Rest of
World
4.8 MM
Source: Poyry World Fibre Outlook 2012; Units shown in metric tonnes
China will account
for 75% of
incremental growth
Investor Roadshow | November 5, 2014
ILIM JV Overview
2007 - 2011
• IP purchased 50% of ILIM Holding in 2007 ($640MM)
• IP received $234 million in cash dividends to date
• IP EPS accretive – cumulative $213MM in IP equity earnings to date
• Record ILIM Holding earnings in 2011 - $530 million EBITDA
2012 - 2013
• High return, strategic capital build out (Bratsk Mill new fiber line,
Koryazhma Mill PM-7)
2014
• Capital projects ramp up
67
Investor Roadshow | November 5, 2014
2009 2010 2011 2012 2013
Sales Volume (Million short tons) 2.6 2.8 2.8 2.9 2.7
Sales ($B) 1.3 1.9 2.2 2.0 1.9
Capital Employed ($B) 1.2 1.2 1.6 2.1 2.4
Debt ($B) 0.4 0.5 0.9 1.2 1.5
Operating EBITDA ($MM) 197 516 591 291 208
F/X Gain (loss) (35) 12 (60) 39 (80)
EBITDA ($MM) 163 528 531 330 128
EBITDA Margin 12% 28% 24% 17% 7%
Depreciation ($MM) 120 121 124 134 177
EBIT ($MM) 43 407 406 196 (49)
Interest Expense ($MM) 28 18 7 6 39
Net Income (loss) ($MM) (19) 266 299 132 (72)
IP Equity Earnings (loss) ($MM) (27) 103 134 56 (46)
Dividends (to IP) ($MM) 50 34 85 0 0
Ilim JV results are IFRS basis.
68
Ilim Joint Venture | Full Year Financials
Investor Roadshow | November 5, 2014
Ilim Joint Venture | Pro Forma View – As Shared on February 4th Earnings Call
$ Million ‘09-‘12
Average1 2013 2014
Depreciation $125 $177 ~$225
Interest Expense $15 $39 ~$75
69
Ilim JV figures are on an IFRS basis with the exception of IP Equity Earnings which is US GAAP. IP position in joint venture is 50%.
* Assumes stable FX & current pulp prices 1 See slide #68 for yearly results and additional financial measures
$388
$128
$270
$350 - $400*
~$550 - $600*
'09 - '12 Average 2013 2H2013 Annualized
2014E Fully Ramped Potential
EBITDA Ramp-Up $MM
1
~$100-$120
IP Equity
Earnings* ~$20-$40
IP Equity
Earnings*
Investor Roadshow | November 5, 2014 70
Ilim Joint Venture | Bratsk Project Ramp-Up
63%
75% 82%
89% 94%
4Q13 1Q14 2Q14 3Q14 4Q14F
% o
f F
ull P
rod
ucti
on
Ramp-Up Performance
Steady progress throughout 2014
Significant outage in early 3Q
On track to ramp up to full production by year end
Investor Roadshow | November 5, 2014
Market Pulp Global Cost Curve | Ilim Bleached Softwood Kraft Market Pulp
Ust-Ilimsk
Based on Poyry’s 2014 CostTrac model at 2nd Quarter, 2014, Prices and Exchange Rates. Units shown in metric tonnes
$0
$200
$400
$600
$800
$1,000
0 5,000 10,000 15,000 20,000
Ma
nu
fac
turi
ng
Co
sts
($
/Me
tric
To
nn
e)
Cumulative Capacity (Thousand Metric Tonnes)
Cash + Delivery to Beijing
71
Bratsk
Bratsk
(Pre-Project)
Investor Roadshow | November 5, 2014
Operating Business EPS
2005-2006 as originally reported
2007-2011 adjusted for elimination of the Ilim JV reporting lag
2005-2010 Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings
xpedx is reflected as a Discontinued Operation from 2010 forward.
72
.36 .31
.29
.12 .12
.35
.40
.47 .45
.52
.57
.73
.45 .49
.41
.15
.07
.27
.38
.22
.05
.44
.85
.72 .76 .77 .78
.67
.58
.49
.77
.66 .64 .61
1.01
.81
.60
.93 .95
.42
.08
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
2005 2006 2007 2010 2008
Impact of Mineral
Rights Gain
2009
.83
2011
.93
Final Land Sale
2012 2013 2014
Investor Roadshow | November 5, 2014 73
Balance Sheet | Debt Coverage – As Shared on February 4th Earnings Call
$ B
illio
n
$4.1 Pension Gap
3.8x
2.9x
$10.1 Balance
Sheet
Debt
$9.5 Balance
Sheet
Debt
$1.2 Op. Lease Adj. $1.2 Op. Lease Adj.
