International Paper Company (IP) Q3 2026 Earnings Report, Transcript and Summary

Good morning and thank you for standing by. Welcome to International Papers Third Quarter 26 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, you will have an opportunity to ask questions. To withdraw your question, press 1 again. It is now my pleasure to turn the call over to Mandi Gilliland, Senior Director of Investor Relations. Mandi'am? The floor is yours.

Thank you. Good morning, and good afternoon, everyone, and welcome to International Papers Third Quarter 26 Earnings Call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer and Lance T. Loeffler, senior vice president and chief financial officer. Before we jump in, please note that this quarter, in light of the planned separation of the EMEA business, the subsequent UK regulatory requirements, we are no longer including our existing packaging solutions EMEA, US GAAP financial guidance in our guidance framework. Do not anticipate providing such guidance in the future. The EMEA management team will provide more information at the DS Smith plc Capital Markets Day on November 3rd. This will include details about the business model, growth strategy, and financial outlook following the separation. I would also like to remind everyone there is important information at the beginning of our presentation, including certain legal disclaimers. For example, during this call, we will make forward looking statements that are subject to risks uncertainties. Information about these risks, uncertainties, and other factors that could cause actual results to differ materially from our forward looking statements can be found in our press releases and reports filed with the US Securities and Exchange We will also present certain non US GAAP financial information. Reconciliation to US GAAP financial measures are available on our website along with our third quarter earnings press release and today's presentation slides. Now let me turn it over to Andy Silvernail.

Thank you, Mandi. Good morning, good afternoon, everyone. Let's begin on slide 3. In the third quarter, we improved execution, and delivered an important inflection in earnings in an environment of weak consumer confidence and rising inflation. Our focus is to control what we can control and execute the 3 pillars of our strategy. An advantage cost position, superior customer experience, and a high relative supply position in the markets we serve. In North America, we made meaningful progress improving productivity, particularly across our mill system. Better execution helped us deliver results above expectations and offset persistent inflation as we continue to serve customers and strengthen our position in the market. Given performance to date and expectations for Q4, we expect to outpace industry demand by approximately 2 percentage points for the full year. In terms of improved execution, Pine Hill is a tangible example of our progress. We completed the roof repairs and restarted the mill ahead of schedule. The team's disciplined work and the commitment to safety allowed us to restore operations safely limit disruption across the mill system, and minimize the impact on customer box shipments. I want to thank everybody involved. Great work. Packaging Solutions EMEA also improved sequentially, although results were below our expectations. Natural gas costs rose sharply, and consumers remain cautious. Realization of previously published paper price increases are on track and cost out actions help mitigate rising input costs. We are also advancing preparations to separate the EMEA business I will discuss later in the call. Across both businesses, the progress is encouraging. But there is more work to do. We expect the current market conditions to persist in the fourth quarter and into 2027. Our priorities remain clear. Execute with discipline, manage what we can control, and strengthen the 3 pillars of our strategy. I am on slide 4. Let me spend a minute on demand in North America. Our box shipments declined approximately 2% year over year in the third quarter, 1 point better than our estimate of industry demand. In the quarter, we experienced headwinds from the disruption in the West Coast fresh fruit and vegetable business and softness in protein that have come from smaller livestock herds, inflation, and a strained consumer. In the fourth quarter, we expect to continue to grow above market along with modest recovery in West Coast agriculture, and we expect to see the traditional seasonal increase. We expect to outperform the industry by >1% in the fourth quarter, and by approx. 2% for the full year. With that, I will turn it over to Lance to discuss third quarter results outlook in more detail.

