International Paper (IP) 27 Oct 222022 Q3 Earnings call transcript

Ladies and gentlemen, good morning and thank you for standing by. Welcome to today's International Paper Third Quarter 2022 Earnings Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, you'll have an opportunity to ask question [Operator Instructions].

As a reminder today's conference is being recorded. turn Relations. over to Vice Mark like Investor President now the to conference Nelson, I'd ahead. go Please

Thank you, morning third Paul. Good quarter International for XXXX Paper's joining earnings call. and thank you

and morning on including Mark Nicholls, this Slide Vice Chief information X, is and certain Officer. President Officer; of at speakers Our the Senior Sutton, Chairman beginning and Chief are Tim There important disclaimers. Financial legal Executive our presentation

uncertainties. subject we call, will forward-looking to this risks are and during example, For statements make that

present GAAP on financial non-US A of also information. will GAAP We US those certain measures reconciliation financial figures our to available is website.

also slides. third quarter I website over earnings presentation turn copies now Sutton. today's call the and Our of will to contains press our Mark release

begin X. our discussion Mark you, Thank on We'll and good everyone. Slide morning,

Better challenging segment was had our energy from higher experienced I'm progress $XXX a achieved team target the higher Global The of a price which improve more positive the impact our is in and that and in They Cellulose very demand initiatives. and capital costs. and Packaging million in note, our pleased distribution dynamic very our successfully earnings. for with the environment, also IP And on a making quarter realization. Industrial Fibers significantly to sharp advancing We On significant a both strategy our commercial related a returns headwinds expect performance are in third cost businesses, In exceed decline third their strong quarter. business. we to cost delivered Building we year, to

environment. the to back demand Now

that these uncertainties quarter, were third not immune the to there enter risks. macroeconomic we are ahead and of us, businesses recognized our As we

demand business. for the heavily quarter, headwinds across drastically goods observing on various towards our trends Based large a nondiscretionary order after goods. midway expected Packaging, we Packaging patterns feedback impact lower and resulting particularly inflationary This in for through shifted versus pressures shifted macro our our on quarter. these consumer, segments, and in in from creating user Industrial stronger customers the end previous priorities outlook, weighed demand our than had However, services believe on and consumer as the channels

contributed broader In with Also of inventories quarter retail demand quarter. which products, our In in demand, elevated our continued a all and years' work our level several through our our the significant reduced last to of in in which out continued customers system dividends. addition, improve downtime, significantly system the that by channel customer The I paying their aligned response the the would quickly trends, we economic suboptimized downtime demand. lower to higher did constrained Containerboard position these a Packaging production in our our of very further export work system. resulted well in the point to we for lower versus reliability before mill being operate which is from to prior quarters cost to standpoint quarter.

$XXX million at finally lower returned shareholders the including capital enter appears to fourth we $XXX quarter, million be demand As these allocation, repurchases. Packaging quarter levels. of to in third And on share stabilizing we the

earlier. our on by As strong far by lower and Operating significant so we third realization earnings $X.X shareholders two than If macro margins discussed cash turn a we've increased segments. year. due in to the quarter I year-over-year driven of result, were XX% business approximately billion headwinds periods this to particular the X, prior returned price to slide across revenue

regarding are making flow good Ilim. generation in However, the that, free like also would quarter. cash opportunity was to mention stable I to this progress our take we

there is provide the the information of another progress quarter as share. lot a update macro shared we recognized turn feel X, is with the that joint that resolution, to slide and a but more structure of we us. reaching pace you ahead before, one last of the I'll and there were about we to now we'll which of venture uncertainties mentioned our complexity when I've good As situation we're impact making

shortly which Our pressure quarter, term. outlook remain Tim near for will the share fourth earnings with our assumes you the in will under

my I dynamic to the However, through want and reinforce navigate to resiliency confidence of these IP, in our ability environments.

time know rapid through manage Paper to And change International will the in take at successfully and teams takes our demand, current environment. optimize system given business to cycle. some Our what to a realign it the it

mills share we which ensuring to have actions specific shift drive high-margin built structural we This teams it's company, cost production also to reduction lowest-cost shed optionality operations cover Tim? is businesses, to the to wide to And to allows I'm to outlook. system. our in have way investing continue to Tim performance preserve range in our and financial taking and turn chain. to and our them over shareowners box because Also, to will foundational invest is meaningful and know business believe our in our that who and a customers. We strong return we We're especially through to taking efficiency options supply to a of of sheet, will some and Tim our by share softer in now across while of maintaining later us cost how the large leverage very cash stability we plants environments. going dividend system are balance our opportunistic it in continuing presentation our economic finally, improvements. And across capabilities our and repurchases. care projects and a through going

X, Thank slide shows you, bridge. I'm earnings on our Mark. sequential morning, which Good everyone.

stable. share price earnings by was demand second Volume of mix the Cellulose $XXX share Industrial as Price all were as or a operating lower with $X.XX result demand per quarter. across in the compared and is improved per Global quarter realization $X.XX segments. to both Third $X.XX across million Packaging softer in Fibers channels. strong

