International Paper 2012 Annual Report Download - page 57

freesheet paper were higher in Russia, but lower in
Europe reflecting weak economic conditions and
market demand. Average sales price realizations for
pulp decreased. Lower input costs for wood and
purchased fiber were partially offset by higher costs
for energy, chemicals and packaging. Freight costs
were also higher. Planned maintenance downtime
costs were higher due to executing a significant
once-every-ten-years maintenance outage plus the
regularly scheduled 18-month outage at the Saillat
mill while outage costs in Russia and Poland were
lower. Manufacturing operating costs were favor-
able.
Entering 2013, sales volumes in the first quarter are
expected to be seasonally weaker in Russia, but about
flat in Europe. Average sales price realizations for
uncoated freesheet paper are expected to decrease in
Europe, but increase in Russia. Input costs should be
higher in Russia, especially for wood and energy, but
be slightly lower in Europe. No maintenance outages
are scheduled for the first quarter.
Indian Papers includes the results of Andhra
Pradesh Paper Mills (APPM) of which a 75% interest
was acquired on October 14, 2011. Net sales were
$185 million in 2012 and $35 million in 2011. Operat-
ing profits were a loss of $16 million in 2012 and a
loss of $3 million in 2011.
Asian Printing Papers net sales were $85 mil-
lion in 2012, $75 million in 2011 and $80 million in
2010. Operating profits were improved from break-
even in past years to $1 million in 2012.
U.S. Pulp net sales were $725 million in 2012
compared with $725 million in 2011 and $715 million
in 2010. Operating profits were a loss of $59 million
in 2012 compared with gains of $87 million in 2011
and $107 million in 2010.
Sales volumes in 2012 increased from 2011 primarily
due to the start-up of pulp production at the Franklin
mill in the third quarter of 2012. Average sales price
realizations were significantly lower for both fluff
pulp and market pulp. Input costs were lower,
primarily for wood and energy. Freight costs were
slightly lower. Mill operating costs were unfavorable
primarily due to costs associated with the start-up of
the Franklin mill. Planned maintenance downtime
costs were lower.
In the first quarter of 2013, sales volumes are
expected to be flat with the fourth quarter of 2012.
Average sales price realizations are expected to
improve reflecting the realization of sales price
increases for paper and tissue pulp that were
announced in the fourth quarter of 2012. Input costs
should be flat. Planned maintenance downtime costs
should be about $9 million higher than in the fourth
quarter of 2012. Manufacturing costs related to the
Franklin mill should be lower as we continue to
improve operations.
Consumer Packaging
Demand and pricing for Consumer Packaging prod-
ucts correlate closely with consumer spending and
general economic activity. In addition to prices and
volumes, major factors affecting the profitability of
Consumer Packaging are raw material and energy
costs, freight costs, manufacturing efficiency and
product mix.
Consumer Packaging net sales in 2012
decreased 15% from 2011 and 7% from 2010.
Operating profits increased 64% from 2011 and 29%
from 2010. Net sales and operating profits include
the Shorewood business in 2011 and 2010. Exclud-
ing asset impairment and other charges associated
with the sale of the Shorewood business, and facility
closure costs, 2012 operating profits were 27% lower
than in 2011, but 23% higher than in 2010.
Benefits from lower raw material costs ($22 million),
lower maintenance outage costs ($5 million) and
other items ($2 million) were more than offset by
lower sales price realizations and an unfavorable
product mix ($66 million), lower sales volumes and
increased market-related downtime ($22 million),
and higher operating costs ($40 million). In addition,
operating profits in 2012 included a gain of $3 million
related to the sale of the Shorewood business while
operating profits in 2011 included a $129 million
fixed asset impairment charge for the North Ameri-
can Shorewood business and $72 million for other
charges associated with the sale of the Shorewood
business.
Consumer Packaging
In millions 2012 2011 2010
Sales $3,170 $3,710 $3,400
Operating Profit 268 163 207
North American Consumer Packaging net
sales were $2.0 billion in 2012 compared with $2.5
billion in 2011 and $2.4 billion in 2010. Operating
profits were $165 million ($162 million excluding a
gain related to the sale of the Shorewood business)
in 2012 compared with $35 million ($236 million
excluding asset impairment and other charges asso-
ciated with the sale of the Shorewood business) in
2011 and $97 million ($105 million excluding facility
closure costs) in 2010.
Coated Paperboard sales volumes in 2012 were
lower than in 2011 reflecting weaker market demand.
Average sales price realizations were lower, primar-
ily for folding carton board. Input costs for wood
increased, but were partially offset by lower costs for
chemicals and energy. Planned maintenance down-
time costs were slightly lower. Market-related down-
time was about 113,000 tons in 2012 compared with
about 38,000 tons in 2011.
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