Thanks, Andy. Turning to slide 5 and our enterprise results for the third quarter. Revenue improved sequentially, primarily through realization of previously published price increases. In EMEA, softer demand and a challenging macroeconomic environment continued to weigh on sales. Earnings and margins improved significantly from the second quarter. In North America, the main drivers were price realization, lower planned outage activity, and the absence of spending associated with the now completed Riverdale machine conversion. Higher than expected inflation and softer demand partially offset those benefits. In EMEA, we continue to face softer demand and rising input costs. The team responded by accelerating cost out actions which helped mitigate the impact of these pressures. Third quarter adjusted increased to $843 million, including $37 million of corporate expense. Of that expense, $30 million was attributable to higher insurance costs. Our adjusted EBITDA margin improved nearly 400 basis-point sequentially to 13.6%. And adjusted operating earnings per share was $0.37. Despite the improvement in earnings, free cash flow was -$267 million in the quarter. This reflected cash payments for the second quarter's heavy maintenance spending annual interest payments on legacy DS Smith debt, and an inventory build following our planned outage season. For the full year, we expect to generate free cash flow of approximately $100 million to $200 million. Turning to slide 6. Packaging Solutions North America increased adjusted EBITDA by 56% sequentially. Price realization and stronger operating performance drove the improvement despite softer demand and higher input costs. Price and mix were a $141 million favorable reflecting faster realization of previously published price increases announced through June. Volume was $46 million unfavorable. The benefit of 1 additional shipping day was more than offset by softer demand including food safety related disruption in West Coast agriculture, weakness in protein, seasonally lower daily demand, and lower exports. Operations and costs were $85 million. Improved mill efficiency was the key driver. Initial benefits from the Riverdale ramp up and the absence of spending associated with the completed machine conversion also contributed. We also experienced additional benefits from a full quarter of NORPAK earnings, our 20 strategic initiatives, and lower ongoing mill costs. Inflation was higher than we anticipated during the third quarter. Higher diesel, OCC, and energy costs drove a $55 million unfavorable impact on input costs. The temporary Pine Hills shutdown had a $20 million unfavorable impact in the quarter. Including roof repairs and business interruption, that was partially offset by insurance recovery. We received most of the expected insurance recovery during the quarter. In total, Packaging Solutions North America delivered $663 million of adjusted EBITDA in the third quarter. Moving to our fourth quarter outlook for Packaging North America on slide 7. Price and mix are expected to be favorable. Driven by the continued realization of previously published price increases. The September published price increase is expected to begin flowing through late in the fourth quarter based on our normal realization patterns. Volume is expected to be favorable as seasonally higher daily demand is expected to more than offset 2 fewer shipping days. Operations and costs are expected to be slightly favorable sequentially. Supported by the continued Riverdale ramp up NORPAX synergies, and the absence of the third quarter Pine Hill expense. As a reminder, we also expect this to be the final quarter of Ixtac insurance proceeds. As those benefits will not repeat in 2027. Seasonally higher labor and employee medical benefit costs are also expected to partially offset these benefits. Our outlook assumes continued inflationary pressure. With input costs expected to be unfavorable primarily driven by higher diesel and OCC costs. As noted in the footnotes, our diesel assumptions reflect futures market pricing and US Department of Energy projections published as of September 29th. These items result in an adjusted EBITDA outlook for packaging Solutions North America of approximately $700 million to $740 million for the fourth quarter. Moving to slide 8, I would like to take you through our updated full-year 2026 outlook for our Packaging Solutions North America business. The third quarter improvement was meaningful. And our execution confidence and output is improving. But higher inflation and weaker volume expectations have reduced our full year outlook. Our full-year adjusted EBITDA outlook is moving to $2.27 billion to $2.31 billion. On our second quarter call, incremental headwinds of approximately $145 million have emerged. The largest drivers are higher diesel fuel and distribution costs, along with increased volume pressure. Those headwinds also include approximately $20 million from the third quarter Pine Hill event, net of insurance recovery which was not included in our prior outlook. The balance primarily reflects higher employee medical costs and an outage move from the first quarter of 27 into the fourth quarter of this year. Partially offsetting these headwinds is $35 million of price benefit from faster realization of the June increase and partial realization of the September increase. Together, these items reduce the midpoint of our full year North America packaging outlook by approximately $110 million. Our 2020 initiatives remain on track. We delivered a significant improvement in the third quarter and expect further progress in the fourth quarter from productivity gains, the Riverdale ramp up, and NORPAX synergies. Many of these actions supporting that improvement are already complete and contributing to results. That execution gives us confidence in the expected fourth quarter step up even as demand and inflation remain challenging. Turning to Packaging Solutions EMEA on slide 9. Third quarter results improved sequentially, but were below our expectations. Reflecting continued softness in market demand and persistent cost inflation. Price and mix were $27 million favorable sequentially. Primarily reflecting the pass through of previously published paper price increases and higher prices on external paper sales. Higher paper cost pressured box margins, partially offsetting these benefits. Volume was $32 million unfavorable sequentially as demand across the business remained soft and fell below our expectations. Operations and costs were $76 million favorable sequentially reflecting cost out actions tighter management of controllable costs, and lower variable costs associated with reduced volume. Input costs were $39 million unfavorable primarily due to higher energy costs. All in, Packaging Solutions EMEA delivered $210 million of adjusted EBITDA in the third quarter. As a reminder, considering the planned separation of the EMEA business, and the subsequent UK regulatory requirements, we are no longer including our existing Packaging Solutions EMEA US GAAP financial guidance and our guidance framework. And do not anticipate providing such guidance in the future. I will now turn the call over to Andy to provide an update on the separation planning. Andy?

