J.P. Morgan Diversified Industries Conference | June 5, 2013s1.q4cdn.com/597881801/files/doc_presentations/2013/IP_J... · 2015-11-12 · J.P. Morgan Diversified Industries Conference

J.P. Morgan Diversified Industries Conference | June 5, 2013

J.P. Morgan Diversified Industries Conference | June 5, 2013 J.P. Morgan Diversified Industries Conference | June 5, 2013 2

Forward-Looking Statements

Certain statements in these slides and made during this presentation may be considered 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 include but are not limited to: (i) the level of our

indebtedness and increases in interest rates; (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 our products; (iii) global economic conditions and

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

exchange rates, 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 existing and new environmental and other governmental

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

manufacturing facilities; (vi) risks inherent in conducting business through a joint venture; (vii) our ability to

reach a definitive agreement on a mutually acceptable transaction combining xpedx with Unisource, the

receipt of governmental and other approvals and favorable rulings associated with such a transaction and

the successful fulfillment or waiver of all other closing conditions for such a transaction without unexpected

delays or conditions, and the successful closing of such a transaction within the estimated timeframe; and

(viii) our ability to achieve the benefits we expect from all strategic acquisitions, divestitures and

restructurings. 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 our Securities and Exchange

Commission filings. We undertake no obligation to publicly update any forward-looking statements, whether

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

J.P. Morgan Diversified Industries Conference | June 5, 2013 J.P. Morgan Diversified Industries Conference | June 5, 2013

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.com under Investors.

3


Ilim JV Information

All financial information and statistical measures regarding our 50/50 Ilim joint

venture in Russia (“Ilim”), other than historical International Paper Equity Earnings

and dividends received by International Paper, have been prepared by the

management of Ilim. International Paper has not verified or audited any of this

information. Ilim management has indicated that the financial information was

prepared in accordance with International Financial Reporting Standards and

extracted from Ilim’s financial statements. Any projected financial information and

statistical measures reflect the current views of Ilim management and are subject to

risks and uncertainties that could cause actual results to differ materially from those

expressed or implied by such projections. See “Forward-Looking Statements.”

4


International Paper | Poised for Further Success

5

Significant runway with current portfolio

Balanced growth of revenue and EBITDA

North America consolidation and optimization

Emerging Market growth

Greater than cost of capital returns

Increasing cash generation enables both reinvestment and return of

capital to shareholders

J.P. Morgan Diversified Industries Conference | June 5, 2013 6

North America

Brazil

EMEA & Russia

India

China

North America

Recognized Leader in Core Segments:

Corrugated Pkg. Uncoated Papers

Coated Paperboard Distribution

Emerging Markets Build Leading Positions in Fiber-based Packaging

& Paper Segments in High-Growth Markets

Positioned in attractive markets with low-cost assets that can generate strong free cash flow and returns that exceed our cost-of-capital

$22.1B Net Sales

$1.1B Net Sales

$2.8B Net Sales

$1.6B Net Sales

$0.2B Net Sales

2012 IP net sales excluding TIN Building Products 1 ILIM JV total sales are not consolidated (IP owns 50% of JV)

International Paper | Global Portfolio in Packaging and Paper

$2.0B1 ILIM JV Total Sales


International Paper | Segment & Regional Earnings Profile

North America

75%

Russia 8%

Europe 8%

Brazil 8%

Asia 1%

Industrial Packaging

55%

Printing Papers

31%

Consumer Packaging

12%

Distribution 2%

EBITDA

by Segment

EBITDA

by Region

Based on 2012 earnings from continuing operations before special items.

Russia includes the Svetogorsk mill and IP’s share of Ilim JV equity earnings.

IP’s share of Ilim JV equity earnings reflects approximate proportional adjustments for interest & tax.


IP Transformation Timeline/Plan

8

2005 2006 2007 2008 2009 2010 2011 2012 – 16

Transformation Plan

Divestitures & Strategic Reinvestment

Post Transformation

Strategic Moves

Global Recession Cost of Capital Returns

N.A. Weyco Pkg.

Acquisition

Russia

ILIM JV

India APPM

Acquisition

China

SUN JV

Reaching our Post Transformation

Potential

Brazil

VCP Land / Mill Swap

Mogi Guacu – Tres Lagoas

Coated Papers

Wood Products

Forestland

Kraft Paper

Chemicals

Beverage Pkg.

$11B

Asset Sales

China

SCA Pkg.

Grupo Orsa

N.A. TIN

Acquisition


Supplier Position

North America 2005 2012

Corrugated Packaging 3 1

Uncoated Papers 1 2

Coated Paperboard 1 1

Distribution 1 1

Emerging Markets

Brazil – Uncoated Papers 2 1

Brazil – Corrugated Packaging – 3

Russia – Paper, Pulp & Packaging 3 1

India – Uncoated Papers – 4

China – Coated Paperboard – 2

Repositioned & Well-Positioned

9


Global Economic

Recession

Step-Change Improvement in Free Cash Flow

Free cash flow, based on data in the 10-K for each year at the time of filing.

Excludes net cash pension contributions impacting 2006, 2010 & 2011, cash flows under European accounts receivable securitization beginning

in 2009 and ending in 2011, and cash received from Black Liquor Tax Credits in 2009 and 2010. 2012 Excludes $120 MM cash paid for Temple-Inland change-

in-control agreements and $251 MM cash received from unwinding a timber monetization, $44 MM cash paid for Temple-Inland pension plan contribution and

$80 MM cash paid for Guaranty Bank settlement.

