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Forward-Looking Statements Certain statements in these slides and - - PowerPoint PPT Presentation

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Second Quarter 2017 Earnings | July 27, 2017 Forward-Looking Statements Certain statements in these slides and made during this presentation may be considered forward-looking statements. These statements reflect management's current views and are

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SLIDE 1

Second Quarter 2017 Earnings | July 27, 2017

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SLIDE 2

Earnings Presentation | Second Quarter 2017

Forward-Looking Statements

Certain statements in these slides and made during this presentation may be considered forward-looking

  • statements. These statements reflect management's current views and are subject to risks and

uncertainties that could cause actual results to differ materially from those expressed or implied in these

  • statements. Factors which could cause actual results to differ include but are not limited to: (i) the level of
  • ur indebtedness and changes in interest rates; (ii) industry conditions, including but not limited to

changes in the cost or availability of raw materials, energy and transportation costs, competition we face, cyclicality and changes in consumer preferences, demand and pricing for our products; (iii) global economic conditions and political changes, including but not limited to the impairment of financial institutions, changes in currency exchange rates, credit ratings issued by recognized credit rating

  • rganizations, the amount of our future pension funding obligation, changes in tax laws and pension and

health care costs; (iv) unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation; (v) whether we experience a material disruption at one of our other manufacturing facilities; (vi) risks inherent in conducting business through joint ventures; (vii) the failure to realize the expected synergies and cost- savings from our purchase of the cellulose fibers business of Weyerhaeuser Company; and (viii) our ability to achieve the benefits we expect from all other strategic acquisitions, divestitures and restructurings. These and other factors that could cause or contribute to actual results differing materially from such forward-looking statements are discussed in greater detail in our Securities and Exchange Commission

  • filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result
  • f new information, future events or otherwise.

2

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SLIDE 3

Earnings Presentation | Second Quarter 2017

Statements Relating to Non-GAAP Financial Measures

During the course of this presentation, certain non U.S. GAAP financial measures will be presented, such as Adjusted Operating EPS, Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Adjusted ROIC. A reconciliation of all presented non-GAAP measures (and their components) to U.S. GAAP financial measures is available on the company’s website at internationalpaper.com under Performance/Investors.

3

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SLIDE 4

Earnings Presentation | Second Quarter 2017

Ilim JV Information

All financial information and statistical measures regarding our 50/50 Ilim joint venture in Russia (“Ilim”), other than historical International Paper Equity Earnings and dividends received by International Paper, have been prepared by the management of Ilim. Any projected financial information and statistical measures reflect the current views of Ilim management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such projections. See “Forward-Looking Statements.”

4

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SLIDE 5

Earnings Presentation | Second Quarter 2017

Second Quarter 2017 Results

1 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and

non-operating pension expense)

5

  • Healthy box and containerboard demand driving

N.A. Industrial Packaging performance

  • Positive momentum in Global Cellulose Fibers
  • Record fluff pulp sales
  • Synergies being realized faster
  • Recent price increases being implemented and

realized across key businesses

  • OCC cost averaged $20/ton higher than 1Q17
  • Executed seasonally heavy maintenance outage

schedule; ~75% of outages completed in 1H17

  • Strong Ilim operational results; equity earnings

negatively impacted by non-cash FX

$0.92 $0.60 $0.65 2Q16 1Q17 2Q17

  • Adj. Operating EPS1
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SLIDE 6

Earnings Presentation | Second Quarter 2017

2Q17 Financial Results

2Q16 1Q17 2Q17 Sales ($B) $5.3 $5.5 $5.8

  • Adj. EBIT1 ($MM)

$635 $431 $499

  • Adj. Operating EPS2

$0.92 $0.60 $0.65 Operating EPS impact

  • f Ilim F/X3 – IP Share

$0.01 $0.06 ($0.04)

  • Adj. EBITDA1 ($MM)

$936 $776 $856

  • Adj. EBITDA Margin1

17.6% 14.1% 14.8% Free Cash Flow4 ($MM) $527 $259 $355

1 From continuing operations before special items and non-operating pension expense 2 Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating

pension expense)

3 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.8B at end of 2Q17) 4 See slide #20 for a reconciliation of cash provided by operations to free cash flow

6

936 776 856 2Q16 1Q17 2Q17

  • Adj. EBITDA1

($MM)