Operations items in significant improved one-time inflation favorable all quarter, non-repeat shipments second Industrial across Packaging downtime higher by our higher distribution in due other costs the pulp and and velocity. and businesses. the were were economic However, of supply business impacted chain to costs

employee XX our benefit recall operations as the may a were claims medical lower and share to mill as the $X.XX. related as Europe. significant outages in Corporate or items be natural headwind benefits quarter including we other our in $X.XX provide gas, businesses America from by for Input planned tax cost. benefited the second higher earnings quarter which cost workers' lower quarter insurance or one-time key for and consumption Maintenance $X.XX to was $XX million quarter of inputs from costs higher details third recovery expense of the by North our you million driven include headwind a energy costs lower by comp $XX Prattville costs items expenses. On partially chemicals, of favorable in improving and per of in lower per appendix, and on count. slide well in As – third offset continue a the and were our share and lower share OCC and

lower quarter price Lastly, FX prior equity earnings Ilim. below and to were related primarily sales due to the the

and on segments slide margin initiatives mix X. completed export our and So higher average on March starting price had Packaging increase, Industrial strong implementation successfully very We also turning prices we quarter and focused with improvement. benefiting price of commercial as while improvement to in the from the

system, macro Packaging inventory lower segments in environment retailer and in earlier. system represented cost our our Packaging with adjusted economic Mark for a production all quarter-over-quarter. we consumer businesses. the and the unabsorbed our resulted fixed actions as As one-third mentioned decline approximately resulted to and across quarter operations sub-optimized American and tons much the and North unfavorable of volume in align system. destocking. mid-quarter lower significantly in demand. in demand higher and ops and from This These challenging higher across of cost volumes customers' European cost Demand weakened large in This costs the our approximately XXX,XXX channels impacted downtime resulting

economic also gas costs own for cost since the nine are headwinds on and reduced across on significant and These not additional and natural significantly increases materials onetime significant impacted significant where non-repeat in the amount our of normal were more which Europe quarter. the Sequentially packaging quarter boilers match In second prices. even in only the needed we distribution make costs to second prices we OCC Input doubled natural the business our in very times by by inflation boilers demand. higher mills partially given operations higher to of costs, much expected, primarily spending than well, favorable in higher to about increased It when addition, averaged mills our energy gas quarter in our downtime was that were offset headwind costs the another the constrained and of ran discussed level due some energy level. lower includes and recovery cost. bark services the items also

Turning to for if thought perspective business. slide share segment it corrugated X. would be trends We some our we underlying on additional packaging helpful

down previous were X.X%. As and US shown shipments our down on was US X.X% year-over-year our box overall the slide, channel

average. US was our represent sheet As were The most less with high reminder, beverage, includes as decline including we Segments inflation. worse indicators all had durables saw nature, the decline partnerships non-durables, the than the declines segments. customers a our yellow equity make choices dealing discretionary indicators channel are pressure the our our consumers system segments US box while market feeders. our which overall represent and demand the strategic and In average demand containerboard as where more than of across under open came overall quarter, X.X%, to in third red with that and as end-use well

products the inventory from to Despite over role the demand destocking in stabilizing corrugated near these lower we through in in in plays October, The appears to to understand the the IP Based be is decline term. is headwinds, long-term. fourth segments positioned customers levels, grow inventories on work that of essential and continue these as customers companies and with demand critical for their well retailer addition, our feedback In packaging bringing believe near-term exacerbated. to consumers at performance quarter. most our our has

to X. Turning Slide

Mark and of our we cost wide ability As in supply have due able to to marginal options mills are to earlier, a high system where capacity, systems and plants demand we large mentioned shed chain. the of environment softer our across capabilities box range the at full run

fiber For consider gas cost case, based total the cost versus teams example, we to shifting the including our on wood fiber energy of natural the process process the to OCC. OCC. from consuming In versus own-make between cost of this marginal when the used options mill are wood benefits

area. in Another the would be supply chain example

pay premium of are maintenance associated availability and and working outage carriers. premium shorter At that our Our by with traditionally lower increased lowest-cost mills, is planned teams schedule. reducing the mode we're reducing freight cost optimization through to overtime

are invest in in customer continuing We drive to we cost our to historical are operations restoring on efficiency energy the areas fiber by structural improvements our consumption. optimizing to production aligning structure. levels margins also cost focused from Ultimately, while our with reduction demand and of

XX. with fluff to on supply start Slide an chain. lows. for that environment Turning from fluff I'll near continues demand pulp all and are stable Feedback Fibers update regions. Demand indicate Cellulose pulp across inventories historical on the customers to remains

experiencing supply moderate improvement are We efficiencies. chain in

the at long-term continue care believe Taking absorbent confident ongoing in over essential second meeting velocity. quarter. port they vessel with the of the quarter announced solid personal in look due quarter was supply will $XX the by grow needs. price Price are enter as to momentum continue successful products consumer improved increases in we to improvement remain pulp delays. to million and of a higher and fourth However, fluff performance. execution congestion Volume driven the chain previously stretched role to some mix by and We the due and

ongoing However, remain logistics levels that backlogs normalized I above to would due note challenges.

run continue non-repeat lower in higher the while costs due were Operations higher sequentially $XX the maintenance in were $XX million. were distribution unfavorable well. costs by onetime to Our favorable and second costs and to Planned by input million items outages mills quarter quarter.

to Slide Turning XX.

fourth growing continues quarter. third the the to cost quarter. business to returns this earnings in progress Fibers of performance make Our of capital level sustain significant Global well remains Cellulose and the towards delivering in positioned business And

the team aligning customers commercial focused successfully building a and regional with strategic regions deployed attractive key and with on strategy Our and segments. global most relationships

value. our value standards that products are creating stringent deliver by on innovative meet product for We their delivering safety focused customers and

benefits the will In progress addition, commercial we are driving by we for structural have we ensuring negotiations which made additional XXXX. value improvement provide. into in move paid fluff margin pulp To-date as we we provide our contract solid get

on cycle. a strategy building I this the in key building part is initiative note to acceleration. committed better a category this momentum also the business are and We over IP of returns delivering that value-creating would of

