International Paper Co Earnings - Q3 2025 Analysis & Highlights

Key Takeaways

International Paper Co.'s Q3 2025 earnings call highlighted significant progress on its transformation strategy, despite challenging macro conditions in North America and EMEA. Key themes included strong EBITDA growth in North America, cost-cutting initiatives, and a revised outlook for 2025 and 2027 due to market headwinds.

Key Financial Results

  • Third quarter revenue was slightly higher sequentially due to strong price realization and stable volumes.
  • EBITDA improved by 28%, with margin expansion of approximately 300 basis points.
  • Adjusted EBIT and EPS results included accelerated depreciation expense of $675 million related to facility closures, impacting EPS by $0.81.
  • Free cash flow increased sequentially to $150 million, driven by strong growth in operating cash flow, despite transformation costs.
  • Adjusted EBITDA is used for bridges as a better comparative metric during the company's transformation.

    • Business Segment Results

  • Packaging Solutions businesses grew EBITDA sequentially by 28%.
  • In North America, adjusted EBITDA increased 40% year-to-date, with adjusted EBITDA margin expanding by 370 basis points.
  • EMEA business grew EBITDA and expanded margins sequentially, despite soft demand.
  • North America's adjusted EBITDA was $655 million.
  • EMEA's third quarter adjusted EBITDA was $209 million.

    • Capital Allocation

  • Proceeds from the sale of GCF will be used to reinvest in Packaging Solutions businesses and pay down debt.
  • Capital will be redeployed for stronger returns within the business.
  • The company is investing aggressively in its transformation.
  • Avoided $300 million capital call by closing Savannah.

    • Industry Trends and Dynamics

  • US box industry shipments are now expected to be down approximately 1% to 1.5% for the full year.
  • EMEA box volume is now seen closer to 1%.
  • European market has been challenged by demand softness.

    • Competitive Landscape

  • In North America, the company took market share and grew box shipments in September.
  • The company expects to have above market performance in the fourth quarter and 2026 in North America.
  • The company is focused on a customer-centric approach.

    • Macroeconomic Environment

  • Macro conditions in North America and EMEA continue to be challenging.
  • Factors like trade uncertainty, soft consumer sentiment, and a weak housing market are impacting industry shipments.
  • The European market has been challenged by demand softness, and there have been several price index decreases offsetting that original gain.

    • Growth Opportunities and Strategies

  • The company's strategy is rooted in 80/20, which has four elements: simplify, segment, resource, and grow.
  • The company is simplifying its organization by exiting select businesses, markets, and functions to sharpen focus and liberate resources.
  • A key step of segmentation is the rollout of the lighthouse model.
  • The company is directing resources toward its most advantaged opportunities to drive higher reliability and productivity.
  • The company is reinvesting in strategic priorities.
  • The company is investing in a best-in-class experience for its customers.
  • The company is launching lighthouse pilots in Spain and the UK.

    • Financial Guidance and Outlook

  • Fourth quarter outlook for North America is approximately $600 million of EBITDA.
  • Fourth quarter EBITDA outlook for EMEA is approximately $230 million.
  • The company expects $600 million of incremental adjusted EBITDA in 2026 from actions announced in 2025.
  • Revised full year 2025 targets are $24 billion of net sales, adjusted EBITDA of $3 billion, and free cash flow of negative $100 million to $300 million.
  • The company can deliver $5 billion of EBITDA in 2027.
  • The company expects to outpace the market by a couple of points in 2026 in North America.