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    IP
    Earnings call· Jun 2026(Q2 FY26)

    INTERNATIONAL PAPER CO /NEW/ Q2 FY26 earnings call IP

    Jul 30, 2026 Source

    Executive summary

    International Paper Q2 FY26 — Strong Operational Performance and Strategic Investments Drive Progress

    International Paper demonstrated tangible progress in Q2 FY26 through strong operational execution and strategic investments, exceeding internal expectations despite a complex operating environment. The company is actively simplifying its business and strengthening its cost structure, with significant capital deployed to high-return projects. While macro headwinds and geopolitical uncertainties persist, management remains focused on driving efficiency and profitable growth, with a clear path towards the planned EMEA separation.

    Highlights

    5

    • North America box volumes increased 1.7% year-over-year on a daily basis, with the company expecting to outpace the industry by approximately 2% for the full year.

    • Mill performance improved by approximately 500 basis points year-over-year, showing consistent improvement in capacity utilization.

    • The NORPAC acquisition was completed in June, expanding capacity for lightweight packaging and reducing West Coast distribution costs.

    • The Riverdale machine conversion is complete and its ramp-up is progressing as expected, strengthening product mix and cost position.

    • Packaging Solutions EMEA delivered results ahead of expectations, achieving $182 million of adjusted EBITDA in the second quarter.

    Concerns

    5

    • The full-year adjusted EBITDA outlook was reduced by approximately $50 million at the top end, primarily due to the macro environment and the prolonged impact from the Middle East conflict.

    • Operations at the Pine Hill mill were suspended for structural roof repairs, expected to result in an approximately $85 million impact in Q3 before any expected insurance recovery.

    • The EMEA business experienced softer demand, primarily driven by the geopolitical environment, and margin squeeze due to higher paper prices impacting packaging sales.

    • Macro headwinds, including elevated transportation spot rates, higher OCC, diesel, and employee medical costs, are expected to have an impact closer to $150 million in H2, up from $50 million anticipated.

    • The expected pickup in industry demand for the second half is now downgraded to effectively flat in North America and only modestly up in Europe due to inflation and affordability concerns.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year Adjusted EBITDA
    $2.35 billion to $2.45 billion
    high materiality
    High
    Packaging Solutions North America Adjusted EBITDA
    approximately $555 million to $585 million
    medium materiality
    High
    Pine Hill Disruption Impact
    approximately $85 million
    high materiality
    High
    Pine Hill Disruption Impact (H2)
    between $70 million and $100 million
    high materiality
    Medium
    Riverdale Machine Ramp-up
    largely achieved by the end of the year
    medium materiality
    High
    Waterloo Facility Startup
    start up in the fourth quarter
    medium materiality
    High
    Luca Mill Investment Online
    come online in the third quarter
    medium materiality
    High
    Packaging Solutions EMEA Adjusted EBITDA
    approximately $230 million to $250 million
    medium materiality
    High
    Packaging Solutions EMEA Full-year Adjusted EBITDA
    $900 million to $1 billion
    high materiality
    High
    Packaging Solutions EMEA H2 Adjusted EBITDA
    approximately $510 million to $610 million
    high materiality
    High
    EMEA Separation Timeline
    on track to the announced time line
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Packaging Solutions North America
    Overall sales declined due to planned exit of nonstrategic export business. Earnings and margins declined year-over-year due to planned outage activity and Riverdale conversion. Adjusted EBITDA was $425 million in Q2. Price and mix was favorable by $37 million, volume favorable by $16 million, operations and costs favorable by $1 million. Maintenance outages were $127 million unfavorable, and input costs were $21 million favorable.
    Box volumes: 1.7% YoY daily increaseOutpaced industry: 2% for full year (expected)
    		—1.7% (daily basis)—declined YoY
    Packaging Solutions EMEA
    Experienced softer demand primarily driven by the geopolitical environment. Margin squeeze due to impact of higher paper prices on packaging sales and higher distribution costs. Delivered $182 million of adjusted EBITDA in Q2, ahead of expectations. Price and mix was $12 million unfavorable sequentially, volume slightly lower. Operations and costs were $16 million unfavorable sequentially but better than expected. Input costs were $10 million favorable.
    Cost-out actions: accelerated
    		———declined YoY

    Operational metrics

    20
    Mill performance improvement
    500YoY
    Q2 FY26

    Improvement in mill performance across the system.

    Capacity utilization
    consistent improvement
    Q2 FY26

    Benefits of focused efforts beginning to compound.

    EMEA run rate footprint and cost savings actions
    $210 million
    Ongoing

    Expected run rate savings from actions including 31 manufacturing facilities and a central office.

    EMEA net position reductions
    3,000+
    Ongoing

    Expected net reductions from footprint and cost savings actions.

    Capital investments
    $533 million
    Q2 FY26

    Total capital investments in the quarter.

    Packaging Solutions North America Adjusted EBITDA
    $425 million
    Q2 FY26

    Adjusted EBITDA for Packaging Solutions North America in the second quarter.