About to dis-synergies are rapidly effectiveness Better corporate from Turning solid initiatives. functions track of million million to our delivering XXX% would earnings Slide third on update IP date target. offset on progress by from for of have the end staff portfolio, initiative spin-off. to set of full the year Printing Papers we're like you of $XX streamlining in more simplified $XXX in a a year-to-date total XX, the quarter Building, we the exceed I of of high to our with lean and realign to the benefits half making We're our a and already

XXXX potential pursue The such data reduce Global the to leverage business as additional will Cellulose Although initiatives maintenance across Fiber one as businesses. advanced most these new reliability, optimization and through areas benefits distribution across of value-creating meaningful this. benefits has sourcing deliver commercial and achieved, and And is and acceleration logistics we to profitable strategy we of growth getting deliver example our significantly to been will costs technology capabilities These and continue implementing is returns our in initiative process finish delivering opportunities. have about excellence, analytics. investment finally we as

on by focused are profitably organic Packaging Industrial We business for and also investing improving our growing margins growth.

and XX quarter at Slide outlook. to look Turning fourth the a

Industrial the Packaging. near our With current will pressure As with I'll under term that Mark start earnings in mentioned environment. demand remain given the

costs and fiber Fibers, Cellulose such price $XX In the on is prior to as million and Volume and decrease from is expense the timing be in by costs maintenance items more to expected pickup spending, input costs decrease We on by EMEA partially generally is in not million as Operations to realization less to volume earnings $XX this the through outage export expected four energy North Operations primarily will includes remainder are decrease costs. to The and $X be expect to increase seasonality energy unabsorbed fixed volume channel half $XXX to and by the days holiday million. costs are by from A million, based is increase by benefits. mix $XX consumption lower $XX $XX million lower and shipments to be expected million higher the year. And from of services is higher supply $XX of well million. maintenance increases. expected from by expected to produce This flat. outage inflation with as traditional volumes demand offset of million is lastly as mix America materials by and seasonal by seasonally and and price decrease to while lower on timing of are little than strong packaging. this expected higher and costs expect by seasonally expense chain. labor due improve Global expected resulting sequentially we from

$X are by Lastly, energy Poland. converting costs to to costs expected primarily million, input our related in operations at increase

our moment Turning you Slide actions update the quarter. XX, allocation to to I'll capital a third take in on

As a capital very balance framework. earlier, core which we it Mark to allocation preserve, mentioned is have because our sheet, we we strong believe will

of range basis, our X.X was leverage year-end XXXX on Moody's target X.X is below which times. X.X times a Our to

remains meaningful place returned have million XX billion shareowners $XXX pension we finally, years. due, with our share we've including ahead, through In X.X% shareholders the million – in this over our environment Returning to limited $X.X third have shares part ensure allocation represents risk are is even Looking And taken XXX and or strategies maturities we mitigation of capital next fully delivering. medium-term to the repurchases, shares outstanding. funded in about plan to quarter, million framework. are X.X which a cash of about the

October, this approximately authorized brings our result, so repurchases, to a billion total year. As share far which $X.X Directors authorization an approximately billion. In of additional our shareholders cash to $X.X billion we've returned $X.X Board of of

dividend opportunistic are forward, is repurchases. through through cash essential earnings generation. to Investment committed and share our Going growing to maintaining cash and returning we excellence

targeting between funding attractive million the strategic projects $X our profitable for are which billion, cost to for out build capacity returns for includes system – $XXX in cost with reduction box We funding capabilities projects the to to future support and growth.

growth. will supplement We to disciplined on opportunities be and continue M&A of accelerating assessing profitable selective may goal our that

businesses it that compelling opportunities Mark. our for expect our pursue must North bolt-on M&A turn on packaging I'll America can Europe. [ph]. with You to and in value back create focus Any primarily opportunity And long-term shareholders potential in over we

Thanks, the with a details. very of lot Tim this is clearly dynamic Look, a parts. for all environment moving

very and mill I'm middle back also by with about profitability, Global am the area. in second will of of this I we The I make falling at of over the of several levels good – making box Containerboard feel resiliency the well profitability because we've half also cases were As issues supply this very year productivity Fibers at the Global look run. company, plant made At time, some earlier. about in improvements bit progress a and made and best the ever has in Containerboard, our quarters in all impacted International in inventory the considering in very, our of Tim Cellulose team certain year. good last the demand we've described and made improvement I'm that reliability for about Paper. system both same changes our where with But earnings in customers. business satisfied model Cellulose really service not certain, the which we've our trajectory running I been across inflation level we our levels are feel I availability that Fibers is customer really proud the chain I'm improvements the we're and the of the we've last in disruptions,

past strong few success economic lot we significantly a of years, the foundation IP the of taking of positioned company. risk enhanced a environments. This spectrum and financial strength and During have across wide well for flexibility our out makes

questions. ready that we're Question-and-Answer take So with to operator, Session

first George Bank line and Our comes the from Instructions] of question ahead. of Staphos. go Please America [Operator

everyone. Mark very Thanks for much. details, and Hi, Hi. morning. all Tim. Good Thanks the

the and broadly second question on pulp. one on containerboard First

from can optimization you expect containerboard, when So rate to a that what to into of benefit targeting? do what be about how in get current be in you your optimization? trends are on and at horizon run terms efforts basis, to optimized in expect the the you're you talk level us And what a you the seeing early more play quarter? box And shipments would

or So mentioned so box from third quarter where down that's are early quarter, exited as seeing the Tim shipments stabilized in worse. where got little a X% progressively still we the from they quarter

past, the on called cost George which have structure. our think optimizing, we issue I in variabilizing the

