MEMPHIS (From news reports) -- International Paper missed Wall Street estimates for second-quarter profit on Thursday, hurt by steeper input costs for its corrugated cardboard and fiber packaging products, sending its shares down 7% in premarket trading.
The Tennessee-headquartered firm, which reported its first full quarter since buying UK rival DS Smith , said its margins were affected due to higher costs and muted demand in Europe.
International Paper, the largest packaging company in the world in terms of revenue, has closed underperforming facilities both in the U.S. and Europe as well as exited some businesses, such as its molded fiber unit, to increase productivity.
It has also raised product prices to offset the impact of steep input costs.
The company reported adjusted profit of 20 cents per share for the three months ended June 30, well below analysts' average estimate of 41 cents per share, according to data compiled by LSEG.
British packaging firm Mondi's for the first half of the year due to higher costs, even as the company warned that a challenging economic environment would persist for the rest of the year.
However, International Paper expects stronger global revenue and earnings in the ongoing quarter.
The company's second-quarter net sales rose nearly 43% to $6.77 billion from a year ago, edging past estimates of $6.71 billion.
"I'm pleased to see our teams gaining momentum as we advance our transformation journey," said Chief Executive Officer Andy Silvernail. "Our second quarter results reflect a full quarter of our combined International Paper and DS Smith packaging businesses, as we effectively implement 80/20 strategies. In Packaging Solutions North America, our commercial efforts are driving increased revenue, and we experienced seasonally higher volumes and a stable demand environment. However, margins slipped as we continue to face cost headwinds, and we executed a heavy outage schedule. In Europe, demand remained soft and there was a significant increase in depreciation and amortization expense resulting from our acquisition. Overall, we have exceeded our expectations on commercial actions and are on target to achieve cost-out actions before the end of year."
"Looking ahead," Silvernail added, "we expect stronger global revenue and earnings in the third quarter, with confirmed strategic wins across our packaging businesses, continued progress on cost-out initiatives, and fewer planned maintenance outages. We remain focused on securing an advantaged cost position, delivering superior customer experience, and maintaining a high relative supply position as we continue our transformation into a differentiated and sustainable global packaging company."
