US International Paper expects better second half

02 May 2013 20:22  [Source: ICIS news]

HOUSTON (ICIS)--US-based pulp and paper company International Paper expects to have a better second half of 2013 despite significant economic challenges across the globe, company officials said on Thursday.

“I think there are pluses and minuses … on the macro outlook,” CEO John Farci told analysts during a first-quarter earnings call. The company had earlier announced first-quarter net earnings of $318m (€242m), compared with $235m net earnings in the fourth quarter of 2012 and $188m in the first quarter of 2012.

Farci pointed to slowing economic growth in China, which had been seen as the strongest bulwark economy during the global recession.

“China probably is a little weaker but it’s still a big economy growing at 7%. The issue there probably isn’t the growth rate, it’s the excess capacity that got added,” he said.

Europe will probably continue struggling to emerge from a recession, but the downturn will unlikely deepen, he said.

Farci said the company expects US GDP growth in 2013 to be at 1.5-2%, not the 2.5% that some have predicted.

“We’re growing a lot slower than the world should be growing, or we’re certainly growing a lot slower than the US economy is capable of. And I believe eventually we’ll grow at 3% to 4%, which is where we should be,” he said.

Like the first quarter, Farci said the second quarter will be relatively challenging for the company in terms of total revenues, but that the company will be well-positioned for the second half of the year, driven by increased demand.

International Paper, like all large pulp and paper companies, extensively uses chemicals to manufacture its products. Chemicals made up about 10% of its total cash component, accounting for $2m in input costs in the first quarter of 2013, according to the company.

Caustic soda, starch, sodium chlorate, low-density polyethylene (LDPE) and latex are the primary chemical inputs used by the company.

($1 = €0.76)

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By: Ken Fountain

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