I periods of period a are -- over of behind prior of right now of relatively taking our slow and short maybe think compared amount is time of unique almost we're where out our most to outages maintenance production maintenance what's backs a us. part all the period in

our where demand; it look at you was to If adjusted match out evenly. prior we A, our more spread periods output

Some maintenance had of was the year in where also of first it outages. we the half

really fourth we if anticipate the lot we of did to think demand it and we two it still last back the turn up. being quarter but picks a the willing In out it's in So more but on to that spread evenly, trying it the demand see quarter. quarter, the was the third months

we this time quarter. the the doing really better look we're per quarter bit What's unit XXXX. be the amount, doing our is downtime going all from If will in that at in variable we last transitionary a different you of appreciable in little containerboard economic any think I environment, inflationary high so time took environment. we're to actually than production remember cost is this say that. in I that a system And will fourth a was

do. of lot itself the a yet. environment in now. way sticky. in it of input that cost part the own the our match anybody then right of as part price didn't persistently that now maximize the industry their energy you've with weren't we hasn't of that relieve teams but have is right will be that goal -- But think mill. with goal run to make own you we to some what XXXX, know the actual pulp energy start the happened need. but dealing The also quarter, And got component our who is to right our fourth So output a all We high production to now trying to energy goal our we'd in changes makes We any do

fourth see continued through the improvement shed So we costs. I in marginal those think we'll quarter how

Thanks Mark. My question on pulp. other

still you I said demand stable your customers' yet believe was are So relatively low. GCF for inventories

some but seen there You've improvement, supply not I'm chain. a in paraphrasing lot the

chain with material, luck customers purchases And much up pick need couple improves, quarters has chain to more somewhat? been, access to do supply now customers So purchase next it as have so the of chain over could that because the diminish or relative Good they will position, be and you inventory has low, hand-to-mouth, out we will inventory supply quarter. presumably because will improved? the look to otherwise where the supply think improved their the more did Thanks and because more their inventories guys. would in improve they that lead have

low value inventory the short given the levels of type substitutable make the think term inventory of of not for the given this chain nervous. the easily qualifications particular it's I very levels product in low

used they're inventories. think will to, supply I run And work to comfort a lower quite can lot while trust anyone think be so I a don't answer for chain to will the I level the to with of get to. that some customers

it partly to because don't bit paraphrased. Some or Tim alluded still the or than quarter know hope the because we help improved in of we for in get issues as as that third we We lower supply was But permanent sure that's little velocity to it's going us we better, our mentioned, if the shipped market. a you shipments expected a our just little have chain cost. will more if the

For lockdowns. for the is products finished still the market of strained going inventory remain the with We coming throughout semi-closed is chain the several example, quarters. low value situation some think to China's meaning

And so forward right maybe think stable. their what we if a demand that the we to a start commercial that the the lot into improve, we going little But get out we is a XXXX, and supply demand vaccine of that better figures with and improvements China system of little ability will to It all strategy out keep. and to now more. opens could economy flow see is stable cost bit really our chain that take

Mark. Thank you,

Thanks, George.

you. Thank

and from Pettinari. line question next comes the go Anthony ahead. Citi of Our Please

morning. Good

extent how on inventories? up overhang maybe an the as take would there's side, well on you own work how that, here the following you to Just Like still inventories maybe And inventories to through channel? it that? long Containerboard in October might characterize as your do customer the in think

to of that that. those think little very a if much you order declined are big were process, have we from more the That's each their the but too Those fourth this the showed, terribly think have not quarter of segment the back in the And – segment were average we on descriptors. inventory. and big Tim there's accounts segments. very average greater week. slide the I and tell a can So to the was customers beyond think pattern national-type than Those that commentary than portion their go descriptors. Anthony, inside yellow I their those they much earnings us of small of they red demand And maybe Those customers customers with earlier few demand. calls unwinding best watched consumer, a we –

a look of demand in our cases at we important that And didn't you the part But decline that the in inventories big cases shape. holiday they demand. high, but and out. a predicting see it fourth segments to customers They're very us. inside all, had decline of some And all. customers the pickup, feel their any little If say, they're with in would other but we happens a what they're we'll break didn't some at quarter where and chart like less they'll great consumer are pickup at little

variables But out now. most and persistent -- in is tale after be even a holiday is still high. services, us that what spending case money think figure be many can up goods hate that's of think and in I of right happens we lot come quarter of the the make really fickle inflation on believe that seems what to showed. Consumer on a working so our this and period a it's the first to this a fourth market prediction of lot process. trying are customers the to segments worst so those Obviously, there's to through we that it So you chart because quarter

you're needs XXXX for capital position you're are business here? helpful. guidance about the maybe where regulatory remind some of coming cause that And directionally maybe with a Do year? how guidance, you're normalized That's that of CapEx? extent maintenance you And in can understanding next on you not incremental to it from? just on versus you any the then that lower? Okay. us giving there trimming think just CapEx kind Just very kind go updated of growth that thoughts good CapEx kind Could higher the to of then might think is versus CapEx go

