IP Swings to $1.1B Loss Amid DS Smith Integration, Fiber Divestiture

TL;DR

**IP's Q3 is a bloodbath of losses, but it's a necessary evil for their big bet on packaging with DS Smith; hold tight for the turnaround.**

AI Summary

INTERNATIONAL PAPER CO /NEW/ reported a significant net loss of $1.102 billion for the three months ended September 30, 2025, a stark contrast to the net earnings of $150 million in the same period of 2024. For the nine months, the net loss was $1.132 billion, down from net earnings of $704 million in 2024. This decline was primarily driven by a substantial increase in costs and expenses, including a 48.8% rise in cost of products sold to $12.514 billion for the nine months, and a massive 432.2% increase in depreciation and amortization to $2.050 billion. Restructuring charges also surged by 700% to $464 million for the nine months. Net sales, however, saw a robust increase, reaching $6.222 billion for the three months, up from $3.979 billion in 2024, and $17.628 billion for the nine months, up from $11.913 billion, largely due to the acquisition of DS Smith. The company also announced the sale of its Global Cellulose Fibers business to American Industrial Partners on August 21, 2025, which is now classified as discontinued operations, contributing a net loss of $676 million for the three months. The acquisition of DS Smith significantly expanded the Packaging Solutions EMEA segment, with its net sales jumping from $322 million to $2.310 billion for the three months.

Why It Matters

This filing reveals a pivotal, albeit challenging, period for International Paper. The massive net loss, driven by integration costs from the DS Smith acquisition and the divestiture of Global Cellulose Fibers, signals significant strategic shifts. Investors need to weigh the long-term benefits of these moves against the immediate financial hit. For employees, the restructuring charges and business sales could indicate workforce adjustments. Customers might see changes in product offerings and regional focus, particularly with the expanded EMEA packaging presence. Competitively, the DS Smith acquisition positions IP as a stronger player in European packaging, potentially intensifying competition with rivals like Smurfit Kappa and Mondi, while the fiber business sale streamlines its portfolio.

Risk Assessment

Risk Level: high — The risk level is high due to the significant net loss of $1.102 billion for the quarter and $1.132 billion for the nine months, a sharp reversal from profits in the prior year. This is exacerbated by substantial restructuring charges of $342 million for the quarter and $464 million for the nine months, indicating ongoing operational overhauls and potential instability. Additionally, the company's long-term debt increased significantly from $5.362 billion to $8.990 billion, raising concerns about leverage and interest expense, which jumped from $52 million to $85 million for the quarter.

Analyst Insight

Investors should closely monitor the integration progress of DS Smith and the financial impact of the Global Cellulose Fibers divestiture. While the current losses are substantial, they appear to be tied to strategic repositioning. Consider holding if you believe in the long-term synergy of the DS Smith acquisition and the streamlined focus on packaging, but be prepared for continued volatility as these large-scale changes unfold.

Financial Highlights

revenue

$17.628B

total Debt

$8.990B

net Income

$ -1.132B

eps

$ -2.27

revenue Growth

+48.1%

Revenue Breakdown

Key Numbers

• $1.102B — Net Loss (Q3 2025) (Significant swing from $150M net earnings in Q3 2024)
• $1.132B — Net Loss (YTD Q3 2025) (Substantial decline from $704M net earnings in YTD Q3 2024)
• $6.222B — Net Sales (Q3 2025) (Increased from $3.979B in Q3 2024, driven by DS Smith acquisition)
• $17.628B — Net Sales (YTD Q3 2025) (Increased from $11.913B in YTD Q3 2024)
• $464M — Restructuring Charges (YTD Q3 2025) (Increased from $58M in YTD Q3 2024, indicating significant operational changes)
• $2.050B — Depreciation and Amortization (YTD Q3 2025) (Increased from $630M in YTD Q3 2024, reflecting asset base changes from acquisitions)
• $676M — Discontinued Operations Loss (Q3 2025) (Impact from the sale of Global Cellulose Fibers business)
• $8.990B — Long-Term Debt (Sept 30, 2025) (Increased from $5.362B at Dec 31, 2024, reflecting financing for acquisitions)
• 528,038,317 — Common Shares Outstanding (Oct 31, 2025) (Increased from 448.9 million shares at Dec 31, 2024, partly due to DS Smith acquisition)
• $9.909B — Equity Issued for DS Smith Acquisition (Reflects the significant equity component of the acquisition)

Key Players & Entities

• INTERNATIONAL PAPER COMPANY (company) — Registrant
• DS Smith (company) — Acquired company
• American Industrial Partners (company) — Acquirer of Global Cellulose Fibers business
• Global Cellulose Fibers (company) — Divested business segment
• SEC (regulator) — U.S. Securities and Exchange Commission
• New York Stock Exchange (regulator) — Exchange where Common Shares (IP) are registered
• London Stock Exchange (regulator) — Exchange where Common Shares (IPC) are registered
• FASB (regulator) — Financial Accounting Standards Board