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SLIDE 7

Earnings Presentation | Second Quarter 2017

.60 .65

(.13) (.01) (.07) .13 .06 .04 .03

1Q17 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs Corporate /Other Ilim JV 2Q17

2Q17 vs. 1Q17 Adj. Operating EPS

7

Ops .03 FX (.10)

Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense)

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SLIDE 8

Earnings Presentation | Second Quarter 2017

360 407

(29) (6) 44 26 12

1Q17 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Industrial Packaging | 2Q17 vs. 1Q17 Adj. EBIT1

8

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 9

Earnings Presentation | Second Quarter 2017

0.3 0.4 0.5 0.8 1.3 1.3 1.6 2.0 2.5 2.7 2.7 2.4

9% 13% 15% 15% 19% 18% 20% 19% 22% 24% 24% 22%

0% 5% 10% 15% 20% 25% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2H17 Run

Rate

Thousands

N.A. Industrial Packaging | Margin Expansion

9 Business

  • Adj. EBITDA ($B)

Adj. EBITDA %

IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes

Margin expansion in 2H 2017 driven by price realization in domestic and export channels and lower maintenance outages

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SLIDE 10

Earnings Presentation | Second Quarter 2017

N.A. Industrial Packaging | Containerboard Exports

10

IP Kraft Linerboard

EMEA Asia Latin America

~15% $40/ton1 ~50% +$125/ton1 ~35% +$110/ton1

  • IP’s export channels provide choices for maximizing value
  • f kraft linerboard
  • Price momentum continues
1 RISI Published Pricing; change in pricing from December 2016 to June 2017

Healthy global growth at ~3-4%

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SLIDE 11

Earnings Presentation | Second Quarter 2017

Industrial Packaging | Tangier Box Plant Acquisition

11

Tangier Casablanca Adagir

  • Acquired Europac’s Tangier plant in Morocco
  • Began operations in 2016; attractive asset base
  • Supports Morocco's growing export economy

Madrid

IP Box Plant IP Mill

Kenitra

Continuing to optimize our EMEA Packaging business

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SLIDE 12

Earnings Presentation | Second Quarter 2017

Global Cellulose Fibers | 2Q17 vs. 1Q17 Adj. EBIT1

12

1 Segment adjusted operating profit before special items

(51) 12

33 1 20 6 3

1Q17 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

$ Million

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SLIDE 13

Earnings Presentation | Second Quarter 2017

Global Cellulose Fibers | Integration Synergies Update

13

Synergy Category Description

2Q17 Actual ($MM) YTD Actual ($MM) Current Run Rate Annualized ($MM) Full Synergy Target ($MM)

SG&A / Other

  • Eliminate duplication

$12 $19 $38 $45 Commercial Mix Opportunities

  • Customer and segment
  • ptimization
  • High value product growth
  • Leverage innovation

$8 $12 $32 $40 Manufacturing, Supply Chain, & Sourcing

  • Grade / machine mix
  • ptimization
  • Logistics optimization
  • Efficiency improvements

(Waste, Freight)

  • Purchasing opportunities

$14 $17 $56 $90 Total $34 $48 $126 $175

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SLIDE 14

Earnings Presentation | Second Quarter 2017

100 88

(3) (22) 9 3 1

1Q17 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Printing Papers | 2Q17 vs. 1Q17 Adj. EBIT1

14

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 15

Earnings Presentation | Second Quarter 2017

33 (5)

(2) (5) (35) 4

1Q17 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Consumer Packaging | 2Q17 vs. 1Q17 Adj. EBIT1

15

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 16

Earnings Presentation | Second Quarter 2017

Ilim Joint Venture | 2Q17 vs. 1Q17

$ Million$ 2Q16 1Q17 2Q17 Sales Volume

(thousand tons)

866 748 900 Sales $473 $449 $546 EBITDA $169 $191 $121 F/X (Impact of USD Net Debt)1 $15 $58 ($46)

  • Adj. Operational EBITDA2

$154 $133 $167 IP Equity Earnings (Loss)3 $46 $50 $21

  • Seasonally stronger demand and higher pulp pricing drove operational

EBITDA improvement

  • F/X loss (non-cash) on USD denominated net debt driven by ruble weakening
  • Seasonally weaker volume expected in 3Q17; equity earnings projected to be $35MM4

