IP profit rises on higher paper prices

Global paper and forest products giant International Paper today said its quarterly profit jumped nearly 50 per cent because of increased paper prices, but warned of a slowing economy ahead.

The news pushed down IP shares 2 per cent on the New York stock exchange.

IP, which announced a major overhaul of its businesses last year including the sale of its half stake in Carter Holt Harvey to New Zealand entrepreneur Graeme Hart, said second-quarter net income totalled US$115 million ($188 million), or 24 cents a share, compared with US$77 million, or 16 cents, a year earlier.

Before restructuring costs and other items, the Memphis-based company earned 41 cents a share, above Wall Street expectations of 33 cents, according to Reuters Estimates.

Looking ahead, the third quarter offered a mixed picture.

"The economy is slowing, but we still expect earnings from continuing operations before special items to be higher than the second quarter," Chief Executive John Faraci told analysts on a conference call.

He gave no actual figures, but cited slightly lower inventories, good sales volume, and improving prices for the earnings optimism.

Shares of IP fell 69 cents, or 2 per cent, to US$33.64 in midday trade on the New York Stock Exchange.

Second-quarter net sales rose 7 per cent to US$6.3 billion, driven by higher prices for copier papers, part of the company's printing papers division, which earned US$205 million, compared with US$120 million in the first quarter, IP said.

Industrial packaging earned US$100 million, versus US$38 million in the first quarter, thanks to good cost controls and higher selling prices, the company said.

IP, whose products include copier paper and boxes, has undergone a broad restructuring since July, 2005, announcing sales of forestlands, coated papers for catalogues and brown papers for grocery bags.

Those proceeds have totaled more than US$9 billion and could reach US$11 billion soon, with sales of beverage packaging, plywood and lumber operations, and a coated groundwood mill in Brazil, expected within the next 90 days, IP has said.

IP also said it completed the previously announced sale of coated papers on Tuesday for US$1.4 billion.

However, the coated paper business, which had been considered discontinued operations, has now been reclassified as continued operations because IP will keep a 10-per cent limited partnership in the business, executives said.

As a result, coated papers accounted for 6 cents a share of continuing operations in the second quarter, IP said.

- REUTERS