FAQ

Risk Factors

• Integration of DS Smith Acquisition [high — operational]: The successful integration of DS Smith is critical. Failure to achieve anticipated synergies or manage integration challenges could negatively impact financial performance and operational efficiency. The acquisition significantly increased the company's asset base and debt.
• Increased Debt Load [high — financial]: Long-term debt increased from $5.362B at December 31, 2024, to $8.990B as of September 30, 2025, largely to finance acquisitions. This higher leverage increases financial risk and interest expense, potentially impacting profitability and financial flexibility.
• Restructuring Charges [medium — operational]: The company incurred $464 million in restructuring charges for the nine months ended September 30, 2025, a substantial increase from $58 million in the prior year. These charges indicate significant ongoing operational changes and potential disruptions.
• Increased Depreciation and Amortization [medium — operational]: Depreciation and amortization expenses surged by 432.2% to $2.050 billion for the nine months ended September 30, 2025. This reflects the significant increase in the company's asset base, largely due to acquisitions, and will continue to impact profitability.
• Environmental Regulations [medium — regulatory]: The paper and packaging industry is subject to stringent environmental regulations concerning emissions, waste disposal, and sustainable sourcing. Non-compliance or changes in regulations could lead to increased costs and operational restrictions.
• Commodity Price Volatility [medium — market]: The cost of raw materials, energy, and transportation are subject to market fluctuations. Significant increases in these costs, as seen in the 48.8% rise in cost of products sold to $12.514 billion for the nine months, can pressure margins.
• Discontinued Operations [low — operational]: The sale of the Global Cellulose Fibers business resulted in a net loss of $676 million for the three months ended September 30, 2025. While divesting non-core assets can be strategic, the immediate financial impact and execution risk are present.

Industry Context

The paper and packaging industry is undergoing significant consolidation, driven by strategic acquisitions aimed at expanding market share and operational scale. Companies are increasingly focused on integrated solutions and sustainable practices. However, the industry faces challenges from fluctuating raw material costs, evolving consumer preferences, and stringent environmental regulations.

Regulatory Implications

International Paper operates under various environmental regulations related to emissions, waste management, and sustainable forestry. Compliance is crucial, and any new or stricter regulations could increase operational costs or necessitate capital expenditures. The company's recent acquisitions may also bring new regulatory considerations.

What Investors Should Do

1. Monitor integration progress of DS Smith.
2. Assess the impact of increased debt on financial flexibility.
3. Analyze the sustainability of current cost structures.
4. Evaluate the strategic rationale behind the divestiture of Global Cellulose Fibers.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported a net loss of $1.102 billion, a significant decline from net earnings of $150 million in Q3 2024, largely due to acquisition costs and restructuring.
• 2025-08-21: Sale of Global Cellulose Fibers business — Classified as discontinued operations, contributing a net loss of $676 million for Q3 2025, indicating a strategic shift.
• 2025-09-30: Consolidated Balance Sheet Date — Total long-term debt stood at $8.990B, up from $5.362B at year-end 2024, reflecting financing for acquisitions.
• 2025-10-31: Common Shares Outstanding Date — 528,038,317 shares outstanding, an increase from 448.9 million at year-end 2024, partly due to the DS Smith acquisition.

Glossary

Discontinued operations

A component of a business that the reporting entity has disposed of or classified as held for sale, and that represents a separate major line of business or geographical area of operations. (The sale of the Global Cellulose Fibers business is reported under discontinued operations, impacting the overall net loss.)

Restructuring charges, net

Costs associated with significant reorganizations or shutdowns of operations, such as severance pay, asset write-downs, and closure costs. (A substantial increase in these charges ($464M in YTD Q3 2025 vs $58M in YTD Q3 2024) indicates significant operational changes and associated costs.)

Depreciation and amortization

The systematic allocation of the cost of tangible (depreciation) and intangible (amortization) assets over their useful lives. (A massive increase ($2.050B in YTD Q3 2025 vs $630M in YTD Q3 2024) reflects the expanded asset base from acquisitions.)

Equity Issued for DS Smith Acquisition

The value of shares issued by International Paper to acquire DS Smith, representing a significant portion of the transaction's financing. (Highlights the scale of the DS Smith acquisition and its impact on the company's capital structure.)

