인터내셔널 페이퍼(IP) 2026년 3분기 실적 발표 콘퍼런스 콜: EBITDA 개선, 전망 하향

핵심 요약

• 인터내셔널 페이퍼의 2026년 3분기 조정 EBITDA는 3,700만 달러의 본사 비용을 포함해 8억 4,300만 달러를 기록했습니다. 조정 EBITDA 마진은 전분기 대비 약 400bp 상승한 13.6%를 기록했으며, 조정 영업 EPS는 0.37달러였습니다.
• 북미 포장 솔루션 부문의 조정 EBITDA는 가격 반영, 제지 공장 효율성 개선, 리버데일(Riverdale) 가동 확대 효과 및 계획된 정기 보수 감소에 힘입어 전분기 대비 56% 증가한 6억 6,300만 달러를 기록했습니다.
• 3분기 잉여현금흐름(FCF)은 유지보수 비용 지출, 기존 DS 스미스 부채의 연간 이자 비용, 재고 재축적을 반영해 마이너스 2억 6,700만 달러를 기록했습니다. 경영진은 연간 잉여현금흐름으로 1억 달러에서 2억 달러를 예상하고 있습니다.
• 회사는 연간 북미 조정 EBITDA 전망치를 22억 7,000만 달러~23억 1,000만 달러로 하향 조정했습니다. 약 1억 4,500만 달러의 추가적인 악재가 발생했으나, 3,500만 달러 규모의 가격 인상 효과로 일부 상쇄되었습니다.
• 북미 골판지 상자 출하량은 전년 동기 대비 약 2% 감소했으나, 경영진이 추정한 업계 수요 전망치보다 약 1%포인트 상회했습니다. 회사는 연간 기준으로 업계 평균을 약 2% 상회하는 실적을 낼 것으로 전망합니다.
• 인터내셔널 페이퍼는 스핀오프(분할) 준비를 진행하는 동시에 EMEA(유럽·중동·아프리카) 사업의 매각 가능성도 검토하고 있습니다. 스핀오프 진행 시 회사는 독립하는 DS 스미스 지분 약 20%를 보유할 계획입니다.

주요 재무 데이터

사업 및 운영 실적

북미 포장 솔루션

가격 인상 반영과 운영 개선이 전분기 대비 실적 증가를 견인했습니다. 6월 인상된 가격은 경영진의 예상보다 빠르게 반영되었으며, 9월 가격 인상분은 4분기 말부터 실적에 기여하기 시작할 것으로 예상됩니다.

제지 공장 효율성이 향상되었으며, 리버데일 가동 확대 효과, NORPAC 실적 및 시너지, 80/20 전략 실행, 경상 공장 비용 절감에 따른 초기 이익이 반영되었습니다. 인터내셔널 페이퍼는 미국 내 20개 제지 공장 및 상자 공장을 폐쇄했으나, 경영진은 이 과정에서도 기존 고객을 유지하고 신규 수주를 확보했다고 밝혔습니다.

수요는 계속 둔화된 상태를 유지했습니다. 3분기 상자 출하량은 서부 서해안 과일 및 채소 시장의 차질, 단백질 부문 약세, 소비재 인플레이션, 수출 감소 등의 영향으로 전년 동기 대비 약 2% 감소했습니다. 경영진은 10월 미국 시장 상황에 대해 전반적으로 안정적이지만 신중한 태도가 유지되고 있다고 설명했습니다.

EMEA 포장 솔루션

EMEA 조정 EBITDA는 2억 1,000만 달러를 기록했습니다. 가격 및 믹스가 전분기 대비 2,700만 달러 기여했고, 운영 및 비용 절감 조치로 7,600만 달러가 추가되었습니다. 이러한 이익은 3,200만 달러 규모의 출하량 감소 악재 및 주로 에너지를 중심으로 한 3,900만 달러의 투입원가 상승으로 일부 상쇄되었습니다.

회사는 계획된 분할 및 관련 영국 규제 요건으로 인해 실적 전망 체계에서 EMEA 부문의 미국 회계기준(U.S. GAAP) 재무 가이던스를 제외했습니다.

