Forward-Looking Statements Certain statements in these slides and - PowerPoint PPT Presentation

Second Quarter 2017 Earnings | July 27, 2017

Forward-Looking Statements Certain statements in these slides and made during this presentation may be considered forward-looking statements. These statements reflect management's current views and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. Factors which could cause actual results to differ include but are not limited to: (i) the level of our indebtedness and changes in interest rates; (ii) industry conditions, including but not limited to changes in the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and political changes, including but not limited to the impairment of financial institutions, changes in currency exchange rates, credit ratings issued by recognized credit rating organizations, the amount of our future pension funding obligation, changes in tax laws and pension and health care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our other manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; (vii) the failure to realize the expected synergies and cost- savings from our purchase of the cellulose fibers business of Weyerhaeuser Company; and (viii) our ability to achieve the benefits we expect from all other strategic acquisitions, divestitures and restructurings. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements are discussed in greater detail in our Securities and Exchange Commission filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Earnings Presentation | Second Quarter 2017 2

Statements Relating to Non-GAAP Financial Measures During the course of this presentation, certain non U.S. GAAP financial measures will be presented, such as Adjusted Operating EPS, Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Adjusted ROIC. A reconciliation of all presented non-GAAP measures (and their components) to U.S. GAAP financial measures is available on the company’s website at internationalpaper.com under Performance/Investors. Earnings Presentation | Second Quarter 2017 3

Ilim JV Information All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia (“Ilim”), other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim. Any projected financial information and statistical measures reflect the current views of Ilim management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such projections. See “Forward - Looking Statements.” Earnings Presentation | Second Quarter 2017 4

Second Quarter 2017 Results  Healthy box and containerboard demand driving Adj. Operating EPS 1 N.A. Industrial Packaging performance  Positive momentum in Global Cellulose Fibers  Record fluff pulp sales  Synergies being realized faster  Recent price increases being implemented and realized across key businesses $0.92  OCC cost averaged $20/ton higher than 1Q17  Executed seasonally heavy maintenance outage $0.65 $0.60 schedule; ~75% of outages completed in 1H17  Strong Ilim operational results; equity earnings negatively impacted by non-cash FX 2Q16 1Q17 2Q17 1 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) Earnings Presentation | Second Quarter 2017 5

2Q17 Financial Results Adj. EBITDA 1 2Q16 1Q17 2Q17 ($MM) Sales ($B) $5.3 $5.5 $5.8 Adj. EBIT 1 ($MM) $635 $431 $499 Adj. Operating EPS 2 $0.92 $0.60 $0.65 Operating EPS impact $0.01 $0.06 ($0.04) of Ilim F/X 3 – IP Share 936 856 776 Adj. EBITDA 1 ($MM) $936 $776 $856 Adj. EBITDA Margin 1 17.6% 14.1% 14.8% Free Cash Flow 4 ($MM) $527 $259 $355 2Q16 1Q17 2Q17 1 From continuing operations before special items and non-operating pension expense 2 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) 3 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.8B at end of 2Q17) 4 See slide #20 for a reconciliation of cash provided by operations to free cash flow Earnings Presentation | Second Quarter 2017 6

2Q17 vs. 1Q17 Adj. Operating EPS (.13) .04 .06 .13 (.07) .03 (.01) .65 .60 Ops .03 FX (.10) 1Q17 Price / Mix Volume Operations Maintenance Input Costs Corporate Ilim JV 2Q17 & Costs Outages /Other Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense) Earnings Presentation | Second Quarter 2017 7

Industrial Packaging | 2Q17 vs. 1Q17 Adj. EBIT 1 (29) 12 26 (6) 407 44 360 $ Million 1Q17 Price / Mix Volume Operations Maintenance Input Costs 2Q17 & Costs Outages 1 Segment adjusted operating profit before special items Earnings Presentation | Second Quarter 2017 8

N.A. Industrial Packaging | Margin Expansion Margin expansion in 2H 2017 driven by price realization in domestic and export channels and lower maintenance outages Adj. EBITDA % 24% 24% 25% Thousands 22% 22% 20% 2.7 2.7 19% 19% 20% 2.5 18% 2.4 15% Adj. EBITDA ($B ) 15% 2.0 15% 13% Business 1.6 9% 10% 1.3 1.3 0.8 5% 0.5 0.4 0.3 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17 Run Rate IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes Earnings Presentation | Second Quarter 2017 9

N.A. Industrial Packaging | Containerboard Exports Healthy global growth at ~3-4% EMEA IP Kraft Linerboard Asia ~50% +$125/ton 1 ~15% $40/ton 1 ~35% +$110/ton 1 Latin America  IP’s export channels provide choices for maximizing value of kraft linerboard  Price momentum continues 1 RISI Published Pricing; change in pricing from December 2016 to June 2017 Earnings Presentation | Second Quarter 2017 10

Industrial Packaging | Tangier Box Plant Acquisition Continuing to optimize our EMEA Packaging business  Acquired Europac’s Tangier plant in Morocco  Began operations in 2016; attractive asset base  Supports Morocco's growing export economy Madrid Tangier Kenitra Casablanca Adagir IP Mill IP Box Plant Earnings Presentation | Second Quarter 2017 11

Global Cellulose Fibers | 2Q17 vs. 1Q17 Adj. EBIT 1 12 3 6 20 1 33 $ Million (51) 1Q17 Price / Mix Volume Operations Maintenance Input Costs 2Q17 & Costs Outages 1 Segment adjusted operating profit before special items Earnings Presentation | Second Quarter 2017 12

Global Cellulose Fibers | Integration Synergies Update Current Full 2Q17 YTD Synergy Run Rate Synergy Description Actual Actual Category Annualized Target ($MM) ($MM) ($MM) ($MM) SG&A / Other Eliminate duplication $12 $19 $38 $45   Customer and segment Commercial optimization Mix $8 $12 $32 $40  High value product growth Opportunities  Leverage innovation  Grade / machine mix optimization Manufacturing,  Logistics optimization Supply Chain, $14 $17 $56 $90  Efficiency improvements & Sourcing (Waste, Freight) Purchasing opportunities  Total $34 $48 $126 $175 Earnings Presentation | Second Quarter 2017 13

Printing Papers | 2Q17 vs. 1Q17 Adj. EBIT 1 3 (22) 9 100 (3) 1 88 $ Million 1Q17 Price / Mix Volume Operations Maintenance Input Costs 2Q17 & Costs Outages 1 Segment adjusted operating profit before special items Earnings Presentation | Second Quarter 2017 14

Consumer Packaging | 2Q17 vs. 1Q17 Adj. EBIT 1 0 4 (5) 33 $ Million (35) (2) (5) 1Q17 Price / Mix Volume Operations Maintenance Input Costs 2Q17 & Costs Outages 1 Segment adjusted operating profit before special items Earnings Presentation | Second Quarter 2017 15