16

Ilim JV results are on U.S. GAAP basis

1 Represents F/X impact including amounts related to Ilim JV USD-denominated net debt (balance of ~$0.8B at end of 2Q17); Ilim Group’s functional currency is the

Ruble (RUB); Non-functional-denominated currency balances are measured monthly using the month-end exchange rate

2 Before F/X impact including USD-denominated net debt 3 IP Equity Earnings (Loss) for 2Q16, 1Q17 and 2Q17 include after-tax F/X gains (losses) (primarily on USD-denominated net debt) of $6MM, $23MM and ($18MM),

respectively

4 At June 30, 2017 RUB/USD exchange rate
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SLIDE 17

Earnings Presentation | Second Quarter 2017

North America EMEA & Russia Brazil Price / Mix

Packaging

Realization Stable Stable

Cellulose Fibers

Realization

Paper

Mix Pressure Stable Stable

Volume

Packaging

1 Less Day Stable Stable

Cellulose Fibers

Stable

Paper

Stable Stable Stable

Operations & Other

Packaging

Non-repeats Stable Stable

Cellulose Fibers

Stable

Paper

Stable Stable Stable

Mill Maintenance Outages

Packaging

Decrease $86MM Decrease $2MM Stable

Cellulose Fibers

Decrease $36MM

Papers

Decrease $33MM Decrease $6MM Decrease $3MM

Inputs & Freight

Packaging

OCC & Energy Stable Stable

Cellulose Fibers

Stable

Printing Papers

Stable Stable Stable

Other Items

  • Corporate expense, ~$15MM in 3Q17
  • Interest expense, in line with full-year outlook of ~$575MM-$600MM
  • Tax rate, ~33% in 3Q17
  • Ilim JV, forecasting Equity Earnings of ~$35MM1

Third Quarter Outlook | Changes from 2Q17

17

1 At June 30, 2017 RUB/USD exchange rate
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SLIDE 18

Earnings Presentation | Second Quarter 2017

  • Key drivers of margin expansion
  • Healthy demand outlook in Industrial Packaging and Global Cellulose Fibers
  • Realization of recent price increases
  • Solid operational performance and cost reduction initiatives
  • Significantly lower maintenance outage expense
  • Global Cellulose Fibers synergies and momentum
  • Allocate capital to create value with a near-term focus on debt reduction
  • Remain confident in upside to full year view of 10%+ YoY EBITDA growth

Full Year Outlook | Positioned for Strong Second Half Performance

18

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SLIDE 19

Earnings Presentation | Second Quarter 2017

Appendix

Investor Relations Contacts

Jay Royalty / Guillermo Gutierrez 901-419-1731 Michele Vargas 901-419-7287

Media Contact

Tom Ryan 901-419-4333

19

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SLIDE 20

Earnings Presentation | Second Quarter 2017

$ Million 2Q16 1Q17 2Q17

Cash Provided by Operations $605 $633 $645 Cash Invested in Capital Projects ($328) ($374) ($290) Cash Contribution to Pension Plan $250

  • Free Cash Flow

$527 $259 $355

Free Cash Flow

20

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SLIDE 21

Earnings Presentation | Second Quarter 2017

Maintenance Outages Expenses | 2017 Forecast

21

$ Million 1Q17A 2Q17A 3Q17F 4Q17F 2017F Industrial Packaging $71 $100 $47 $32 $250 North America 69 100 47 32 248 Brazil 2 2 Global Cellulose Fibers $50 $44 $8 $11 $113 Printing Papers $23 $43 $2 $13 $81 North America 23 34 1 11 69 Europe 6 6 Brazil 3 2 5 India 1 1 Consumer Packaging $0 $35 $0 $4 $39 North America 33 4 37 Europe 2 2 Total Impact $144 $222 $57 $60 $483

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SLIDE 22

Earnings Presentation | Second Quarter 2017

IP North American Downtime

22

146 72 92 141 125 86 117 93 157 55 230 212 85 107 41 35

Maintenance Economic

12 15 21 10 35

4 29 31

29 30 11 25 10 24 25

3 15 12 4 29 18 55 131 90

Containerboard Uncoated Papers Cellulose Fibers

Thousand Tons Thousand Tons Thousand Tons

150

Coated Paperboard

201 16 322 46 353 210 193 158 13

78

128

Thousand Tons

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SLIDE 23

Earnings Presentation | Second Quarter 2017

Special Items Pre-Tax ($ Million)

