Good morning and thank you for joining us. Welcome to International Paper's Third Quarter 2024 Earnings Call. All lines are currently muted to minimize background noise. After the speakers finish their remarks, there will be a chance for you to ask questions. I would now like to hand the call over to Mark Nellessen, Vice President of Investor Relations. Mark, you have the floor.

Thank you, Regina. Good morning, and thank you for joining International Paper's third quarter earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer; and Tim Nicholls, Senior Vice President and Chief Financial Officer. 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 and uncertainties. These and other factors that could cause actual results to differ materially from such forward-looking statements can be found in our press releases and reports filed with the U.S. Securities and Exchange Commission. We will also present certain non-U.S. GAAP financial information. A reconciliation of those figures to U.S. GAAP financial measures is available on our website. Our website also contains copies of the third quarter earnings press release and today's presentation slides. With that, I'll now turn the call over to Andy Silvernail.

Hey. Thanks, Mark. Good morning. Good afternoon, everyone. I'll begin on Slide 3. After my first six months in this role, I'm encouraged by the pace of improvement and proud of the team for aggressively engaging in IP's transformation. We are building a performance-driven culture at IP that will enable us to create significant value for our employees, customers, and shareholders. That work begins with strong alignment around a very clear and compelling strategy. We will drive profitable growth by being the low-cost producer and the most reliable and innovative sustainable packaging solutions provider in North America and EMEA. We are using our 80/20 approach to guide investments and align resources to win with our most attractive customers, reduce complexity and cost throughout the company, and drive transformational performance. Ultimately, building great teams and a customer culture are foundational to our improvements. We are passionate about delivering a superior experience to our best customers and best-in-class returns for our shareholders. Let's turn to Slide 4. We are on our way to driving transformational changes at IP. We've conducted 80/20 training with our top leaders across the company and are actively deploying the methodology. We will continue to embed this practice with our commercial teams at the mills, in box plants, and with administrative functions. I was delighted that about 80% of our active investors joined us for the 80/20 overview session in August. Importantly, we are completing 80/20 segmentation across the company. We are examining our portfolio and business segments, markets, customers, products, suppliers, and assets and facilities. We are performing zero-based analysis to determine our key resource needs, and we are developing implementation plans and aligning resources to position our businesses to win for customers. We have fully entered the implementation phase by engaging our teams and taking actions to accelerate our strategy and significantly improve IP's performance. I'm now on Slide 5. I'll share some strategic actions we are taking in the fourth quarter to position IP for success. What all these actions have in common is that they give us greater focus on strategic customers and markets, align resources and investments to win, and simplify all aspects of IP, which reduces complexity and costs. While we are confident that these actions are necessary, they include some difficult decisions that impact our team members, their families, and the surrounding communities. One of the great strengths of IP is our values. We make these decisions with care and compassion, ensuring that we treat people with dignity and respect while providing support, outplacement, and severance to help people in their transition. Our actions at the enterprise level are centered on reducing complexity and shifting resources into the businesses and closer to the customer to accelerate strategy. This is the fundamental principle of 80/20. We are simplifying to enable greater focus and collaboration, improved execution, more agility, improved customer experience, and lower costs. Within our North American Packaging business, we are investing for outstanding service, reliability, productivity, and enhanced capabilities to win with customers while optimizing our total system and reducing structural costs. As I mentioned on the Q2 call, we have two regional optimization pilots underway in our box system. We are reducing complexity and investing in equipment and people to improve safety, product quality, on-time delivery while lowering costs. Importantly, we are seeing a 20% to 30% productivity improvement in these early stages in these pilot areas. There is an opportunity to apply this approach across our national box network. This will be a key lever for delivering profitable market share growth now and in the future. Recently, we announced five plant closures in regions where we have excess capacity and an opportunity to optimize our footprint, working closely with our customers to transition their business to other IP plants. We expect to retain 100% of our strategic customers and we are making investments in remaining facilities for future growth. Importantly, we have identified multiple opportunities for greenfield and brownfield box plant investments that will be industry-leading in all aspects of safety and performance. You should expect to see announcements and investments soon to increase our strength in strategic markets. After a strategic review, we've decided to evaluate opportunities to better position GCF for long-term success. Our Board has authorized us to pursue strategic options. We have engaged Morgan Stanley as our advisor. GCF, as a leader in fluff pulp, is very well positioned in a growing global market. We have a talented team, a strong market position, and great technical expertise. We have a highly advantaged mill system. And as I mentioned, we have a global supply position. Throughout the process, we are fully committed