1

John V. Faraci

Chairman &

Chief Executive Officer

UBS Global Paper and Forest Products Conference

Recovering from the downturn: industry challenges and opportunities

September 16, 2009

2

Forward-Looking Statements

These slides and statements made during this presentation contain 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 relate to:

(i) increases in interest rates and our ability to meet our debt service obligations; (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 its products; (iii) global economic conditions

and political changes, including but not limited to the impairment of financial institutions,

changes in currency exchange rates, credit availability, 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 environmental and other governmental regulations and to actual or

potential litigation; and (v) whether we experience a material disruption at one of our

manufacturing facilities and risks inherent in conducting business through a joint venture.

We undertake no obligation to publicly update any forward-looking statements, whether as

a result of new information, future events or otherwise. 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.

3

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.comunder Investors.

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Economic Recession

55

Economic Recession

66

Agenda

1) Improved Strategic Position

2) 1H09 Review

3) Emerging Market Operations

4) Cash Generation

5) Cash Allocation

6) Potential Opportunities

77

IP TransformationImproved IP’s Strategic Position

• More Focused – Global Paper & Packaging

• Reduced Capital Intensity

• Stronger Businesses

• More Global

• Lower Cost

• More Profitable

• More Sustainable Cash Flow

8

1H09 ReviewMaximizing Cash and Reducing Debt

Exceptional Free Cash Flow

$1.9 Billion YTDDebt Reduction

Execution

• Matching our Production

to Customers’ Needs

• Driving Integration

Synergies

• Reducing Overhead

Expenses

• Cost Reduction Programs

Environment

• Weak Demand

• Input Cost Relief

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1H09 Financial SnapshotSolid Results Despite Challenging Economy

Earnings from continuing operations before special items; 1Q09 & 2Q09 includes WY PKG1 Cash provided by continuing operations less capital expenditures; includes alternative fuel mixture tax credits2 Excludes $3.0B proceeds from WY PKG bond issuance

$ Billion 1H08 1H09

Sales $11.5 $11.5

EBITDA $1.3 $1.3

EBITDA Margin 11.4% 11.6%

Free Cash Flow1 $0.5 $1.9

Cash Balance at June 30 $1.02 $1.7

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1,181

284

58209

207

Containerboard Uncoated Papers

Market Pulp

Coated Paperboard

Th

ou

san

d T

on

s

MaintenanceLack-of-Order

N.A. Lack of Order & Maintenance Downtime24% of Capacity in 1H09

70

239327

1,388

• LOO downtime excludes capacity from mills or machines that have been permanently shutdown (Franklin #3 - 32,000 tons

and Louisiana mill - 120,000 tons) or indefinitely shut down (Valliant #3 - 97,000 tons)

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11.2%

16.3%

8.8%

5.6%

17.5% 17.2%

15.3%

8.6%

20.7%

16.9%

13.3%

9.5%

IP Competitor A Competitor B Competitor C

2Q08 1Q09 2Q09

North American Industrial PackagingIndustry-Leading Margins

EBITDA Margin

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Source: Earnings calls, press releases, public filings, IP analysis

EBITDA based on operating profit before special items

EBITDA margin equals EBITDA divided by sales

11.1 2.5 4.2 7.1Capacity (Million Tons)

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Increasing Free Cash FlowIndustrial Packaging Integration Synergies

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CategoryAmount($ Million)

Reduce Salaried Headcount $200

Optimize Mill & Box Plants $120

Improve Box Margins $105

Reduce Mill Freight $40

Rationalize Box Plants $35

Total Forecasted Synergies > $500

Does not include $90 million in procurement savings

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North American Printing PapersIndustry-Leading Margins

17.6%

15.4%

5.8%

13.7%

9.0%

13.1%13.4%

10.7%

12.7%

IP (North America) Competitor A Competitor B

2Q08 1Q09 2Q09

EBITDA Margin

Source: Earnings calls, press releases, public filings, IP analysis

EBITDA based on operating profit before special items

EBITDA margin equals EBITDA divided by sales 13

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North American Coated PaperboardIndustry-Leading Margins