Year-Over-Year Comparison

Compared to the prior year, International Paper has experienced a dramatic shift from profitability to a significant net loss, with Q3 2025 reporting a $1.102 billion loss versus $150 million in earnings for Q3 2024. This is largely driven by a substantial increase in costs and expenses, including a 48.8% rise in cost of products sold and a 432.2% surge in depreciation and amortization, primarily due to the acquisition of DS Smith. While net sales saw a robust increase of 56.4% to $6.222 billion in Q3 2025, this was overshadowed by the increased expenses and restructuring charges. New risks related to acquisition integration and a significantly higher debt load have emerged.

Key Financial Figures

• $1.00 — he registrant's common stock, par value $1.00 per share, as of October 31, 2025 was 5

Filing Documents

• ip-20250930.htm (10-Q) — 1868KB
• ip-20250930exhibit101.htm (EX-10.1) — 34KB
• ip-20250930exhibit102.htm (EX-10.2) — 1474KB
• ip-9302025xex311certificat.htm (EX-31.1) — 10KB
• ip-9302025xex312certificat.htm (EX-31.2) — 9KB
• ip-9302025xex32certificati.htm (EX-32) — 6KB
• 0000051434-25-000074.txt ( ) — 13704KB
• ip-20250930.xsd (EX-101.SCH) — 71KB
• ip-20250930_cal.xml (EX-101.CAL) — 161KB
• ip-20250930_def.xml (EX-101.DEF) — 375KB
• ip-20250930_lab.xml (EX-101.LAB) — 916KB
• ip-20250930_pre.xml (EX-101.PRE) — 646KB
• ip-20250930_htm.xml (XML) — 2325KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements Condensed Consolidated Statement of Operations - Three Months and Nine Months Ended September 30, 2025 and 2024 1 Condensed Consolidated Statement of Comprehensive Income (Loss) - Three Months and Nine Months Ended September 30, 2025 and 2024 2 Condensed Consolidated Balance Sheet - September 30, 2025 and December 31, 2024 3 Condensed Consolidated Statement of Cash Flows - Nine Months Ended September 30, 2025 and 2024 4 Condensed Notes to Consolidated Financial Statements 5 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 33 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 45 Item 4.

Controls and Procedures

Controls and Procedures 45

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 46 Item 1A.

Risk Factors

Risk Factors 46 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47 Item 3. Defaults Upon Senior Securities 47 Item 4. Mine Safety Disclosures 47 Item 5. Other Information 47 Item 6. Exhibits 48

Signatures

Signatures 49 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS INTERNATIONAL PAPER COMPANY Condensed Consolidated Statement of Operations (Unaudited) (In millions, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net Sales $ 6,222 $ 3,979 $ 17,628 $ 11,913 Costs and Expenses Cost of products sold 4,287 2,880 12,514 8,632 Selling and administrative expenses 493 473 1,505 1,222 Depreciation and amortization 1,099 208 2,050 630 Distribution expenses 524 288 1,457 901 Taxes other than payroll and income taxes 40 30 168 92 Restructuring charges, net 342 55 464 58 Net (gains) losses on sales and impairments of businesses 16 — ( 35 ) — Net (gains) losses on sales and impairments of assets 15 — ( 52 ) — Interest expense, net 85 52 277 156 Non-operating pension expense (income) ( 4 ) ( 12 ) ( 6 ) ( 34 ) Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings (Loss) ( 675 ) 5 ( 714 ) 256 Income tax provision (benefit) ( 250 ) ( 107 ) ( 242 ) ( 385 ) Equity earnings (loss), net of taxes ( 1 ) ( 1 ) ( 3 ) ( 4 ) Earnings (Loss) From Continuing Operations $ ( 426 ) $ 111 $ ( 475 ) $ 637 Discontinued operations, net of taxes ( 676 ) 39 ( 657 ) 67 Net Earnings (Loss) $ ( 1,102 ) $ 150 $ ( 1,132 ) $ 704 Basic Earnings (Loss) Per Share Earnings (loss) from continuing operations $ ( 0.81 ) $ 0.32 $ ( 0.95 ) $ 1.83 Discontinued operations ( 1.28 ) 0.11 ( 1.32 ) 0.19 Net earnings (loss) $ ( 2.09 ) $ 0.43 $ ( 2.27 ) $ 2.02 Diluted Earnings (Loss) Per Share Earnings (loss) from continuing operations $ ( 0.81 ) $ 0.31 $ ( 0.95 ) $ 1.80 Discontinued operations ( 1.28 ) 0.11 ( 1.32 ) 0.19 Net earnings (loss) $ ( 2.09 ) $ 0.42 $ ( 2.27 ) $ 1.99 Average Shares of Common Stock Outstanding – assuming dilution 528.0 353.4 498.2 353.6 The accompanying notes are an integral part of these condensed financial statements. 1 Table of Contents INTERNATIONAL PAPER COMPANY Condensed Consolidated Statement of

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