International Paper Company (NYSE:IP) reported better-than-expected adjusted earnings of 59 cents per share in the second quarter of 2023, surpassing the Consensus Estimate of 42 cents per share by a significant 40%. However, the bottom line declined by 40% compared to the same quarter last year, primarily due to lower volumes in its segments caused by weak demand and customer inventory destocking.

Including one-time items, the company recorded earnings per share of 64 cents from continuing operations in Q2 2023, compared to $1.13 per share in the year-ago quarter.

The net sales for the quarter were $4.68 billion, representing a 13% decrease from the year-ago quarter and missing the Consensus Estimate of $4.94 billion.

Cost of sales decreased by 12% to $3,360 million in Q2 2023 from $3,806 million in the prior-year quarter, leading to a 16.5% decline in gross profit to $1,322 million.

Selling and administrative expenses increased by 12% to $336 million from $300 million in the last year’s quarter. The total segment operating profit dropped 43% to $334 million in the quarter, primarily impacted by the Industrial Packaging segment. Adjusted operating profit in Q2 was $204 million compared to $364 million in the same period of 2022.

The company reported earnings of $55 million from its “Building a Better IP” initiatives in Q2 2023, bringing the total to $120 million for the first half of 2023.

Segment Performance

Industrial Packaging: Sales for the segment were $3.9 billion, down 13.5% from the previous year due to weak demand for corrugated boxes and containerboard, as well as lower prices. The operating profit plunged 46% year over year to $304 million due to additional economic downtime and higher operating costs.

Global Cellulose Fibers: Sales for the segment declined 11.4% year over year to $698 million, mainly due to lower sales of fluff pulp and decreased pulp pricing. However, the segment reported an operating profit of $30 million in Q2, a 20% improvement from the year-ago quarter.

Financial Position

At the end of Q2 2023, cash and temporary investments totaled $746 million, compared to $804 million at the end of 2022. The company repurchased shares worth $40 million and paid dividends worth $160 million during the second quarter of 2023.

Long-term debt for IP stood at around $5.6 billion at the end of Q2 2023, compared to $4.8 billion at the end of 2022. Cash flow from operating activities was $873 million in the first six months of 2023, compared to $978 million in the same period of the previous year.

Price Performance

IP’s shares have experienced a decline of 19.1% in the past year, while the industry faced a decline of 31.1%.

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