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International Paper earnings, xpedx record sales

Press release from the issuing company

MEMPHIS, Tenn., Feb. 7  - International Paper preliminary full-year 2007 net earnings total $1.2 billion ($2.70 per share) compared with $1.1 billion ($2.18 per share) in 2006. The company reports fourth-quarter 2007 net earnings of $327 million ($0.78 per share) compared with $217 million ($0.51 per share) in the prior quarter and $2 billion ($4.38 per share) in the fourth quarter of 2006. Amounts in all periods include special items; most notably, 2006 fourth-quarter net earnings include an after-tax gain of $2.7 billion ($6.07 per share) from the sale of U.S. forestlands.

Full-year 2007 earnings from continuing operations and before special items are $963 million ($2.22 per share), up 52 percent from $635 million ($1.33 per share) in 2006. Earnings from continuing operations and before special items in the 2007 fourth quarter total $294 million ($0.69 per share), compared with $243 million ($0.57 per share) in the third quarter and $216 million ($0.47 per share) in the fourth quarter of 2006.

Quarterly net sales rose to $5.8 billion from $5.5 billion in the third quarter and $5.3 billion in the fourth quarter of 2006. Annual sales remain about even with the prior year, at $21.9 billion in 2007 versus $22 billion in 2006.

Operating profits in the fourth quarter reached $711 million, up from $610 million in the prior quarter and $425 million in the fourth quarter of 2006. Full-year 2007 operating profits of $2.4 billion also rose, up from $2.1 billion in 2006.

"We increased profits before special items by 52 percent in 2007, which is strong evidence that the transformation we began in 2005 is continuing to pay off," said International Paper Chairman and Chief Executive Officer John Faraci. "We've steadily expanded our margins through internal cost controls and by focusing on the right customers and product segments within our key businesses. Our global investments are adding to revenue and profit growth and helping to offset some demand decline in North America."

Chief Financial Officer and Senior Vice President Tim Nicholls added, "Solid fourth-quarter results tell the same story. Margins and volumes continue to improve, contributing to strong business earnings in paper, packaging and xpedx. Improved price realizations in the quarter helped offset the impact of continuing increases in raw material and distribution costs, but we expect continued input cost pressures in the first quarter of 2008. Uncertainty within the North American economy will also play a role in the first quarter, but we will continue to balance our supply with our customers' demand. Global demand for paper and packaging continues to look solid."


Fourth-quarter 2007 segment operating profits and business trends compared with the previous quarter are as follows:

Operating profits for Printing Papers reached $314 million, up from third- quarter operating profits of $307 million. The increase is driven by price improvement in North American and European papers and market pulp as well as by fewer maintenance outages in the European paper mills. Higher raw material and energy costs and unfavorable operating expenses in several North American mills negatively impacted results. Volumes were generally strong as well, apart from a slight seasonal decline in North American paper volumes. Results in Brazil benefited from better mix and a tax gain in the quarter.

Industrial Packaging operating profits rose to $144 million from $115 million in the prior quarter, driven by strong price improvement and increased volumes in the North American containerboard and European container businesses. Volumes were seasonally lower in the U.S. box business, with prices strengthening. Higher distribution and raw material costs were largely offset by a reduction in Pensacola linerboard machine conversion and start-up costs versus the third quarter.

Consumer Packaging operating profits total $40 million for the fourth quarter, versus $49 million in the third quarter, primarily because of a quarter-to-quarter increase in planned maintenance outages in the coated paperboard business. Price improvements in that business were more than offset by higher raw material, distribution and operations costs. Foodservice and Shorewood results were about even quarter-to-quarter.

The company's distribution business, xpedx, reported operating profits of $39 million on record revenues. Results are slightly lower than third quarter's $40 million because of costs associated with the start-up of xpedx's Canadian operations.

Forest Products operating profits total $174 million, up from $99 million in the previous quarter, because of an increase in earnings from land sales. The company has approximately 300,000 acres of land remaining for sale, primarily composed of smaller retail and larger transitional tracts.

Net corporate expense totals $201 million for the 2007 fourth quarter, up from $188 million in the 2007 third quarter, reflecting higher year-end medical costs and adjustments to incentive compensation accruals.


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