$2.2 Pension Gap
[2.7x]1 [2.3x]2
2013 2012
Adjusted Debt reflects gross balance sheet debt plus pension gap and operating leases (Moody’s Methodology)
Adjusted EBITDA incorporates pension and lease expense adjustments (Moody’s Methodology) 1 Simple Debt Coverage: Balance Sheet Debt / 2012 Reported EBITDA of $3.7B 2 Simple Debt Coverage: Balance Sheet Debt / 2013 Reported EBITDA of $4.1B 3 AA Corporate Bond Rate
Moody’s Target: Adjusted Debt < 3X Adjusted EBITDA
Reduced Balance Sheet debt $2.5B
since Temple-Inland acquisition;
$650MM paid in 2013
Pension Gap decreased by $1.9B
due to asset performance and
discount rate3 increase
Achieved Moody’s debt coverage
target of < 3X adjusted EBITDA
as of year end 2013
$1.8B cash balance at year end
Investor Roadshow | November 5, 2014
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040
Mil
lio
n
Debt Maturities Monetization & Other
1 Timber Monetization debt and other debt intended to be rolled over or refinanced, (Sun joint venture debt and other foreign subsidiary debt)
Debt Maturity Profile | Maturities as of December 31, 2013
74
1
Investor Roadshow | November 5, 2014
25%
50%
75%
100%
125%
$0
$300
$600
$900
$1,200
$1,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Maintenance Regulatory Strategic Cost Reduction % of Depreciation
$ Million % of Depreciation
Reflects continuing operations
Capital Spending
75
~$1,400
Investor Roadshow | November 5, 2014
Pension Plan Update | As of December 31, 2013
• No contribution 1960-2005; $2.5B
contribution 2006-2011
• In 2012, no IP plan contribution and
$44MM for TIN plan
• $31MM contribution made in 2013
• 2014 pension contribution ~$450MM
• Further contributions expected over
2015/16 timeframe
($0.2)
($3.2)
($2.8)
($1.5)
($2.4)
($2.7)
($4.1)
($2.2)
Billio
n
Year-End Funded Status1
76
1 Reflects status as of December 31
Investor Roadshow | November 5, 2014
Pension Plan Update1 | As of December 31, 2013
231 195
342
545
366
$0
$150
$300
$450
$600
2010 2011 2012 2013 2014E
Millio
n
Annual Pension Expense2 Key Variables 2012 2013 2014E
Assumed Rate of Return
8.0% 8.0% 7.6%
Discount Rate 5.1% 4.1% 4.9%
Average Annualized Returns3
2013 14.1%
Past Five Years 13.7%
Past Ten Years 8.8%
Portfolio Asset Allocation at 12-31-13
Target Actual
Equity 42% - 53% 49%
Bonds 30% - 40% 32%
Real Estate 6% – 12% 10%
Other 3% - 15% 9% 1 2013 and onward include Temple-Inland pension plan 2 Non-cash expense for U.S. plans only 3 Through December 2013
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 241 observations
77
Investor Roadshow | November 5, 2014
Maintenance Outages Expenses | 2014
$ Million 1Q14 2Q14 3Q14 4Q14F 2014F
Industrial Packaging $69 $91 $26 $47 $233
North America 69 91 23 47 230
Brazil 0 0 3 0 3
Printing Papers Total $31 $60 $16 $47 $154
North America 30 35 14 38 117
Europe 1 24 1 0 26
Brazil 0 1 0 9 10
India 0 0 1 0 2
Consumer Packaging $20 $26 $1 $11 $58
North America 20 19 1 11 51
Europe 0 7 0 0 7
Total Impact $120 $177 $43 $105 $445
78
Investor Roadshow | November 5, 2014
19
127 167
99 88 46
118 123
48
300 49
30
1 70
276 60 58
69
Maintenance Market
Coated Paperboard1
6
22 13 1
24 24 20
53 27
24
59
2
38
18
53
19
58
16 20 1
North American Downtime
1 8 14
21 20 2
15 19
12
Containerboard Uncoated Papers2
Market Pulp
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
Th
ou
sa
nd
To
ns
1 Augusta PM#2 was permanently shutdown in March 2013 (36000 tons / quarter) 2 Courtland shutdown of two machines in 4Q13; shutdown complete in February 2014
319
49
176
79
197
100
158
322
178 181
117
0
Investor Roadshow | November 5, 2014
Total Cash Cost Components | 3Q14 YTD
Fiber 31%
Freight 16%
Materials 14%
Labor 12%
Energy 10%
Overhead 9%
Chemicals 8%
80
North American mills only
Investor Roadshow | November 5, 2014
2007 2008 2009 2010 2011 90
95
100
105
110
115
120
125
130
2012 2013 2014
U.S. Mill Wood Delivered Cost Trend | 1% Increase vs. 2Q14 Average Cost
Cost Indexed to January 2007 values
81
Investor Roadshow | November 5, 2014
2007 2008 2009 2010 2011 40
60
80
100
120
140
160
180
200
2012 2013 2014
Cost Indexed to January 2007 values
U.S. OCC Delivered Cost Trend | 5% Decrease vs. 2Q14 Average Cost
82
Investor Roadshow | November 5, 2014
2014 Global Consumption | Annual Purchase Estimates for Key Inputs
Commodity U. S. Non – U. S.
Energy
Natural Gas (MM BTUs) 65,000,000 11,000,000
Fuel Oil (Barrels) 880,000 400,000
Coal (Tons) 490,000 700,000
Fiber Wood (Tons) 52,000,000 9,000,000
Old Corrugated Containers / DLK (Tons) 4,500,000 430,000
Chemicals
Caustic Soda (Tons) 370,000 95,000
Starch (Tons) 430,000 102,000
Sodium Chlorate (Tons) 180,000 45,000
LD Polyethylene (Tons) 40,000 -
Latex (Tons) 16,000 5,000
Does not include Asia or volume consumed by joint ventures (Sun JV, Ilim JV) Estimates are based on normal operations and may be impacted by downtime Excludes annual consumption related to Courtland operations terminated in 1Q14
83
Investor Roadshow | November 5, 2014
Investor Relations | Contact Information
Jay Royalty • Vice President, Investor Relations
901-419-1731
Michele Vargas • Director, Investor Relations
901-419-7287
Betty Groom • Financial & Administrative Analyst
901-419-4250
84