00:00Exciting news, not just on the earnings front, but on this deal to split into two.
00:04As Matt mentioned, this comes about a year after your acquisition of DS Smith.
00:09What was the calculus of rather than work on continue to integrate that versus splitting apart into two companies?
00:16Yeah, well, thanks for having me here this morning, Danny and Matt.
00:19And really the impetus here and the exciting part of this is what we realized is what we have are two regional powerhouses in sustainable packaging.
00:28And as we dug deeper into the businesses, it just became more obvious every day that all of the value was in those regional integrations.
00:36And that's really what drove this decision making.
00:39It's an exciting day here for an international paper and the opportunity to leverage those two powerhouses by focusing on capital allocation that's really unique to their missions.
00:49To be able to drive the focus, as you know, 80-20 is really how we work in this company.
00:54And that really says, hey, let's simplify the businesses, let's segment them, let's focus resources on what drives the most value and allow those businesses to thrive and become best in class in their markets.
01:05To what extent did tariffs, Andy, or trade uncertainty, you know, the changing geopolitical landscape have to do with this decision?
01:16Because at first glance, you know, to the layman, it looks like that could be the motivator.
01:21Yeah, you know, very little, actually.
01:24You know, at any point in time, you've got to think about the geopolitical implications and all the forces that are shaping the world.
01:31But it's a moment in time.
01:33And when we're making decisions here at International Paper, we've got to think for the long term.
01:37We have to think for really for generations.
01:39And so while that's a factor that you have to consider, it's really around the fact that all of the value is regional.
01:46And that's the really important message here is the value is regional.
01:50And so let's focus on the customers, their distinct missions, distinct needs.
01:53Let's focus on the assets that need to be applied there and critically, the capital allocation and the resource allocation to allow them to pursue those unique missions.
02:03Andy, another thing that's been weighing on CEOs' minds who have to deal with an international company, a global company, is weakness in the dollar and how that's impacting various FX effects of earnings and revenue coming in.
02:17How are you thinking about that, especially with splitting your business into these local divisions?
02:21Yeah, Danny, when it comes down to it, that's really not a decision point in a moment in time.
02:28The strength of the dollar in any single period, not really a factor here in decision making.
02:34Again, the focus has got to be on the long term, on the structural dynamics of the business, what allows value creation to happen, how customers behave, how the markets behave, and then therefore how we apply our resources to drive value.
02:48And so, again, you've got to take the time to really understand what's happening in the geopolitical context, what's happening to trade pressures, what's happening to capital flows.
03:00But ultimately, again, I've got to be thinking about decades.
03:03You know, one of the things that I find really interesting about this business and I love about this business is we have to think long term.
03:11The capital investments that we're making, how market structures evolve over time, those are really long term plays.
03:17And we've got to be thinking about maximizing long term value creation, not short term gyrations in markets.
03:23You do have, I mean, this is a four year low, so it's not that short term for the dollar.
03:28And, you know, we're looking at forecasts for it to continue to sink.
03:33Nonetheless, it puts you in a relatively good position, right?
03:35Because you have something like 65 packaging plants around the U.S.
03:39You produce, I think, like 70 percent of your paper here in America.
03:43So as the dollar declines, aren't you able to sell more of it to people overseas?
03:50Well, you know, what's fascinating here, Danny, is because of our name, International Paper, people kind of think of us as a global commodity paper company.
03:58And the reality is, is we are a packaging company.
04:01And that packaging business and sustainable packaging is actually very local.
04:05So while we manufacture paper in region, I mean, in each region, very little of it crosses borders.
04:13And so really our paper manufacturing is done in the region.
04:16It's then shipped to around regional population densities or MSAs and then is converted into sustainable packaging.
04:24And so in terms of how the dollar affects us, it's really just a translational impact today.
04:30And, of course, it has implications of how the global economy forms and reacts.
04:34But in terms of actually how the markets form and the implications for us as we go forward and as we split into two separate public companies,
04:41it's really just going to be the impact that it has on the overall economy, not so much how it impacts international paper.
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