International Paper Co posted a lower-than-expected profit on Thursday due to weak sales of consumer packaging in North America and Asia. IP, one of the world's largest producers of corrugated packaging and paper, does not expect the global economy to improve in 2013, although it expects recent price increases to stick and significantly boost its own profit next year.
"The world seems to be moving in slow motion," Chief Executive Officer John Faraci said in an interview. "It's still moving ahead, but it's definitely in slow motion." The company is having a "terrific year" in Russia and Eastern Europe, and volumes are improving in Brazil, Faraci said. However, China's economy in slowing and consumer demand is tepid in North America, he said.
"In China it feels like 2 to 3 percent GDP growth, not 7 percent," Faraci said. "Demand feels like it's more or less sideways in North America, where it's not getting much better, and not getting much worse." The company, which bought smaller rival Temple-Inland earlier this year, has been able to raise prices for container board and boxes 5 percent to 10 percent, the first increases in two years, Faraci said. The price increases will lift results in the fourth quarter and 2013, Faraci said. "We think International Paper is positioned to do significantly better in 2013 than 2012," he said.
RESULTS The company posted net earnings of $237 million, or 54 cents per share, compared with $468 million, or $1.08 per share, a year earlier. Excluding one-time items, IP earned 75 cents per share. By that measure, analysts on average expected 77 cents, according to Thomson Reuters I/B/E/S. Net sales rose 6 percent to $7.03 billion. Analysts expected $7.08 billion.