Thanks, Lance. Turning to slide 10 and to the EMEA separation. We are advancing the EMEA separation and are on track to finalize execution. Earlier this month, issued a press release confirming that we are evaluating a potential sale while continuing the spin off work in parallel. The release was issued in accordance with UK requirements. As a matter of practice, we do not comment on ongoing M&A discussions so I will not elaborate further beyond what we have already disclosed. Work on the potential spin off is progressing well. Under that scenario, we expect both companies to have investment grade credit ratings, tailored investment and capital allocation strategies, and compelling financial profiles. Plan for International Paper to retain approximately a ~20% stake in the independent company. DS Smith. Regardless of the path we ultimately take, we are moving swiftly forward with the separation. The progress reflects tremendous focus, discipline, and commitment of the teams working on the separation. I wanna thank everyone involved for the excellent work they are doing to prepare both companies for success. As noted earlier, on November 3rd, EMEA management team will host the DS Smith Capital Markets Day. Providing a deeper look at the business its growth strategy, and its financial outlook following separation. It will be an important opportunity to showcase how DS Smith is preparing for the next chapter. Let me close on slide 11. Our third quarter improvement is meaningful and the trajectory will continue this year and next. Across both regions, we have lowered structural cost eliminated inefficient capacity, and invested to improve our customer experience. We have made substantial progress, and there is more to do. In North America, we expect further improvement in the fourth quarter and throughout 2027 as cost reductions, productivity gains, and price realization help us offset inflation. We will continue to simplify the business, invest in customers, build strength in our most promising markets. The upcoming separation creates the opportunity for 2 focused regional packaging leaders. EMEA will continue to focus on its self help story, with a step function change in cost position and investing to leverage in its market position customer relationships. The new international paper will drive significant improvements in profitability and returns in Q4 and in 2027, by building on the progress we have made in cost transformation, and commercial depth and breadth. Following the separation, we will share more details on our financial outlook capital allocation framework, and strategic priorities. Our confidence in future profitable growth is grounded in what we have accomplished and in the actions already underway not an assumption that the environment will get easier. We will be disciplined in execution, and focused on creating lasting value for customers, our teammates, and shareholders. With that, let's open the call up for questions.

Thank you. If you would like to ask a question, simply press again, press 1. We do ask that you limit yourself to 1 question and 1 follow-up question. Your first question comes from Philip Ng with Jefferies. Please go ahead.

Hey, guys. Well, Andy Hey, Philip. Great progress in Q3 in terms of the operations and the commercial side of things. that is pretty encouraging. But in terms of the outlook, what are you seeing in terms of what your customers are saying, whether it is North America and Europe? You know, appreciating Q3 got impacted by some of the ag dynamic, but have you seen that kind of bounce back? Just curious what kind of trend you are seeing in October, November, and the opportunity on the commercial side perhaps to win some new business, in 2027 for North America as well. Yeah.

First of all, good morning, Philip. So as I look at North America, what I would say is the market is stable. If I think sequentially, the market is generally stable. And we expect it is gonna take some time to work through the fruit and vegetable issue on the West Coast. And what I mean by that is, obviously, you are starting to see demand at the at the consumer level picking back up, but that will take its time to work itself all through the supply chain and then the growing season in next year. Right? So it will take a little bit of time there. But we do not see any big issues. Protein was a little soft. And if you look at the at the beef folks as an example, they are getting squeezed right now. And consumers appear to be trading down. We are seeing that certainly in the marketplace. And so you are seeing softness there. But, generally, I would say, pretty flat sequentially. You know, across the board, the biggest issue both on the inbound side and hitting the customer is inflation. Right? that is the thing that they are wrestling the most with. And obviously, we are wrestling the most with input cost, and then we are now seeing price flow itself through and becoming positive there. We expect that to continue. In Europe, it is much the same, just more volatility. Right? I think that is just fair to say. More volatility on the input cost, and more volatility that the customer is experiencing in the marketplace. And everyone has seen the news what is going on over there. So there is hesitancy in the marketplace. But, generally, North America, pretty flat sequentially. Europe, very modest uptick that we have seen thus far in October, but I would not say anything to get real excited about at that stage.

