International Paper Boosts Industrial Packaging Business

International Paper Company (NYSE:IP) recently augmented its Industrial Packaging business by converting its paper machine at the Riverdale Mill in Selma, AL, from uncoated freesheet to high quality whitetop linerboard and containerboard. The paper and paper products manufacturer’s strategic move will strengthen its leading position in the market and optimize its operations in North America.

Machine Conversion

International Paper will invest $300 million to convert its No. 15 paper machine at the Riverdale Mill for higher containerboard production. The conversion, aimed to be completed by mid-2019, is likely to boost annual containerboard capacity by 45,000 tons. In addition, the conversion will improve the flexibility of the company to shift production from containerboard to linerboard according to the demand schedule. However, the conversion will reduce its annual uncoated freesheet capacity by 235,000 tons.

Restructuring Initiatives

International Paper is continuously undergoing restructuring initiatives to transform itself into a core packaging company. It intends to invest $300 million through 2017 to further improve its North American containerboard mill system, enhance product quality and reduce manufacturing and delivery costs. These projects are expected to have a collective internal rate of return of 20%.

At the same time, the company is divesting its non-core businesses to focus more resources on high-return capital projects in its core businesses that can drive additional earnings growth. The paper and packaging products manufacturer’s strategic move is also aimed to improve its long-term profitability as it faces stiff competition from diverse players across the industry.

Moving Forward

With these initiatives, International Paper expects to improve its sagging shares. The company has underperformed the industry with an average year-to-date return of 5.7% compared with a 7.1% gain for the latter.

International Paper currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Mondi (LON:MNDI) plc MONDY and Taseko Mines Limited (NYSE:TGB) , both carrying a Zacks Rank #2 (Buy), while Smurfit Kappa Group plc (OTC:SMFKY) sports Zacks Rank #1 (strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mondi has a long-term earnings growth expectation of 6%.

Smurfit Kappa Group has a long-term earnings growth expectation of 4%.

Taseko Mines has beaten earnings estimates in each of the trailing four quarters with a positive surprise of 241.7%.

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