International Paper said it continues to see market expansion opportunities in its Industrial Packaging business after trebling business in the last five years.
John V. Faraci, chairman and chief executive officer, told analysts he believed the optimization opportunities were huge in a conference call discussing the firm’s Q2 results.
“When you think about five years ago, IP had a $3bn to $4bn business and now it's a $12bn business.”
The firm said Morocco and Turkey are doing well from a demand and profitability standpoint, after acquiring the shares of Turkish JV partner, Sabanci Holdings, for $56m in September last year.
On the Moroccan box business which serves the fruit and vegetables market, he added: “And we certainly are glad that we invested in Morocco when we did. Would we expand in that business? Yes, we would if we saw the right opportunity that capitalized on our existing strengths, which is really serving the fruit and vegetable market.
“But everything between Morocco and Turkey right now looks a little bit unstable. I think we're going to sit back and watch.”
Selling prices influence
Industrial Packaging operating profits in the second quarter of 2013 were $477m compared with $369min the first quarter of 2013.
In North America, higher selling prices for boxes and containerboard, increased box shipments and lower operating costs drove improved results.
In Europe, performance was weaker in challenged Western European markets.
“We've got strong results from Industrial Packaging, driven by increased pricing, seasonally stronger volumes, coupled with, I'd say, very solid results out of Brazil and our European, Russian paper business,” he added.
However, Faraci said softer demand was a problem from most regions of the world and pulp prices continue to be well below mid-cycle levels.
He added there is still an oversupply situation in coated paperboard in China and despite their joint venture operating well there's a lot of excess capacity.
Stable consumer packaging
Meanwhile, Consumer Packaging operating profits were $52m in the second quarter of 2013 compared with $51m in the first quarter of 2013.
Earnings were impacted by higher sales volumes and lower manufacturing costs in North America, offset by higher annual outage costs in North America and Europe.
Carol L. Roberts, chief financial officer and senior vice president, said the economic conditions on the EMEA packaging business continue to be challenged.
“What we're seeing in Europe is margins that are under pressure due to some rising board costs and lower box prices”.
The firm also said operations have begun at Bratsk and Koryazhma in relation to their Ilim joint venture and are now at the ramp-up stage with full production capacity expected by the year end.