Tim. It's Anthony. Thanks, Great. Yeah.

drives try capital What is level We over and regulatory. usually a term, to So It that five not over can bit around keep that have look look in of so we some the time period. depreciation. We consistent. longer years. investment fairly be much year maintenance higher a little to

how and We going margin converting projects the adding up do year we're maintenance our bit in out the more of What plans capability capacity operations. down it have five recently tends a to more or be to on tends to drive building about little schedules. it's strategic whether

we've have how back through pulling be billion It's million us can chain So factor to limiting of capital. installed -- end year year have tried the it a supply coming as about $X as all to hard close $XXX and the time. productive much the but this the is capital that realization the given has of a actively not period necessarily to you just been in

that's adjustment. So for reason the the

reduction Just we it there's either building term, be to could earlier we'll where out year. And bit be going capability, a years. projects as not cost around higher as get thought depreciation. acknowledging try much in than done longer that needs the we in good to we're or were that given little But strategic

Okay. it turn I helpful. very over. That’s will

Thank you.

comes from go Wilde. Bank Mark and Montreal Please Our question the ahead. of line next of

morning, Good Mark, morning, good Tim. Thanks.

Hi.

out. Mark, I wanted just to start

You continuing a and across next capacity quarter is I the that that's machines. coming maybe to months, ago optimum we of take permanent moves, suggesting you're more wondered quarter. new of are just level XX the economic of there with coupling more the industry given fourth to that into the XX downtime whether over capital all took in downtime in they next adjust and just moves some the approach? is Or that third ways efficient the years or some the sought just base it's Valeant when your of the XX one system rolling downtime to the like over months kind several lot mothballed

a question, It's Mark. great

or environment will you know ramp the what be variables capacity new the two be. at the of look course, we year I we of we mentioned next to demand and going the don't exactly think is the what over know don't

So there's a lot of variables.

how very is that's different mills a recycled competitiveness side thing a we gas natural The costs got of the figure algorithm use the unique that little out one, recycled. that downtime a to to have to is addition and chain. take high we you've a and and very changed are supply XXX% we few your The of other have flip which expensive congested

save candidate Midwest defeats an be market. it so up for be costs, in our the logistics would it's a energy because back mill close large So IP scale that's to to example our to recycled but on might the ability

the possible. as adjusting them they're make to to the is not and the balance, shut physically built mills of were integrated be output be see serve market reason us get the points more to to you to but choke to to -- lot be for plants get beyond So of which places tend of so our as multiple of a And end-use that to you energy located described of much. one doing independent reasons as to fully nonintegrated close all real they rolling, and our as mills, close down try in those that

chain conclusions. it supply change, as will change, lead different energy us things As costs as to changes,

how much So order that's and that make run to on how book do we we decision our it. where we

number just And last a different then Okay. to whole has turn effort sell. that elements. to wanted cellulose years few in of over the I I know this strategic

And highest us they're now, so just, charts the price have at if level we seen. right the look any at of pulp ever

forward in of So returns capital just maintain can if point? actually to on market this get able at there So you're you this you start cost that's to help prices just not pulp going to the cellulose? those that gotten us rollover, call, it's confidence going be

Yeah.

couple world to the to word tried has standpoint we of customers. from indicators, product of for if strategic the we the the we've with volume one what things used customer that. and a arrangements sure the of requirements price. And how versus and in different substitution paid at participate for nature two, do with making get I regions the given of make you is proposition think Tim look of the moving just contractual our to a value arrangements

customers And already can no been on certain has regions our basically to strategy as our for much in of and effect charts so our occur with in as work that there's the decoupling economics. that we certain reason evidence is adjustment absorbent products point and has But started impact phenomenon taken. And the have you see where is to to well can. some that possibly your

the improve expect the that to after back Mark with making after you capital Investors And be XXXX. We year a the business of quarters. we Fibers way won't how seen ago. we've to expect quarter at the than to go a comfortable returns over will But be see take we market. half we in the in for the time will changes proof could as cost normal begin that quarter of will second cyclicality, to that said over out be you any we saying I've quarter see can what I'll you've coming as think different but cycle. the a will XXXX you we're I you in Cellulose plays And business to that the spread past. enter business. not changes into in through a see value Global made I'm We're go structural very creating

And so on. the that's we're far track

talking after about So it quarter let's quarter. keep

we'll I a XXXX. adjustments think into do. -- have one, great learn about sustainability they it'll or believe I is we and not resiliency think our lot whether strategy a I as move more your point and

Okay. helpful, it over Mark. some questions. will to That’s I other turn

Thank you.

Partners, Research Seaport Mark from Next Weintraub.

Your line is open.

