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International Paper Shedding Some Facilities
Memphis, Tennessee, USA, 01 May 2012 -- The announced closure of plants in Fort Smith, Arkansas, Santa Paula, California, Chicago, Illinois, and Solon, Ohio may not be the last as International Paper Co. eliminates overcapacity at its manufacturing facilities, according to the company’s CFO.

Memphis-based International Paper is still in the process of divesting three mills across the country, as part of the requirement for U.S. Department of Justice approval of its acquisition of Temple-Inland Inc., based in Austin, Texas.

Carol Roberts, the company’s CFO, said it is working to become as efficient as possible during the process, which includes integrating 10,000 employees, 59 box plants, 14 building products plants, and seven containerboard mills into the International Paper fold.

"When you combine systems of this size, there’s going to be more opportunity (for facility closings)," Roberts said. "This is the tough part. But we stated in the beginning that there would be 12 to 14 facilities impacted by the combination."

Roberts said the company is providing an opportunity for the 215 employees who were affected by the recent closures to be placed at other International Paper facilities.

"If they’re in a city with other factories, we try to place those folks in those other facilities," Roberts said.

The company is selling mills in Hueneme and Ontario, California, and in New Johnsonville, Tennessee. The sales are expected to be completed this summer. International Paper is continuing to operate those plants until they’re sold.

While the company’s earnings declined 47% in the first quarter to USD 188 million, Roberts said the company has been exposed to "global head winds," which have affected prices on pulp and export papers, but those prices bottomed in the first quarter.

The company did take a significant hit from the money it had to invest in the Temple-Inland acquisition, something executives predicted would happen when the deal was approved. Roberts said Temple-Inland has been "earnings neutral" so far in its effect on International Paper’s bottom line, but the effect is expected to be felt beginning in 2013.

"When we told everybody about Temple-Inland, we said it’s a great strategic fit, but in the beginning you have extra debt and step-up depreciation," Roberts said. "We’ve gotten off to a great start, but we haven’t begun to see the benefits yet."

The company acquired USD 700 million of Temple-Inland’s debt and paid USD 32 per share, for a total cost of USD 4.5 billion.

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