IP Q1 2026 Earnings Transcript

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Date

Thursday, April 30, 2026 at 10 a.m. ET

Call participants

• Chairman & Chief Executive Officer — Andrew K. Silvernail
• Chief Financial Officer — Lance T. Loeffler

Takeaways

• North American Box Volume -- Increased 2% year over year on a per-day basis, outperforming the market by nearly 3% as industry volumes declined 0.3%.
• Box Productivity -- Improved 7% since 2024, reflecting operational gains and footprint rationalization.
• Adjusted EBITDA (Q1 Enterprise) -- $677 million, with a margin of 11.3%.
• Adjusted EBIT (Q1 Enterprise) -- $188 million, benefiting from the absence of prior period accelerated depreciation.
• Free Cash Flow (Q1) -- $94 million, including a one-time $280 million tax refund.
• Debt Reduction -- $660 million of debt repaid using $1.1 billion proceeds from the GCF business sale.
• North America Q2 Volume Outlook -- Expected to increase approximately 3% with the industry forecasted flat.
• North America Adjusted EBITDA Outlook (Q2) -- Forecasted at $380 million to $410 million.
• North America Full-Year Adjusted EBITDA Outlook -- Updated to $2.35 billion to $2.5 billion, down from $2.5 billion to $2.6 billion.
• EMEA Q1 Adjusted EBITDA -- $208 million reported, with favorable price/mix and volume trends sequentially.
• EMEA Q2 Adjusted EBITDA Outlook -- Targeted at $150 million to $170 million amid anticipated peak margin compression.
• EMEA Full-Year Adjusted EBITDA Outlook -- Reduced to $900 million to $1.0 billion from $1.0 billion to $1.1 billion.
• Enterprise 2026 Adjusted EBITDA Outlook -- $3.2 billion to $3.5 billion, based on current business unit guidance.
• Enterprise Free Cash Flow Outlook -- Estimated range of $300 million to $500 million for 2026.
• Strategic Investments -- Capital spending is accelerating, with investment per facility for 2025-2027 running approximately 50% higher than the prior three-year average.
• Norpak Paper Mill Acquisition -- Three-machine mill strengthens West Coast footprint, expected to deliver high teens or better return on invested capital post-integration.
• EMEA Cost-Out Progress -- Run-rate savings increased by about $40 million to over $200 million, with 31 closures completed or in process, reducing headcount by more than 2,800 positions.
• Separation Process -- EMEA business to be dual-listed on LSE and NYSE; International Paper will retain approximately 20% stake for twelve to eighteen months post-separation.

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Risks

• Chairman & CEO Silvernail said, "gains have not been fast enough or consistent enough to offset the macro pressures," referencing persistent unplanned costs and underperformance in mill reliability.
• North America Q1 Costs -- Operations and costs were $29 million unfavorable, including $18 million due to the winter storm and elevated reliability challenges.
• Loeffler noted, "Input costs were $43 million unfavorable, primarily due to a regional spike in natural gas prices and local utility costs related to the winter storm," with total winter storm impact at approximately $53 million of unfavorable EBITDA.
• EMEA Margin Pressure -- Near-term margin compression expected as "pricing actions in packaging lag by roughly three to six months," and input costs rise ahead of pricing recovery.
• Full-year 2026 adjusted EBITDA guidance was reduced for both business units, with North America revised down $100 million and EMEA down $100 million, driven by macro environment, winter weather, weaker operating performance, and commercial headwinds.

Summary

International Paper (NYSE:IP) reported first-quarter top-line and EBITDA metrics constrained by soft demand, input cost headwinds, severe winter weather, and deliberate portfolio actions. International Paper outlined North American volume growth outpacing the industry, reinforced by commercial wins and productivity gains, with management guiding to sequential and second-half improvement as price realization and cost reductions flow through. EMEA performance was shaped by aggressive cost-out actions and substantial margin compression, with recovery expected in the second half from pricing and energy cost normalization. The Norpak acquisition and network investments are positioned as high-return strategic moves bolstering regional supply, efficiency, and long-term asset reliability. Both North America and EMEA EBITDA outlooks were trimmed $100 million each, with enterprise adjusted EBITDA now expected at $3.2 billion to $3.5 billion for the year.

