International Paper Company

Good morning and thank you for standing by. Welcome to today's International Papers fourth quarter 2022 earnings call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, you will have an opportunity to ask questions. To ask a question, press one then zero on your telephone keypad. To remove yourself from the question queue, repeat the one zero command. As a reminder, today's conference call is being recorded. I'd now like to turn today's conference over to Mark Nellison, Vice President, Investor Relations.

Thank you, Paul. Good morning, and thank you for joining International Paper's fourth 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 is 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 fourth quarter earnings press release and today's presentation slide. I will now turn the call over to Mark Sutton.

Thank you, Mark, and good morning, everyone. We'll begin our discussion on slide three, where I will touch on our full year of 2022 results. First of all, as I think about 2022, I'm very proud and appreciative of all the hard work our employees have done during the year and for our strong customer relationships as we've managed through a very dynamic and uncertain market environment. Looking at our performance, international paper grew revenue and earnings driven by solid commercial and operational execution, while facing significant inflation and lower demand in the second half of the year. We also made solid progress in building a better IP. We delivered $250 million of earnings benefits from our initiatives, focused on lowering our cost structure and accelerating profitable growth. And as a result, we exceeded our full-year target and have strong momentum going forward. We're also confident in the profitable growth opportunities across our industrial packaging business and have made strategic investments to support this growth. We will continue to invest to grow earnings and cash generation by building additional capabilities and capacity in our U.S. box system during the next few years. I'm also pleased with the significant progress we made toward achieving value creating returns in our global cellulose fibers business. We delivered $100 million of earnings growth in 2022 and we expect significant earnings improvement this year. This past year, we also returned $1.9 billion of cash to shareholders, and our balance sheet is very strong. This allows International Paper to navigate the uncertain macroeconomic environment from a position of strength, and we believe it will give us opportunity to continue to invest through the cycle to grow earnings and cash generation while also returning cash to our shareholders by maintaining our dividend and through opportunistic share repurchase. Turning to our full year key financials on slide four, revenue increased by 9% year over year, driven by strong price realization in our two business segments. Operating earnings per share improved by 32%. Operating margins were impacted by lower volumes from weaker demand for packaging and elevated supply chain and input cost. Overall, EBIT improved by about $300 million year-over-year. In terms of segment performance, both our industrial packaging and global cellulose fiber segments contributed to our earnings growth by about $100 million each as our profit improvement initiatives and price realization offset significant inflationary cost headwinds. Our corporate expenses were also lower by about $100 million, primarily driven by our building a better IP initiatives and some favorable FX. And for the year, we also generated $1.2 billion of free cash flow, which was above our prior outlook, driven by higher earnings and improved working capital in the fourth quarter. Turning to slide five, I would like to comment on the press release we issued last week regarding the progress we were making related to our Illum joint venture. We have entered into an agreement to sell our 50% interest in Elam SA to our JV partners for $484 million. This transaction reflects a total enterprise value for Elam of approximately 3.5 billion and approximately 3.1 times EBITDA, the EBITDA multiple for 2022 full year results. The JV partners have also expressed interest in purchasing all of IP shares in JSC ILM Group, which represents a 2.39% stake for $24 million. We also intend to divest all other residual and non-material interest associated with ILM to our JV partners. The deal is subject to regulatory approvals in Russia. We are making good progress and will provide you with additional information when it becomes available. Upon finalizing this deal, IP will no longer have any investments in Russia. Turning now to slide six and our fourth quarter results, earnings and free cash flow for the quarter were above prior periods and came in better than the outlook we provided last quarter. Demand for our products played out as we expected. In industrial packaging, our U.S. Fox shipments were down about 6% year-over-year on a daily basis, similar to what we experienced in the latter part of the third quarter, after consumer priorities shifted toward non-discretionary goods and services. In addition, our customers and the broader retail channel continued to work through elevated inventories of their products, which constrained packaging demand in the quarter. Underlying demand for absorbent pulp was stable. On a positive note, we did see meaningful relief from lower input costs, and our fourth quarter earnings also benefited from our building of better IP initiatives and some favorable one-time items in the quarter, which Tim will speak to later in the presentation. And finally, we generated solid free cash flow and returned $355 million to shareholders during the quarter. I will now turn the call over to Tim to cover our business segment performance as well as our outlook. Tim?