2Q16 1Q17 2Q17 Industrial Packaging

Kleen Products Settlement Agreement

($354)

Holmen Acquisition Bargain Purchase Gain

$6

Impairment of Asia Box & Restructuring

($28)

Other

($1) ($3) Global Cellulose Fibers

Pulp Business Inventory Step-up Amortization

($14)

Pulp Business Acquisition

($5) ($4) ($5)

Other

($1) Printing Papers

Other

($2) Consumer Pkg.

Asia Foodservice Sale

($9) Corporate

ArborGen Sale

$14

Interest Income on Income Tax Refund Claims

$4

Other

$2 Total Special Items Before Tax ($33) ($14) ($353)

Special Items Before Tax | Continuing Operations

23

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SLIDE 24

Earnings Presentation | Second Quarter 2017

Special Items Net of Taxes

1Q17 2Q17 $ Million EPS $ Million EPS

Earnings Before Special Items $249 $0.60 $270 $0.65 Special Items Net of Taxes: Kleen Products Settlement Agreement ($219) Tax Expense – International Investment Restructuring ($15) Pulp Business Inventory Step-up Amortization ($8) Asia Foodservice Sale ($4) Pulp Business Acquisition ($2) ($3) Holmen Acquisition Bargain Purchase Gain $6 ArborGen Sale $9 Net Income Tax Refund Claims $47 Other ($2) $1 Total Special Items Net of Taxes ($21) ($0.05) ($169) ($0.41) Non-Operating Pension Expense ($19) ($0.05) ($21) ($0.05) Net Earnings $209 $0.50 $80 $0.19

24

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SLIDE 25

Earnings Presentation | Second Quarter 2017

  • Adj. Operating Profits by Industry Segment | Continuing Operations

25

$ Million$ 2Q16 1Q17 2Q17

Earnings (Loss) From Continuing Operations Before Income Taxes and Equity Earnings

($14) $244 ($29)

Interest Expense, Net $129 $142 $141

3

Noncontrolling Interest / Equity Earnings Adjustment

  • ($1)

Corporate Items, Net $25 $11 $4 Special Items, Net $33 $14 $353 Non-Operating Pension Expense $487 $31 $34

  • Adj. Operating Profit Before Special Items

$660 $442 $502

Industrial Packaging1 $486 $360 $407 Global Cellulose Fibers1,2 ($16) ($51) $12 Printing Papers1 $117 $100 $88 Consumer Packaging1 $73 $33 ($5) Total Adj. Industry Segment Operating Profit1,2

$660 $442 $502

Equity Earnings (Loss), net of taxes – Ilim

$46 $50 $21

1 Excludes special items (Non-GAAP) 2 Earnings from newly acquired pulp business are reflected beginning December 1, 2016 3 Excludes a special item of $4MM in interest income
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SLIDE 26

Earnings Presentation | Second Quarter 2017

Geographic Business Segment Operating Results | Quarterly

26

$ Million

Sales D & A

  • Adj. Operating Profit1

2Q16 1Q17 2Q17 2Q17 2Q16 1Q17 2Q17

Industrial Packaging North America $3,138 $3,155 $3,336 $172 $496 $362 $408 Europe $295 $317 $341 $9 $6 $8 $5 Brazil $51 $59 $60 $5 ($12) ($10) ($6) Global Cellulose Fibers2 Global Cellulose Fibers $259 $564 $612 $65 ($16) ($51) $12 Printing Papers North America $466 $468 $446 $19 $51 $33 $21 Europe $288 $274 $299 $11 $34 $29 $26 Brazil $219 $214 $232 $27 $34 $39 $43 India $42 $48 $47 $5 ($2) ($1) ($2) Consumer Packaging North America $416 $388 $395 $23 $48 $14 ($19) Europe $85 $78 $79 3 $25 $19 $14

Does not reflect total company sales

1 Excludes special items (Non-GAAP) 2 Sales and Earnings from newly acquired pulp business are reflected beginning December 1, 2016
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SLIDE 27