• Chairman & CEO Silvernail said, "we are temporarily short paper in North America ahead of the Riverdale conversion," characterizing this as a near-term headwind with expected long-term benefits to system mix and lightweight capacity.
• International Paper is actively executing a planned separation of its North American and EMEA businesses, targeting completion within twelve to fifteen months and indicating both entities are expected to achieve investment-grade credit ratings upon dual public listings.
• Management confirmed recent customer wins are broad-based across U.S. national, local, and European central accounts, "Reliability of supply is the single most important factor for every customer," supporting volume outperformance without aggressive pricing moves.
• Chairman & CEO Silvernail clarified, "On the quasi one-time bucket, it is at least $100 million," referencing transformation and contract costs, a portion of which will not repeat in subsequent years.

Industry glossary

• OCC: Old Corrugated Containers; recovered post-consumer corrugated fiber used as a key input in recycled containerboard manufacturing.
• Lighthouse Practices: Internally referenced operational best-practice methodologies deployed for mill and box plant productivity enhancement.

Full Conference Call Transcript

Andrew K. Silvernail: Thanks, Mandi. Good morning and good afternoon, everyone. Let us begin on slide three. This quarter reinforced the importance of controlling the controllables in a dynamic operating environment. While inflationary pressures and weather-related disruptions created volatility, our focus remains squarely on enabling our strategy and improving execution. Today, we outlined the steps we are taking to manage external pressures, strengthen execution across the business, and address gaps where performance did not meet expectations, all in support of driving sustainable long-term value at International Paper Company. I want to start by being clear about what is working and what needs to improve.

In North America, we delivered above-market growth for the third straight quarter, with box shipments exceeding the industry by 3% as planned customer wins came through. We are seeing mill and box plant productivity improve as strategic investments and lighthouse practices take hold, and we are strengthening our footprint through investments to support long-term profitable growth. We are executing important improvements, but the gains have not been fast enough or consistent enough to offset the macro pressures. North American mill reliability has inflected positively; however, we need to accelerate the momentum. We have more work to do to reach best-in-class reliability and that is essential to delivering the cost and service performance we expect. We also need to improve execution.

Unplanned costs have been higher than expected, driven by both transformation activity and external factors. While some level of transition cost is inherent as we reshape the footprint and execute our transformation, we need to do a better job of identifying how to mitigate impacts and reliably overcome shortfalls. Let us turn to EMEA. We have made progress on cost-out actions with footprint and overhead flowing through the P&L. The conflict in the Middle East has increased the overall challenge across both regions, with more energy exposure in EMEA. We are doing a very good job of managing the exposures and pulling forward cost as quickly as possible.

Importantly, we have stayed focused on the broad improvement work while a small core team executes the separation. The EMEA market has been softer than expected with the macro environment impacting demand. We have modestly underperformed the market in terms of volume, as we have held pricing. Our focus is maximizing total value by balancing the price-volume trade-offs in the soft market. We have, however, sharpened our commercial focus; we want to make sure that we have the right price-value trade-offs to maximize profitability. In parallel, we are pushing harder on the transformation costs that are already underway and we are focusing on execution and accelerating progress in a very challenging operating environment.

We have made important progress in both North America and EMEA, aggressively reshaping our portfolio, footprint, and operating structure. These changes have allowed us to radically change and improve investments in asset quality, reliability, and cost structure. In turn, we have improved our competitive position, grown in North America, and positioned ourselves for further profit improvement in the back half of the year and beyond. I am now turning to slide four. Let us take a look at the areas where actions are translating into results. In North America, our team outpaced the market on volume growth for the third consecutive quarter.

Even with the challenging backdrop, North American box volumes in the first quarter increased 2% year over year on a per-day basis, compared to a decline of 0.3% for the overall industry, which translates to nearly a 3% outperformance of the market. Looking ahead to the second quarter, we expect our North American volumes to be up about 3% with the industry again tracking flat. On a full-year basis, we continue to expect to outperform the industry by about 2%. Lastly, due to macro trends, our full-year 2026 industry demand outlook is now approximately flat year over year compared to prior assumptions of flat to up 1%. I am now moving to slide five.

This page shows how our performance in North America is being supported by underlying improvements across the mill and box system. In the mill system, we are making steady operational progress. The winter storm impacted operational performance in late January and early February, but we saw strong improvements through March and momentum continuing into April. More broadly, capacity utilization has improved meaningfully over time, supported by elevated capital investment that is reversing a decade of underinvestment and improving reliability across the system. These gains are also reinforced by better operating discipline, as lighthouse practices are rolled out across the mill system.

On the box side, performance is improving as those same lighthouse practices take hold, particularly volume optimization and stronger daily management. As a result, box productivity has improved 7% since 2024, and we have continued to rationalize the footprint. Taken together, these actions strengthen our advantaged cost position by simplifying operations, moving volume to our most advantaged assets, and putting capital to work where it earns the highest return. The key takeaway is that these are real, measurable improvements from actions already underway. On the next slide, we will show how continued targeted investment is expected to build momentum and further strengthen our mill and box system over time. Now turning to slide six.