to supporting our business and serving our customers. We will update investors when the process is completed. Regardless of whether we sell or keep GCF, it will be positioned to win for the long-term. While we are engaging in this process, we'll continue to accelerate our strategy to focus on fluff and improve business performance. The decision to close the Georgetown mill allows us to exit about 300,000 tons of commodity SBSK and low-value specialty grades across the system. This move significantly lowers complexity and costs, improves returns, and reduces earnings volatility. We expect to retain 100% of our fluff grades and customers and increase our absorbent mix to about 80%. GCF will continue to have plenty of capacity for growth with key customers. These actions strengthen GCF, making them a stronger supplier of high-quality fluff pulp to the market and for our strategic customers. And again, regardless of the outcome, GCF has the potential to be an attractive business with meaningful upside potential. I'm now on Slide 6. This slide reflects some early wins we are seeing across the company through the 80/20 framework. Our teams are engaged; they've jumped in, and they are not wasting any time. We are taking action to win with our customers, reduce complexity, and improve performance. Here are just some examples I thought I'd highlight – of all the great work happening with our teams. On safety, our intent is to set the industry standard as a great place to work by starting because we are the safest place to work. We are using 80/20 analytics to understand opportunities for safety improvement that include better root cause analysis and advanced technology. Simply put, safety must be above everything else. I've already discussed the pilot plans in two regions, where we are seeing double-digit productivity improvements. Also, the corporate reorganization will allow us to focus on our customers and business results. We are moving from a matrix organization to a customer-focused organization. Importantly, we've changed our sales incentive programs that are simpler and better aligned with our commercial strategy to drive profitable growth and reward those who deliver. Another great example is a large strategic customer with whom we partnered to look at their mix of business that was driving significant complexity. By working together, we reduced the complexity of their order patterns, saving 1,300 hours of changeover time and significantly improving service levels. These kinds of examples can be found across the system for more opportunities in the future. We also had a couple of quick-hit wins in sourcing in the U.S. and Europe where we partnered with strategic suppliers to improve costs and terms. There is more to come, but we are encouraged by the level of commitment and excitement across the company as we work to deliver safe, profitable growth. All right. I'm on Slide 7. There is good momentum in the company, but we are just beginning our 80/20 journey, and it needs to take hold in every part of the company. Ultimately, 80/20 is a powerful business model when it is lived not only in the C-suite but also with customers at paper machines and at the shipping docks of box plants. Along with the progress at IP, we are very excited to complete the DS Smith acquisition. I'm sure you've all seen the strong shareholder support. We are bringing together two great organizations and building winning positions in the attractive markets of North America and Europe. We expect to close in the early first quarter upon completion of regulatory reviews. Our teams are actively involved in planning for the integration. I'm pleased to announce that after closing the transaction, Tim Nicholls will serve as the interim leader of the combined IP and DS Smith EMEA teams. In addition to his responsibilities as the CFO, we are fortunate to have outstanding finance teams at IP and DS Smith that enable us to do this. Finally, we are happy to announce that we will host an Investor Day on March 25th, 2025, at Freedom Hall at the New York Stock Exchange. This will be an opportunity for us to share details about our strategy and value creation opportunities across the company. Now let me turn to the third-quarter performance and the outlook. First, I'll share some highlights and then turn it over to Tim, who will walk us through the details. I'm on Slide 9. Our third-quarter earnings came in above our outlook for the quarter. Better performance was driven by strong price improvements across the portfolio. This included about $17 million of benefit from our Box Go-to-Market strategy. Volumes were seasonally lower as expected. Operating costs were higher sequentially due to lower volumes, seasonally higher labor costs, employee incentive compensation, and some reliability issues at our mill system, which Tim will address as he covers the business segment performance. In terms of the underlying market, we continue to see stable to moderately improving demand and trends in North America across the various segments we serve. In Europe, we have seen some softening; however, as expected, IP's packaging volumes lag the overall market as we restructure commercial agreements to improve overall profitability. Relative to prior year performance, we've had higher sales revenues to offset the higher costs, primarily related to inflation, employee incentive compensation, as well as some reliability issues and spending to improve future performance. As I mentioned earlier, we are laser-focused on reducing structural costs across the company and we are taking actions. As we look into the fourth quarter, we expect higher earnings across our packaging business as our price increases from the prior index movement stick. We also expect lower costs from improved operations and lower planned maintenance outages. We expect lower earnings in GCF as a result of prior price index declines and higher planned maintenance outages. In the fourth quarter, we are also calling out significant accelerated depreciation expenses associated with the facility closures that I mentioned earlier. With that, let me turn over to Tim, who will provide more details about our third-quarter performance and our outlook.

