Like other packaging companies, International Paper noted inflated input costs in the third quarter related to energy and fuel, as well as for recovered fiber, amounting to a $55 million impact.
In its larger North America business, IP reported that prices were up but sales volumes were down amid lower demand. IP did calculate $35 million worth of price benefit “from faster realization of the June increase and partial realization of the September increase,” said CFO Lance Loeffler in an earnings call Wednesday.
North American box volumes were down about 2% year over year, which the company partly attributed to West Coast agriculture and customer facility closures. IP said it believes broader industry demand was down by about 3%.
The European market remains soft. “Packaging margins were impacted by higher paper prices not yet realized in previously published box pricing,” IP reported.
Evolving network
Third-quarter results also reflected the first full quarter of the integration of Norpac, a Washington-based paper mill operator acquired in June. Elsewhere in its network, IP completed repairs at a Pine Hill, Alabama, containerboard mill during the quarter following storm damage.
CEO Andy Silvernail also touched on the company’s broader footprint rationalization. “If you look across the entire system: in the U.S., we have closed 20 facilities in total, box plants and mills. And we've really lost no business along that process,” he said.
IP shared some updates on the European business, but largely plans to discuss the impending business split during a Nov. 3 investor day. IP is positioning the business, to go by the legacy name DS Smith, as “an enhanced pure-play packaging leader within the European market.” IP wants to retain a 20% stake in that business. “Regardless of the path we ultimately take, we are moving swiftly forward with the separation,” said Silvernail.
In its Q3 results, IP recorded goodwill impairment of $1.38 billion and separation costs of $65 million related to the Europe Middle East Africa business.
Outlook for North America
For the North America business, IP projects segment operating profit of up to $500 million in Q4 and up to $1.4 billion for 2026. IP projects its box volumes are on track to outpace estimated industry demand by approximately 2% for the full year.
IP lowered its guidance for adjusted earnings before interest, taxes, depreciation and amortization. It had most recently projected between $2.35 billion and $2.45 billion for 2026 but now expects between $2.27 billion and $2.31 billion.
“Since our second quarter call, incremental headwinds of approximately $145 million have emerged. The largest drivers are higher diesel fuel and distribution costs, along with increased volume pressure,” Loeffler explained.
IP is no longer offering financial guidance for the EMEA unit due to the planned separation.
