International Paper Q4 Earnings Call Highlights

International Paper (NYSE:IP) used its fourth-quarter earnings call to outline a major portfolio move alongside detailed 2025 results and 2026 targets, framing the next phase of its “80/20” transformation strategy as a plan to split the company into two regionally focused, publicly traded packaging businesses.

Plan to separate EMEA Packaging business

CEO Andy Silvernail said the company intends to create “two publicly traded, scaled, regional packaging solution leaders” in North America and EMEA, arguing that the two markets have different competitive and customer dynamics that require tailored strategies and capital allocation. Silvernail described the decision as the next step in the company’s 80/20 performance system—specifically “segmenting the business” after a year of simplifying operations, exiting lower-margin activity, and redirecting resources.

CFO Lance Loeffler said the separation is expected to be structured as a spin-off of the EMEA Packaging business to shareholders, with International Paper retaining a “meaningful ownership stake” in the new company. Whether the transaction is tax-free to U.S. shareholders will depend on the final structure, including the level of ownership retained. Management expects the separation to be completed in 12–15 months, subject to customary conditions and regulatory approvals, with the new EMEA company planned to be listed on both the London and New York Stock Exchanges.

As part of the leadership plan, Silvernail, Loeffler, and Tom Hamic will remain in their roles at International Paper. Following the separation, Tim Nicholls—currently EVP and President of DS Smith—will serve as CEO of the standalone EMEA Packaging business. Loeffler added that David Robbie is expected to be appointed chairman of the EMEA company’s board.

To support EMEA’s ongoing transformation ahead of separation, management plans to invest approximately $400 million in EMEA during 2026 to fund the 80/20 implementation and restructuring work.

How management described the two businesses

Silvernail provided pro forma figures for what the post-separation International Paper would look like as a North American packaging company comprised of Packaging Solutions North America assets (including legacy IP and DS Smith assets). He cited full-year 2025 pro forma net sales of more than $15 billion and approximately $2.3 billion of adjusted EBITDA for that business.

Nicholls described the EMEA Packaging business as a leading provider of innovative, sustainable packaging solutions across Europe. Management cited full-year 2025 pro forma net sales of approximately $8.5 billion and approximately $800 million of adjusted EBITDA for the EMEA business. Nicholls said EMEA is still in the early stages of the transformation program, but management expects to begin seeing more benefits in 2026.

2025 results and transformation actions

Silvernail said North America delivered approximately 37% year-over-year adjusted EBITDA growth in 2025, supported by progress on the 80/20 plan. He also said the company expected fourth-quarter volume growth to outpace the underlying market by 3–4 percentage points. Across the year, he cited approximately $510 million of run-rate cost benefits, including about $110 million related to footprint optimization in 2025, with a similar amount expected in 2026.

In EMEA, Silvernail said the company “actioned 20 site closures,” impacting approximately 1,400 roles, with another seven sites and 700 roles in works council discussions. Loeffler later said those actions are expected to deliver run-rate cost savings of more than $160 million.

At the enterprise level for full-year 2025, Silvernail said adjusted EBITDA margin expanded by 230 basis points. He noted adjusted EBIT and EPS were impacted by $958 million of accelerated depreciation related to footprint optimization and higher depreciation and amortization tied to the DS Smith acquisition. As anticipated, management said transformation investments contributed to negative free cash flow of $159 million for the year. Silvernail also noted that enterprise earnings numbers had been restated to exclude GCF, and management said it closed that transaction at the end of the prior week.

North America: Q4 bridge, 2026 drivers, and first-quarter outlook

In North America, Loeffler emphasized service and reliability improvements and said on-time delivery increased to the “upper 90s,” which supported customer wins. He said the company has installed its Lighthouse model in 85% of its box plant system and expanded Lighthouse learnings to all mills.

For the fourth quarter of 2025, Loeffler walked through sequential adjusted EBITDA drivers, concluding with adjusted EBITDA of $560 million for North America. Key items included:

• Volume: $87 million unfavorable, including almost $60 million from exiting non-strategic export business and three fewer shipping days, partially offset by strategic customer onboarding.
• Operations and costs: $3 million favorable, with mill-closure cost-out offset by timing of spending, transitory network optimization costs, and higher seasonal labor costs.
• Maintenance and outages: $41 million unfavorable as the company invested in mill reliability and quality.
• Input costs: $24 million favorable, helped by minimizing impacts from natural gas curtailment at the Valliant mill, which management said is now resolved.

Looking to 2026, Loeffler said North America’s EBITDA growth is expected to be driven by approximately $100 million of commercial benefits and $500 million of cost benefits, offset by roughly $200 million of non-recurring transformation costs tied to reliability and capacity investments, “primarily driven by the Riverdale Mill conversion” in the first half of 2026. He also said inflation is expected to rise by approximately $200 million, with sourcing and procurement actions intended to reduce the impact.

Management said it remains confident in its North America 2026 adjusted EBITDA target of $2.5 billion to $2.6 billion, assuming industry growth is flat to up 1% and the company outperforms by about 2%. Loeffler also quantified sensitivity to pricing, saying the guidance does not include future price realization and that each $10 per ton price move would be worth about $90 million of annualized adjusted EBITDA.

For the first quarter of 2026, the company guided to North America adjusted EBITDA of approximately $534 million, citing a $51 million expected improvement in price and mix, offset by $68 million unfavorable volume. Loeffler added that the first-quarter outlook did not include impacts from a winter storm in the U.S. Southeast; management was assessing the impact and estimated a potential $20 million to $25 million headwind in the quarter.

EMEA: early benefits, 2026 expectations, and Q1 outlook

For EMEA, Loeffler said the company delivered sequential fourth-quarter adjusted EBITDA growth of $19 million, mainly from favorable fiber and natural gas input pricing and early benefits from 80/20 cost actions. Demand was described as “soft but broadly stable,” with continued pressure on board pricing.

For full-year 2026, Loeffler said EMEA adjusted EBITDA growth is expected to be driven by $200 million of commercial benefits (primarily from above-industry growth and flow-through from 2025 strategic customer momentum) and $200 million of cost-out benefits (from footprint and headcount optimization and improvements in procurement, distribution, and mill and box systems). Those benefits are expected to be offset by approximately $100 million of inflation.

For the first quarter, management said EMEA EBITDA is expected to be roughly in line with the fourth quarter, with price and volume tailwinds of approximately $33 million offset by $42 million higher operations and costs due to timing of energy subsidies typically received in the second half and costs tied to accounting policy changes.

For 2026, Silvernail said the company is projecting enterprise net sales of $24.1 billion to $24.9 billion, adjusted EBITDA of $3.5 billion to $3.7 billion, and free cash flow of $300 million to $500 million, with first-quarter adjusted EBITDA guidance (including corporate) of $740 million to $760 million.

In Q&A, Silvernail confirmed the company sent a price letter to customers earlier in the week and reiterated that guidance does not include incremental price. On dividends, Silvernail said the company is maintaining its dividend policy through 2026 but will evaluate the post-spin dividend policy over time in conversation with shareholders.

About International Paper (NYSE:IP)

International Paper is a global producer of renewable fiber-based products, focused primarily on pulp, paper, and packaging. The company manufactures containerboard and corrugated packaging used for shipping and retail display, as well as a range of specialty papers and pulp products that serve industrial, consumer goods, and e-commerce customers. Its product portfolio is oriented toward large-scale packaging solutions, tissue and paper grades, and raw pulp for a variety of manufacturing uses.

Founded in 1898, International Paper is headquartered in Memphis, Tennessee, and is one of the largest and longest-established companies in the forest products sector.