Building on the productivity improvements and early operating results we just discussed, this slide highlights key strategic investments we are making across North America, aligned with our strategic priorities of superior customer experience and high relative supply position. We have meaningfully accelerated investment across our network. These include targeted acquisitions, greenfield facilities, strategic conversions, and more than 80 major investments across the mill and box system, including corrugators, converting equipment, and specialty capabilities. With projects underway or planned primarily from late 2025 through 2026, in Spain, the U.S., and Mexico, collectively these investments will improve reliability, modernize our asset base, and strengthen our competitive position to win with customers.

We also recognize we are temporarily short paper in North America ahead of the Riverdale conversion. While that conversion creates a near-term headwind, it is a clear long-term tailwind, improving our system mix, expanding lightweight capacity, and generating attractive returns as the project comes online. Overall, we are investing approximately 50% more per facility in 2025 through 2027 than the average of the prior three years. This level of investment reflects a deliberate shift toward rebuilding reliability, upgrading capabilities, and positioning the system for sustained performance and long-term value creation. I am moving to slide seven. We recently announced a bolt-on acquisition that fits squarely with our strategy: the Norpak paper mill in Longview, Washington.

This is a high-quality, top quartile asset that strengthens our West Coast footprint, which builds on our Springfield mill and box plant network across the region, and lowers our overall system cost. Its location creates meaningful freight advantages in West Coast markets, and its capabilities improve the efficiency and competitiveness of our integrated network. The mill includes three paper machines, two of which are producing recycled lightweight containerboard, enhancing our ability to meet growing customer demand for lightweight solutions and higher recycled content. Just as important, this acquisition gives us strategic flexibility, supporting growth in attractive end markets while creating opportunities for further cost optimization across the system.

Post-integration, we expect this investment to deliver high teens or better returns over time, consistent with our disciplined capital allocation approach. Overall, this is exactly the kind of targeted, value-accretive investment we are looking for as we continue to optimize our footprint and build long-term value. Turning to slide eight and our EMEA business. As we saw in North America, the first step in our transformation is to simplify. Here is what it looks like in EMEA, starting with footprint optimization across the region. The data here reflects the actions that we have completed as well as many still in process. We also believe there are additional opportunities to optimize our footprint, with additional actions being proposed or evaluated.

When we shared this slide last quarter, we had approximately $160 million of run-rate cost savings. Since then, we have continued to make progress, increasing run-rate savings by roughly $40 million to more than $200 million in total. To date, 31 closures have been completed or are in process, which will result in net reductions of more than 2.8 thousand positions. We will continue to provide updates as we advance our actions in a disciplined and respectful way. I am now turning to slide nine. Before getting into the results and outlook, I want to step back and frame the macro environment that is influencing near-term results across both regions, particularly in the second quarter.

Starting with demand, in both North America and EMEA, overall market demand is softer than we expected coming into the year by about a point. This reflects a more cautious consumer, particularly as inflation and uncertainty persist. We have not seen abrupt changes in order patterns in either region, but I am cautious about demand. Visibility beyond the near term is limited, so we are staying focused on what we can control: strengthening the competitiveness of our network, onboarding commercial wins, investing in our assets, and executing on cost out.

As we look at energy, in North America, energy cost exposure remains relatively contained as our mills generate more than 70% of their own energy, and our principal energy input is natural gas, which is stable now and in the futures market. In Europe, our business has an effective hedging strategy in place to help mitigate the impact of higher energy prices. The exposure is significant, but our strategy should allow inflation pressure to be offset commercially assuming recent market price increases stick. Now I am turning to freight. Freight is having a significant near-term impact across both regions. In North America, sharply higher and volatile diesel prices are putting pressure on costs across the supply chain.

Combined with an exceptionally tight freight market, this remains a strong headwind. As a reminder, rising freight costs are not passed through directly; they are recovered through pricing over time. In other impacts in North America, higher diesel prices are also flowing through to OCC and chemicals, reflecting increased transportation costs and oil-linked inputs. In EMEA, OCC prices remain relatively stable given supply availability, though we do expect higher collection and distribution costs to begin showing up as we move into the second quarter. I am on slide 10. Now turning to our enterprise results for the first quarter.