EMEA 사업 분할

인터내셔널 페이퍼는 스핀오프 준비를 진행하는 동시에 매각 가능성도 함께 검토하고 있습니다. 스핀오프 시나리오 하에서 경영진은 양사 모두 투자적격 신용등급을 유지하고 독립적인 자본 배분 전략을 추진할 것으로 기대하고 있습니다. DS 스미스의 전략 및 재무 전망에 대한 자세한 내용은 11월 3일 열리는 애널리스트 데이(Capital Markets Day)에서 발표될 예정입니다.

경영진 가이던스

연간 북미 조정 EBITDA 전망치의 중간값은 약 1억 1,000만 달러 하향 조정되었습니다. 경영진은 디젤 및 물류 비용, 판매량 감소, 파인힐 공장 이슈, 직원 의료비, 2027년 1분기에서 앞당겨진 정기 보수 등으로 인해 약 1억 4,500만 달러 규모의 추가 악재가 발생했다고 설명했습니다. 다만 빠른 6월 가격 반영과 9월 일부 가격 인상으로 3,500만 달러의 상쇄 효과가 나타났습니다.

4분기에는 우호적인 가격 및 제품 믹스, 계절적 일일 수요 증가, 지속적인 리버데일 가동 확대 및 NORPAC 시너지 등이 호재로 작용할 것으로 기대하고 있습니다. 반면 디젤 및 OCC 비용 상승, 계절적 인건비, 직원 의료비 등은 계속 악재로 작용할 것으로 전망됩니다.

경영진은 2027년 실적 가이던스를 제공하지 않았습니다. 해당 전망은 1월 말 4분기 실적 발표 시 함께 제시될 예정입니다. 2027년 북미 설비투자(CAPEX)는 2026년과 유사한 수준의 높은 상태를 유지할 것으로 전망됩니다.

리스크 및 관전 포인트

• 경영진은 소비자 부담 지속이 포장 수요를 제한함에 따라 부진한 시장 상황이 4분기를 거쳐 2027년까지 이어질 것으로 예상하고 있습니다.
• 디젤, OCC, 천연가스, 에너지, 물류 및 직원 의료비 등의 비용 인플레이션은 여전히 악재로 작용하고 있습니다.
• 서부 서해안의 농업 부문 차질이 공급망과 다음 재배 시즌을 거치며 해소되기까지는 시간이 걸릴 수 있습니다.
• 축산 농가의 어려움 지속과 소비자의 저가품 선호(트레이드 다운) 현상으로 인해 단백질(육류) 수요는 여전히 약세를 보이고 있습니다.
• EMEA 사업부문은 수요 및 투입원가 변동성이 큰 상황에서 최종 분할 구조도 아직 확정되지 않은 상태입니다.
• 이스타크(Ixtac) 보험금 수령액은 4분기를 끝으로 종료되며 2027년에는 추가 발생하지 않을 것으로 예상됩니다.

애널리스트 Q&A 주요 내용

• 가격 정책: 경영진은 통상적인 4~5개월의 인상 반영 기간을 감안할 때 9월 가격 인상분이 1분기 말이나 2분기 초까지 대부분 반영될 것으로 기대하고 있습니다.
• 마진 및 생산성: 경영진은 2027년 가이던스 제시는 사양했으나, 북미 EBITDA 마진이 '앞자리가 2'(20%대)에 진입하는 것이 여전히 가능하다고 밝혔습니다. 리버데일, NORPAC, 생산성 투자 및 폐쇄 시설의 잔여 비용 제거 등이 마진 개선을 뒷받침할 것으로 기대됩니다.
• 수요 전망: 경영진은 당사의 장기 출하량 성장률을 약 0.5%~1% 수준으로 추정하지만, 단기 시장은 인플레이션 및 소비자 부담으로 인해 전반적으로 보합세를 유지할 것으로 예상합니다.
• 잉여현금흐름: 경영진은 영업 실적 개선, 운전자본의 긍정적 전환, 연중 가장 적은 분기 설비투자에 힘입어 4분기 현금흐름이 개선될 것으로 기대합니다.
• 리버데일: 공정 전환은 일정대로 진행 중이며, 2027년 1분기와 2분기까지 본격적인 가동 확대가 이어질 것으로 예상됩니다.
• 점유율 확대: 경영진은 예상되는 업계 대비 우수한 실적이 주로 이전 기간 대형 및 소형 고객사 전체에서 확보한 수주 덕분이라고 설명했습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, and thank you for standing by. Welcome to International Paper's Third Quarter 2026 Earnings Call. [Operator Instructions]

It is now my pleasure to turn the call over to Mandi Gilliland, Senior Director of Investor Relations. Ma'am, the floor is yours.

