International Paper Reports 2Q Earnings, Profits Fall Sharply
Press release from the issuing company
STAMFORD, Conn., July 17 - International Paper today reported second-quarter 2001 earnings of $64 million ($.13 per share) before special items, an increase of $40 million over the previous quarter. First-quarter 2001 earnings before special and extraordinary items were $24 million ($.05 per share). Earnings for the second quarter last year were $315 million ($.75 per share) before special items. Second-quarter 2001 net sales were $6.7 billion, compared to $6.8 billion in the second-quarter 2000 and $6.9 billion in the first-quarter 2001.
"The external environment continues to be very difficult. We are taking a whole series of actions to strengthen our company and improve profitability, and those internal initiatives helped us to achieve improved results this quarter,'' said John Dillon, chairman and chief executive officer. "We have continued to reduce our capacity to match demand from our customers, improved our operations and began to realign staff resources to better our financial results.''
During the quarter and in early July, the company announced approximately 4,000 job reductions related to capacity shutdowns, internal reorganizations and streamlining of salaried staff functions.
Earnings, despite improved operating efficiencies during the quarter, were negatively impacted by weak pulp and paper markets. Export competitiveness continues to slide as a result of the strong U.S. dollar.
The Printing & Communications Papers business is aggressively pursuing improvement initiatives and expects significant cost savings as a result of a sector reorganization. However pulp markets continue to weaken, and the European Papers business is softening. In the Coated and Supercalendered Papers business, improved operating efficiencies have slightly offset a weak demand for magazine grades.
The company's distribution business, xpedx, is making progress on its internal profit improvement program, but was affected by weak printing markets as well as slowing sales in packaging and industrial supplies.
Earnings in Consumer Packaging increased over the first quarter due to operations improvements and system-wide cost reductions. The strong dollar continued to weaken bleached board demand as well as containerboard exports. Industrial Packaging continued to take extensive market-related downtime, and as a result announced the indefinite shutdown of 610,000 tons of capacity.
In the Forest Products segment, lumber sales were up in an environment of stable housing starts, and prices for both oriented strand board and plywood have improved during the quarter. Stumpage prices continue to decline.
In businesses outside North America, the global economic slowdown also had an impact on Carter Holt Harvey's forest products and pulp markets in Asia. Late in the quarter, business slowed in Europe. Market conditions in Brazil are stable, and financial results are holding up well.
"Going forward, we do not expect any near-term improvement in demand for our products -- because of the normal summer slowdown -- but we are convinced our internal improvement efforts will continue to help offset external market conditions,'' said Dillon.
After special items, International Paper reported a net loss of $313 million ($.65 per share) in the second quarter of 2001, compared with net earnings of $270 million ($.64 per share) in the second quarter of 2000 after special items. In the first quarter of 2001, the company reported a net loss of $44 million ($.09) after special and extraordinary items.
Special items in the second quarter included charges for facility closures, administrative realignment and related severance ($465 million before taxes and minority interest), impairment losses on assets of businesses held for sale ($85 million before taxes), and additional Champion merger integration costs ($32 million before taxes).
The company will hold a webcast to discuss earnings and current market conditions at 10 a.m. (EDT) today. All interested parties are invited to listen to the webcast live via the company's Internet site at http://www.internationalpaper.com by clicking on the Investor Information button. Persons who wish to listen to the live earnings webcast must pre-register at the site. A replay of the webcast will also be available on the web-site beginning at 1 p.m. (EDT) this afternoon.
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