Overall performance reflects a challenging operating environment, normal seasonal volume declines, and several deliberate actions we have taken to strengthen the business long term. On sales, year-over-year growth primarily reflects the additional month of DS Smith in Packaging Solutions EMEA. Sequentially, revenue stepped down as expected due to normal seasonality across end markets. In Packaging Solutions North America, sales are also impacted by our decision to exit nonstrategic export business following the Savannah shutdown. Adjusted EBIT for the quarter was $188 million, benefiting from the absence of accelerated depreciation that we saw in prior periods. Adjusted EBITDA was $677 million and margins were 11.3%.

We will address the underlying margin drivers, including mix, cost timing, and execution-related impacts in more detail as we move through the discussion. Free cash flow was $94 million in the quarter, which included a one-time $280 million tax refund. As a reminder, we also received $1.1 billion from the sale of the GCF business in the quarter, allowing us to pay down $660 million of debt, further strengthening the balance sheet. While earnings came in below our expectations, we must control what we can control. We are laser-focused on accelerating cost reductions in both regions, maximizing high-quality organic and inorganic investments, and winning share intelligently. Now Lance will provide additional details on each business.

Lance T. Loeffler: Thanks, Andy. Turning to slide 11 and starting with our Packaging Solutions North America first quarter results compared to our fourth quarter results. Price and mix was favorable by $24 million, driven primarily by product mix as well as higher export pricing. Volume was $52 million unfavorable, reflecting the normal seasonal step down across all channels from a strong fourth quarter as well as lower export sales from repositioning containerboard into the domestic market. Operations and costs were $29 million unfavorable, primarily due to the winter storm impact of approximately $18 million as well as elevated cost due to reliability challenges. While we still experience some isolated reliability incidents each quarter, we are seeing progress.

Improved operational performance across the mill contributed $15 million of benefit in the quarter. Converting run rates continue to improve, and the footprint rationalization is delivering cost out each quarter. These improvements helped offset inflation and weather-related disruptions. Maintenance and outages were $17 million favorable, driven primarily by the timing of a planned outage. With reduced production in our mill system during the winter storm, our timing for certain planned outages shifted in order to support inventory build in advance of a heavy second quarter outage schedule. That deferral created approximately $20 million of timing benefit in the first quarter, with the outage now expected to take place in the second quarter.

Input costs were $43 million unfavorable, primarily due to a regional spike in natural gas prices and local utility costs related to the winter storm across our mill and box system, representing approximately $35 million. Overall, the January winter storm resulted in approximately $53 million of unfavorable EBITDA impact across operations, costs, and inputs. In total, Packaging Solutions North America delivered $477 million of adjusted EBITDA in the first quarter. Moving to our second quarter outlook for Packaging Solutions North America, on slide 12. Price and mix are expected to improve, driven primarily by favorable product mix. That improvement is partially offset by the impact of the $20 per ton price decrease published in February.

As a reminder, given normal price realization lags, the published price increases of $40 per ton in March and $30 per ton in April will benefit results beginning in the third quarter. Volume is expected to be favorable, reflecting a seasonal pickup and one additional shipping day sequentially. Operations and costs are expected to be slightly unfavorable sequentially, primarily driven by the downtime associated with the Riverdale paper machine conversion and costs related to the additional machine work that coincides with planned outages, offset by the non-repeat of the first quarter weather impacts and the benefit from cost reduction initiatives related to distribution.

Maintenance and outages are expected to be unfavorable sequentially, as the second quarter represents roughly twice a normal outage schedule, which includes spending tied to the Riverdale conversion. Finally, input costs are expected to be favorable primarily due to favorable seasonal weather, partially offset by higher OCC and freight costs driven by diesel prices. These items result in an adjusted EBITDA outlook for Packaging Solutions North America of approximately $380 million to $410 million for the second quarter. Let us turn to slide 13 and walk through what has changed in our 2026 Packaging Solutions North America outlook.

At a high level, the full-year outlook reflects unfavorable impact of the macro environment, winter weather, and weaker-than-expected operating performance, with published pricing actions providing a meaningful offset. We see North America industry demand roughly flat for the year, with our business growing approximately 2% above the market based on known customer wins. On the left-hand side of the slide, you can see our original 2026 adjusted EBITDA outlook of $2.5 billion to $2.6 billion has been updated to $2.35 billion to $2.5 billion. On the right-hand side is a bridge that explains what is driving this change.

