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International Paper Profit Climbs, Shares Rise

Reuters
Thursday, 31 Jul 2008 | 10:26 AM ET

International Paper's quarterly earnings rose and beat Wall Street expectations as higher prices and cost-saving measures helped offset the impact of more expensive raw materials, the paper and packaging maker said.

International Paper's shares rose more than 12 percent after the company also said it would raise prices in the third quarter for both its paper and packaging businesses in North America.

Excluding one-time items, second-quarter earnings were 56 cents a share, up from 52 cents a year earlier and well above analysts' average forecast of 40 cents.

Net income increased to $227 million, or 54 cents a share, from $190 million, or 44 cents a share, a year earlier, when results were hurt by one-time charges.

Sales rose 9.8 percent to $5.81 billion, driven by gains from all its major segments. Analysts on average had forecast revenue of $5.81 billion, according to Reuters Estimates.

"Considering the magnitude of input cost inflation in (the second quarter), we consider this a very solid performance," Deutsche Bank analyst Mark Wilde said in a note to clients.

International Paper's $6 billion acquisition of Weyerhaeuser's packaging business will make International Paper the largest U.S. corrugated box maker, ahead of Smurfit-Stone Container .

"We're ready to complete the acquisition of Weyerhaeuser's Containerboard, Packaging and Recycling business next week, which will give us additional opportunities to reduce costs in our North American packaging business," Chief Executive John Faraci said in a statement.

International Paper also said it has agreed to sell about 13,000 net acres of subsurface mineral rights located in the Haynesville Shale natural gas formation in northwest Louisiana to Chesapeake Energy Corp for about $263 million. The deal is expected to close in late August.

The company expects third-quarter North American paper and packaging volume shipments to remain flat, in line with those of the second quarter.

Overseas paper pricing is likely to improve on the same basis, while volumes are expected to increase slightly. The company expects third-quarter overseas packaging shipment volumes to remain flat, while pricing is likely to be under pressure.

Memphis, Tennessee-based International Paper expects sequential increases in third-quarter input and freight costs, both within North America and overseas.

International Paper's shares rose $3.04 to $27.36 in early New York Stock Exchange trading.

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