International Paper Reports Earnings, Says Weak Economy, Strong Dollar Hammered Domestic Profitability
Press release from the issuing company
PURCHASE, N.Y., April 18 - International Paper (NYSE: IP) today reported first-quarter 2001 earnings of $24 million ($.05 per share) before special and extraordinary items. Earnings for the same period a year earlier were $249 million ($.60 per share) before special and extraordinary items. First-quarter 2001 net sales were $6.9 billion, compared to $6.4 billion in the first-quarter 2000. Fourth-quarter 2000 earnings before special and extraordinary items were $145 million ($.28 per share) and sales were $7.2 billion. First-quarter 2000 figures do not include Champion International Corporation, which International Paper acquired in June of last year.
"While we can't change the economy, we are changing the company. We are taking actions that we are convinced are benefiting shareholders in the short term and are positioning the company to win in the long term," said John Dillon, chairman and chief executive officer. "We are matching our production to our orders, which has led to reductions in inventories. We are focusing on our three core businesses -- paper, packaging and forest products -- and are reinforcing relationships with our customers. And our continuing internal improvement effort will give International Paper a superior competitive position when the business outlook improves."
The continuation of a dramatic slow down of orders due to a very weak U.S. economy and strong U.S. dollar hammered domestic profitability and export competitiveness. Also influencing earnings this quarter were higher energy costs, lower volumes and downward pressure on pricing. In addition, several of the company's larger facilities did not operate well early in the quarter. The company does not expect those operating issues to have a significant impact on performance in the second quarter.
During the quarter, International Paper took approximately 490,000 tons of market-related downtime.
The company's divestiture program is moving ahead as planned. In the first quarter, International Paper received proceeds from the sale of its west coast forestlands, oil & gas properties and Zanders, a European coated paper business. In March, the company announced the sale of its Curtis/Palmer hydroelectric project in Corinth, New York. Including all of these sales, the company will have generated nearly $2 billion in proceeds from divestitures since the acquisition of Champion last June.
In the Coated and Supercalendered Papers business, sales were weakened by a significant reduction in corporate and general business advertising. Printing and Communications Papers earnings reflect weak overall demand but somewhat better conditions in the converting markets. Pulp prices remained under increasing pressure.
In the European Papers business, markets remained stable with the exception of weak pulp demand and pricing.
The company's distribution business, xpedx, experienced lower sales volumes in commercial printing. To offset slow business conditions, xpedx is consolidating facilities and reducing some jobs while pursuing sales growth initiatives.
Earnings in Consumer Packaging were affected by weakened bleached board demand and an increasingly competitive marketplace. Prices, however, remained steady. Industrial Packaging earnings were affected by taking significant downtime -- about 270,000 tons, or 20 percent of our system capacity -- to match our production with our customer orders. In addition, prices for containerboard were down slightly.
In the Forest Products segment, our Wood Products businesses improved performance from the fourth-quarter 2000 but continue to be impacted by depressed prices in lumber and panels. Over supply in the market has prices running near 10-year lows.
The company will hold a webcast to discuss earnings and current market conditions at 11:30 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 2:30 p.m. (EDT) this afternoon.
After special and extraordinary items, International Paper reported a net loss of $44 million ($.09 per share) in the first quarter of 2001, compared with net earnings of $378 million ($.91 per share) in the first-quarter of 2000 after special and extraordinary items. The company reported a net loss of $371 million ($.85 per share) in the fourth quarter of 2000 after special and extraordinary items.
Special and extraordinary items in the first quarter represented the cumulative impact of adopting the new accounting standard for derivative and hedging transactions ($25 million before taxes and minority interest), an extraordinary item for additional anticipated losses on dispositions ($73 million before taxes) and a special item for additional Champion merger integration costs ($10 million before taxes). The total pre-tax charge was $108 million or $68 million after taxes and minority interest ($.14 per share).
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