Okay. Helpful. Appreciating, , some of the dynamics you are seeing in North America, is timing. Right? I mean, you have got a pretty good box price realization in Q3, and that will continue to build You know, I think at 1 point, you were talking about aspirationally 20%-plus type EBITDA margins in North America. Is that still a realistic goal for 2027 given the pricing you have realized already, or do you need kind of more help on that for it to kind of get to that type of profitability in that business?

Yeah. We are not doing anything in terms of guidance for 2027 at this stage. I think that is prudent given what we are seeing happening with inflation in the marketplace. I think the trajectory that we are on and our ability to get to something with a 2 in front of it, I still very much believe that is possible in the business. And, , just across the board, we are starting to see traction operationally, which is really good. And if I go back in time, really throughout this entire year in the mill system in particular, You know, it is been clouded a little bit with a couple events in terms of the ice storm and with Pine Hill. If you look at the underlying operational improvements over the past year, with that, the team has just done a terrific job we are now seeing that momentum. If I think back to this time last year, right, we were talking about a lot of the issues that had been consistent in that in that mill system from underinvestment. And we are seeing fewer of those. They are not zero, and I do not expect them to be zero, because the investments take time to build. But I really like what we are seeing there. And if you look across the entire system, right, we have in The US, , we have closed 20 facilities in total—box plants and mills, and we have really lost no business along that process. And in fact, we won business. And most importantly, we are seeing the kind of productivity that we talked about in the second quarter and the first quarter We saw it again in the third. We believe we are gonna see it in the fourth, and we will see it significantly into next year as we lap some of the big projects that we did this year. As we bring up, NORPAK, as Riverdale continues to ramp And so we feel good about the trajectory that we are on in terms of margin improvement. Okay. Appreciate the color, Andy. Thank you so much.

Thank you. You bet. Thanks, Philip.

Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Thanks. Andy, you sort of got in front of my question a little bit. Saying you do not wanna provide any, , guidance for next year. I just understand I was trying to work that out. So maybe the controllables and what. As we think about obviously, where costs go, that. that is very hard to predict. But we still have a lot of the flow through from price. And is it fair to say that you do not have a lot of the September increase baked into box prices for the fourth quarter?

Is that is correct. Okay. that is correct.

And I think you mentioned Riverdale. You mentioned NORPAK. Something that can continue to ramp higher. Are there other things in terms of actions you have done and or have already signaled that we should be contemplating in terms of what can drive earnings higher next year in North America?

Yep. Mark, it is not kind of big nameplate things like facility closures that we have mentioned in the past, but what we are now moving to really aggressive reinvestment and productivity. And that is what we are seeing show up now. Right? And so we are going to be delivering kind of trend line productivity here into 2027 and feel very good about that as I think about the investments and the cost that we have had in 2024, 2025, now 2026. Definitely seeing that ramp in productivity. So you should not expect to see, again, big nameplate things, but you should expect to see, , meaningfully above trend line improvements in productivity. Yeah.

I would also add, Mark, that, , next year too will also be the continuation of eliminating the tails on that operating cost for the facilities that we have closed as we continue to Yeah. Sell the real estate and actually fully exit a lot of those decisions, that will continue as well. So those layers mean a lot. Maybe not in isolation, but as you stack up 20 of them, on a monthly basis, it is a meaningful number. And so we expect to make significant progress in that area too.

Okay. that is that is helpful. And just maybe if we think about I guess you are really not talking about Europe at all, but it as that process happens, is there anything on, like, the corporate expense side as you run North America separately that we should be thinking about that would change in 2027 versus 2026?

Yeah, Mark. So there is a. there is an extensive part of this, right, that is aimed at watching the stranded cost. And eliminating those as we go into the course of next year. So that is something that we have been focused on that we are planning for and that we will continue to do so that those stranded costs do not become a way on the new IP.

