International Paper Capital Expenditures Remain Healthy Amidst Major Transformation

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Researched by Industrial Info Resources (Sugar Land, Texas). As part of a transformation plant announced in July 2005, International Paper (NYSE:IP) (Memphis, Tennessee) indicated the possibility of selling or spinning off assets or businesses and using the proceeds from divestures to reduce debt. At year-end 2006, debt was reduced to $7.2 billion from the approximately $13.4 billion, which was recorded at the end of the second quarter of 2005. Also included in the transformation plan was the decision of the company to focus on two of its global platform businesses: uncoated papers and packaging, along with xpedx, its merchant distribution business. To that end, IP has invested over $500 million during the last two years along with the possibility of future investment strengthening the remaining assets.

Data extracted from Industrial Info’s online database before the recent sale of assets showed 119 plants operated by International Paper in the U.S and Canada. Since that announcement, Industrial Info Resources has reported 29 projects from International Paper for approximately $560 million that are currently active. Among them, 15 projects, estimated at $450 million, are scheduled to begin construction in 2007 and beyond.

IP’s transformation, by most measures, has been successful. Most recently, to further strengthen its balance sheet, the company sold thirteen of its lumber mills to West Fraser Timber Company Limited (Vancouver, British Columbia) for $325 million. Prior to the West Fraser transaction, IP divested its kraft papers business to Stone Arcade Acquisition Corporation (Northfield, Illinois) for $155 million. That was followed by the sale of its North American beverage packaging operations to Carter Holt Harvey Limited (Auckland, New Zealand) and its Arizona chemical business to Rhone Capital for approximately $413 million and $485 million respectively.

Revenues generated on the first quarter of this year amounted to approximately $1.376 billion.

International Paper has been a leader in the forest products industry for more than 100 years with operations in the U.S., Europe, South America and Asia

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