Why did adjusted operating earnings decline year over year despite higher net sales?

Adjusted operating earnings fell to $105 million from $193 million in Q2 2024. Management cited cost headwinds and a heavy planned maintenance outage schedule in Packaging Solutions North America, soft demand in Europe, and a significant increase in depreciation and amortization of $480 million versus $261 million a year earlier, resulting from the DS Smith acquisition.

What were the net special items in the quarter?

Net special items were an after-tax charge of $34 million ($0.06 per diluted share). These included DS Smith combination costs of $32 million before tax, severance and other costs of $39 million before tax, and Global Cellulose Fibers strategic options costs of $15 million before tax, partly offset by a $51 million pre-tax gain on the sale of five European box plants.

How did the DS Smith acquisition affect the segment structure?

Following the completed acquisition of DS Smith on January 31, 2025, the company reports three segments: Packaging Solutions North America, Packaging Solutions EMEA, and Global Cellulose Fibers. The legacy EMEA Industrial Packaging business was moved into Packaging Solutions EMEA, and prior periods were recast. Packaging Solutions EMEA net sales were $2,291 million in Q2 2025 compared with $328 million in Q2 2024.

What is the company's outlook for the third quarter?

Management said it expects stronger global revenue and earnings in the third quarter, citing confirmed strategic wins across packaging businesses, continued progress on cost-out initiatives, and fewer planned maintenance outages. It also said it is on target to achieve cost-out actions before year-end.

What is happening with the Global Cellulose Fibers business?

The filing references the company's announced decision to explore strategic options for its Global Cellulose Fibers business, with associated costs of $15 million before tax in Q2 2025. Segment operating profit was $(4) million in the quarter, compared with $17 million in Q1 2025, as higher planned outage and operating costs offset higher average sales prices.

IP/INPAP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 31, 2025. Cited figures are marked; the original filing is the authoritative source.

International Paper reported second quarter 2025 net earnings of $75 million^a, or $0.14 per diluted share, and adjusted operating earnings (non-GAAP) of $105 million, or $0.20 per diluted share, on net sales of $6.8 billion ($6,767 million).

Net sales rose from $4,734 million^b in the second quarter of 2024 and $5,901 million in the first quarter of 2025, reflecting the combined International Paper and DS Smith packaging businesses, with the Company noting this was a full quarter of the combination. CEO Andy Silvernail said margins slipped in Packaging Solutions North America due to cost headwinds and a heavy outage schedule, and that European demand remained soft, with significantly higher depreciation and amortization from the acquisition. Segment results were mixed.

Packaging Solutions North America operating profit rose to $277 million^c from $142 million in the first quarter of 2025, while Packaging Solutions EMEA swung to an operating loss of $(1) million from $46 million, and Global Cellulose Fibers posted a $(4) million loss compared with $17 million. Net special items were an after-tax charge of $34 million ($0.06 per diluted share). Free cash flow was $54 million for the quarter, and cash provided by operations was $476 million.

For the six months ended June 30, 2025, the Company reported a net loss of $(30) million. Management stated it expects stronger global revenue and earnings in the third quarter, citing confirmed strategic wins, continued cost-out progress, and fewer planned maintenance outages.

The filing also references ongoing review of strategic options for the Global Cellulose Fibers business. Results are preliminary and unaudited.

02—Key points

Key Highlights

Q2 2025 net earnings of $75 million ($0.14 per diluted share), versus $498 million ($1.41 per diluted share) in Q2 2024
Adjusted operating earnings of $105 million ($0.20 per diluted share), down from $193 million ($0.55 per diluted share) in Q2 2024
Net sales of $6,767 million, up from $4,734 million in Q2 2024 and $5,901 million in Q1 2025, reflecting the DS Smith combination
Packaging Solutions North America operating profit of $277 million, up from $142 million in Q1 2025, with management citing margin pressure from cost headwinds and planned maintenance outages
Packaging Solutions EMEA operating loss of $(1) million, down from $46 million in Q1 2025, with soft demand and higher energy costs cited
Free cash flow of $54 million in Q2 2025, compared with $167 million in Q2 2024; six-month free cash flow was $(564) million
Management expects stronger global revenue and earnings in Q3 2025, with fewer planned maintenance outages and continued cost-out progress

03—Questions

Frequently Asked Questions

Why did adjusted operating earnings decline year over year despite higher net sales?
Adjusted operating earnings fell to $105 million from $193 million in Q2 2024. Management cited cost headwinds and a heavy planned maintenance outage schedule in Packaging Solutions North America, soft demand in Europe, and a significant increase in depreciation and amortization of $480 million versus $261 million a year earlier, resulting from the DS Smith acquisition.
What were the net special items in the quarter?
Net special items were an after-tax charge of $34 million ($0.06 per diluted share). These included DS Smith combination costs of $32 million before tax, severance and other costs of $39 million before tax, and Global Cellulose Fibers strategic options costs of $15 million before tax, partly offset by a $51 million pre-tax gain on the sale of five European box plants.
How did the DS Smith acquisition affect the segment structure?
Following the completed acquisition of DS Smith on January 31, 2025, the company reports three segments: Packaging Solutions North America, Packaging Solutions EMEA, and Global Cellulose Fibers. The legacy EMEA Industrial Packaging business was moved into Packaging Solutions EMEA, and prior periods were recast. Packaging Solutions EMEA net sales were $2,291 million in Q2 2025 compared with $328 million in Q2 2024.
What is the company's outlook for the third quarter?
Management said it expects stronger global revenue and earnings in the third quarter, citing confirmed strategic wins across packaging businesses, continued progress on cost-out initiatives, and fewer planned maintenance outages. It also said it is on target to achieve cost-out actions before year-end.
What is happening with the Global Cellulose Fibers business?
The filing references the company's announced decision to explore strategic options for its Global Cellulose Fibers business, with associated costs of $15 million before tax in Q2 2025. Segment operating profit was $(4) million in the quarter, compared with $17 million in Q1 2025, as higher planned outage and operating costs offset higher average sales prices.

04—Continue

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