Yep. Okay. And that is how and that is it. I should. Let me finish. So, like, that would also include the impact of GCF too, remember. So we sold GCF earlier this year. And so it is a combination of the stranded costs associated with carrying GCF and our European business. Yeah. They come off the TSA. Yep. But that is. And we will give we will give more specific guidance when we execute the separation. Whether it is a spin or a sale, we will have more information for everybody to give kind of help you with the modeling more specifically. Correct? Fair enough. Thank you, guys.

You bet. Thanks, Mark.

Your next question comes from the line of George Staphos with Bank of America. Please go ahead.

Everyone. Good morning. How are you? Thanks for the details. I want to. If you understanding that you are not going to guide on 2027, I wanted to come back a little bit to maybe some of the individual buckets in terms of the bridge. And in particular, let's call it the 80/20 cost piece or productivity piece as we look out is there a way to size what in North America that benefit was this year, 2026, and what it could look like in 2027, and what , the ongoing cost inflation that you have got a hurdle every year might look like and what it looked like this year?

Yeah. I think so. So, George, if you take a look at you look at everything we have published so far to date, including the third quarter today and the expectations of the fourth quarter, if you go back and put those bridges together, that will answer the first part of your question.

Like, really explicitly.

But And then I just wanna get at but in 80/20, you do include some commercial, I think. So just on the cost out is it where I was going with that, Andy?

Yeah. Yeah. What you would look like? I think you. That. that is trying to parse it too finely. Right? Because you are. it is you really need to look at cost as a total. And I would break it down between input cost and structural cost. And that is how we have it broken down by light item in the in the decks. So you can see kind of all that. And so, like, to ascribe a specific number to a specific action, I do not think is the right thing to do because these things are tied together in all the different work that we are doing. And as a specific to 2027, again, , we will we will guide 2027. We do the fourth quarter call at the end of January. Okay.

Appreciate the thoughts on that. Let me let me try a different area or topic. So looking to the fourth quarter, you guided to what you should from a volume standpoint in North America and where you think the market is. And you are dealing with significant inflation and are raising pricing. And we understand that point. What impact do you think is occurring to your volume or maybe the market as a whole from the impact of pricing on demand? And as you think about the next couple of years, in North America from a demand standpoint, what do you think the algorithm looks like? You know, if traditionally we grew 1.5% how much do we shave off because of inflation at the consumer level or GDPs. You know, what can that growth rate look like given all the work that you are doing to try to raise pricing understandably? Thanks, and I will turn it over there.

Okay. Thanks, George. Appreciate that. Yeah. A few things in there that I think are important. So number 1, I think the question is, what do we believe of the long term demand profile looks like in the business? And our view is it is somewhere in the neighborhood of a half point to a point of volume growth. that is our view. Right now, because of the inflation that is out there and the pressure on that mid level and lower level consumer, , we expect the markets to be pretty flattish that is our expectation as we stand here right now. But they certainly are pressuring it. So if you if you think about that k shaped economy that all of us have talked about so much, , the bottom of the k is hurting. there is no doubt about it. And those folks are making really specific choices about their goods purchases. I think, , as I kind of think about the near term, , the next quarter, into the early, certainly, part of 2027, all indicators would say that folks are gonna continue to be under pressure as we think about elevated energy costs whether it is oil, it is natural gas. Right? it is diesel. You pick it. We. there is no reason at this stage to believe that is gonna fall off in a meaningful way. And that is how we are planning the business is to expect that we will be living in an elevated level. To be clear, right, the gyrations around the energy equation have been. I mean, really incredible since, , since February. If you go to look at the ups and downs, obviously, we are all reading the news and hearing about , what may or may not happen post election in The Gulf. Obviously, we have no control over that, but that volatility is what we are managing. And I think managing quite well, actually. But I expect there to be continued pressure on the consumer, which will create--which will create pressure on the customer And we need to continue to drive cost out of our system and raise prices appropriately as we see the. As the market forms and how we think about the business. So that is how I would characterize it. Well, we would like a little bit more color on the cost out certainly doing a really good job on that both in terms of EMEA and North America. You did a great job there managing against that. And we will mark the progress in 2027. Thanks very much. I will turn it over.

Thanks, George.

Your next question comes from the line of Detlef Winklemann with JPMorgan. Please go ahead.