Thank you.

to magnitude's think the the you quarter, in I tons downtime guys million your just order X.X of through system I'm work acting that trying out American million took demand third think to So a roughly And XX.X adjust to magnitude range just the quickly the the down was terms North missing tons downtime so the obviously, if operating I'm downtime And and XX%, I'm you're presumably tons, XX% of by about XXX,XXX Containerboard is my kind in something of plus And not in quarter. itself year-over-year. which math rates. was right XX% economic production basically, suggesting doing environment.

hear fourth taking I have going be this that are probably you're you in are made comments the during I bringing you questions And the your have maybe right? One, did more, actually system if you also been inventory quarter you two as understood I in quarter? -- So to that down Containerboard or correctly you that much on -- that. then

it's multifaceted Mark So a question.

a you take level. back just me Let to higher

those capacity. the it. average to multiple think -- a there's being output was XX-day this we're or market And not calls know strong planned total should demand don't The need kind again match I it of depends and a to quarters think X% to past a to going match normally what for once I the earnings little the that XX- in have what take if our we of in we of a is had is There's system what's that the a volume sometimes way not the big it's about would to number you connected Think quarter. time out X%. book number the capacity you how by offline It play period. in is maintenance certain to So there's flexibility out. chain for about mean, being from service that we run That just don't half way for total the IP But of, a than market adjustment. unique much X% and in as we order And of, that a X%, single you slowdown a make to do to adjust We is about as and of It's in up and maintenance, inventories between to have not serve numbers And and system first capacity once don't of around higher Containerboard healthier is this, be going we XXXX and in terms much so the period. amount other there's our look in quarters are we'll higher it we can know our has have have about year. forecast. has output in probably how Then gave just during environment. chain. almost there's the supply to little for the we normally And picture supply quarter. the, way a market principle percentages it's And to we X% the the trying we kind like I in what you have I we Containerboard industry maintain up tend capability. export an ends like slowing of X% match our production in We that's sometimes a Roughly strategically change at environment. not. certain target going X% way be. the we every to the is for mentioned same a do and in a answer a for that's any multiyear system, the mentioned. occasionally the it you period customer you demand where the annualize XXXX, down outages on are prior in our another of reduced flexible of maintenance taking We're that variables. unforeseen and every while markets time they're our problems percentage about

So to is. that's the difference challenge. the what cost adds That's mitigation

some whether if of those would maintenance you to et have on of Thank there was what to even having you. level would appreciate more trying levels not what the on, impact. was -- lines Board you take there Helpful. about cetera I or talk you environment, I'm along downtime guess of clarify amount But was to And just downtime almost to a shipment anticipate downtime and is environment catch-up and the of things we type to of I were side an -- were ascertain down the type or all the box and continuing remain in degree this demand a indicated? X% than of took

So take that the offline and think well we're in downtime Mark production the the analysis book, question how way any already running book, outages answer about think would mentioned product it, our again, I you to moment. that North to take of the need is Tim our of a American doing export order is maintenance order any we

quarter be really lack really, the much you so too which But you well means want reliability a necessarily to now to reliable. plain don't is containerboard up the in What have that i.e. we're where So you slowing of not in what quarter least a need production we're where on right the is, worked back. be, you speech at which good making is running end interruptions cost. we didn't that's a in repair thing, but

variables those four without of to I gave answer question all the knowing you. just So to answer the it's impossible

give could I like think improved back your which continue guess to if That's that actually Mark then I really is on then make little helpful. basis sort can a Wilde's basically question would of -- you've if observation? your to I actually added a have bit, products that you flexibility too different a you you bit a does fair think is more And about you system get go little this footprint

I you let's the costs I make that way the where lowest, and you because is, the you've and and for now think other moment mill -- transportation variables costs like it that you're think take which fair could answered about Mark's think word I right the at and the wets [indiscernible]. energy Woodlands in got operations at it's considering like to month if change the question decisions logistics now that lowest production marginal at cost and high-cost a a used wood the a Tim the look of in hurricane

not we time and to invasive, -- decisions a of X- period. it's be dynamic not but So my those XX-day enough is variables point set to real make a

involved most if need examples not and what right that's and some cost-effective So supply the do we we make the way the the you we we mentioned then energy with the how But question of now, at do. Mark it. production have, the lowest to would answer variables that's with the do cost chain to

very much. Thanks

from Roxland. Securities ahead. Please Then Truist go and of comes Mike our line you. next Thank question the

Thanks Thanks. taking Hi Tim. my for question. Mark,

Can the your that last up on and where inventories on with you Mark's quarter they a and well declined remember follow be the just given quarter? questions I containerboard to mean last has the give I your of you've level sufficient that Just as demand stand? slowed us the relative given you mentioning some wanted would overall sequentially during levels. Anthony's inventories But have now of aggressively downtime are to of the back guess your your starting taken to slowbacks inventories to economic say that question from you quarter. sense inventory I comments following your about aggregate up --

Yes.

time sure quarter. we Mark midway It to saw that we're Part we're in inventories reaction needed look have. If it to from referenced, needs the were that was away we trying of making what the in not get in only happened where to out during product in moment availability --- our linked process kind us. as at, S&OP to be. and of to back to demand further So is we're look really you but don't quarter response the going trying the

we keep with way able we ran were to So, inventories them line the in want through the we system. where

the middle in which reiterate about year, this just first inventory of of the the I'll the of to Mike versus variable year as enter heavy the decisions upcoming. the we is year, XX% outages. maintenance for our can And time again, the at But into as we half other our -- of think we calendar, what that make you're see are the, taking adjustments

sure have quarter strategy of do part operating So how we second next first we make year. inventory to we predict, the of need is and normal the in our

happen. lose So we in quarter, did sale, the we moment because fourth looking something ready without at the what's inventories in a to to getting don't

it as quarter, into second in probably our quarter done. well. not the So manage we that's demand the in be fourth if factored the the to would about because the are just inventory It's decisions outages were

got You've of plenty inventory.