Transformation

$0.7 Billion (average)

2008 – 2012

$1.8 Billion (average)

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

2005 2006 2007 2008 2009 2010 2011 2012

$ B

illi

on

s

10


Global Economic

Recession

Returns on Invested Capital1 above our Cost of Capital

11

4.5%

6.3%

7.5%

6.5%

5.0%

8.1%

9.4%

8.2% 8.1%

0%

2%

4%

6%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 1Q13

ROIC WACC

1 ROIC = [Operating Earnings before Interest] / [Equity (adjusted for pension) + Interest-Bearing Debt]


Our Post Transformation Potential | Investor Day 2012 Mid-Cycle Target

2005 2012 Mid-Cycle

Potential

Revenue ($Billion) 24 28 33

EBITDA1 ($Billion) 2.8 3.7 5.1

EBITDA Margin 12% 13% 15%

Free Cash Flow2 ($Billion)

0.4 1.6 2.2

ROIC 4.5% 8.2% 12.0%

From continuing operations before special items and non-operating pension expense 1 2005 EBITDA includes discontinued operations. 2 Free cash flow before dividends; 2012 Excludes $120 MM cash paid for Temple-Inland change-in-control agreements and $251 MM cash received from

unwinding a timber monetization, $44 MM cash paid for Temple-Inland pension plan contribution and $80 MM cash paid for Guaranty Bank settlement.

Mid-Cycle Potential excludes similar items.


Balanced Global Earnings Growth

2011 EBITDA

Mid-Cycle EBITDA Potential


$1.65B

Printing Papers $1.34B

Consumer Packaging

$0.61B

xpedx $0.10B

$3.7B

$5.1B

Asia (Sun JV)

Europe

North America

India

Brazil

Europe

North America

Asia

Europe

North America

North America


$2.62B

Printing Papers $1.57B

Consumer Packaging

$0.70B

xpedx $0.22B

1

As of May 2012 Investor Day 1 Excludes Grupo Orsa acquisition

Opportunities

• Higher containerboard and

box pricing

• NA Industrial Packaging

optimization

• Leveraging global footprint

• xpedx spin & merge with

Unisource

Challenges

• Weaker demand environment

• Pulp pricing below midcycle

• Overcapacity in China


Global Recession

N.A. Industrial Packaging | The Strategic Journey

14

0.4 0.5 0.6

0.8

1.3 1.3 1.6

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013-16E

Bu

sin

es

s

EB

ITD

A ($

B)

Weyco Packaging Acquisition &

Integration

TIN Acquisition &

Integration

Optimization

2005 2006 2007 2008 2009 2010 2011 2012 2013 - 16


N.A. Industrial Packaging Relative EBITDA Margins

1Trailing twelve months EBITDA margin

IP EBITDA margins based on North American Industrial Packaging operating profit before special items

Competitor EBITDA margin estimates obtained from public filings and IP analysis

Excludes the Recycling Business and revenue from trade volumes

17.3% 17.1%

11.3%

19.6% 19.4%

15.4%

19.2% 19.4%

13.4%

IP PCA RockTenn

1Q12 4Q12 1Q13

15

19.4%1

18.8%1

13.5%1


Brazil Packaging | Path to 18% IRR

3.0%

3.8%

4.1%

4.8%

4.9%

All Other

Pharmaceutical

Meat

Chemical

Food

CAGR 2012-2017

1 Source: ABPO Report; Orsa IP Team Analysis

Operating Machine

Efficiency

• From 87% to 93% Utilization

• 8% Improvement Plan

Paper Machine Speed

• 4% Improvement Plan

Mill Cost Reductions

•Moisture Content

•Energy Consumption

•Chemicals Consumption

(Recycled Mills)

OCC Sourcing

•Supply Chain Improvements

•Procurement Best Practices

3 Key Levers

Market Growth1 Productivity Improvements Cost Improvements

Healthy Growth in Core Segments 2 - 3 Year Horizon


Printing Papers | Leveraging Our Global Paper Portfolio

$1MM

$9.3MM

$6.5MM

2013 Global Mix Improvement Opportunity of $17MM (annuallized)

EMEA Cutsize Mix Upgrade

A4 Commodity → A4 Premium

North America Export Mix Upgrade

Offset Rolls → A4 Commodity Cutsize

Latin America Geographic Mix Upgrade (Cutsize)

A4 Europe → A4 Latin America


Ilim Joint Venture | June 2013 Projects Update

18

Bratsk Mill Koryazhma Mill

Pulp Dryer Wet End

Sawlog Cross-cutting Line PM #7 Dryer Sections

• Construction phase complete April 15th

• New fiber-line running, in full ramp mode

• Cost savings from new turbines underway

• Construction phase complete April 1st

• PM running offset rolls, cut-size

• Coater completion and start-up by end of Q3

Offset Roll Production


International Paper’s Balanced Use of Cash

Maintain Strong

Balance Sheet &

Credit Rating

•Appropriate Liquidity

& Debt Coverage

•Prudent Contributions

to Pension Plan

Systematically Return

Cash to Shareholders

•Maintain Sustainable

Dividend at 30-40% of

FCF

•Share Repurchases

Effective Capital Spending

•Maintenance & Regulatory

Capital Expenditures

•High Return, Cost

Reduction Projects

Selective

Reinvestment

•Improve Cost Position in

North America

•Capitalize on Global Demand

Growth

•Above Cost of Capital Returns

Capital Spending

Free

Cash

Flow

19


Summary | IP Poised for Further Success

20

Significant runway with current portfolio

Balanced growth of revenue and EBITDA

North America consolidation and optimization

Emerging Market growth

Greater than cost of capital returns

Increasing cash generation enables both reinvestment and return of

capital to shareholders

Documents

J.P. Morgan Diversified Industries Conference | June 5, 2013s1.q4cdn.com/597881801/files/doc_presentations/2013/IP_J... · 2015-11-12 · J.P. Morgan Diversified Industries Conference