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International Paper Misses Overall - Analyst Blog
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Cost and Margins
Adjusted cost of goods sold amounted to $5.14 billion, a 7% increase from $4.79 billion in the year-earlier quarter. Adjusted selling and administrative expenses decreased 2% to $469 million. Segment operating income decreased 5% year over year to $634 million.
Segment Performance
Industrial Packaging: Sales for this segment surged 25% year over year to $3.3 billion. Adjusted operating income increased 14% to $342 million.
Printing Papers: Sales increased 2% to $1.58 billion in the quarter. The segment's adjusted operating income dipped 16% to $201 million.
Consumer Packaging: Sales decreased 20% to $765 million from $955 million in the year-earlier quarter. Adjusted operating profit was $67 million in the quarter versus $103 million in the year-ago quarter.
Xpedx (Distribution Business): Sales for the segment dropped 10% to $1.50 billion from $1.7 billion in the year-ago quarter. Adjusted operating income of this segment decreased 11% to $24 million.
Financial Position
Cash and cash equivalents were $1.27 billion at the end of the quarter compared with $1.22 billion at the end of the second quarter. Cash flow from operating activities improved to $2.27 billion during the first nine months of fiscal 2012 from $2.04 billion in the prior-year comparable period. Debt-to-capitalization ratio was 59.9% as of September 30, 2012 compared with 62.9% as of June 30, 2012.
Our View
Mergers and acquisitions continue to be International Paper's key strategy to strengthen its businesses over the long term. The company's acquisition of Temple-Inland is expected to be highly accretive beyond 2013. The combination will fortify the packaging business of North America by increasing its share in the corrugated packaging market to 34% from the current level of 27%.
Furthermore, through its joint ventures, International Paper has significant projects underway in Russia and China, which will help the company sustain its earnings growth. International Paper retains a short-term Zacks #2 Rank (Buy).
Memphis, Tennessee-based International Paper is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia and North Africa. International Paper conducts its businesses through five segments: Printing Papers, Industrial Packaging, Consumer Packaging, Distribution (Xpedx) and Forest Products.
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