Great. Thanks, Andy. Now turning to Slide 10, I'll provide more details about the third quarter as we walk through the sequential earnings bridge. Third-quarter adjusted operating earnings per share was $0.44 compared to $0.55 in the second quarter. Price and mix were higher by $0.29 per share driven by the flow-through of prior price index movements in both businesses. Higher export prices, as well as margin benefits from successfully executing our Box Go-to-Market strategy. Volume was unfavorable by $0.12 per share due to the seasonally lower box shipments and some volume trade-offs related to commercial contract restructuring actions. Although we continue to see favorable demand trends, deploying our commercial strategies across the portfolio continues to impact volumes in the near term as expected. Operations and costs were unfavorable by $0.28 per share sequentially. This is largely from the impact of lower volumes, seasonally higher labor costs, higher employee incentive compensation, some reliability incidents, and spending, as well as some weather impacts. Maintenance outages were higher by $14 million or $0.03 per share in the third quarter, and inputs were unfavorable sequentially with higher costs for energy and wood. Finally, corporate items positively impacted earnings by $0.08 per share sequentially due to the timing of corporate items and a lower effective tax rate. If we turn to Slide 11, I'll cover industrial packaging. Price and mix were higher due to the realization of approximately $70 million of benefit from the prior index movement. Additional benefits from our Box Go-to-Market strategy contributed approximately $17 million to earnings, and higher exports contributed approximately $18 million. Volume was lower by $48 million sequentially due to seasonality and one less shipping day in the third quarter. In addition, we made choices based on our Box Go-to-Market strategy that negatively impacted our volume in the near term but will allow us to improve our margins and mix over the longer term. Operations and costs were $89 million unfavorable sequentially, primarily due to lower volumes, seasonally higher labor costs, and higher employee incentive compensation. Operations and costs also include a $42 million unfavorable impact from reliability incidents that occurred at a few mills, partially offset by $20 million of insurance proceeds for the Ixtac box plant fire that occurred earlier this year. Planned maintenance outages were higher by $38 million sequentially, and input costs were $24 million unfavorable, primarily due to the higher energy and wood costs. If we turn to Slide 12 and cover GCF, price and mix were sequentially higher by $24 million due to price index movements. Volume sequentially was lower by $4 million. Operations and costs were unfavorable sequentially by $35 million, which includes an $18 million unfavorable impact from reliability incidents at a few of our mills in addition to other items, including higher employee incentive compensation. Planned maintenance outages were lower in the third quarter by $24 million. Finally, input costs were flat with lower energy and chemical costs offsetting higher wood costs. I'm on Slide 13 now, and before we get into the details of the outlook, I would note that accelerated depreciation expense will be a significant impact in the fourth quarter due to previously announced facility closures, so we've highlighted that for each business. In line with guidance from the SEC, accelerated depreciation will be included in operating earnings. Earnings for our Industrial Packaging segment are expected to be higher sequentially by approximately $55 million, which includes accelerated depreciation expense of $15 million. Earnings for Global Cellulose Fibers are expected to be lower sequentially by approximately $275 million, which includes accelerated depreciation expense of $220 million, as well as higher planned maintenance outages. Now let me give you the breakdown by business segment. I'll start with industrial packaging. We expect price and mix to improve earnings by $45 million sequentially. This is primarily the result of prior index movement in North America, with some benefit from previous actions under our Box Go-to-Market strategy. The sequential improvement also includes favorable mix in our EMEA packaging business given the strong fresh food and vegetable season in Morocco. Volume is expected to decrease earnings by $15 million due to two fewer shipping days partially offset by seasonally higher daily demand. We expect operations and costs to increase earnings by $5 million. This includes improved performance and reliability, which are partially offset by higher seasonal costs and the non-repeat of insurance proceeds received in the third quarter. We expect accelerated depreciation to decrease earnings for the packaging business by approximately $15 million due to the five packaging facility closures in the fourth quarter. Lower maintenance outage expense is expected to increase earnings by $21 million. Lastly, lower input costs are expected to increase earnings by $15 million, primarily due to lower OCC and wood costs. Switching to Global Cellulose Fibers, we expect price and mix to decrease earnings by approximately $25 million as a result of prior index movement. Volume is expected to be stable. We expect operations and costs to increase earnings by approximately $5 million due to improved performance and reliability, which is partially offset by higher seasonal and distribution costs. We expect accelerated depreciation to decrease earnings for the Pulp business by approximately $220 million due to the closure of the Georgetown mill in the fourth quarter. Higher planned maintenance outage expenses are expected to decrease earnings in the fourth quarter by approximately $36 million. Lastly, input costs are expected to be stable. And with that, I'll turn it back over to Andy.

