International Paper Company

Q3 performance: execution improved, but cash flow hurt - Management said Q3 delivered an *“important inflection”* despite weak consumer confidence and rising inflation. - Enterprise adj. EBITDA margin: improved ~400 bps sequentially to 13.6%; adj. operating EPS: $0.37. - Free cash flow (FCF): -$267m in Q3—driven by cash payments for 2Q heavy maintenance, annual interest on legacy DS Smith debt, and an inventory build after the planned outage season (i.e., working capital timing more than operating deterioration). - Full-year FCF outlook: ~$100m–$200m (despite Q3 negative cash flow).

North America (Packaging Solutions NA): above expectations; outperforming demand; productivity ramp - Box shipments: -2% YoY in Q3, described as ~1 point better than industry demand estimate. - Continued headwinds: West Coast fresh fruit/vegetable disruption, protein softness from smaller livestock herds, and a strained consumer from inflation. - Management expectation: North America should outpace industry demand by ~2 percentage points for full-year 2026 (and >1% in Q4). - Pine Hill restart ahead of schedule after roof repairs; impact minimized on shipments via disciplined, safety-focused execution. - Earnings bridge drivers for Q3 NA: price realization, lower planned outage activity, and absence of spend tied to completed Riverdale conversion; offset by higher-than-expected inflation and some event impacts (including temporary Pine Hill shutdown net of insurance).

North America outlook/forecast changes (big investor focus): EBITDA guide down modestly - Q4 NA adj. EBITDA: guided ~$700m–$740m, supported by: - favorable price/mix (September price increase expected to flow through late Q4), - slightly favorable operations/costs (Riverdale ramp, NORPAK synergies, and removal of the Q3 Pine Hill expense), - but assumes continued inflationary pressure (diesel/OCC/energy unfavorable). - Full-year 2026 NA adj. EBITDA outlook reduced to $2.27b–$2.31b. - Management cited new incremental headwinds since prior outlook of ~$145m, mainly higher diesel fuel/distribution costs and increased volume pressure, including ~$20m net from Pine Hill event (insurance not included previously). - Some offset from ~$35m price benefit from faster June realization and partial September realization. - Pricing realization timing: September increase mostly realized by end of Q1 / early Q2 (about 4–5 months realization lag).