Packaging demand remains strong
But International Paper’s quarterly earnings still below pre-virus levels
Strong packaging demand in North America and signs of economic recovery aided International Paper’s quarterly earnings, but the company’s results still fell short of PRE-COVID-19 levels.
The Memphis-based packaging, paper and pulp maker’s net sales and earnings were $5.1 billion and $204 million, respectively, for the 2020 third quarter ending Sept. 30.
Both results were down from the year-before quarter’s $5.6 billion in net sales and $344 million in net earnings. Sales improved from the second quarter’s $4.9 billion, however.
Chairman and CEO Mark Sutton said the company sees “continued momentum in demand for corrugated packaging” and will continue to focus on cash generation and its balance sheet. CFO Tim Nicholls said operational earnings were better than expected.
“International Paper once again delivered solid results and generated strong cash from operations in a dynamic environment,” Sutton said. “Our performance continues to demonstrate the strength of our customer solutions and the scale and flexibility of our system.”
Operating profit for International Paper’s industrial packaging segment, its largest, was $469 million for the quarter, down from $535 million the year-before quarter.
The segment’s earnings are an improvement from the second quarter of 2020, as North America saw “higher sales volumes for boxes, lower economic downtime and lower recycled fiber costs,” the company said in a news release. Additionally, the effects of COVID-19 “showed some recovery in all regions at the end of the third quarter,” the company said, although earnings decreased in Europe.
CFO Tim Nicholls said the packaging segment is “seeing the benefits of strong at-home consumption” as more people shop online. Corrugated packaging demand accelerated, with that momentum continuing in the current quarter, Sutton said.
International Paper’s fibers segment saw a $59 million operating profit loss in the quarter, a sharp decline from the segment’s $4 million profit the year-before quarter.
“The third quarter was impacted by higher planned maintenance outage expenses and economic downtime,” the company said of the segment. “Average sales prices were higher. Sales volumes were seasonally lower and reflect slower COVID-19 pandemic related consumer demand.”
Fluff pulp used in absorbent hygiene products saw seasonally lower demand, as there was inventory destocking across most regions, Sutton said. The previous quarter saw strong demand for fluff pulp, and demand is now normalizing, Nicholls said.
International Paper’s printing papers segment saw $63 million in profit in the third quarter, down from the year-before quarter’s $162 million but a sharp rebound from the second quarter’s $11 million loss.
Both North America and Brazil saw earnings increase in this segment from “higher sales volumes and lower economic downtime reflecting signs of recovery” from the COVID-19 pandemic’s effect on demand, the company said.
Sutton said the papers segment is “in the early stages of recovery as offices and school activities begin to restart.” Demand is still “well below prior-year levels,” according to Nicholls.
Max Garland covers Fedex, logistics and health care for The Commercial Appeal. Reach him at max.garland@ commercialappeal.com or 901-529-2651 and on Twitter @Maxgarlandtypes.