International Paper 2015 Annual Report Download - page 42

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Pulp: Pulp is used in the manufacture of printing, writing
and specialty papers, towel and tissue products and
filtration products. Pulp is also converted into products
such as diapers and sanitary napkins. Pulp products
include fluff, and southern softwood pulp, as well as
southern and birch hardwood paper pulps. These
products are produced in the United States, France,
Poland, Russia, and Brazil and are sold around the
world. International Paper facilities have annual dried
pulp capacity of about 1.8 million tons.
Consumer Packaging
International Paper is one of the world’s largest
producers of solid bleached sulfate board with annual
U.S. production capacity of about 1.2 million tons
(reduced from about 1.6 million tons) after initiating the
conversion of the Riegelwood Mill to 100% pulp
production in late December of 2015. Our coated
paperboard business produces high quality coated
paperboard for a variety of packaging and foodservice
end uses. Our Everest®, Fortress®, and Starcote®
brands are used in packaging applications for everyday
products such as food, cosmetics, pharmaceuticals and
tobacco products. The Carolina® brand, which was sold
to MeadWestvaco Corporation in April 2015, was used
in commercial printing end uses. Our U.S. capacity is
supplemented by about 379,000 tons of capacity at our
mills producing coated board in Poland and Russia and,
prior to its sale in October 2015, by our International
Paper & Sun Cartonboard Co., Ltd. joint venture in
China which had an annual capacity of 1.4 million tons.
Our Foodservice business produces cups, lids, food
containers and plates through three domestic plants
and four international facilities.
Ilim Holding S.A.
In October 2007, International Paper and Ilim Holding
S.A. (Ilim) completed a 50:50 joint venture to operate a
pulp and paper business located in Russia. Ilim’s
facilities include three paper mills located in Bratsk, Ust-
Ilimsk, and Koryazhma, Russia, with combined total
pulp and paper capacity of over 3.4 million tons. Ilim
has exclusive harvesting rights on timberland and forest
areas exceeding 14.8 million acres (6.0 million
hectares).
Products and brand designations appearing in italics
are trademarks of International Paper or a related
company.
INDUSTRY SEGMENT RESULTS
Industrial Packaging
Demand for Industrial Packaging products is closely
correlated with non-durable industrial goods
production, as well as with demand for processed foods,
poultry, meat and agricultural products. In addition to
prices and volumes, major factors affecting the
profitability of Industrial Packaging are raw material and
energy costs, freight costs, manufacturing efficiency
and product mix.
Industrial Packaging net sales for 2015 decreased 3% to
$14.5 billion compared with $14.9 billion in 2014, and
2% compared with $14.8 billion in 2013. Operating
profits were 2% lower in 2015 than in 2014 and 3%
higher than in 2013. Excluding costs associated with
the acquisition and integration of Temple-Inland,
goodwill impairment charges, costs associated with a
multi-employer pension liability and other special items,
operating profits in 2015 were 3% lower than in 2014
and 8% higher than in 2013. Benefits from lower input
costs ($175 million) were offset by lower average sales
price realizations and mix ($144 million), lower sales
volumes ($36 million), higher operating costs ($43
million) and higher maintenance outage costs ($16
million). Additionally, operating profits in 2015 include
a goodwill and trade name impairment charge
associated with our Brazil Packaging business ($137
million). Operating profits in 2014 include a goodwill
impairment charge of $100 million related to our Asia
Industrial Packaging business, costs of $16 million
associated with the integration of Temple-Inland, a
charge of $35 million associated with a multi-employer
pension plan withdrawal liability and a net charge of $7
million for other items. Operating profits in 2013 include
costs of $62 million associated with the integration of
Temple-Inland, a gain of $13 million related to a bargain
purchase adjustment on the acquisition of a majority
share of our operations in Turkey, and a net gain of $1
million for other items.
Industrial Packaging
In millions 2015 2014 2013
Sales $ 14,484 $ 14,944 $ 14,810
Operating Profit 1,853 1,896 1,801
North American Industrial Packaging net sales were $12.5
billion in 2015 compared with $12.7 billion in 2014 and
$12.5 billion in 2013. Operating profits in 2015 were
$2.0 billion compared with $2.0 billion (both including
and excluding costs associated with the integration of
Temple-Inland, a multi-employer pension withdrawal
liability and other special items) in 2014 and $1.8 billion
(both including and excluding costs associated with the
integration of Temple-Inland and other special items in
2013.