International Paper Company

quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks you will have an opportunity to ask questions. To ask a question press star one on your telephone keypad. To withdraw your question press star one again. As a reminder to ask a question press star one. To withdraw your question press star one again. It is now my pleasure to turn the call over to Mandy Gilliland, Senior Director of Investor Relations. Ma'am the floor is yours.

Thank you Krista. Good morning and good afternoon and thank you for joining International Papers second quarter 2025 earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer and Lance Loeffler, Senior Vice President and Chief Financial Officer. There's important information at the beginning of our presentation including certain legal disclaimers. For example during this call we will make forward-looking statements that are subject to risks and uncertainties. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements can be found in our press releases and reports filed with the U.S. Securities and Exchange Commission. We will also present certain -U.S. GAP financial information. A reconciliation of those figures to U.S. GAP financial measures is available on our website. Our website also contains copies of the second quarter earnings press release in today's presentation slides. I will now turn the call over to Andy Silvernail.

Thanks Mandy. Before we get into detail I want to welcome you to the IR team. It's great to have you leading our investor relations efforts as the next step in your journey. I want to speak to our strategy and the momentum we are gaining across the organization. There are three key messages we want you to take away today. One, our transformation is on track. Second quarter revenue was at our expectation and we have confidence in closing the market share gap in North America this year even as the U.S. and EMEA markets remain soft. Two, our cost performance in North American mill system and EMEA are not where we want them to be but we have clear line of sight to improvements. Three, we are holding our 2025 EBITDA guidance with our commercial and cost improvements efforts taking hold. We will win at IP through our deployment of 8020. More specifically we'll win through great teams deploying 8020 at the point of impact. We launched 8020 a year ago and we did the same at the close of the DSMF acquisition. EMEA has mobilized teams to deploy 8020 by region focusing on initiatives to accelerate significant synergies and profitable growth. Radical focus on the critical view is the key to our transformation. Momentum is picking up. While our two regional packaging businesses are at different stages in this journey, they are both executing a similar framework to achieve our 2027 targets. In the second quarter we started to see momentum build and they will take flight in half of the year. I want to thank the EMEA team for their tremendous work in tackling the challenges involved in combining the two organizations. This includes the finalized required sale of five plants in France, Spain, and Portugal to the POM group announced earlier this month. Our packaging solutions North America team has bound the transformation journey since last year and we're seeing accelerated momentum in our 8020 implementation. We're gaining traction and customers have noticed. In the last few months I had the opportunity to meet with several large customers and they're excited about the things that we're working on. They're experiencing improvements in service and quality. They appreciate the investments we're making to support their growth and they recognize the new international paper with a stronger customer-centric focus. This same sentiment is at the heart of our commercial gains in the second quarter as we continue to close the gaps industry in North American packaging. I've also visited our lighthouse teams in Chicago and Atlanta during the second quarter where I observed our strategy in action. They have incorporated 8020 into daily management and they are building stronger problem-solving muscles which has resulted in improved reliability and cost reduction. The same focus on 8020 is permeating the company both in operations and in our corporate functions. It is the engine to our strategy. Moving to slide four, let me start by sharing our current view of the markets in North America and EMEA. Industry demand in North America has been relatively stable but softer than last year as economic uncertainty from tariffs continues to impact industrial production and box demand across the manufacturing sector. Based on our order patterns through July we expect industry box demand to remain stable in the third quarter with upside potential in Q4 if geopolitical pensions ease and economic activity improves. Our gaps industry widened over the course of last year peaking in the fourth quarter of 2024 when we shifted our portfolio to a more profitable mix. As we indicated in the Q4 call, we anticipated closing the gap to industry this year. That trend started in Q1 and improved as predicted by another 200 basis points in the second quarter. We expect our gap to industry to close by the fourth quarter largely attributed to known commercial wins that will ramp up in the second half of the year. Turning to EMEA, due to the inconsistency of industry data in EMEA, the right-hand side is reflective of our EMEA box shipments on a -over-year absolute basis. The weak market is a headwind for us with macroeconomic volatility in the region. While we're holding markets here, box shipment slowed sequentially in the second quarter by approximately 1% primarily driven by market softness in April and May. June volumes, however, showed signs of recovery which has continued into July. Looking ahead to the second half of the year, we anticipate a moderate increase in demand with fast-moving consumer goods seasonal growth in the third and fourth quarters. The wild card is the unpredictable and unresolved tariff negotiations which continue to pose macroeconomic uncertainty. Moving to slide five. Last quarter, we shared the commercial actions we are taking to achieve our 2025 run rate target of $600 million and our 2027 target of $1.1 