Thanks, Tim. We'll now turn to Slide 14. Again, look, we are making great progress, and we are well on our way to building a performance-driven and customer-centric culture. We are taking actions. We are taking actions to control our own destiny, and we are making the right choices to accelerate performance improvement. I'm confident that we have the right strategy, a talented team, and a concrete plan to create a great place to work, deliver customer excellence, and drive profitable growth. Our actions will drive transformational improvements at IP and create significant value for our shareholders. With that, operator, we are now ready to take questions.

Thank you. Our first question is from Phil Ng with Jefferies. Please go ahead.

Hey, guys. Andy, it's been really inspirational in terms of the progress you guys have made in this short time. So really exciting. As you look at the mix of customers that you're looking to optimize, how is that progress coming along? I know you've realigned your sales incentive compensation structure for a lot of your employees; are you seeing any early findings or changes in behavior? And if I look at Tim's forecast for box shipments sequentially in the U.S., it looked okay. It didn't seem like there was any more incremental leakage there. So give us an update on how that contract negotiation is progressing? Are you seeing any more incremental churn on the customer side?

Thanks, Phil. I appreciate the question. First of all, let me recognize the teams for having done a tremendous job. We do a morning call in advance of earnings, and we were able to talk to a bunch of folks here today and just recognize the incredibly hard work that the people have done over the last six months to create momentum. So I personally want to acknowledge the monumental work that has been accomplished. Specific to your question on volume, what we're seeing there is that it feels like the leakage has slowed. And I don't want to jump the gun here and say gone because we still will have year-over-year volume down here for the next few quarters. But we do expect that by the back half of next year, we expect to turn that and we expect it to be at least back to market growth. What I would say we're seeing right now is the expected losses, and if we look at the band of volume losses, we are better than the bottom end of the band of that range of expectations, which is positive. We have also gotten much sharper through the 80/20 work of getting clear about what segments of the market are priorities for us. If I were to simplify that, in the U.S. market, that's about 400 billion square feet from a packaging standpoint. About 60% is what I consider the big middle. So 20% is on one end, which tends to be smaller local customers, and on the other end are very price-sensitive larger customers. The sweet spot for us is that big middle; that is where we are really good. We do business across the spectrum given our market position. If we can do business with folks on good terms and conditions, we're open for business. But our focus is really on those people who match our strategy. Our strategy is to be the low-cost producer. We're not going to be the low-price player, but we will be the low-cost producer. We are going to be great on service, and we will invest where we have strength, and the customers that really align with that in that big middle is the sweet spot for us, and we really like that overall positioning. In terms of the further segmentation, that really starts to become regional and then super local. One of the things I love about this business is, as I discussed when I first thought about joining the company, what rang in my head was commodity, commodity, commodity. That's not the case; we have a highly differentiated position and can have a highly differentiated position in our marketplace. I feel good about the segmentation and the focus. As we've been rolling out 80/20 training regionally, we've now done three regional commercial train-the-trainers, and we've identified big chunks of opportunities in the marketplace where our value proposition is highly aligned with what the customer wants. So I feel good that we're heading in the right direction. It's too early to call a turn, but I think the leakage has certainly slowed.