Earnings Presentation | Second Quarter 2017

2017 Operating Earnings

27 Pre-Tax $MM Tax $MM Non- controlling Interest $MM Equity Earnings Net Income $MM Average Shares MM Diluted EPS1 Net Earnings from Continuing Operations 1Q17 $244 ($83)

  • $48

$209 416 $0.50 2Q17 ($29) $89

  • $20

$80 416 $0.19 Net Special Items 1Q17 $14 $7

  • $21

416 $0.05 2Q17 $353 ($184)

  • $169

416 $0.41 Non-Operating Pension Expense 1Q17 $31 ($12)

  • $19

416 $0.05 2Q17 $34 ($13)

  • $21

416 $0.05

  • Adj. Operating Earnings

1Q17 $289 ($88)

  • $48

$249 416 $0.60 2Q17 $358 ($108)

  • $20

$270 416 $0.65

1 A reconciliation to GAAP EPS is available at www.internationalpaper.com under the Performance tab, Investors section
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SLIDE 28

Earnings Presentation | Second Quarter 2017

  • Adj. Operating EPS

28

2006 as originally reported 2007-2011 adjusted for elimination of the Ilim JV reporting lag 2006-2010 Net Earnings from continuing operations and before special items; 2010 onward reflects Operating Earnings xpedx is reflected as a Discontinued Operation from 2010 onward

.12 .35 .40 .47.45 .52 .57 .73 .45 .49

.41

.15 .07 .27 .38 .22 .05 .44

.85

.72 .76.77 .78 .67 .58 .49 .77 .66.64 .61 1.01 .81 .60 .93.95 .53 .84 .97.97 .87 .80 .92.91 .73 .60 .65

.42 .08 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q17 2Q17

2006 2007 2010 2008

Impact of Mineral Rights Gain

2009

.83

2011

.93

Final Land Sale

2012 2013 2014 2015 2016

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SLIDE 29

Earnings Presentation | Second Quarter 2017

.92 .65

(.15) (.14) (.17) (.06) .14 .01 .03 .07

2Q16 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs Corporate & Other Items Ilim JV Pulp Acquisition 2Q17

2Q17 vs. 2Q16 Adj. Operating EPS

29

Adjusted operating EPS based on Adjusted Operating Earnings (defined as Net Earnings (GAAP) from continuing operations before special items and non-operating pension expense)

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SLIDE 30

Earnings Presentation | Second Quarter 2017

486 407

(64) (20) (102) 107

2Q16 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Industrial Packaging | 2Q17 vs. 2Q16 Adj. EBIT1

30

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 31

Earnings Presentation | Second Quarter 2017

2Q17 vs. 1Q17 2Q17 vs. 2Q16 Business

Volume Price / Mix per Ton Volume Price / Mix per Ton

N.A. Container1 5.9% $13 1.6% $34 European Container Flat €19 2% €10

Average IP volume and price realization (includes the impact of mix across all segments)

1 On a per day FBA basis

Industrial Packaging | Volume and Pricing Trends

31

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SLIDE 32

Earnings Presentation | Second Quarter 2017

N.A. Industrial Packaging Relative Adj. EBITDA Margins

32

22.8% 22.6% 18.3% 18.7% 20.6% 15.9% 19.3%

22.0%

IP PCA WestRock

2Q16 1Q17 2Q17

1Trailing Twelve Months

IP Adjusted EBITDA margins based on North American Industrial Packaging operating profit before special items Excludes the Recycling Business and revenue from trade volumes Competitor Adjusted EBITDA margin estimates obtained from public filings and IP analysis

TTM1

19.5% 21.0%

TTM1

WRK Reports 8/3

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SLIDE 33

Earnings Presentation | Second Quarter 2017

Global Cellulose Fibers | 2Q17 vs. 2Q16 Adj. EBIT1

33

1 Segment adjusted operating profit before special items

(16) 12

(16) (18) 42 (1) 19 2

2Q16 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs Outages All Other 2Q17

$ Million

Pulp Acquisition

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SLIDE 34

Earnings Presentation | Second Quarter 2017

Global Cellulose Fibers | Volume and Pricing Trends

34

2Q17 vs. 1Q17 2Q17 vs. 2Q161 Business

Volume Price / Mix per Tonne Volume Price / Mix per Tonne

Pulp (metric ton) 3% $45 7% $20

Average volume and price realization (includes the impact of mix across all grades and destinations)

