Business Blog: Hoover’s Business Insight Zone

Today’s Company of the Day is International Paper.

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Given the radical scope of International Paper’s overhaul in recent years, one is attempted to cross a pun with a dose of business jargon and say that the company “started over with a clean sheet of paper.” The whole paper and pulp industry has turned volatile as consumers have changed their behaviors in various ways, demanding more of some types of paper goods and less of others. International Paper has changed the mix of its business to build up some operations (such as high-end packaging) that yield high profit margins, while shifting away from low-margin or shrinking businesses like coated papers.

Restructuring such a vast enterprise as International Paper — the world’s largest forest products company — has meant years of buying and selling. Although the company still owns half a million acres of US forestland (with harvesting rights on nearly twice that much in Brazil and Russia), it has sold more than five million acres of woodland in the US. It has also hived off chemicals operations (Arizona Chemical), a building products maker (Masonite), and wood products factories (to Georgia Pacific), among many other deals. The result of all this cutting is a smaller but more profitable company: International Paper brought in about one-fourth less revenue in 2006 than it did in 2000 ($22 billion versus $28 billion), but with profit margins near 5% instead of less than 1%.

The company’s profit warning last week is a sign of how far it has come: International Paper’s share price slipped a bit after it announced the profits on land sales would be a little lower than expected for the third quarter of 2007. Yet the company is still on pace to turn more profit in the quarter than it did in the quarter before. That puts International Paper a country mile ahead of its loss-making performances of 2001, 2002, and 2004. That clean sheet of paper looks much better now that it has nothing but black ink on it.

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