International Paper cuts 2026 guidance ahead of DS Smith split

International Paper lowered its 2026 guidance for adjusted earnings before interest, taxes, depreciation and amortization to $2.27 billion-$2.31 billion after approximately $145 million of new headwinds emerged.

CFO Lance Loeffler said on Wednesday’s call: “Since 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.”

What changed in International Paper’s 2026 outlook?

International Paper had most recently projected $2.35 billion-$2.45 billion for 2026. The company cut that range after higher diesel fuel, distribution costs and volume pressure added to its second-quarter assumptions.

For North America, International Paper projects segment operating profit of up to $500 million in Q4 and up to $1.4 billion for 2026. The company also expects its box volumes to outpace estimated industry demand by approximately 2% for the full year.

How are costs and demand affecting box operations?

International Paper, like other packaging companies, reported inflated input costs in the third quarter. Higher energy, fuel and recovered-fiber costs created a $55 million impact, IP said.

North American prices rose while sales volumes fell amid lower demand, IP said. Loeffler calculated a $35 million price benefit from faster realization of the June increase and partial realization of the September increase.

North American box volumes declined about 2% year over year, International Paper said. The company partly blamed West Coast agriculture and customer facility closures. IP estimated broader industry demand fell about 3%.

The European market remained soft, IP said. Higher paper prices had not yet been reflected in previously published box pricing, which pressured packaging margins, according to International Paper.

What changed across the mill network?

International Paper’s third-quarter results included the first full quarter of integrating Norpac, a Washington-based paper mill operator acquired in June. IP also completed storm-damage repairs during the quarter at its Pine Hill, Alabama, containerboard mill.

CEO Andy Silvernail said: “If you look across the entire system: in the U.S., we have closed 20 facilities in total, box plants and mills. And we’ve really lost no business along that process.”

International Paper linked those closures to its broader footprint rationalization.

What does the DS Smith separation mean for investors?

International Paper plans to discuss most details of the impending split at a Nov. 3 investor day. The separated European business will use the legacy DS Smith name, IP said.

IP wants to retain a 20% stake in the European operation. International Paper described the business as an enhanced pure-play packaging leader within the European market. Silvernail said the company was moving swiftly with the separation regardless of the path chosen.

The third quarter included a $1.38 billion goodwill impairment and $65 million in separation costs tied to International Paper’s Europe, Middle East and Africa business. IP no longer offers financial guidance for the EMEA unit because of the planned separation.

What should investors watch next?

The Nov. 3 investor day is the next scheduled venue for separation details. In operations, Q4 North American profit of up to $500 million and the reduced 2026 range will focus attention on price realization against fuel, distribution, recovered-fiber and volume pressure.