1Proforma basis- Combined Global Cellulose Fibers
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SLIDE 35

Earnings Presentation | Second Quarter 2017

117 88

(30) (2) (4) 7

2Q16 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Printing Papers | 2Q17 vs. 2Q16 Adj. EBIT1

35

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 36

Earnings Presentation | Second Quarter 2017

2Q17 vs. 1Q17 2Q17 vs. 2Q16 Business

Volume Price / Mix per Ton Volume Price / Mix per Ton

N.A. Printing Papers (4%) ($12) 2% ($59) European Papers1 (5%) €14 (1%) (€18)

Average IP volume and price realization (includes the impact of mix across all grades)

1 Excludes Russia

Printing Papers | Volume and Pricing Trends

36

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SLIDE 37

Earnings Presentation | Second Quarter 2017

N.A. Printing Papers Relative Adj. EBITDA Margins

37

15.0% 13.4% 14.0% 11.1% 15.6% 12.7% 9.0% 15.5%

IP PCA Domtar

2Q16 1Q17 2Q17

UFS Reports 7/28

1Trailing Twelve Months

IP Adjusted EBITDA margins based on operating profit from continuing operations before special items Competitor Adjusted EBITDA margin estimates obtained from public filings and IP analysis

TTM1

13.9% 17.2%

TTM1

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SLIDE 38

Earnings Presentation | Second Quarter 2017

Printing Papers | IP Brazil

38

$ Million 2Q16 1Q17 2Q17 Sales $219 $214 $232

  • Adj. Earnings

$34 $39 $43

  • Adj. EBITDA Margin

25% 30% 30% 2Q17 vs. 1Q17 2Q17 vs. 2Q16

Uncoated Freesheet

Volume Price / Mix per Ton Volume Price / Mix per Ton

Domestic (BRL) (8%) R$68 (12%) R$131 Export (USD) 22% $13 20% ($24)

Segment adjusted operating profit before special items IP Brazil results are reported in the Printing Papers segment Average IP Brazil price realization (includes the impact of mix across all grades)

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SLIDE 39

Earnings Presentation | Second Quarter 2017

73 (5)

(3) (9) (3) (30) (33)

2Q16 Price / Mix Volume Operations & Costs Maintenance Outages Input Costs 2Q17

Consumer Packaging | 2Q17 vs. 2Q16 Adj. EBIT1

39

$ Million

1 Segment adjusted operating profit before special items
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SLIDE 40

Earnings Presentation | Second Quarter 2017

Average IP price realization (includes the impact of mix across all grades)

1 All periods exclude Carolina brand coated bristols sales

2Q17 vs. 1Q17 2Q17 vs. 2Q16

Volume Price / Mix per Ton Volume Price / Mix per Ton

N.A. Coated Paperboard1 Flat $13 (5%) ($18)

Revenue Revenue

Foodservice 5% Flat Consumer Packaging | Volume and Pricing Trends

40

slide-41
SLIDE 41

Earnings Presentation | Second Quarter 2017

Ilim Joint Venture | Full Year Financials

41

2013 2014 2015 2016

Sales Volume (Million tons) 2.7 3.2 3.3 3.5 Sales ($B) 1.9 2.1 1.9 1.9 Debt ($B) 1.5 1.4 1.2 1.5

  • Adj. Operating EBITDA ($MM)

203 459 694 680 F/X Gain (Loss)1 ($MM) (80) (674) (188) 63 EBITDA ($MM) 123 (215) 506 743 Depreciation ($MM) 176 188 128 121 EBIT ($MM) (53) (403) 378 622 Interest Expense ($MM) 39 69 52 81 Net Income / (Loss) ($MM) (72) (359) 237 385 IP Equity Earnings / (Loss) ($MM) (46) (194) 131 199 Dividends (to IP) ($MM) 56 35 60

Ilim JV results are US GAAP basis

1 Represents F/X impact including that related to Ilim JV USD-denominated net debt (balance of ~$0.6B at year end 2016)
slide-42
SLIDE 42