Hi, guys. Good morning. Maybe to start just with your free cash flow guidance that you have given us. I know it is now down to call it $100 million to $200 million Are you able to kind of talk through the moving parts Because if I am looking at it, obviously, we have got an EBITDA line item. We have got tax and We have got your CapEx guidance, but there still seems to be a bit of a gap of, call it, I do not know, dollars $300 million to $400 million Is that just working capital? Anything else I might be missing on that side? And then I have got 1 follow-up, if you do not mind.

Yeah. I think that is the 1 that is the 1 filler. And for us, particularly in the third quarter, right, what you saw in our free cash flow number was the catch up. Right? So on inventory, and the build that we have been trying to, , that did not happen. So remember, we had a huge turnaround quarter in the second quarter. Normally, we would be preparing for that and building inventory in the first quarter. We were unable to do that. Because of the winter storm. So the third quarter is really that the catch up quarter for us from an inventory perspective. So working capital, was a big draw. As you think as you think to the to the fourth quarter, 2 perspectives, Detlef. 1 is , the outlook change, which is, I would say, fundamentally is driven off of the, direct result of the lower earnings outlook. Right, for the business for the year. Based on the things that we have already discussed on the call. But in terms of cash flow itself for the fourth quarter, I would characterize it as stronger operating results, right, generally speaking, with a big working capital swing back to the positive. Right, now that we have got that inventory build behind us. And then, yeah, this will be probably the lowest CapEx quarter for us for the year. So those. All those events sort of combined a much stronger free cash flow profile in the fourth quarter.

Okay. Great. Thanks. And then maybe just 1 just technical question in terms of EMEA, nothing regarding the outlook. Just in terms of where do you have your carrying value for EMEA now I mean, my calcs are saying it is about $3.6 billion but I just want to confirm.

No. Let's get back to you and make sure we get that accurately because that number is gonna be very low. Yeah.

Okay. Great. Thank you.

You bet.

Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Good morning. Good morning, Anthony. Hey, just following up on 2027, but as IP becomes kind of North American standalone, I was just wondering if you can kind of talk about sort of the CapEx needs of the North American business as you see it. At the Analyst Day, think you gave kind of a 6.5% of sales kind of benchmark out there. But I am just wondering how we should think, , in the future about where you are from kind of a CapEx cycle perspective.

Yeah. Anthony, I think the 6.5 percent you are remembering was specific to Europe. To EMEA. We. We have said that we are gonna be elevated in North America here for a couple more years, and I think that the range that we are in right now we should expect to see this year, next year, and we will we will figure out 2028 based on the capitalization needs and the opportunities. But I would I would say, generally, this the range that we are gonna have this year will be similar in 2027 for North America.

Okay. Okay. Okay. that is very helpful. And then just as a follow-up, I do not know if I missed this, but how much of a headwind was West Coast ag on volumes in the quarter? And then did you mention how volumes have been in October? From a North American box shipments?

Yeah. We have not broken out the impact of West Coast ag specifically. We have just noted it in more general terms. We see it within, , our book of business customer by customer, so we can kind of see it like that. But we have not aggregated it as a singular piece and said it is x percent. So we have not broken that out, , to that discrete level. And then as you think and look right now, what I would say is, look, things are generally kind of similar. In The US as I look through the month. It just does not look a whole lot different. Right? It feels like the consumer and therefore, the customer is generally cautious and dealing with inflation. Okay.

that is helpful. I will turn it over.

Thank you. Thanks.

The next question comes from the line of Hillary Cacanando with Deutsche Bank. Please go ahead.

Hi. Thank you for taking my question. In terms of pricing, when would you expect to have substantially all of the September price increase reflected in box pricing? Hi, Hillary.

This is Juliet. For us, it is probably fully realized. it is probably the beginning of Q2. End of Q1, something like that. Takes us about 4 or 5 months to fully realize and work it through. Got it. Thank you. And then and then in terms of the expectation, , to have, , outperformance versus the industry, is it primarily shared gains or, , is there like, a mix component. You know, a mixed component there as well? it is it is mostly share gains. So it is it is business that we have won in prior periods that are now flowing through. You know, between large and small customers. So it is been, it is been pretty consistent there. Okay. Got it. Great. Thank you very much.

Thank you.