Pricing is the largest positive impact, approximately $175 million, which reflects the cumulative price impact of February, March, and April price index publications. That benefit is offset by several headwinds. The macro environment represents about a $200 million unfavorable impact, primarily driven by higher diesel and chemical costs, inflation in OCC and other raw materials, as well as the impact of lower demand. Performance represents approximately $75 million of headwinds, primarily driven by operation reliability costs as well as operational and commercial challenges in our specialty business. And finally, winter weather in the first quarter created an impact of approximately $50 million as I previously discussed.

Taken together, these items explain the step down from our original outlook to where we are today. The next slide highlights why we continue to expect meaningful improvement in the second half as these pressures ease and execution benefits come through. Moving to slide 14. With a full-year adjusted EBITDA outlook of $2.35 billion to $2.5 billion, we now expect to deliver $900 million in the first half with a step up of roughly $650 million, significantly increasing our second half results. The right side of the slide walks through the primary drivers, which are well understood and are being executed in detail by our Packaging Solutions North America team.

The largest contributor is an uplift in pricing, volume, mix, and seasonality totaling about $300 million, reflecting published price flowing through, seasonal demand patterns, and mix benefits as we move into the back half of the year. Eighty-twenty initiatives are expected to drive roughly $150 million of cost out, driven by footprint actions, productivity improvements, and supply chain initiatives that are already underway. Planned maintenance outages contribute another $150 million as heavier outage activity in the first half rolls off in the second half. Conversion of the Riverdale paper machine and the mill’s annual outage will be finished by the end of the second quarter. Those first-half impacts of approximately $100 million will not repeat in the second half.

These benefits are partially offset by continued macro pressures, which we estimate as roughly a $50 million headwind in the second half, reflecting higher prices for diesel and chemicals. Putting it all together, these growth and timing impacts support an improvement of roughly $650 million. The key takeaway is that the second half improvement is driven by execution, pricing flow-through, and normalization of known factors, and it underpins our confidence in Packaging Solutions North America earnings trajectory for the remainder of 2026. Turning to Packaging Solutions EMEA on slide 15. The business delivered solid first quarter results amid a challenging and dynamic macro environment. Price and mix was $12 million favorable sequentially.

Packaging margins expanded due to the €40 paper price decline in January, which was mostly offset by lower paper margins tied to that same price decline. Volume was $3 million favorable sequentially. Although the post-holiday ramp-up in January was lower than expected, we were encouraged by improving trends as the quarter progressed. March volumes were up year over year on a same-day basis, indicating momentum heading into the second quarter. Operations and costs were $39 million unfavorable sequentially, primarily reflecting elevated costs as a result of one-time changes in segment allocations and incentive compensation. Higher European energy price volatility had a minimal impact on results in the quarter, supported by our existing hedging program.

All in, Packaging Solutions EMEA delivered $208 million of adjusted EBITDA in the first quarter. Moving to our second quarter outlook for Packaging Solutions EMEA on slide 16. The key theme for the second quarter is peak margin compression, as higher paper costs are realized ahead of pricing recovery. Energy-driven increases in paper prices are flowing through immediately, while pricing actions in packaging lag by roughly three to six months. This timing dynamic is pressuring margins in the near term before expanding as box pricing catches up. We expect pressure to moderate in the second half as prior paper price increases flow through our box contracts, with margins progressively improving.

Against that backdrop, price and mix are expected to be unfavorable for the second quarter. Volume is expected to be favorable sequentially, primarily driven by recovery from the softness experienced in January and continuation of improving trends seen in March and April. We also expect incremental contributions from known customer wins secured in 2025 to build through the second quarter and into the second half. Operations and costs are expected to be unfavorable, primarily reflecting higher distribution costs flowing through the supply base, as well as lower levels of energy subsidies. Finally, input costs are expected to be unfavorable, driven by higher OCC and energy costs.

These items result in an adjusted EBITDA outlook for Packaging Solutions EMEA of approximately $150 million to $170 million in the second quarter. Turning to slide 17. I would like to walk through what has changed since we originally set our 2026 outlook for Packaging Solutions EMEA and how that translates to the updated full-year EBITDA target. Since we set our original 2026 outlook, the net impact of the change is approximately $100 million, lowering our adjusted EBITDA range from $1.0 billion to $1.1 billion to $900 million to $1.0 billion. The largest driver is on the commercial side, totaling approximately $100 million. This reflects a combination of lower expected sales volume and margin compression versus our original assumptions.

In particular, as we moved into the year, volume was affected by deliberate trade-offs we made last year in our commercial approach, and we also saw pressure on contribution margins in parts of the portfolio. On cost, the net impact is flat. The continued pressure from higher oil prices impacting distribution costs is offset by favorable OCC costs and cost-out actions already underway across the business. Overall, the outlook represents a cost-volume squeeze in the second quarter that eases in the third and fourth quarters, with strong price momentum going into 2027 assuming price increases into the market stick. Turning to slide 18.