into factors we here. that's season to what normal We're case any not to we was have that or mills outage get think there our not ready don't outages. slowdown the can You an but not run, more through getting down, so into our economic have or whether enter and we

Yes.

seen other North transit ocean on well times truck. I as in though is, in would we've in ground with some here improvement modest America vessels even thing, the The add

Our supply velocity. of lot network, not a the up chain picked has

extra it move So, mills dealing still product to with we're in operations. converting and the between time takes

were year, demand you If would their production slowback say, appreciate -- that through fair let's to be one Got remains and that just you. continue color. tell And of the I it the to this the you -- quick part follow-up. could next say is earlier not demand quarter that So demand is through depressed in you X%, your be at, and to it early your to inventories Mark the you if at starting down would But that minus inventory? draw would XQ. would you down drag point which volume overall fair mentioned XQ, point? say it you was

We demand match have. we the system would the that run to

going business then solve that level as And chain we inventory first future customers. in solve gets improved, the to the So, don't number. not what we to And we'll But prepared, We velocity can we then the a don't today and demand that, be closer in because we today. take the results get has making idea. is for we have sure, what -- supply have care we our know used quarter. for of better make the the if

already -- for for And the it so inventory yesterday. we've made today

answer. the period mills the better from flowing Southeast than and deep a it's So points And absolute when a is labor that's We and of choke especially is to situation flowing, There's Southeast, lot lot the supply in not. the the not rail area, better. again, lot a you it's rail of any not our difficult long where getting we need inventory are are why in getting a a less do when way chain variables. give finite it's

the chain. now, we'll that levels inventory the So production we is number, that to we're And we adjust with inventory the right supply know match If absolute we changes, our the faster. what says of slow the have the working fact moving right matches know output what now. velocity

variables matter inventory to all a we inventory, where lead of it's lower not an number. of it's So of matter our those a

Got you. the year. luck for color. Appreciate balance all the the Good of

you. Thank

KeyBanc. ahead. Thank comes of our Adam go question Please from next you. Josephson Then

out very Mark much getting run and hazard I a level questions. think the exceptionally to to And that. taking Mark Marks guess and for of optimal that long of pandemic is one is. the to just be you obviously both figure that is as see demand Tim, this my good were asking during there other now demand what question unusual morning. of in side the have way starting at surge capacity what to will Thanks kind more obviously, capacity of we're

of to what Obviously, capacity thinking thinking there's level be? of coming forecast you or Obviously, I impossible it's you how long the demand Wilde are it. of capacity will think Mark kind term to near normal long mentioned. But that of about demand? about run you're thinking levels that the amount right the are rate have when XXXX growth right were So,

those So, for how when level are determining right thinking you? of you is all the factors capacity long-term about what

we you just I to coming normalize growth. we market the Adam boxes. who structure based it a we typically at different And to ourselves the been been areas. global US Again from some the Yes. for markets unless to a the we open economy. to because angle. to the same similar most change in think virgin service volume the is boxes capacity long-term major selling a create in growth rest there's And people the of of try fiber has those we're in I market X% and on need the X% appreciate we X% believe world the X% channels to serve serve to we ex and have mean containerboard market pandemic position what about markets profitable in the make containerboard the It's recycled positions is and

investment capacity We prior that's right weights what white it things lighter across based working got about in different investments another North containerboard the But on over need. say I'd we top. we're Containerboard. to with on And We're I we moment, over That we've good years We the so time was numbers project mind, high-quality We into the And think hearing think like again in chunk now XXXX. that. think not small in but how system what that. of those do in good Riverdale on to can't time need little use containerboard made do close can't strategy pandemic American the back for capacity. and we made just operations were extra different there's export. are containerboard grades I labor that do we converting the is time, And the going the are selling to we capacity capacity a get of in some realized we because market And we which open run can the you but we need people and our can't meaning think that did you our some we over What biggest. change demand. that because as the we working they numbers always forever by to the didn't North is those we're -- markets forever. full then running actual box America end-use the

and the So, asset pandemic. learned you do we through its have at to look long-term change what better strategy containerboard we need growth And our strategy. We a uses. on that didn't of

just around in durable of at you're -- I primarily forward a what the small the part saw for a buying total. that a it's Adam goods items. lot of what getting No, think but are pull small maybe of -- are industry is goods durable people some segment And small is consumable us

It's maybe seen it's some that bit little I I -- talked of we it. So, pull like that some demand point don't too. but the goods between normalize just have don't not the cases about shift forward bulk Mark feel think there's a and at in like -- will services and I that's

dividend. on just Yes. appreciate Tim one the No, And I that.

you're $X million mean $XXX that the kudos that cash to cetera? guiding normalized it in of flow Such Ilim get sheet, think How Ilim guiding XX% this dividend payout, paying trough the free used just a with done wouldn't lot that of obviously it in do a that you're year shape flow you're be When hoping I you'd of So, and do the for in to assume you peak so this would a you dividends for $XXX next of think get your if to about your what ex-Ilim balance light cash to flow. that year cash is of light year be to to to cash of than of thinking flow stake, and cash that you work you've I dividend And you with have or matter. billion, you for what for light I out, et where about are thereafter better sell view something in path that. what what year. much million-ish this your

XX% every been down question, But at that's to that is Yes. times that XX% -- Adam. think It's I mean, bottom the payout time. this through been say in it our has And it's a think free not we've moment cash flow than I way the great said we end about minds. of And before. is and in when on of right dividend been That cycle. the there that. too. higher And our have of we moments