Next question comes from the line of Anojja Shah with UBS. Please go ahead. Hi, good morning everyone. Morning. Morning. I wanted to morning. Wanted to ask about your funds in the back of your deck. So I noticed that on a sequential basis, your box tons fell by about 5%. But your containerboard tons increased by about 14%. Can you just talk about what is happening here?. Interruption, miss Shaw. Your connection. We cannot understand you. Is this? Can you hear me better now? No. it is broken up. I would. Let. Let's have her come back on at the end. Understood. Your next question comes from the line of Michael Roxland with Truist Securities. Please go ahead.

Yeah. Thank you, Andy, Lance, Mandi, and team for taking my questions.

Lance, if I heard you correctly, you mentioned that 4Q should benefit from $35 million of faster realization of the June price increase and also partial realization of the September price increase. Yep. what is the just in terms of the faster realization for June, what does it allow you. What had allowed you to realize the June price increase at a faster pace? You know, I think it is just it is just the way that we have forecasted the business. And, , we look at traditional yeah. Patterns and the way that we realize it, I think our teams have done a really good job of working the contracts, being forward with the customer, and just executing quicker.

If you think about it, Mike.

Right? You know, these things are generally written into contracts. And then you actually have a piece that is written in the contracts, and then you have a piece that is not. Right? And when you get faster realization, 1 of 2 things tends to happen. Either with a piece that is not contractual, right, you are able to get it into the market, and you are able to get it to stick quicker, which is, again, to Lance's point, we have done that a little bit faster than what our expectation would be. Not enormously fast. But a little bit faster. And on the contract side, what it really is just diligence of making sure that you execute to the contract. Right? Because if not, it can take longer. Right? That can lag. And so we have got to make sure that we go. We are working with our customer base executing with the contract. So those 2 things typically are the are the levers. And we are just seeing a little bit better uptake on the first piece. And on the second, we are just keeping a discipline with the execution within the contract language. Got it. And, Andy, would it be fair to say that maybe there could be some upside with the September price increase as well? I know Lance called out late 1Q, early 2Q, could that be even pulled forward if you guys are on top of enforcing the contract? I think what we have guided, we feel pretty good about, , generally. So I think I. that is the number I would use. Yeah.

Got it. Great. Perfect. And 1 quick follow-up. A follow-up. In terms of Riverdale, how is that mill operating? When do you expect to be at full utilization? And can you just remind us what the start up cost were in Q3 and when those should wind down?

Start up cost, do you have any start up cost in Q3 was. Yeah. Have to get back to you on that, Mike. Sorry. Do not have that number specifically.

But in terms of the ramp right, if you recall, it basically ramps up through first quarter and second quarter of next year in the full ramp. But what I will say is the team is doing a really nice job Right? We are on schedule. We have had no major issues. And so, , kudos to the team. Those of you who are really familiar with this stuff, this is very complex. And the team has done an excellent job. And same thing on Pine Hill. Right? That mill operations team, if you think back over the last 6 months or 9 months, what they have handled and handled very, very well. And Jason Handley is the leader of the business, he is just done an exceptional job, he and his team, and so, real kudos to them. Thanks very much.

Ladies and gentlemen, that does conclude our question and session. I would now like to turn it back over to Andy Silvernail for closing comments.

Well, thank you very much. And Anojja, I am sorry you got cut but we look forward to talking to you, , separately in our 1-on-1 on 1 sessions. Just thank you to everybody for your attention to IP and your interest in IP. And, really, thank you to the teams. You know, this has been an incredibly turbulent time over the last, , couple of years in terms of what is happened in the external markets. And how the teams have focused and executed and we are seeing that start to ramp now and hit in the sequential numbers that we have seen and what we are--what we believe will happen in the fourth quarter. And as we look forward into 2027. And so, look, the markets are gonna be soft. We are gonna be dealing with, accelerated inflation. We all know that at this stage. We do not believe there is anything that is gonna change that. But our focus is controlling what we can control, and that is the main thing. Is commercially and operationally is for us to be laser focused on the things that we can control and the levers that we can pull to enable us to get the kind of operating leverage that we know is possible in the business. So again, thank you to everybody involved, and we look forward to talking to you in a quarter.

Thank you. Once again, we would like to thank you for participating in International Paper's Third Quarter 2026 Earnings Call. You may now disconnect.