We outline the key drivers behind the step change we expect in EMEA as we move from the first half into the second half of the year. The core of the second half improvement is margin recovery and commercial uplift. As discussed earlier, we saw energy and paper price increases in the first quarter, and given it takes three to six months for these increases to flow through to our box contracts, we expect packaging margins to expand in the second half of the year. On the volume side, the second half also benefits from three additional shipping days, normal seasonal improvement, and the onboarding of new customer wins.

Taken together, margin recovery and commercial volume uplift are expected to contribute approximately $110 million of incremental EBITDA in the second half. Beyond margin and volume, there are two additional contributors to the step up. First, we expect to realize $40 million of cost-out benefits in the second half, primarily from footprint optimization actions that improve network efficiency, reduce fixed costs, and support structural margin recovery. Second, we are assuming approximately $50 million of energy price improvement, reflecting anticipated cost normalization in the second half, assuming no further material escalation in the Middle East. Altogether, these factors result in second half adjusted EBITDA of $540 million to $620 million for EMEA.

Combined with our first half outlook, this view supports our full-year 2026 adjusted EBITDA target of $900 million to $1.0 billion for Packaging Solutions EMEA. With that, I will turn the call back over to Andy.

Andrew K. Silvernail: Thanks, Lance. I am on slide 19. Before we wrap up the EMEA discussion, I want to provide a brief update on our separation process. As we outlined on our January earnings call, we announced plans to create two separate publicly traded companies in North America and EMEA. Since then, a small core team has been working through the separation planning, and we have made meaningful progress over the past three months. Following the separation, International Paper Company expects to retain approximately a 20% ownership stake for roughly twelve to eighteen months, and the EMEA packaging business is expected to be dual listed on both the LSE and NYSE. We also expect both companies to have investment-grade credit ratings.

From a timing standpoint, we remain on track to complete the separation within the twelve to fifteen month time frame we outlined in January, subject to customary approvals and conditions. This move is the right step to accelerate value creation for both businesses and will enable us to achieve best-in-class performance in each regional business. Let me close on slide 20 by stepping back and reinforcing what matters most. At International Paper Company, our focus remains clear and consistent: driving long-term value creation. Our eighty-twenty approach continues to sharpen our attention on the most important value drivers, reducing complexity, and improving execution across the company.

Against the backdrop of heightened macroeconomic uncertainty, including elevated input costs and ongoing pressures affecting consumer demand, we have updated our full-year 2026 outlook for both businesses. In North America, we expect to deliver $2.35 billion to $2.5 billion of adjusted EBITDA. In EMEA, we are targeting $900 million to $1.0 billion of adjusted EBITDA. At the enterprise level, including corporate, that translates to $3.2 billion to $3.5 billion of adjusted EBITDA. Free cash flow of approximately $300 million to $500 million reinforces our commitment to disciplined capital allocation, a strong balance sheet, and returning cash to shareholders.

We are making real and meaningful progress in every part of our organization, as we focus on controlling our own destiny while navigating the macro environment. We remain confident in our ability to drive long-term value creation at International Paper Company. We will now open the call for questions.

Operator: Thank you. If you would like to ask a question, please press 1. To withdraw your question, press 1 again. Our first question comes from the line of Michael Andrew Roxland with Truist Securities. Please go ahead.

Michael Andrew Roxland: Thank you, Andrew, Lance, Mandi, and team for taking my questions. Good morning. Andy, I wanted to get a sense, with the revised guide to $3.2 billion to $3.5 billion this year, that was, at the midpoint, a $250 million cut. Can you help us bridge how to get to 2027 EBITDA of $5 billion, particularly as this cut and whatever incremental costs are a setback to some degree?

Andrew K. Silvernail: No problem. Thanks, Mike. So I think what I do is focus on what Lance took you through—the bridge from the first half to the second half—which I think has been put through in a lot of detail there and how that builds itself up, and the reliability of those elements and how they flow through the P&L. If you look at the balance of that and then you add incremental price that will flow through in the year—so right now in North America, you are talking about a net of $50 that has been published. You will get about half of that this year; you will get half of that incrementally next year.

And then in Europe, you have a €100 price increase that has gone through. You will get a piece of that this year and the bulk of that in the following year. And so you take those incremental items, plus what was in our funnel relative to operating cost improvements, and consider a very modest market growth—returning to overall normal market growth, about a point in the U.S. and a point to two points in Europe—plus share wins that we believe that we will have in the year. That all adds up right into the range that we are talking about.

