International Paper reports earnings, xpedx makes $31 million
Press release from the issuing company
Feb. 1 -- International Paper today reported preliminary full-year 2006 net earnings of $1.1 billion ($2.18 per share) compared with $1.1 billion ($2.21 per share) in 2005. The company posted fourth-quarter 2006 net earnings of $2.0 billion ($4.37 per share) compared with earnings of $202 million ($0.42 per share) in the third quarter of 2006 and a loss of $77 million ($0.16 per share) in the fourth quarter of 2005. Amounts in all periods include special items, and all periods presented now reflect the wood products and beverage packaging businesses, along with the kraft papers and Brazilian coated papers businesses, as discontinued operations.
Full-year 2006 earnings from continuing operations and before special items were $635 million ($1.33 per share), compared with $329 million ($0.70 per share) in the 2005 full year. Earnings from continuing operations and before special items in the fourth quarter of 2006 were $211 million ($0.47 per share), compared with $196 million ($0.40 per share) in the third quarter and $18 million ($0.04 per share) in the fourth quarter of 2005.
Quarterly net sales were $5.3 billion for the quarter, down slightly from $5.4 billion in the third quarter and $5.5 billion in the fourth quarter of 2005. Annual net sales were $22 billion in 2006 compared with $21.7 billion in 2005.
Operating profits for the fourth quarter were $418 million, compared with operating profits of $657 million in the third quarter of 2006. Excluding special items, operating profits were $546 million in the fourth quarter versus $644 million in the third quarter, mainly due to lack-of-order downtime and operating issues at specific mills. Full-year 2006 operating profits were $2.1 billion versus $1.6 billion in 2005.
"International Paper delivered solid fourth-quarter results," said International Paper Chairman and Chief Executive John Faraci. "Prices remained strong, inventory levels are in good shape, and cost controls continued to produce results. We saw some upside from lower interest expense and fewer shares outstanding. Significant debt reduction and our share repurchase program strengthened our balance sheet and returned value to shareowners. However, as is typical, volumes were seasonally slower. We also saw our operations affected by lack-of-order downtime, planned maintenance outages and the impacts of capital projects in our North American and Brazilian paper businesses."
Faraci continued, "Year over year, we saw strong gains in pricing, volume, cost and mix in 2006, and delivered our best performance since 2000. We achieved approximately $330 million in profit improvement, which boosted our earnings per share by about 56 cents. While we are not satisfied with the absolute level of earnings, we are encouraged by the continued supply/demand balance in our North American uncoated papers and industrial packaging businesses, the strength in our global papers business, and the progress we made in our transformation plan. We are well positioned to continue building on these gains in 2007."
Commenting on the first quarter of 2007, Faraci said, "We expect volumes to improve slightly in the first quarter, the result of seasonal improvements in our container and printing papers businesses, but expect some of that to be offset by slightly higher input costs. Timber harvest revenues will also drop off next year, now that we've completed the sale of most of our U.S. forestlands."
He added, "Our priorities in 2007 are to significantly improve our profitability and returns and continue to return value to shareowners. We're targeting $400 million in improvements to our existing businesses, and expect to deliver about $165 million in operating earnings this year from recent selective reinvestments in Brazil and China. We also remain committed to returning value to shareowners. We currently have an open-market plan in place to buy back shares and plan to repurchase up to $1.6 billion of our stock by year-end."
Fourth-quarter segment operating profits and business trends compared with the third quarter of 2006 are as follows:
Printing Papers operating profits were $62 million, or $190 million excluding special items, down from the third quarter's record operating profits of $249 million, due to lower North American volumes that more than offset some modest volume increases in Europe and Brazil; higher operating costs related to lack-of-order downtime in North America and planned maintenance outages in North America, Europe and Brazil; as well as the impact of spending related to other planned upgrades and conversions.
Industrial Packaging operating profits were $122 million in the fourth quarter, compared with $138 million in the third quarter, or $125 million excluding special items. The slight decrease reflects slightly lower volumes, higher manufacturing expense and higher input costs.
Consumer Packaging operating profits were $28 million in the fourth quarter, down from $48 million in the third quarter due primarily to a one- time non-cash charge related to Shorewood Packaging, as well as lower volumes and mill operating issues.
The company's distribution business, xpedx, reported record fourth-quarter operating profits of $31 million compared with operating profits in the prior quarter of $34 million, due to seasonal slowdown.
Fourth-quarter Forest Products operating profits of $162 million were generally flat with third-quarter operating profits of $166 million. Higher real estate sales were offset by lower recreational and harvest revenues following the completion of the sale of 5.1 million acres of U.S. forestlands in the fourth quarter.
Net corporate expenses totaled $166 million for the quarter, down from $221 million in the third quarter, reflecting favorable year-end adjustments of full-year LIFO and other benefits-related charges.
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