International Paper swung to a $12M Q2 2026 loss as sales fell 2.2% to $6.0B: North American volume shrank after mill closures even as box shipments grew, while the EMEA business lost $80M as paper costs outran box prices.
Revenue
$6.0B
-2.2% YoY
Net income
-$12M
Diluted EPS
$-0.02
Operating margin
2.1%
Overview
International Paper, the largest US maker of corrugated boxes and the paper they are made from, lost money in the second quarter of 2026. Net sales fell 2.2% to $6,004 million and the company posted a loss from continuing operations of $12 million ($0.02 per diluted share), against a $75 million profit ($0.14) a year earlier. Two things drove the swing: the North American business sold fewer tons after closing mills and cutting export sales, and the European business (mostly the former DS Smith, acquired in January 2025) slipped deeper into loss as weak demand met higher paper costs that it has not yet passed on in box prices.
This is the first quarter with no Global Cellulose Fibers (GCF) results at all. IP sold that pulp business to American Industrial Partners on January 23, 2026, for $1.1 billion in cash plus $168 million of preferred stock. It is reported as a discontinued operation, so the 2025 figures below have also been restated without it. That removal barely affects the year-on-year profit comparison: GCF contributed $0 to Q2 2025 net earnings (a $1 million pre-tax loss offset by a $1 million tax benefit, on $624 million of sales).
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$6,004M
$6,142M
-2.2%
Earnings (loss) from continuing operations (= net earnings)
$(12)M
$75M
n/m (swung to loss)
Diluted EPS (GAAP)
$(0.02)
$0.14
n/m (swung to loss)
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Operating margin (total segment operating profit ÷ net sales)
2.1%
4.5%
-2.4 pts
Packaging Solutions North America (PS NA) sales
$3,688M
$3,860M
-4.5%
PS NA segment operating profit
$204M
$277M
-26.4%
Packaging Solutions EMEA (PS EMEA) sales
$2,287M
$2,291M
-0.2%
PS EMEA segment operating profit (loss)
$(80)M
$(1)M
$79M worse
North American box shipments, per day
—
—
about +1.7%
Restructuring charges, net
$9M
$39M
-76.9%
"Segment operating profit" is IP's own measure of what each business earned from running its operations, before interest, corporate overhead, pension accounting and one-off "special items". IP does not report a single consolidated operating-profit line, so the operating margin above is the two segments' combined profit ($124 million this quarter, $276 million a year ago) divided by net sales. "Adjusted EBITDA" goes one step further and also adds back depreciation and amortization, the non-cash charges for wearing out mills and writing down the value of acquired assets over time.
Takeaway: IP's two regions are moving in opposite directions underneath the loss. North America is shrinking on purpose (closed mills, fewer low-margin exports) while growing domestic box shipments about 1.7% per day and pushing through price increases; its profit dip this quarter is mostly heavy planned maintenance and the Riverdale machine conversion. Europe is the real problem: a $79 million year-on-year profit decline on flat sales, because containerboard prices rose faster than box prices and demand stayed soft. Management's full-year target of $3.20–3.40 billion of adjusted EBITDA requires roughly $1.94–2.14 billion in the second half versus $1.26 billion in the first, so the plan depends on both regions improving quickly.
Why the quarter came in lower
Headline profit vs. underlying profit. The GAAP loss was widened by $54 million of pre-tax "special items" ($42 million after tax, $0.08 per share), which IP strips out of its adjusted figures. The largest was $43 million of costs to prepare the planned spinoff of the EMEA business. Also included: $22 million of restructuring for staff and asset realignment, $5 million of NORPAC acquisition costs, an $11 million gain on selling a box plant in Chile, and a $13 million benefit from revising down the expected cost of closing the Riceboro, Georgia containerboard mill. Even after those adjustments, adjusted operating EPS still fell from $0.18 to $0.04, so the decline is not mainly about one-offs.
Higher depreciation is a big part of the drop, and it is an accounting effect. Depreciation and amortization rose $57 million (13.2%) to $488 million. The filing attributes this primarily to finalizing the purchase accounting for DS Smith in the second half of 2025, which revalued its assets and changed their estimated useful lives; in PS EMEA alone, D&A rose $67 million. The total also includes $23 million of accelerated depreciation tied to site closures. This lowers reported operating profit but is not cash leaving the business, which is one reason adjusted EBITDA fell less (-12.4%) than combined segment operating profit (-55%).
Taxes. Because the pre-tax result was a $26 million loss, IP recorded a $15 million tax benefit, which is why the after-tax loss ($12 million) is smaller than the pre-tax loss.
Interest costs fell. Net interest expense dropped $21 million to $87 million, which the filing attributes to more interest income on higher average cash balances and more interest capitalized into construction projects. Debt was reduced by a net $501 million in the first half.
