International Paper 2014 Annual Report Download - page 65

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regions. Principal cost drivers include manufacturing
efficiency, raw material and energy costs and freight
costs.
Printing Papers net sales for 2014 decreased 8% to $5.7
billion compared with $6.2 billion in 2013 and 8%
compared with $6.2 billion in 2012. Operating profits in
2014 were 106% lower than in 2013 and 103% lower
than in 2012. Excluding facility closure costs,
impairment costs and other special items, operating
profits in 2014 were 7% higher than in 2013 and 8%
lower than in 2012. Benefits from higher average sales
price realizations and a favorable mix ($178 million),
lower planned maintenance downtime costs ($26
million), the absence of a provision for bad debt related
to a large envelope customer that was booked in 2013
($28 million), and lower foreign exchange and other
costs ($25 million) were offset by lower sales volumes
($82 million), higher operating costs ($49 million),
higher input costs ($47 million), and costs associated
with the closure of our Courtland, Alabama mill ($41
million). In addition, operating profits in 2014 include
special items costs of $554 million associated with the
closure of our Courtland, Alabama mill. During 2013,
the Company accelerated depreciation for certain
Courtland assets, and evaluated certain other assets
for possible alternative uses by one of our other
businesses. The net book value of these assets at
December 31, 2013 was approximately $470 million.
In the first quarter of 2014, we completed our evaluation
and concluded that there were no alternative uses for
these assets. We recognized approximately $464
million of accelerated depreciation related to these
assets in 2014. Operating profits in 2014 also include
a charge of $32 million associated with a foreign tax
amnesty program, and a gain of $20 million for the
resolution of a legal contingency in India, while
operating profits in 2013 included costs of $118 million
associated with the announced closure of our
Courtland, Alabama mill and a $123 million impairment
charge associated with goodwill and a trade name
intangible asset in our India Papers business.
Printing Papers
In millions 2014 2013 2012
Sales $5,720 $6,205 $6,230
Operating Profit (Loss) (16) 271 599
North American Printing Papers net sales were $2.1 billion
in 2014, $2.6 billion in 2013 and $2.7 billion in 2012.
Operating profits in 2014 were a loss of $398 million
(a gain of $156 million excluding costs associated with
the shutdown of our Courtland, Alabama mill) compared
with gains of $36 million ($154 million excluding costs
associated with the Courtland mill shutdown) in 2013
and $331 million in 2012.
Sales volumes in 2014 decreased compared with 2013
due to lower market demand for uncoated freesheet
paper and the closure our Courtland mill. Average sales
price realizations were higher, reflecting sales price
increases in both domestic and export markets. Higher
input costs for wood were offset by lower costs for
chemicals, however freight costs were higher. Planned
maintenance downtime costs were $14 million lower in
2014. Operating profits in 2014 were negatively
impacted by costs associated with the shutdown of our
Courtland, Alabama mill but benefited from the absence
of a provision for bad debt related to a large envelope
customer that was recorded in 2013.
Entering the first quarter of 2015, sales volumes are
expected to be stable compared with the fourth quarter
of 2014. Average sales margins should improve
reflecting a more favorable mix although average sales
price realizations are expected to be flat. Input costs
are expected to be stable. Planned maintenance
downtime costs are expected to be about $16 million
lower with an outage scheduled in the 2015 first quarter
at our Georgetown mill compared with outages at our
Eastover and Riverdale mills in the 2014 fourth quarter.
Brazilian Papers net sales for 2014 were $1.1 billion
compared with $1.1 billion in 2013 and $1.1 billion in
2012. Operating profits for 2014 were $177 million
($209 million excluding costs associated with a tax
amnesty program) compared with $210 million in 2013
and $163 million in 2012.
Sales volumes in 2014 were about flat compared with
2013. Average sales price realizations improved for
domestic uncoated freesheet paper due to the
realization of price increases implemented in the
second half of 2013 and in 2014. Margins were
favorably affected by an increased proportion of sales
to the higher-margin domestic market. Raw material
costs increased for wood and chemicals. Operating
costs were higher than in 2013 and planned
maintenance downtime costs were flat.
Looking ahead to 2015, sales volumes in the first
quarter are expected to decrease due to seasonally
weaker customer demand for uncoated freesheet
paper. Average sales price improvements are expected
to reflect the partial realization of announced sales price
increases in the Brazilian domestic market for uncoated
freesheet paper. Input costs are expected to be flat.
Planned maintenance outage costs should be $5 million
lower with an outage scheduled at the Luiz Antonio mill
in the first quarter.
European Papers net sales in 2014 were $1.5 billion
compared with $1.5 billion in 2013 and $1.4 billion in
2012. Operating profits in 2014 were $140 million
compared with $167 million in 2013 and $179 million in
2012.
Compared with 2013, sales volumes for uncoated
freesheet paper in 2014 were slightly higher in both