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International Paper CEO explains what really triggered shares to fall 5%

International Paper CEO explains what really triggered shares to fall 5%

Shares of International Paper fell 5 percent on Thursday after the company reported earnings, which CEO Mark Sutton attributed to a "margins squeeze" that occurred in the second half of 2016.

"We had input costs rising. We were able to raise prices, but that's just beginning to take traction as we turn the calendar into 2017," Sutton told "Mad Money" host Jim Cramer.

International Paper is the top maker of corrugated packaging in North America, and a major producer of coated paperboard and un-coated free sheet. The stock has had a big run since the election, up to nearly $58 last week from $44 on Election Day.

Mark Sutton, CEO, International Paper
Justin Solomon | CNBC

Even after an explosion occurred at one of International Paper's mills in Florida, the stock didn't budge. The company also recently doubled down on business with a $2.2 billion acquisition of Weyerhaeuser's pulp making division.

Sutton attributed issues surrounding input costs to the rise of energy prices, specifically natural gas at the end of the year, and the rise in the price of recovered fiber. This includes bringing older boxes back into the stream. Sutton cited 90 percent of boxes in the U.S. are recycled back into the stream, making it a commodity, and the price rose quickly on demand from China.

"When you have that happen, it can squeeze margins until your price increases flow through," Sutton said.

Moving forward, Sutton expressed optimism for President Donald Trump's agenda. A strong U.S. economy will be good for customers, and be good things for the company, too. Deregulation could also help the company, Sutton said, because the company generates 70 percent of energy from burning wood biomass, and would like it to be declared carbon neutral.

"Those are the kinds of things that we just get hung up with in the EPA and other areas, and we need to move on, because it takes a lot of uncertainty off the table around where you need to spend capex," Sutton said.

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