Michael Andrew Roxland: Got it. So just a quick follow-up. I do not believe the original guidance embedded much in the way of price. So really the incremental here is you are going to be able to hit your guide because of the $50 per ton net in North America plus €100 per metric ton in Europe as well. That is really what is going to help you hit your 2027 target.

Andrew K. Silvernail: Yes. To be clear, Mike, this does not include any other pricing that may come through. So nothing that has been talked about in the market. The only thing that is included in there is what has been published so far.

Michael Andrew Roxland: Got it. And then just quickly, on strategic customer wins—obviously it is helping you drive your volume growth, pretty strong performance there. To the extent you can comment, in what end markets do you see these gains? And can you also remind us of how International Paper Company was able to secure these wins, assuming that nothing was done on price given the company’s refocused commercial mindset?

Andrew K. Silvernail: Yes, a few things there. We have seen pretty consistent wins here since 2024 and through 2025. It has been a broad mix across end markets, so it is really across every product category that we have been in. We have won nationally, and we have won locally in the U.S., and we have done a very nice job with what we call our central accounts in Europe—think pan-European accounts. We have not done as well locally in Europe as we have in the U.S. We need to get better from that regard. So it is broad based, and it is national and local accounts that we have seen. To your point, we have not been aggressive on pricing.

We have tried to really price to the market. As you know, with any large tender, price is a factor in there, but that comes after service and it comes after quality. Reliability of supply is the single most important factor for every customer. As you are onboarding a large customer—and we have done several here over the last year or so—that takes considerable time because they are exceptionally concerned about that cutover and not losing the ability to get their packaging supplies. We have seen that very consistently. We have, very purposefully, kept our discipline relative to market pricing, and I think that is very important.

We are starting to see those things play out in the marketplace as we are seeing inflation make its way through. I feel really good about where we are commercially. As you know, we have radically restructured our sales force and our incentive system in the U.S. Europe is a little bit different model. There is a pan-European model and a local model, and we are getting more synthesis and more synergy from those businesses coming together—the legacy IP and the legacy DS Smith EMEA. But it really is winning customer by customer.

Michael Andrew Roxland: Got it. Very clear. Good luck.

Andrew K. Silvernail: Thanks, Mike.

Operator: Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Mark Weintraub: Thanks, Andy. For a while there, you were way behind the eight ball on market growth—you were losing a lot of share—and you turned that around. Now we are seeing it. What we are not seeing is the reliability part of the equation playing out. Are you seeing things now that can give us confidence that is going to start showing up, and what are those things? And as a quick follow-up, is there a ballpark number as to how much quasi one-time transformation and contract costs might be impacting this year, where you can have a high degree of confidence that it should not repeat next year?

Andrew K. Silvernail: If you go back to the slide that shows the capacity utilization and the productivity improvements in the mill and the box plant, starting in 2024 when we really started to execute the overall changes—that was a combination of accelerating capital investment and the lighthouse approach, which is really a focused approach around how you run a good system daily—you see a 7% to 8% overall improvement in those systems in North America. Where we are missing, Mark, is in the transformation and transactional costs. Think of things like network cost in terms of distribution and shipping, the cost of having assets on our books longer than expected and having to maintain them—we are absorbing some of that.

We are also, unfortunately, absorbing some contract costs; if you look back at the [inaudible] contract, which ends this month—so in April—that ends. We will absorb about $20 million more than expected in that contract because of performance. That is going to come out, and those assets no longer need to perform, and they were assets that, frankly, were underinvested in. Our specialty business—think bulk products and the like—has missed our expectations. The market has been weaker; we have had reliability issues; we have accelerated the investment there. The key is that the core large-scale assets that we are investing in are showing measurable changes in productivity driven by reliability.

As you know, reliability is the underlying first step in productivity. Now we have to drive down these ancillary costs that have been out there, and we have very good line of sight to that. As an example, if you think of cube utilization in transportation, we have gone very aggressively after that. We are still early, and we have driven huge improvements in the first stages. So, major improvements in the major assets, and now we have to take care of these ancillary issues that are very solvable but, frankly, a pain and worse than our expectations. On the quasi one-time bucket, it is at least $100 million.

Mark Weintraub: Super. And then if I could quickly on NORPAK—three big paper machines, a lot of production capacity. Hard from the outside to square away all the numbers. Anything additional you can tell us about EBITDA and what it can bring to you?

