International Paper Swings to Loss as EBITDA Slides for Third Quarter
International Paper posted a $12 million loss from continuing operations in the second quarter as adjusted EBITDA fell for a third straight period to $587 million.
International Paper (IP) swung to a loss from continuing operations in the second quarter, reporting a $12 million shortfall that compared with income of $76 million in the first quarter and $75 million a year earlier. The paper and packaging maker's diluted earnings per share from continuing operations fell to a loss of $0.02, down from $0.14 in each of the prior two comparable quarters.
The results extended a decline that has been building since late last year. Adjusted EBITDA from continuing operations dropped to $587 million in the quarter, down 12.4% both sequentially from $677 million and year-over-year from $670 million, marking the third consecutive quarterly decline after $758 million in the fourth quarter of 2024. Net sales of $6.00 billion rose modestly from $5.97 billion in the first quarter but remained 2.2% below the $6.14 billion posted in the second quarter of 2024.
Free cash flow turned negative for the first time in this stretch, coming in at negative $7 million versus positive $94 million in the first quarter and $54 million a year earlier. Cash and temporary investments fell to $726 million as of June 30 from $1.145 billion at the end of 2024, reflecting $1.212 billion used in financing activities during the first half, including $593 million in debt reduction and $490 million in dividends paid.
The company's two packaging segments diverged in the direction of the pressure. Packaging Solutions North America operating profit fell to $204 million from $248 million in the first quarter and $277 million a year earlier, even as sales prices and volumes both improved, as higher planned maintenance outage costs and spending tied to the Riverdale paper machine conversion weighed on results. Packaging Solutions EMEA posted a widening loss of $80 million, up from a $51 million loss in the first quarter and just $1 million a year earlier, as soft market volumes in Europe offset higher paper prices and box pricing lagged the pace of paper price increases.
Net special items added to the drag, rising to a $42 million after-tax charge from $19 million in the first quarter, driven by $32 million in new separation costs tied to the Packaging Solutions EMEA business and $4 million in transaction costs from the NORPAC acquisition. International Paper completed that acquisition of the NORPAC mill in Longview, Washington, along with the Delmarva corrugated packaging facility in Dover, Delaware, and finished the Riverdale conversion during the quarter, expanding its packaging footprint even as near-term earnings absorbed the associated costs.
Interest expense, net fell to $87 million from $108 million a year earlier but rose from $76 million in the first quarter, a swing attributed to the absence of an $11 million tax-refund interest benefit recorded in the prior period.
For the third quarter, International Paper guided to adjusted EBITDA of $780 million to $830 million, a range that includes an $85 million negative impact from a temporary closure of its Pine Hill, Alabama mill, a facility not mentioned in either the first-quarter or fourth-quarter 2024 releases. The company also narrowed its full-year 2025 EBITDA guidance to $3.20 billion to $3.40 billion, down from the $3.20 billion to $3.50 billion range it gave in the first quarter, which itself had already been cut from the $3.5 billion to $3.7 billion range issued at the end of 2024.