11.7%12.7%

10.5%

7.1%

11.7% 11.5%

IP (North America) Competitor A

2Q08 1Q09 2Q09

EBITDA Margin

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Source: Earnings calls, press releases, public filings, IP analysis

EBITDA based on operating profit before special items

EBITDA margin equals EBITDA divided by sales

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Emerging Market OperationsNew Machines in China and Brazil

Brazil - Três Lagoas

Uncoated freesheet

machine

200,000 metric tons

Overall machine

efficiency: 90%

China - Sun JV

Coated paperboard machine

400,000 metric tons

High demand growth region

Low-cost manufacturing

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Russian and Eastern European OperationsHighlights

Volume & price rebounding in Russia & China

Cash dividend of $62MM received from

Ilim JV in 4Q08

Improved mix on Svetogorsk coated paperboard

Strong performance at Kwidzyn

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8066

58

WYPKG

(8)

(24)

(4)

0

15

30

45

60

75

90

2005 Headcount*

Divestments & Acquisitions

Headcount Reduction

June 2008

Headcount Reduction

June 2009

Th

ou

san

ds o

f E

mp

loyees

Increasing Free Cash Flow 28% Headcount Reduction

* At January 1, 2005Excludes Ilim joint venture employees

Achieved year-end headcount goal during 2Q

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Increasing Free Cash FlowReducing Capital Spending

25%

50%

75%

100%

125%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2005 2006 2007 2008 2009P 2010P

Cost Reduction Strategic Regulatory Maintenance

$ Million

% of Depreciation

Normalized Target for Capital Spending 60-70% of Depreciation

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$0.6

$1.7

$2.2

2007 2008 1H09 Annualized

Billi

on

Increasing Free Cash FlowImproving in a Tough Environment

Free cash flow before dividends.

1H09 Annualized is free cash flow before dividends; excludes alternative fuel mixture tax credits.

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Debt Reduction ProgressReduced Debt by $2.5 Billion since Acquisition

12.7

~ 9.5

0.6

0.6

0.6

0.6

0.1*

$8

$9

$10

$11

$12

$13

$14

August 2008 Pro Forma

with Acquisition

2H08 1Q09 2Q09 July August Projected Year-End Balance

Bil

lio

n

* Excludes the debt repayment of $1B from the proceeds of our August bond issuance: $1B 7.5% notes due 2021

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Debt ReductionTargeting < 3X Debt-to-EBITDA

$9.5 B$8 - $9 B

2009 Year-end Total Estimated Debt

Target < 3X Debt-to-EBITDA

Pension Obligation

2222

1,255

930

550

965

$0

$400

$800

$1,200

$1,600

2009 2010 2011 2012

Mil

lio

n

Debt Maturities Monetization & Other

$3.7 Billion Maturing through 2012

Debt maturity profile as of December 31, 2008

Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt

Liquidity Management & Debt Reduction Maturities before Repayments & Refinancing

2323

20

325

75250

$0

$400

$800

$1,200

$1,600

2009 2010 2011 2012

Mil

lio

n

Debt Maturities Monetization & Other

$0.7 Billion Maturing through 2012

Debt maturity profile as of May 31, 2009

Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt

Liquidity Management & Debt ReductionMaturities as of August Month-end

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$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Mil

lio

n

Debt Maturities Monetization & Other

Monetization & Other: Intend to rollover or refinance timber monetization debt, Sun JV debt and other foreign subsidiary debt

Preferred Annual Debt Ceiling

Debt Maturity ProfileMaturities as of August Month-end

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Where We Go From HerePriorities

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Improve Margins

Match our Production to our Customers’ Needs

Continue Cost Reductions

Maximize Synergies

Maximize Free Cash Flow

Achieve Debt Reduction Target

Increase Shareholder Value

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Cash Flow& Earnings

Potential Opportunities to Increase Value

• Further Cost Reduction

• Recovery in North American

and European Demand

• Resumption of Emerging

Market Growth

• Potential for Price Improvement

• Reduction of Underutilized Capacity

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