3 Min Read
(Reuters) - International Paper Co (IP.N), which acquired rival packaging maker Temple-Inland Inc in February, posted a better-than-expected quarterly profit on strong sales of shipping boxes and paper.
The company, which operates around the world and became the largest North American producer of corrugated packaging in the buyout, said pockets of weakness remain -- especially in Europe -- but signs of recovery are emerging.
"I feel very good about the rest of the year," Chief Executive John Faraci said in an interview on Friday. "It's not a macro-bullish story. It's a macro-positive story."
North America is "sluggishly slow, but positive;" Europe likely will be in a "shallow" recession for the rest of the year; and China and India's economies are "slowing down a bit, but still have strong GDP growth," Faraci said.
For the first quarter, International Paper posted net income of $188 million, or 43 cents per share, compared with $281 million, or 65 cents per share, in the year-ago quarter.
Excluding restructuring charges and other one-time items, the company posted profit of 57 cents per share.
By that measure, analysts had expected earnings of 50 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 4.6 percent to $6.66 billion. Analysts had expected $6.79 billion in revenue.
Sales of corrugated packaging boxes, which are primarily used for shipping by Amazon.com Inc (AMZN.O) and other customers, rose 22 percent to $3.12 billion.
Sales of printing papers rose 2 percent to $1.56 billion.
The company did see weakness in its distribution unit due to a drop in volume shipped. Sales in that unit fell 12 percent to $1.48 billion.
Shares, which closed Thursday at $33.75, have traded between $21.55 and $36.50 in the past 52 weeks.
IP's $3.7 billion buyout of Temple in February -- seven months after the company's initial $3.3 billion offer was rejected -- came after a lengthy review by the U.S. Department of Justice.
When the deal closed, IP said it expected to save about $300 million over two years.
After only six weeks IP has saved $100 million in shipping and other costs in its box plant operations -- the lion's share of IP's business with 60 plants, Faraci said.
"Temple's freight cost was 50 percent more than ours to ship corrugated packaging around the country," Faraci said. "We've already figured out how to take about $100 million out of that freight bill."
That number doesn't even factor in mills or office operations, Faraci said.
Reporting By Ernest Scheyder; Editing by Gerald E. McCormick, Dave Zimmerman