International Paper trebles packaging profits on biofuels boost

The Memphis-based firm received a $482 pre-tax credit for using alternative energy sources, a result of US legislation passed in 2007. As a result, operating profit overall soared from $393m in the second quarter of 2008 to $779m.

In its two packaging divisions, overall operating profit more than trebled to $369m, compared to $101m in the same period last year, thanks to a $285m boost from the pre-tax credit.

The purchase of Weyerhaeuser last year has also boosted the firm, although sales remained the same as in 2008 at $5.8bn for the quarter.

IP’s industrial packaging operation recorded sales up 54% following the Weyerhauser integration, to hit $2.27bn compared to $1.48bn in the second quarter of 2008.

Chief executive John Faraci was confident that the company was well positioned for an upturn in demand. “When we look at global economic conditions today, it appears the worst is behind us,” he said.

Faraci said that North American demand had stabilised at lower levels, while Latin American paper and Chinese packaging demand was growing. “The good news is that mill and channel inventories are lean for both paper and containerboard,” he said.

The world’s largest paper and pulp company has also paid back $600m debt in the quarter.

“The results reflect the continued focus on reducing capital spending, managing working capital and decreasing overheads, as well as cash received from alternative fuel mixture credits,” said Faraci.

IP uses a biofuel called “black liquor” that is a by-product obtained while processing wood to get pulp for making paper.

In December, the firm announced it was cutting 1,500 of its 65,000 global workforce, and closed a paper mill in Inverurie in March.

INTERNATIONAL PAPER Q2 RESULTS

Total sales $5.8bn (2008: $5.8bn)
Operating profit $788m ($393m)
EBITDA $520m ($302m)

Industrial packaging
Sales $2.27bn ($1.48bn)
Operating profit $255m ($87m)

Consumer packaging
Sales $770m ($795m)
Operating profit $114m ($14m)

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