Andrew K. Silvernail: First of all, Mark, I am very excited about this. If you think about our overall strategy around our mill network—which is to drive down the overall cost point to an advantaged cost position—second, driving reliability throughout the system, and finally driving overall returns, this is a great example of the kind of investments and changes we need to make. We closed three North American mills last year—Savannah and Red River being the two big ones. In both of those assets, we concluded after a lot of work that you are never going to earn an exciting incremental return there. As we closed those, we fundamentally did two big things.

Number one, we moved a bunch of people and investment to Mansfield. If you recall, Mansfield was a huge issue a year ago, and we have effectively eliminated that issue. I was at Mansfield very recently with the team. They have done a masterful job. While it is not where we want it to be yet, compared to a year ago, it is remarkable what they have done with better capabilities, some new team members, and a bunch of new investment. So that is one big step—going from an underperforming asset to a really high-performing asset with a great team that can drive excellent returns. Second, you have NORPAK. On the West Coast, we are significantly short paper.

We are shipping paper to the West Coast uneconomically. NORPAK allows us to go more toward the lightweight market that is critically important there. It is a big asset with three paper machines—two in our core market, one that is not but can be in the future if we choose. As I look at that trade of assets, it is exactly the kind of thing we need to do—moving from the left-hand side of the performance curve to the right-hand side with Mansfield and NORPAK. In terms of returns, our belief on a full-year basis as we get into 2027 is high teens or better in terms of return on invested capital.

It has solid EBITDA in its current system, and we have some work to do—less on the asset itself and more on integrating it into our network.

Operator: Your next question is going to come from the line of Anthony James Pettinari with Citi. Please go ahead.

Brian Bergmeyer: Hi. Good morning. This is actually Brian Bergmeyer on for Anthony. Thanks for taking the question. Just wondering if you could share some high-level thoughts on the supply-demand outlook in Europe. We have seen some closure announcements and higher energy prices pressuring higher-cost players. How are you thinking about the broader outlook for the region?

Andrew K. Silvernail: I would say demand is modestly down compared to expectations. It is still growing in Europe, modestly. We expect it to be about a point less than we came into the year when it is all said and done, driven from the consumer side—consumers being overall more hesitant for well-known reasons, including the most recent impacts of the conflict in Iran. We expect that to continue for a bit as uncertainty is out there—economically, broad-based uncertainty that was first driven by trade and tariffs and now the conflict in the Middle East. It will be a little weaker than expected, but still positive.

On the energy side, as Lance mentioned, we have a very effective hedging strategy in place that, assuming price sticks, will buy us time to pass through into the marketplace. The €100 has gone through; that €100 is worth about €300 million on an annualized basis in Europe, and it will overcome the issues we are facing short term. If you look at our P&L, we are getting that profit accordion squeeze in the short term—specifically in the second quarter—until pricing starts to make its way through the system. Relative to high-cost producers, one important aspect in EMEA given the energy shock is that bottom quartile assets tend to be older, have more reliability problems, and are more fossil-fuel dependent.

Combine those, and this situation is very painful. As best as we can tell—from our analytics and outside experts—the fourth quartile is very likely under cash cost right now. You are seeing small actions relative to that—temporary shutdowns, furloughs, a few closures. We also have to be realistic: historically, you do not see a mass pivot point where the fourth quartile closes en masse. They will hold on as long as possible, hoping that price comes to the market. Capacity is slowly coming out of the system as folks are under cash cost. This is a very difficult time if you are a fourth quartile producer.

Brian Bergmeyer: Got it. Really appreciate the detail. Just one quick follow-up: was there any change in demand throughout the quarter into April following the cost spike in March?

Andrew K. Silvernail: Not really. We have not seen a major change. From a pattern standpoint, January in the U.S. was really strong—it popped up. As I expressed openly in our quarterly calls and in one-on-ones, we believed a big piece of that was the drawdown of inventory that happened in the fourth quarter and that was a snapback, and that proved to be accurate. We are seeing normalization now. The market in the U.S. is basically flat; the marketplace was down 0.3% overall in the first quarter. The important thing is looking at it on a per-day basis. We think the second quarter is basically flat.

The balance of the year is effectively flat for the industry in North America, and we will outpace that. As we get into the second half, we will have more difficult comps, so that will come down. Overall, we believe we will beat the market by about two points. In Europe, you are going to see basically half a point to a point of market growth. That is what it feels like right now. We were a little behind the market in the first quarter, and as we have been holding on price to value, we will be targeted where we need to be to make sure we do not lose important business on price where we should not.

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