International Paper 2015 Annual Report Download - page 46

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Augusta, Georgia mill and $2 million of costs associated
with the sale of the Shorewood business.
Consumer Packaging
In millions 2015 2014 2013
Sales $2,940 $3,403 $3,435
Operating Profit (Loss) (25) 178 161
North American Consumer Packaging net sales were $1.9
billion in 2015 compared with $2.0 billion in 2014 and
$2.0 billion in 2013. Operating profits were $81 million
($91 million excluding the cost associated with the
planned conversion of our Riegelwood mill to 100% pulp
production, net of proceeds from the sale of the Carolina
Coated Bristols brand, and sheet plant closure costs)
in 2015 compared with $92 million ($100 million
excluding sheet plant closure costs) in 2014 and $63
million ($110 million excluding paper machine
shutdown costs and costs related to the sale of the
Shorewood business) in 2013.
Coated Paperboard sales volumes in 2015 were lower
than in 2014 reflecting weaker market demand. The
business took about 77,000 tons of market-related
downtime in 2015 compared with about 41,000 tons in
2014. Average sales price realizations increased
modestly year over year as competitive pressures in
the current year only partially offset the impact of sales
price increases implemented in 2014. Input costs
decreased for energy and chemicals, but wood costs
increased. Planned maintenance downtime costs were
$10 million lower in 2015. Operating costs were higher,
mainly due to inflation and overhead costs.
Foodservice sales volumes increased in 2015
compared with 2014 reflecting strong market demand.
Average sales margins increased due to lower resin
costs and a more favorable mix. Operating costs and
distribution costs were both higher.
Looking ahead to the first quarter of 2016, Coated
Paperboard sales volumes are expected to be slightly
lower than in the fourth quarter of 2015 due to our exit
from the coated bristols market. Average sales price
realizations are expected to be flat, but margins should
benefit from a more favorable product mix. Input costs
are expected to be higher for wood, chemicals and
energy. Planned maintenance downtime costs should
be $4 million higher with a planned maintenance outage
scheduled at our Augusta mill in the first quarter.
Foodservice sales volumes are expected to be
seasonally lower. Average sales margins are expected
to improve due to a more favorable mix. Operating costs
are expected to decrease.
European Consumer Packaging net sales in 2015 were
$319 million compared with $365 million in 2014 and
$380 million in 2013. Operating profits in 2015 were $87
million compared with $91 million in 2014 and $100
million in 2013. Sales volumes in 2015 compared with
2014 increased in Europe, but decreased in Russia.
Average sales margins improved in Russia due to
slightly higher average sales price realizations and a
more favorable mix. In Europe average sales margins
decreased reflecting lower average sales price
realizations and an unfavorable mix. Input costs were
lower in Europe, primarily for wood and energy, but were
higher in Russia, primarily for wood.
Looking forward to the first quarter of 2016, compared
with the fourth quarter of 2015, sales volumes are
expected to be stable. Average sales price realizations
are expected to be slightly higher in both Russia and
Europe. Input costs are expected to be flat, while
operating costs are expected to increase.
Asian Consumer Packaging The Company sold its 55%
equity share in the IP-Sun JV in October 2015. Net sales
and operating profits presented below include results
through September 30, 2015. Net sales were $682
million in 2015 compared with $1.0 billion in 2014 and
$1.1 billion in 2013. Operating profits in 2015 were a
loss of $193 million (a loss of $19 million excluding
goodwill and other asset impairment costs) compared
with losses of $5 million in 2014 and $2 million in 2013.
Sales volumes and average sales price realizations
were lower in 2015 due to over-supplied market
conditions and competitive pressures. Average sales
margins were also negatively impacted by a less
favorable mix. Input costs and freight costs were lower
and operating costs also decreased.
On October 13, 2015, the Company finalized the sale
of its 55% interest in IP Asia Coated Paperboard (IP-
Sun JV) business, within the Company's Consumer
Packaging segment, to its Chinese coated board joint
venture partner, Shandong Sun Holding Group Co., Ltd.
for RMB 149 million (approximately USD $23 million).
During the third quarter of 2015, a determination was
made that the current book value of the asset group
exceeded its estimated fair value of $23 million, which
was the agreed upon selling price. The 2015 loss
includes the net pre-tax impairment charge of $174
million ($113 million after taxes). A pre-tax charge of
$186 million was recorded during the third quarter in
the Company's Consumer Packaging segment to write
down the long-lived assets of this business to their
estimated fair value. In the fourth quarter of 2015, upon
the sale and corresponding deconsolidation of IP-Sun
JV from the Company's consolidated balance sheet,
final adjustments were made resulting in a reduction
of the impairment of $12 million. The amount of pre-tax
losses related to noncontrolling interest of the IP-Sun
JV included in the Company's consolidated statement
of operations for the years ended December 31, 2015,
2014 and 2013 were $19 million, $12 million and $8
million, respectively. The amount of pre-tax losses
related to the IP-Sun JV included in the Company's