Int’l Paper posts higher 1st-qtr profit
NEW YORK – International Paper Co.’s quarterly profit
rose, helped by increased selling prices for printing paper and wood products,
but surging chemical and energy costs continued to hit profit margins, the
world’s largest paper and forest products maker said Friday.
Net income rose to $77 million, or 16 cents a share, for
the first quarter ended March 31, up from $73 million, or 15 cents, a year
earlier.
Earnings from continuing operations and before special
items were 34 cents a share. On that basis, analysts on average expected 32
cents, according to Reuters Estimates.
Shares of the Stamford, Connecticut, company rose 1.57
percent in early trade.
It said business conditions in North America were
seasonally slow in January and February and started to improve in mid-March
while volumes in Europe and Brazil were also down versus the fourth quarter.
International Paper expects the second quarter to be
seasonally stronger than the first quarter with better volume in its pulp and
industrial packaging and higher selling prices in Brazil and the North American
paper and packaging units.
Sales in the first quarter rose to $6.6 billion from $6.1
billion a year earlier which the company attributed to better pricing across its
business in North America.
Still, Chief Executive John Faraci said operating margins
continued to be hurt by higher raw material costs, primarily for energy and
chemicals.
“While the rate of increase in these raw material costs
appears to be abating, we expect no significant decline in the near term,” said
Faraci.
Investors should be worried about continued high raw
material costs that have muted a cyclical recovery within the industry, CIBC
World Markets analyst Don Roberts said.
“We’re at normalized commodity prices (in the paper
industry), but nowhere near normalized profits,” Roberts said. “It appears as if
the pulp and paper companies have missed a cycle.”
U.S. packaging company Meadwestvaco Corp. also posted a
first-quarter profit on Friday, but said improvements in its packaging business
were largely offset by higher raw material costs.
International Paper shares were up 1.57 percent, or 54
cents, at $34.84, in morning trade.
Shares fell 12 percent during the quarter, underperforming
peers on the S&P Paper and Forest Products index, which fell 6.32 percent in
the same period.