International Paper is “through the transformation plan”, according to its CEO who said the company has been rebuilt and has performance potential with existing assets.
John V. Faraci, chairman, chief executive officer and chairman of the executive committee, said India is going to be an exciting market but it doesn’t mean they are going to do a lot of things in 2013.
“Well, International Paper is not an M&A story. We're through the transformation plan. That's over. We've rebuilt the company. It looks different, and it's got a lot of performance potential upside in the existing assets we have,” he told analysts in a conference call discussing the firm’s results.
“So I'll just say that to reinforce that we're not out saying we have to do things to improve International Paper, we've got plenty on our plate that we've put in place over the last several years.”
International Paper predicted yearly expenses due to maintenance outages would rise from $194m to $227m in Industrial Packaging and Consumer Packaging from $50 to $66m with a $20m increase forecasted in North America.
The firm said Q1 2013 demand in North America would be “more of the same” with seasonally weaker volumes in Europe and Brazil.
For the rest of the year, the packaging company said it predicts global growth of 3-4% and US growth of 1-2%.
International Paper said a key aim of 2013 was the strategic entry into corrugated packaging in Brazil by Q2 2013 after the deal was completed this month and also targeted its corrugated packaging JV in Turkey which was finalised at the start of the year.
Faraci outlined some of the levers to improve returns including Industrial Packaging in North America with merger benefits and of increased pricing of containerboard and box.
“In Latin America, the returns in Brazil get better because we're selling more paper in the region, where the EBITDA per ton or the EBIT per ton is significantly higher than it is for the rest of the world.
“And that market's growing. And we got the boiler project in India. And we paid the price to get into India, and we see a lot of improvement.”
Reflecting on the Q4 and full year 2012 results, the firm said it had experienced higher than planned mill maintenance outages and higher fiber and energy input costs.
The firm said a containerboard price increase has been fully realized and they noted pricing softness in consumer grades and paper exports with a modest improvement in pulp prices.
Industrial Packaging operating profits in Q4 2012 were $368m ($336m including special items) compared with $342m ($255m including special items) in Q3 2012.
The profit increase in North America was the result of improved pricing, partially offset by higher planned outage-related maintenance expenses and input costs.
Profits also benefited from seasonally higher sales volumes in Europe and an insurance settlement of $16m related to the earthquake that occurred in Northern Italy in May.
For the full year, Industrial Packaging was up to $1.4bn in operating profits from $1.2bn in 2011.
Consumer Packaging operating profits were $39m in Q4 2012 compared with $67m in Q3 2012 with earnings impacted by higher outage-related maintenance expenses and lower average sales price due to mix, along with cost associated with the start-up of the coated paper machine in China.
For the full year, Consumer Packaging operating profit was down to $265m from $364m in 2011.