Okay, super. You talked about a few things, early wins in terms of the pilot program on the box side to kind of unlock more efficiency, your ability to kind of ramp that more broadly, and you also highlighted a large customer where you were able to reduce the complexity and really reduce the changeover. That's pretty exciting. So your ability to kind of roll that out more broadly as well.

Yes, so I think, Phil, both those two things are really nuanced, but I can't stress how important those examples are as you think about rolling them out across the company. For example, you think about the box plant pilots, fundamentally, what's happening is we have two box plants in a region. One effectively becomes a low mix, high volume plant, and the other becomes a high mix plant. There can be a tendency for some to say, 'Oh, well, we've now stratified our plant.' No, what we've done is specialized our plants. The one dealing with high volume can build their labor force and align their entire plan around a certain business model that drives tremendous efficiency aligned with what the customer needs. The high mix plant gets greater changeovers; even the equipment can differ when you start thinking about what you're discussing there. We can't do that everywhere in the country, but we have 20 to 25 regions, and within that, probably at least half have the dynamics we're talking about. So we can explore those kind of options. I think that's exciting. And don't forget what's really important. We closed five plants, but some may look at that and say, 'Hey, you’re taking capacity out of the system; that's a problem.' These are plants that were underutilized, and we can move 100% of the customers to somewhere we have capacity. As we grow our overall capacity in the system by driving productivity, we open up service levels. And then, on that, the greenfields and brownfields we're looking at. And we'll get more specific in the future, likely after the fourth quarter call, talking more about capital planning and what that means for us incrementally. As long as our strategy is going in the right direction, we won't be scared about investing in growth and productivity for our customers. Regarding that one changeover example, what's exciting is that it's a total win-win, working with a customer whose service levels weren't quite satisfactory. They've become very demanding about very specific business models, and we're able to partner with them and understand their needs. What they want is rapid, on-time delivery, even same-day. That level of service can be challenging when you have fluctuating order patterns. We're trying to strike a balance where we can meet customer demands while also managing our capital needs and costs, and we've found a great equilibrium. That one customer, one facility or perhaps two facilities, represents 1,300 hours of changeover time – a significant reduction in operational inefficiencies.

Okay, these are all great examples. Appreciate the color, Andy.

Yes. Thank you, Andy, Tim, Mark, for taking my questions. Great quarter. Obviously, you've all been slightly busy.

Yes.

I wanted to follow up on Phil’s question regarding the 20% to 30% productivity improvement. Can you talk about what that means for EBITDA on average at those box plants? And in terms of deploying this methodology at the box plants, over what timeframe do you see this rolling out? And lastly, is this something that you can apply to your mill system as well?

Yes, great questions, Michael. If I were you, I wouldn't focus on EBITDA by box plant. I don't think that's the great measure because what you're looking for out of your box plants is great customer service and a low-cost position while doing that. If we can move productivity from box plant to box plant within a region, that's what we want. If you create a unit of productivity in our business, you can drive on a contribution level, 60-plus percent incremental margins. It's huge, right? In my experience, you'd see 30% to 35%, and now we're not going to pocket all that because we're going to reinvest back in the business, and that's where the magic begins. If you think of it this way, with box plants, what that does is create local flexibility for great customer service, lowers your cost structure, and allows you to grow. It also reduces your capital intensity needs, improving profitability, customer service, and your return on invested capital. And yes, you can apply that approach in the mill system. It's different, but philosophically, it's the same. Let's consider a winder in the paper-making process, which is often a bottleneck and a dangerous environment. By performing analytics, focusing on bottlenecks, and introducing technology, we can drive productivity and safety improvements. We're beta testing optical technology in certain mills that will shut down machines anytime a human gets too close to a dangerous area. We can absolutely apply this approach in both box plants and mills. In 2025, we will establish what I'll call lighthouses and utilize a process called strategy deployment. For those familiar with Danaher or the Toyota Production System, it's Hoshin Planning or policy deployment. We're focused on safety, 80/20 methodologies, and the integration of DS Smith. These will be the key areas of deployment next year, with a couple of box plant and mill lighthouses creating best-in-class examples of the strategies we want to employ.