billion. You can reference the list of first quarter commercial and cost-out actions in the appendix and we'll continue to update the appendix slide each quarter to reflect our cumulative actions and momentum. Now, let's take a look at our accomplishments in the second quarter. In Packaging Solutions North America, we continue to make progress servicing our customers. On-time delivery improved from 92% in the fourth quarter of last year to 97% in the second quarter. We made investment announcements focused on growing and attractive markets. We continue executing to over serve our 80s customers such as rolling out our -to-perfect service model. This includes identifying actions required to achieve perfection on key metrics for our 80s customers. We're also increasing positions with large global accounts by collaborating across both packaging businesses. In EMEA, with our combined team, we are refocusing our efforts on most attractive customers, differentiating our -to-market strategy and developing prospect plans to grow our position. And we are winning strategic accounts through our strong customer-centered culture at DSMF. All in for the first half of the year, our actions account for a run rate of approximately $650 million. This trajectory reinforces our confidence that we are on our way to achieve our goal of $1.1 billion of commercial excellence benefits by 2027. Now, I'm moving to slide six to discuss our cost-out actions in the second quarter. In Packaging Solutions North America, we announced decisions to close four facilities, sell three facilities, and exit a non-core business. As difficult as these decisions are, it is the right thing to do. Strategic decisions like these allow us to reduce complexity and minimize cost, which enables us to reinvest to build an advantage cost position and enhance the customer experience. Last quarter, we communicated our goal of deploying the White House model to 75 plants by year end. We have now installed the model in 40 plants and continue to see productivity improvements as we optimize. We are also identifying opportunities in procurement to reduce spend across both packaging businesses. Importantly, we continue to stride along our North American mill system. Year to date, we have left about $150 million of profit on the table due to reliability issues. We are hyper-focused on this area for improvement. In EMEA, we have proposed to close five UK plants subject to consultation, which we believe will be worth approximately $25 million. We have also proposed to stream mine our packaging business regional structure and consolidate 13 subregions into seven, essentially eliminating a layer of reorganization. The estimated cost of the regional and subregional reorganization in EMEA will be known once those plans are finalized and we begin consultations with the new proposed organization. With the combined first and second quarter cost out actions, we are nearing our goal of $600 million run rate by year end and we are on our way to achieve the $1.9 billion target for 2027. We have accomplished a great deal this past year, but we have much less to do. Our work is just beginning, and as you can see on slide seven, we have many more value drivers developing that will contribute to our performance on our transformational journey. As an example, last month we announced the exploration of a greenfield -the-art sustainable packaging plant in Salt Lake City. We anticipate this investment will drive growth in an attractive market where we can leverage our strategic strengths. Moving forward, initiatives such as these will continue to be developed. We are committed to a great company. So let's turn to our performance and outlook. Slide eight serves as a reminder of how we will reference our businesses for financial reporting purposes, including the abbreviations of PSNA and PSEMA for our packaging solutions businesses in each of those regions. Regarding our global solar espyvers business, the strategic review has progressed. There are no changes to our expected timeline and we remain committed to achieving the best value for the business. Now I'll share some highlights of our performance and then turn it over to Lance to walk through the details. I'm on slide nine. Second quarter results reflect higher revenue driven by a full quarter of DSMS and strong price realization. Volume in the second quarter was seasonally higher and stabled in a stable demand environment in North America. However, we experienced lower volume and softer demand in EMEA. Last quarter we noted that results were relatively low quality and we expected QQ to be much higher quality. That's exactly what happened. The modest sequential decline in EBITDA is primarily due to four things. One, Q1 had favorable non-recurring items that did not repeat. Two, Q2 had unfavorable non-recurring items and costs from our transformation efforts. Three, Q2 also accounted for our highest quarter of planned maintenance outages. Four, while packaging solutions in EMEA demand was soft, we also experienced a spike in fiber costs. Lance is going to walk you through the detail in a moment to bring clarity to the bridges and give you insights into the important Q3 sequential profit ramp. Our free cash flow for the second quarter was 54 million dollars. As a reminder, cash flow in the first quarter was negatively impacted by 670 million dollars related to the investments in our transformation, including severance costs and DS Smith transaction costs, along with incentive compensation payout. For the full year, we still expect to be in the range of 100 to 300 million dollars of free cash flow. As we look to the third quarter, we expect significantly higher earnings sequentially. This will be driven by higher volume and lower costs across all our business segments. Our commercial strategy is gaining momentum. We are closing the gap to industry in North America, and we will continue to strengthen as we onboard strategic winds. We also have fewer planned mountain outages in North America, and we are accelerating 80-20 implementation as we move into the third quarter. With that, let me turn it over to Lance to provide more details about our second quarter performance and outlook. Thanks, Andy.