Fourth Quarter and Full-Year 2019 Earnings I January 30, 2020 - PowerPoint PPT Presentation

Fourth Quarter and Full-Year 2019 Earnings I January 30, 2020

Forward-Looking Statements Certain statements in this presentation that are not historical in nature may be considered “forward - looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are often identified by the words “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend” and words of a similar nature. These statements are not guarantees of future performance and reflect management’s current vie ws with respect to future events, which 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 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 International Paper faces, cyclicality and changes in consumer preferences, demand and pricing for International Paper products; (iii) domestic and global economic conditions and political changes, including but not limited to changes in currency exchange rates, trade protectionist policies, downgrades in International Paper’s credit ratings, and/or the credit ratings o f banks issuing certain letters of credit, issued by recognized credit rating organizations; (iv ) the amount of International Paper’s future pension funding obligations, and pension and health care costs; (v) unanticipat ed expenditures or other adverse developments related to the cost of compliance with existing and new environmental, tax, labor and employment, privacy and other U.S. and non-U.S. governmental laws and regulations; (vi) whether International Paper experiences a material disruption at one of its manufacturing facilities; (vii) risks inherent in conducting business through joint ventures; (viii) International Paper’s ability to achieve the benefits expected from, and o ther risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions, (ix) information technology risks, and (x) loss contingencies and pending, threatened or future litigation, including with respect to environmental related matters. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in International Paper’s press releases and U.S. Securities and Exchange Commission filings. In addition, other risks and uncertainties not presently known to International Paper or that it currently believes to be immaterial could affect the accuracy of any forward-looking statements. International Paper undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Statements Relating to Non-U.S. GAAP Measures While the Company reports its financial results in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), during the course of this presentation, certain non-U.S. GAAP financial measures are presented. Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and t rends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. The non -GAAP financial measures in this presentation have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, our presentation of non-GAAP financial measures in this presentation may not be comparable to similarly titled measures disclosed by other companies, including companies in our industry. A reconciliation of all presented non- U.S. GAAP measures (and their components) to U.S. GAAP financial measures is available on IP’s website at internat ionalpaper.com under Performance/Investors. Ilim JV and Graphic Packaging Investment Information All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia (“ Ilim ”) and our 18.3% ownership interest in a subsidiary of Graphic Packaging Holding Company, other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim and Graphic Packaging Holding Company, respectively. Any projected financial information and statistical measures reflect the current views of Ilim and Graphic Packaging Holding Company 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” above. Earnings Presentation I Fourth Quarter and Full-Year 2019 2

Full-Year 2019 Results Solid performance in a challenging environment  $3.9B Adjusted EBITDA 2  3 generation $2.3B free cash flow  4 – 10 th consecutive year above 11% Adjusted ROIC  Adjusted Operating EPS 1 cost of capital Strengthened commercial offerings in faster growing  packaging segments $4.43 2019 Strong operating performance and cost management  Executed our capital allocation framework  $5.32 Targeted investments to strengthen packaging business 2018  Returned $1.3B to shareholders  Repaid $1.0B of debt  $3.49 2017 See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 3

Full-Year 2019 Financials $ Billion 2017 2018 2019 (except as noted) Sales $21.7 $23.3 $22.4 Adjusted EBITDA Adjusted EBIT 1 $2.4 $3.0 $2.6 1 ($B) Adjusted Operating EPS 2 $3.49 $5.32 $4.43 Adjusted EBITDA $3.7 $4.3 $3.9 1 $3.9 2019 Adjusted EBITDA Margin 17.2% 18.7% 17.2% 1 Equity Earnings ($MM) $177 $336 $250 Free Cash Flow $2.0 $1.7 $2.3 3 $4.3 2018 See footnotes beginning on Slide 19 $3.7 2017 Earnings Presentation I Fourth Quarter and Full-Year 2019 4

Strong, Sustainable Free Cash Flow 1 5-Year Average $1.9 $2.3 $2.2 $2.1 $2.0 $1.9 $1.8 $1.8 $1.7 $1.7 $1.7 $1.7 $1.6 $ Billions $1.0 $0.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 5

1 Above Cost of Capital Expanded Spread of Adj. ROIC 5-Year Average 11.0% 13.2% 11.4% 10.8% 10.0% 9.9% 9.7% 9.5% 9.2% 8.3% 8.1% 7.5% 2020 WACC 6.3% 6.5% 5.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 6

2019 vs. 2018 Adjusted Operating EPS 1 5.32 (.29) (.21) (.56) .18 (.20) .14 4.43 .05 2018 Price / Mix Volume Operations Maintenance Input Costs Corporate Equity Earnings 2019 & Costs Outages /Other See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 7

Fourth Quarter 2019 Financials 4Q18 3Q19 4Q19 Sales ($B) $6.0 $5.6 $5.5 1 ($MM) Adjusted EBITDA 1 Adjusted EBIT $931 $680 $661 ($MM) Adjusted Operating EPS 2 $1.65 $1.09 $1.09 1 ($MM) Adjusted EBITDA $1,268 $1,006 $1,002 $1,002 Adjusted EBITDA Margin 21.3% 18.1% 18.2% 4Q19 1 Equity Earnings ($MM) $79 $27 $29 3 ($MM) Free Cash Flow $535 $597 $565 $1,006 3Q19 See footnotes beginning on Slide 19 $1,268 4Q18 Earnings Presentation I Fourth Quarter and Full-Year 2019 8

4Q19 vs. 3Q19 Adjusted Operating EPS 1 1.09 1.09 (.21) .01 .05 .06 .08 (.06) .07 3Q19 Price / Mix Volume Operations Maintenance Input Costs Corporate Equity Earnings 4Q19 & Costs Outages /Other See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 9

Industrial Packaging | 4Q19 vs. 3Q19 Adjusted EBIT 1 605 17 46 23 535 (38) 22 $ Million IP U.S. box shipments: +0.1% YoY (blended basis) N.A. Industrial Packaging Adj. EBITDA Margin of 24.9% Improved export containerboard demand 3Q19 Price / Mix Volume Operations Maintenance Input Costs 4Q19 & Costs Outages See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 10

Global Cellulose Fibers | 4Q19 vs. 3Q19 Adjusted EBIT 1 4 (49) (45) $ Million 4Q19 fluff prices pressured by commodity pulp cycle Successful contract season accelerates IP’s fluff recovery in 4 (3) 2020 (1) 0 3Q19 Price / Mix Volume Operations & Costs Maintenance Input Costs 4Q19 Outages See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 11

Printing Papers | 4Q19 vs. 3Q19 Adjusted EBIT 1 162 (27) (58) 18 109 14 0 $ Million N.A. – strong performance in cutsize; weak commercial printing L.A. – strong seasonal demand in Brazil; weak export demand in LatAm Ops. and costs impacted by non-cash LIFO charge 3Q19 Price / Mix Volume Operations & Costs Maintenance Input Costs 4Q19 Outages See footnotes beginning on Slide 19 Earnings Presentation I Fourth Quarter and Full-Year 2019 12