Got it. I appreciate the color. Obviously, there's a tremendous amount of work ahead, but the trajectory seems very positive.

And Michael, one more thing — you’ll see at the Investor Day on March 25 that we'll spend time on lighthouses and the integration of DS Smith. You'll see how these strategies will be working in practice. Sorry, Mike, did you have another question?

No, this is – and this is great. One quick follow-up: In terms of the potential for additional portfolio optimization, obviously, the company closed a mill in Orange earlier this year. I think at a recent conference, you mentioned trying to analyze where the company is over-capitalized. Where does that analysis stand right now? And what's the potential for further portfolio rightsizing at the mill level?

Yes, great question. We have to be careful in those conversations for various reasons, not least of which is revitalizing the DS Smith acquisition, right? We're going through regulatory approvals which requires caution. That being said, we are examining opportunities throughout our entire portfolio, looking at sub-segments of business, including the SBSK example within GCF, which are commoditized products that carry high capital intensity and earnings volatility. As we move forward, you will notice a constant effort, like a 20-mile march, toward becoming a more integrated business with less volatility. Our core packaging business exhibits low volatility. The demand patterns aren't very volatile, yet we induce a lot of the volatility into that business, creating uncertain situations. As we progress, you will see us look across our portfolio to focus on integrated high-value businesses that we want to allocate resources toward, while deemphasizing areas that do not fit that criteria.

All right. Thanks very much and good luck in the quarter and in 2025.

Thanks, Michael.

Thank you. Congrats on all the progress so far. So your big picture — $2 billion or $4 billion — you talked about $1 billion from cost and ops, if I'm remembering correctly. We certainly see some of the actions being laid out. The strategic . . . now you're 230, which I assume would be something you'd consider on that $1 billion. What I'm trying to understand a little is, particularly as I think about even 2025 but obviously beyond that too. If I have this base of $2 billion run rate entering the year, and then I can layer in the strategic actions you've identified – how much more from what you're doing 80/20-wise could potentially flow in 2025 and beyond above and beyond, say, labor and benefits or something that would be the typical offset? I realize that's a mouthful I just threw out there, but hopefully, you understand that direct.

Mark, let me make sure I understand what you're asking. Are you asking what the benefits could be in 2025 above inflation? Is that what you're asking?

At the heart of it, yes.

The way I look at this is the numbers I mention are net numbers. I think it will be more like a 60-40 split of cost versus commercial efforts, and I believe it's a multiyear journey. It's not all going to happen in 2025. We want to pull as much forward as we can. I was fortunate early in my career to work for a gentleman named George Sherman, the first CEO of Danaher. One of the key takeaways I received was to always 'get ahead.' That's what we’re trying to do right now: get ahead with our cost base. While it's great to improve the cost structure and profitability, that's a benefit right now. This improvement allows us to invest back in the business, which we need to do. The goal is to pull as much forward as possible into 2025 while being responsible. We want to run hard but also consider the efforts of various teams in different parts of the organization. We're running a marathon, and we want to ensure we can handle the challenges effectively.

I appreciate that. Is it fair to say that the benefits from 80/20, even in the earlier stages like in 2025, should outpace inflation and provide value?

Sorry. I'm sorry, Mark. Yes, absolutely, right. We should — my expectation is that the cost and inflation equation will be positive at 2025.

Thanks. Good morning.

Good morning.

If you could comment, does this concept of regional box plant specialization that you talked about on this call already exist across the DS Smith box plant system? Or how would you characterize the opportunity to bring this approach to their system as well?

