Virus shakes up paper company
International Paper of Memphis sees strong demand for fluff pulp used in hygiene products.
The COVID-19 pandemic continues to shake up demand for International Paper's mix of products, the Memphis company reported in its quarterly earnings Thursday.
International Paper is seeing “continued strong demand” for fluff pulp used in absorbent hygiene products, while printing paper sales fell sharply as more people worked remotely and schools closed, said Chairman and CEO Mark Sutton on the earnings call.
For the quarter ending June 30, International Paper net sales were $4.87 billion, and business operating profits were $428 million. That's down from the year-before quarter's $5.67 billion in net sales and $629 million in operating profit.
However, Sutton said the quarter saw “solid earnings” overall for International Paper as it navigated a challenging economic environment, pointing out the company's free cash flow and cost management as high points.
“Our performance demonstrates the strength and resilience of our employees, our diverse customer base and our world-class manufacturing and supply chain capabilities,” he said. “Looking ahead, we will continue to focus on cash generation to reinforce the company's financial strength as we manage through ongoing uncertainty.”
International Paper makes packaging, paper and pulp for a wide range of products, including tissues, paper towels, toilet paper and diapers. The company employs more than 50,000 people and services some 25,000 customers in 150 countries. International Paper's industrial packaging operations, its largest segment, kept results afloat with $449 million in operating profit for the quarter. That's down from $515 million the year-before quarter.
Industrial packaging earnings were stable in North America, but sales volumes in Europe decreased due to the COVID-19 pandemic, the company said in its quarterly earnings presentation.
Packaging demand for its e-commerce, shipping and distribution customers is expected to be up in the near term, and the company is building out its capability and capacity to support ecommerce growth, according to the presentation. International Paper's fibers and printing papers segments saw operating profit losses of $10 million and $11 million, respectively, for the quarter. Products from its fibers business are used in paper towels, toilet paper, hygienic products for medical facilities and more.
Fibers' results were still ahead of its $54-million loss the previous quarter. International Paper attributes this in part to higher sales volumes and average prices that reflect Covid-19-driven consumer demand.
The printing papers segment's results fell sharply from the $114 million in operating profit it earned the year-before quarter.
“In North America, earnings decreased significantly driven by lower sales volumes and increased economic downtime reflecting the unprecedented demand impact of the COVID-19 pandemic,” International Paper said in its earnings release.
Paper sales volumes in Brazil, Europe and Russia also declined due to the pandemic and increased economic downtime. “As we look ahead, we are starting to see some recovery in our markets as economics around the world begin to reopen,” Sutton said. “Having said that, uncertainty regarding the duration and magnitude of the economic impact of COVID-19 persists.”