International Paper Company PFD $4

Q3 performance: execution improved, but cash flow weak (and inflation persists) - Management said they “improved execution” in a tough macro backdrop (weak consumer confidence, rising inflation). - Enterprise Q3 adjusted EBITDA margin improved ~400 bps sequentially to 13.6%; adjusted EPS: $0.37; adjusted EBITDA: $843M (includes $37M corporate). - Free cash flow (FCF) was -$267M in Q3 (key reasons: heavy maintenance cash payments from Q2, annual interest on legacy DS Smith debt, and inventory build after the planned outage season). - Full-year FCF outlook unchanged/affirmed: ~$100M to $200M.

North America packaging: above-industry demand in outlook; productivity wins, but cost inflation and ag disruption still hurt - Q3 shipments: box shipments down ~2% YoY (stated as ~1 point better than industry demand). - Outlook for demand: expects to outpace industry demand by ~2 percentage points for full-year 2026, and outperform by >1% in Q4. - Q3 headwinds: disruption in West Coast fresh fruit & vegetable business + protein softness (from smaller herds), plus strained consumer/inflation. - Key positives: productivity improvements across the mill system, including Pine Hill roof repairs with restart ahead of schedule and safe minimal disruption; plus continued ramp benefits (Riverdale, NORPAX/NORPAK synergies, 20 initiatives). - Big negative cost items: Q3 inflation impact included higher diesel/OCC/energy (+$55M unfavorable) and Pine Hill temporary shutdown (~$20M unfavorable, partially offset by insurance recovery).

Updated full-year 2026 North America financial outlook: lowered by new headwinds - Full-year Packaging Solutions North America adjusted EBITDA: $2.27B–$2.31B (i.e., implied deterioration vs prior outlook). - Management cited incremental headwinds ~+$145M since the prior outlook, mainly: - higher diesel fuel & distribution costs - volume pressure - ~$20M Pine Hill event impact (net of insurance) noted as added headwind - employee medical costs and an outage timing move (from 1Q’27 into 4Q’26) - Offsetting factors: ~$35M price benefit from faster realization of June increase plus partial realization of the September increase.