Yes. I mean look, DS Smith is a terrific company, and they've done a lot of things really, really, well that, frankly, are better than us. They are better than IP commercially; there's no doubt about it. I think they are further ahead of us in some regards commercially, and there's no doubt about it. But yes, there will be opportunities. I think you have fewer proportionally, and probably a lower density of plays in Europe than you have in the U.S.; that's probably true due to country boundaries. Even though you theoretically have a union in practice, it doesn't quite work like that. You'll notice uniqueness in Europe around country boundaries that will be different. That being said, we will take DS Smith’s insights into how we focus on our most important customers, what we call our 80s is absolutely going to inform our productivity. We've outlined a bunch of synergies, and we think there's potentially upside there. We do want to be cautious and responsible in our execution, but there will be opportunities down that road; however, it will be a different path. DS Smith is in a different place than IP, and that doesn't necessarily mean it's always a better place.

Yes. Good morning. Thank you for taking my questions. First one is just staying with the Global Cellulose Fibers business. Now that sale is very much a potential auction. Can you just give us a bit more detail on how much of the uplift in group EBITDA to $4 billion in the targets you had anticipated coming from that is also a meaningful part of the $230 million EBITDA opportunity to identify so far? And then sorry, bundling into that $230 million. Is the $25 million from procurement within that number as well? Thanks.

I don't think I've got — let's make sure I captured it right. Relative to GCF, it's a comparatively small part of achieving the $4 billion target. It plays into the broader strategy. The procurement savings are not part of that; they are separate.

Very clear. And just returning to the 20% to 30% productivity improvement you've talked about achieving in the pilots. Can you just clarify what that actually means? Is that 20% to 30% lower total variable costs, including or excluding raw materials? How are you measuring that?

Yes. The way to think about it is in terms of output over a fixed base. So it’s square feet per unit. This leads to choices, right? You can either grow, which is the optimal outcome, or you may consolidate other facilities. In the U.S., parts are overutilized; there's demand that can't be satisfied. We are trying to aggressively free capacity to meet that demand, while there are also parts of the country with too much capacity where we've had to make those tough decisions. The five plants closed to date are those with excess capacity, resulting in fixed cost savings. The real objective is to free up capacity to grow while recognizing higher variable contribution margins.

Good morning, guys.

Good morning.

Thanks for taking the questions. I wanted to ask, Andy, a little bit of what you started to address in the last question, which is you're talking about freeing up maybe some capacity in certain parts of the system. Is the question about how much of what you're seeing across your converting system is more about increasing productivity, say on a per-employee basis, square footage per employee or something like that? You talked about variable costs versus freeing up capacity because when we look across what's been added from other players, it doesn't seem like there's a shortage of converting capacity in the marketplace. So it seems a little circular to free up capacity. How do you think about that balance? Or maybe again, quantify for us, oh, this many plants we see as a cost savings and productivity on the cost side, and here is where we have a bottleneck issue?

Yes. You're touching on a crucial point. When you look at converting capacity at the highest level, there is not an overall shortage in the U.S. However, region by region, that is not universally true; some regions are over capacity while others have shortages. One of the mistakes we've made is not making tough choices regarding that balance. We need to strategically invest in areas of strength and reduce excess capacity where it isn't warranted. The underperformance of certain areas has often skewed our overall capacity, and that’s exactly what we need to rectify as we progress. There are a few things that we need to watch that could pose potential bottlenecks or roadblocks to success. One of the early focuses is the matrix structure in Memphis, which can make collaboration tough and complicate understanding priorities. This has created challenges, and we need to align closer to customer needs rather than just reporting structures. Making that shift is potential stumbling block we must actively manage. Change takes time, especially given the decades of established practices. We must create a culture that embraces the changes we want to implement. I want to thank all of you for taking the time to listen to our journey. There's been a tremendous amount of work that has gone in over the last six months. I'm incredibly proud of the team for all they've done. Organizations are built of people, and the things we're doing are tough. We are making challenging decisions to pave the way for better outcomes to come. Our focus is on building a great organization that supports our customers, owners, and ultimately our people. As we navigate this transition, I’m proud to be a part of this team and feel great about the direction we’re heading. Thank you very much.

Once again, we'd like to thank you for participating in International Paper's third quarter 2024 earnings call. You may now disconnect.