    Packaging Solutions EMEA Adjusted EBITDA
    $182 million
    Q2 FY26

    Adjusted EBITDA for Packaging Solutions EMEA in the second quarter, ahead of expectations.

    H1 Adjusted EBITDA
    $902 million
    H1 FY26

    First half adjusted EBITDA for the company.

    Improvement from H1 to H2 (ex-Pine Hill)
    $600 millionvs H1 FY26
    H2 FY26

    Expected improvement in adjusted EBITDA from the first half to the second half, excluding the impact from Pine Hill.

    EMEA H1 Adjusted EBITDA
    $390 million
    H1 FY26

    First half adjusted EBITDA for Packaging Solutions EMEA, slightly ahead of prior expectations.

    EMEA H1 to H2 step-up
    $170 millionvs H1 FY26
    H2 FY26

    Expected step-up in adjusted EBITDA for Packaging Solutions EMEA from the first half to the second half.

    EMEA H2 incremental adjusted EBITDA from margin recovery and commercial uplift
    $110 million
    H2 FY26

    Largest contributor to EMEA H2 step-up, supported by incremental commercial growth, seasonality, and additional shipping days.

    EMEA H2 cost out benefits
    $40 million
    H2 FY26

    Expected benefits from footprint optimization actions and lower distribution costs in the second half.

    EMEA H2 input costs contribution
    $20 million
    H2 FY26

    Expected contribution from anticipated lower OCC costs in the second half.

    North America carryover cost out for next year
    $350 million to $400 million
    FY27

    Carryover cost out from actions taken in North America that will flow into next year.

    Europe carryover cost out for next year
    $200 million to $250 million
    FY27

    Incremental carryover cost out from actions taken in Europe that will flow into next year.

    Internal inflation
    $200 million
    YoY

    Year-on-year internal inflation, excluding input inflation.

    Industry demand trend
    flatdowngraded from 1 point pickup
    H2 FY26

    Expected industry demand trend in North America for the second half of the year due to inflation and affordability.

    Industry demand trend
    modestly updowngraded from 1 point pickup
    H2 FY26

    Expected industry demand trend in Europe for the second half of the year due to inflation and affordability.

    Pricing proxy
    $9
    Ongoing

    Proxy for pricing flow-through, meaning $1 per ton of contained board leads to $9.

    Industry KPIs

    5
    MetricValueDetails
    Safetysobering reminder
    CAPEX capital program$533 millionUSD
    Volume production growth1.7%%
    End market demand driversflat (North America), modestly up (Europe)
    Adjusted underlying EBITDA$2.35 billion to $2.45 billionUSD

    Deals & partnerships

    2
    NORPACAcquisition of mill production facility.

    Completed in June. Mill production was temporarily slowed during a DuPont investigation, but operations have returned to pre-incident level.

    nullAcquisition of a converting facility.

    The Dover converting facility acquisition is part of the company's focused investments.

    Capital programs

    6
    NORPAC mill acquisitionclosed
    Start: June

    Benefit: expands ability to serve growing demand for lightweight, high-performance packaging grades, reduces West Coast distribution costs, lowers total cost position, strengthens overall mill system

    Completed in June. Mill production temporarily slowed during a DuPont investigation but operations returned to pre-incident level.

    Riverdale machine conversioncomplete, ramp-up progressing

    Benefit: strengthens product mix, enhances advantaged cost position, supports a more balanced paper system, expected to deliver mid-teens to mid-20s returns

    Conversion is complete and ramp-up is progressing as expected. Anticipated to be largely achieved by year-end with full run rate in Q1 2027.

    Dover converting facility acquisition

    Benefit: strengthens footprint in an attractive region, adds an established customer base, supports long-term growth strategy

    Acquisition of a converting facility, reflecting an 80/20 approach to investments.

    Waterloo facilitypreparing to start up
    Start: Q4

    Benefit: expands presence in an attractive segment of the market, positions to deliver high-quality packaging solutions with greater speed and reliability

    State-of-the-art facility designed around safety, productivity, and innovation. Expected to be fully operational by Q2 2027.

    Luca mill modernizationnearing completion

    Benefit: modernizing recycled containerboard platform, replacing older paper machine with new lightweight machine, delivering higher yield, lower energy consumption, greater sustainability performance, creating a more efficient mill, strengthening converting network

    Transformational investment in EMEA expected to come online in the third quarter.

    Romania capacity expansionunderway

    Benefit: expanding capacity within an existing operation to support customers and capture growth in Eastern Europe (approximately 4% CAGR)

    Investment in EMEA to capitalize on growth in one of the fastest-growing regions in the portfolio.

    Risks & headwinds

    7
    Macro environment and Middle East conflictFull year 2026

    Reduced full-year adjusted EBITDA outlook by $50 million at the top end

    Mitigation: Continued execution of 80/20 initiatives and realizing prior price increases.

    Pine Hill mill disruptionQ3, H2 2026

    approximately $85 million impact in the third quarter; preliminary H2 estimate between $70 million and $100 million

    Mitigation: Mill expected to be operational by end of August; expects to recover majority through insurance.