Earnings Presentation | Second Quarter 2017

Ilim Joint Venture | Volume and Pricing Trends

42

2Q17 vs. 1Q17 2Q17 vs. 2Q16 Business

Volume Price / Mix per Tonne Volume Price / Mix per Tonne

Pulp (metric ton) 19% $44 3% $61

Average Ilim JV (100%) volume and price realization (includes the impact of mix across all grades and destinations)

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SLIDE 43

Earnings Presentation | Second Quarter 2017

Total Cash Cost Components | 2Q17 YTD

43

Fiber 34% Materials 17% Freight 12% Labor 12% Energy 8% Overhead 10% Chemicals 7%

North American mills only (excludes newly acquired pulp business)

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SLIDE 44

Earnings Presentation | Second Quarter 2017

($16) $15 ($2) ($1)

Fiber Energy Chemicals Freight

North America Outside North America

($6) $3 $1 ($2)

Industrial Packaging Global Cellulose Fibers Printing Papers Consumer Packaging

Energy Wood Chemicals Freight OCC

By Business By Input Type

Input costs ($MM) for continuing businesses

Global Input Costs vs. 1Q17 | $4MM Unfavorable, or $0.01/Share

44 OCC

Wood

slide-45
SLIDE 45

Earnings Presentation | Second Quarter 2017

($72) ($28) $0 ($9)

Fiber Energy Chemicals Freight

North America Outside North America

($102) $0 ($4) ($3)

Industrial Packaging Global Cellulose Fibers Printing Papers Consumer Packaging

Energy Wood Chemicals Freight OCC

By Business By Input Type

Global Input Costs vs. 2Q16 | $109MM Unfavorable, or $0.17/Share

45 OCC Wood

Input costs ($MM) for continuing businesses

slide-46
SLIDE 46

Earnings Presentation | Second Quarter 2017 90 95 100 105 110 115 120 125 130

U.S. Mill Wood Delivered Cost Trend | 2Q17 Average Cost Down 2% vs. 1Q17

46

IP data, cost Indexed to January 2007 values

2008 2009 2010 2011 2012 2013 2014 2015 2016

slide-47
SLIDE 47

Earnings Presentation | Second Quarter 2017 40 60 80 100 120 140 160 180 200 220

IP data, cost Indexed to January 2007 values

U.S. OCC Delivered Cost Trend | 2Q17 Average Cost Up 10% vs. 1Q17

47

2008 2009 2010 2011 2012 2013 2014 2015 2016

slide-48
SLIDE 48

Earnings Presentation | Second Quarter 2017

U.S. Natural Gas Cost Trend | 2Q17 Average Cost Down 6% vs. 1Q17

48 50 100 150 200 250

IP data, cost Indexed to January 2007 values NYMEX Natural Gas closing prices

2008 2009 2010 2011 2012 2013 2014 2015 2016

slide-49
SLIDE 49

Earnings Presentation | Second Quarter 2017 50 100 150 200 250 300

U.S. Fuel Oil Cost Trend | 2Q17 Average Cost Down 13% vs. 1Q17

49

IP data, cost Indexed to January 2007 values WTI Crude prices

2008 2009 2010 2011 2012 2013 2014 2015 2016

slide-50
SLIDE 50

Earnings Presentation | Second Quarter 2017 75 100 125 150 175 200

U.S. Chemical Composite Cost Trend | 2Q17 Average Cost up 1% vs. 1Q17

50

IP data, cost Indexed to January 2007 values Delivered cost to U.S. facilities: includes Caustic Soda, Sodium Chlorate, Starch and Sulfuric Acid 2007 - 2008 excludes WY PKG

2008 2009 2010 2011 2012 2013 2014 2015 2016

slide-51
SLIDE 51

Earnings Presentation | Second Quarter 2017

2017 Global Consumption | Annual Purchase Estimates for Key Inputs

51

Commodity North America Non – North America Energy

Natural Gas (MMBTUs)

85,000,000 11,000,000

Fuel Oil (Barrels)

450,000 400,000

Coal (Tons)

95,000 600,000 Fiber

Wood (Tons)

60,000,000 8,000,000

Old Corrugated Containers / DLK (Tons)

4,800,000 300,000 Chemicals

Caustic Soda (Tons)

470,000 70,000

Starch (Tons)

390,000 120,000

Sodium Chlorate (Tons)

200,000 60,000

LD Polyethylene (Tons)

40,000

  • Latex (Tons)

10,000 6,000