North America (PS NA): smaller on purpose, maintenance-heavy quarter
PS NA sales fell 4.5% to $3,688 million. The filing says this was "driven by lower sales volumes reflecting the impact of our mill strategic actions and lower export volumes partially offset by higher sales prices for boxes." In plain terms: IP has been closing high-cost mills (Red River in Campti, Louisiana and Riceboro, Georgia) and selling less containerboard overseas, where margins are thinner, while raising prices on the boxes it sells at home.
Domestic demand held up: box shipments rose about 1.7% per day versus Q2 2025, which management credits to "continued success in winning and retaining customer business." Mill capacity utilization was up about 5% versus 2025.
Segment profit fell 26.4% to $204 million. Cost of products sold was $87 million lower on the reduced volume, but the filing points to higher planned maintenance outage costs (Q2 was "the year's peak outage spending period"), spending on converting the No. 16 machine at the Riverdale mill in Selma, Alabama from uncoated office paper to containerboard (a $250 million project, now complete and expected to reach full capacity by Q1 2027), and higher freight costs, partly offset by lower recovered-fiber (used cardboard) costs.
Two deals added capacity during the quarter: IP bought the NORPAC mill in Longview, Washington for $368 million on June 4 (it contributed $36 million of sales and a $5 million net loss in its first weeks), and it acquired a corrugated packaging facility in Dover, Delaware.
Europe, Middle East & Africa (PS EMEA): squeezed between paper and box prices
PS EMEA sales were essentially flat at $2,287 million, but the segment lost $80 million versus a $1 million loss a year earlier. Year-on-year, sales were "slightly lower driven by lower sales volumes and prices for paper." Against the first quarter the squeeze is clearer: "packaging margins were impacted by higher paper prices not yet realized in box pricing." Because this business turns containerboard into boxes, a rise in paper prices hurts until box prices catch up. Higher oil prices also raised delivery costs, while energy costs were lower, helped by subsidies.
About $67 million of the year-on-year profit decline is the higher depreciation from DS Smith purchase accounting described above, so the operating deterioration before that effect is much smaller than the headline $79 million, though still negative. EMEA restructuring ran $14 million this quarter as IP accelerates cost cuts, including consolidating smaller German plants into one modern site; $97 million of EMEA severance was still accrued at June 30.
Planned separation. IP intends to spin off the EMEA packaging business as a separate company listed in London and New York, keeping a stake of about 20%. The filing says completion is expected 12 to 15 months from the announcement, subject to final board approval, an SEC registration statement and a UK prospectus.
First half and cash flow
For the six months, net sales rose 5.0% to $11,975 million. The filing attributes the increase primarily to higher sales prices, and the comparison is also flattered by timing: 2026 includes six months of DS Smith versus five in 2025 (the deal closed January 31, 2025). Earnings from continuing operations were $64 million versus a $49 million loss; net earnings were $48 million after a $16 million loss from discontinued operations (GCF's final weeks, including a $3 million loss on the sale).
Operating cash flow was $1,137 million for the half versus $188 million a year earlier, when $670 million went to DS Smith deal costs, severance and incentive payouts. Capital spending was $1,050 million, leaving free cash flow (operating cash minus capital spending) of $87 million; in Q2 alone, free cash flow was $(7) million per the earnings release. IP expects full-year 2026 capital spending of $2.0–2.1 billion. Cash stood at $726 million at June 30, down from $1,145 million at year-end, after $490 million of dividends ($0.925 per share for the half, unchanged) and the NORPAC purchase.
Outlook
Management's targets from the July 30 earnings release:
Target
Q3 2026
Full-year 2026
Adjusted EBITDA from continuing ops
$780–830M
$3.20–3.40B
Earnings from continuing ops before taxes
$215–260M
$843–1,043M
Depreciation and amortization
$491M
$1,965M
The Q3 target includes an $85 million hit from the temporary shutdown of the Pine Hill, Alabama mill, idled at the end of June after weather damaged its roof; the company expected to restart it in August 2026.
For North America, the 10-Q expects Q3 volumes to be lower on reduced exports, but price and mix higher from previously announced price increases, much lower maintenance spending, and higher input costs. For EMEA, it expects higher sales from higher paper and box prices and seasonal volume, with lower recovered-fiber costs partly offset by higher energy costs.
Our read: North America's quarter looks like a trough by design: the maintenance peak and the Riverdale conversion are behind it, domestic box volumes are growing, and price increases are still flowing through. The Q3 target of $780–830 million is a large step up from $587 million, and management attributes most of it to lower maintenance and pricing. The harder part is the full year: first-half adjusted EBITDA was $1,264 million, so the $3.20–3.40 billion target implies roughly $1.94–2.14 billion in the second half and more than $1.1 billion in Q4 alone. That requires EMEA box prices to catch up with paper prices in a market the company itself calls subdued. EMEA margins in Q3 are the number to watch, both for whether the annual target holds and for what the business will look like when it is spun off.