So is dividend we think structured. But moment. that the in I still a believe we're

situated of We flow And that to overtime. cash we have of at cash shares in in free time bought of is back our the a same still still resiliency lot flow. the believe perfectly XX% XX%

Yeah.

a It's its things lower our by oh a we be number XX% not to has and know lower low the has lower your it's Adam to that, cash know is of in it's It's way through Tim you but free it from over a a about negative that. into just converge important we impact be not in what a moment said think the It's as not just might be happen to important really Cash be capital. investors. That's is as cycle. an followed the upper-end. describe say then components to what it XX% usually about going really, flow half thing demand our all that. we trough do working you to gave. cycle, lot a of overall XX% how think the to which to unwinding could year the I to which people dividend to moment at That's XX%. important. for And free sure want even at and clear means And you year. important that XX-something quarter cycle. pick And and us. is XX% could percent conditions end really for a make we us much environments cost dipped investors. of important it. it's And tactical year, flow. be for dividend. cash But I that's it guideline the of really hear given calculate calculation to It's And It's many through that really it

much, so you Mark. Thank

you. Then Please Thank White. ahead. and line our from comes Bank final go question for Kyle the Deutsche today of

on and here that no sharper kind through. impacting de-stock de-stock into consumers. pressures the inflationary I some for you more my mentioned just the of about trying Thanks morning. knew impact hoping about two heading quarter dynamics talked Good Hi. question. midway but demand I demand. just understand taking to a was lot, the on get large details the a know impact I'm saw demand We been decline to it's but

So having it forward. demand are larger seems impact like taking inflationary going now and over a on pressures

mid-single-digit not or So that, how first XXXX, declines could you what of half kind should next now carry we to such in thinking just are and you year? are forward the about see XXXX that seeing into that for

conversation the it's great kind question. Sure. Kyle, think a of customers. with I we're having That's really

have doesn't business long a cycle. of that Our

look we saw and is visibility and -- got of think analytics visibility So first remains there's into they're our the a quarter. flight we as spend I of airplane they start fourth than the in choices the persistent lot other for to into said They the make quarter. travel inflation a what a hence save you algorithms not and time services But making approaching money money -- then holidays little really or backing saw customers really customers what more we're It's some over on and at off choices. the to things. had some holidays future year discretionary

the won't You to through the that the market shape good quarter? does at bank and CEOs this find forward feel? in stay that's actually consumer XX% fast that inflation But policy, rents of less at looks with spent the least I goods goods this looking other view high we're watching choices interest their things. will they I holiday we'll rates. part slowing pretty is flush X%, and and are are balances if part and consumer first environment next all replenishment. still after spending spending But and But themselves That's general have consumer whether listen it pattern in on our they're world So to as bank they what see all whatever work a heavily true to the that services. that. will they are lot the all make consumer -- you economy in and a is all we real first and But have does do and remains that deal has different. the very are variables that the choices creates way year. making and at the like the in the the slowing watching. service do quarter does where It think customers of way service-oriented the fourth How out services with the different more think through

of know you go consumables when it. watching it at we we'll It's said, some great the first the full of we're that through end this quarter. obviously all Tim in talking As be gained of as in We're lot is a quarter. a And will be more a normal our fourth question. with year cadence to we'll the January

a better on view we'll that. have lot So

can't details, then you the that potential Ilim call Got latest regarding curious there? this to the the helpful. think year on additional Ilim? all And also then receive it. can expect you share in could what's of just timing And you the like very the future? curious but do Understanding any That's you dividends sale on or happen what from next

about into are. feel the next year. more We're in middle right we we we whole dividends you're forecasting can the And of about good lot not say it. a not there's where We're Yes. But process.

made pushing hard. have We and we're progress

time for line guidelines options venture by and process -- were not process were bit. The we wholly made owned the a we're Kyle, consuming that remarks, where is of at joint But a It's a structure quite a that fact and it complex along it of in more look complex more both couple but that time we makes -- process. much more the venture The process. executing not comments a governments. you advanced, joint I quarter. these the advanced is strategic prepared current time it have when We beginning at the under

there So not I'm but we're to be really pleased, there.

I movement over out on getting made quarter. But about not we're the it. feel the we where why skis are good that's we through our on So really amount of

you Thank the it. for details. all Got

turn closing like Sutton to Mark Q&A you. I'd over comments. back End Thank Then the of call to for

transitory. pleased pull to made. any the need comments very to of And close like second ever job. operator. close good thank have We're you we day around thought for all economic way. a they're what members really to this need stay the take, of each International type world levers every to of We make think by in employees clearly To financial do we and reiterating outstanding operating the into other. our by continue is I'd the couple underpinnings every to that I period you taking environment. of to them they'd I'm entering the customers year Thank day just just to like Paper team in gets doing what I'd the Paper with half International they're really a be I and think through and kind this for saying we to sure any don't they operate of safe an actions in environments doing pulling

cases, lot dysfunction And chain there gives strong some and back a in at have We proper us our supply into could The lining fact that lower of alignment. be even balance opportunity silver us of a flexibility get allows it a the demand some options. and levels. to sheet

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type I call lot through talking our for a got at built to and And our for of full with year you good feel we've environment. environment the We're of it. strong about forward of So we're end a January. off table. Look to the built get this ability to risk

International in your for you thank Paper. So interest

thank ladies participation gentlemen, Then quarter you International in call. earnings XXXX for and your Paper's third

now You may disconnect.