International Paper Company

Good morning, and thank you for standing by. Welcome to today's International Papers second quarter 2022 earnings call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, you'll have an opportunity to ask questions. To ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, you may repeat the 1-0 command. As a reminder, this conference is being recorded. I'd now like to turn today's conference over to Mark Nelson, Vice President, Investor Relations. Sir, the floor is yours.

Thank you, Paul. Good morning, and thank you for joining International Paper's second quarter 2022 earnings call. Our speakers this morning are Mark Sutton, Chairman and Chief Executive Officer, and Tim Nichols, Senior Vice President and Chief Financial Officer. There's important information at the beginning of our presentation on slide two, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information. And a reconciliation of those figures to U.S. GAAP financial measures is available on our website. Our website also contains copies of the second quarter earnings press release and today's presentation slides. I will now turn the call over to Mark Sutton.

Thank you, Mark, and good morning, everyone. We will begin our discussion on slide three. In the second quarter, our international paper delivered strong revenue growth and earnings growth on both a year-over-year and sequential basis, all while expanding our margins. In addition, our second quarter earnings were better than our prior outlook, driven by strong price realization, solid operating performance, and cost benefits. All of this helped us overcome significantly higher input costs, especially for energy, chemicals, and distribution. Our mills and converting system performed very well as we managed through continued logistics constraints, which negatively impacted our operating costs. We successfully executed our second highest maintenance quarter of the year and have completed about 65% of our planned maintenance in the first half of the year. Demand for our products was impacted by a shift in consumer spending from goods to services in the quarter, while the retail channel managed through elevated inventories. In addition, our businesses continue to focus on serving our customers' needs while navigating through a challenging supply chain and labor environment. We made good progress on our Building a Better IP initiatives. We achieved $65 million of earnings in the quarter for a total of of $105 million through the first half of the year. Given our strong momentum, we expect to achieve the high end of our full-year target of $200 to $225 million. We are excited by the opportunities we have identified to significantly lower our cost structure and accelerate profitable growth. On capital allocation, we returned $565 million to shareholders in the second quarter, including $395 million of share repurchases. As a result, we've returned more than $1.1 billion of cash to share owners so far this year. This highlights the choices that our strong balance sheet and cash generation provide us. On our last call, I mentioned that we were pursuing strategic options for our equity investment in the Illum Group, which includes possibly selling our 50% stake. We have engaged advisors and are actively working with interested parties We've made good progress during the second quarter and have identified serious options that we believe could be attractive. As I mentioned before, the complexity of the situation and our JV structure impacts the pace of reaching a resolution. We will provide another update when there is more information to share. Turning to the second quarter results on slide four, revenue increased by 13% year over year driven by strong price realization across our two business segments. Operating earnings per share improved by just over 50% versus last year. And margins improved in the second quarter as strong price realization more than offset higher distribution input cost. And we delivered additional benefits from our Building a Better IP initiatives. Free cash flow was lower in the quarter due to higher working capital use as we grew revenues and replenished inventories coming out of our highest maintenance outage season. In addition, both prior periods included a dividend from our equity ownership in Illinois. Looking to the rest of the year, we expect further margin expansion as continued realization of prior price increases outpaces higher input costs. We step down from our highest maintenance outage quarters of the year and also expect additional earnings growth from our Building a Better IP initiatives. As a result, I'm confident we will achieve our full-year targets for EBITDA and free cash flow, which remain unchanged. I'll now turn the call over to Tim, who will cover our business sector performance and outlook. Tim? Thank you, Mark. Good morning, everyone.