    EMEA softer demandQ2 2026 (continued)

    null

    Mitigation: Progress on cost-out actions, continued onboarding of customer wins, seasonal strength.

    EMEA margin squeezeQ2 2026

    null

    Mitigation: Expected margin recovery and commercial uplift in H2 as prior paper price increases flow through to box contracts.

    Macro headwinds (transportation, OCC, diesel, medical costs)H2 2026

    impact closer to $150 million (up from $50 million anticipated)

    Mitigation: Actions to mitigate macro headwinds and support confidence in outlook.

    Industry demand trends (North America & Europe)H2 2026

    Expected pickup of about 1 point downgraded to effectively flat (North America) and modestly up (Europe)

    Mitigation: Focus on internal execution and cost-out initiatives.

    West Coast fruit and vegetable market slownessJuly, Q3

    null

    Mitigation: Expects short-term impact, but will be a headwind.

    What to watch in Q3 FY26

    5

    Pine Hill Mill Operational Status

    next quarter
    CurrentSuspended for structural roof repairs
    TargetOperational by end of August

    Why it matters

    The timely return to service of the Pine Hill mill is critical for Q3 results and overall supply chain tightness, with insurance recovery being a key factor.

    Our outlook shows a separate line item forecasting an approximately $85 million impact in the third quarter. before any expected insurance recovery. We do expect to recover the majority of that impact through insurance in the second half, but we're still working through the details.

    Q&A highlights

    5

    What drives the implied 50% increase from Q3 to Q4 in North America adjusted EBITDA, including diesel price assumptions? Also, an update on total 80/20 achievements in North America and Europe.

    Lance attributed the Q3-Q4 ramp to continued Riverdale ramp-up, strengthening pricing flow-through from June publications, and constant maturation of cost-out initiatives. Diesel price assumptions were kept simple, assuming today's strip due to geopolitical uncertainty. Andy detailed 80/20 in Europe (31 facilities, 3,000+ people impacted, moving into profit increases) and North America (major structural changes done, now in optimization mode, aggressive reinvestments in Mansfield, Riverdale, NORPAC, Waterloo, Dover).

    “The second, of course, is the pricing flow through that's going to continue to strengthen into the end of the year on pubs, the price publications through June, right? So we'll be continuing to add momentum as we realize more price across our box system into the end of the year.”

    asked by George Staphos · answered by Lance Loeffler

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Excellence and Cost Reduction

    International Paper reported significant improvements in its mill system, with performance enhancing by approximately 500 basis points year-over-year and consistent gains in capacity utilization. This progress is attributed to focused efforts on reliability and productivity, alongside strategic footprint actions. In EMEA, the company announced over $210 million of run-rate footprint and cost savings actions, including the closure or process of closing 31 manufacturing facilities and a central office, expected to result in net reductions of more than 3,000 positions.

    02

    Strategic Investments and Portfolio Optimization

    The company is making targeted investments to upgrade its portfolio and drive reliability, productivity, and growth. Key examples include the NORPAC mill acquisition, the Riverdale machine conversion, the Dover converting facility acquisition, and the new Waterloo facility. These investments are designed to strengthen the competitive position, support customers, and are expected to deliver financial returns in the mid-teens to mid-20s, reflecting an 80/20 approach to capital allocation.

    03

    EMEA Business Transformation and Separation

    Over the past 18 months, International Paper has taken significant steps to transform its EMEA business, simplifying the organization, integrating acquisitions, resetting the cost base, and building a stronger commercial model. Investments in EMEA include modernizing the Luca mill's recycled containerboard platform, consolidating volumes in Germany, and expanding capacity in Romania to capitalize on growth in Eastern Europe (4% CAGR). The planned separation of the EMEA Packaging business remains on track to its announced timeline.

    04

    North America Box Volume Growth and Customer Focus

    North America box volumes increased 1.7% year-over-year on a daily basis in Q2, with the company projecting to outpace the industry by approximately 2% for the full year. This growth is a direct result of strengthened customer relationships and new business wins. The company highlights its Aurora, Illinois commercial performance and Innovation Center as an example of its customer focus, enabling collaboration on packaging solutions.

    05

    Inflationary Pressures and Macro Headwinds

    The company is navigating a dynamic operating environment marked by significant macro headwinds🌐. An anticipated $150 million impact in the second half of the year is expected from elevated transportation spot rates, higher OCC, diesel, and employee medical costs. Furthermore, the expected industry demand pickup in the second half has been downgraded to effectively flat in North America and only modestly up in Europe, primarily due to persistent inflation and affordability concerns impacting consumer behavior.

    06

    Pine Hill Mill Disruption and Mitigation

    Operations at the Pine Hill mill were proactively suspended to complete structural roof repairs, with the mill expected to be operational by the end of August. This disruption is forecasted to have an approximately $85 million impact in Q3, with a preliminary H2 estimate of $70 million to $100 million. The company anticipates recovering the majority of this impact through insurance and is managing the resulting tightness in the network by optimizing mill efficiency and redirecting export volumes.

    AI-generated summary of the company’s earnings call. Not investment advice.