Mandi Gilliland

Thank you. Good morning and good afternoon, everyone, and welcome to International Paper's Third Quarter 2026 Earnings Call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer; and Lance Loeffler, Senior Vice President and Chief Financial Officer.

Before we jump in, please note that this quarter, in light of the planned separation of the EMEA business and the subsequent U.K. regulatory requirements, we are no longer including our existing Packaging Solutions EMEA U.S. GAAP financial guidance and our guidance framework and do not anticipate providing such guidance in the future. The EMEA management team will provide more information at the DS Smith plc Capital Markets Day on November 3. This will include details about the business model, growth strategy and financial outlook following the separation.

I'd also like to remind everyone there is important information at the beginning of our presentation, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. Information about these risks, uncertainties and other factors that could cause actual results to differ materially from our forward-looking statements can be found in our press releases and reports filed with the U.S. Securities and Exchange Commission.

We will also present certain non-U.S. GAAP financial information. Reconciliation to U.S. GAAP financial measures are available on our website, along with our third quarter earnings press release and today's presentation slides.

Now let me turn it over to Andy Silvernail.

Andrew Silvernail

Thank you, Mandi. Good morning, and good afternoon, everyone. Let's begin on Slide 3.

In the third quarter, we improved execution and delivered an important inflection in earnings in an environment of weak consumer confidence and rising inflation. Our focus is to control what we can control and execute the 3 pillars of our strategy: an advantaged cost position, superior customer experience and a high relative supply position in the markets we serve.

In North America, we made meaningful progress improving productivity, particularly across our mill system. Better execution helped us deliver results above expectations and offset persistent inflation as we continue to serve customers and strengthen our position in the market. Given performance to date and expectations for Q4, we expect to outpace industry demand by approximately 2 percentage points for the full year.

In terms of improved execution, Pine Hill is a tangible example of our progress. We completed the roof repairs and restarted the mill ahead of schedule. The team's disciplined work and the commitment to safety allowed us to restore operations safely, limit disruption across the mill system and minimize the impact on customer box shipments. I want to thank everybody involved. Great work.

Packaging Solutions EMEA also improved sequentially, although results were below our expectations. Natural gas costs rose sharply and consumers remain cautious. Realization of previously published paper price increases are on track and cost-out actions helped mitigate rising input costs. We are also advancing preparations to separate the EMEA business, which I'll discuss later in the call.

Across both businesses, the progress is encouraging, but there's more work to do. We expect the current market conditions to persist in the fourth quarter and into 2027. Our priorities remain clear: execute with discipline, manage what we can control and strengthen the 3 pillars of our strategy.

I'm on Slide 4. Let me spend a minute on demand in North America. Our box shipments declined approximately 2% year-over-year in the third quarter, 1 point better than our estimate of industry demand. In the quarter, we experienced headwinds from the disruption in the West Coast fresh fruit and vegetable business and softness in protein that have come from smaller livestock herds, inflation and a strained consumer. In the fourth quarter, we expect to continue to grow above market along with modest recovery in West Coast agriculture, and we expect to see the traditional seasonal increase. We expect to outperform the industry by more than 1% in the fourth quarter and by approximately 2% for the full year.

With that, I'll turn it over to Lance to discuss third quarter results and outlook in more detail.

Lance Loeffler

Thanks, Andy. Turning to Slide 5 and our enterprise results for the third quarter. Revenue improved sequentially, primarily through realization of previously published price increases. In EMEA, softer demand and a challenging macroeconomic environment continued to weigh on sales.

Earnings and margins improved significantly from the second quarter. In North America, the main drivers were price realization, lower planned outage activity and the absence of spending associated with the now completed Riverdale machine conversion. Higher-than-expected inflation and softer demand partially offset those benefits. In EMEA, we continue to face softer demand and rising input costs. The team responded by accelerating cost-out actions, which helped mitigate the impact of these pressures.

Third quarter adjusted EBITDA increased to $843 million, including $37 million of corporate expense. Of that expense, $30 million was attributable to higher insurance costs. Our adjusted EBITDA margin improved nearly 400 basis points sequentially to 13.6%, and adjusted operating earnings per share was $0.37.

Despite the improvement in earnings, free cash flow was negative $267 million in the quarter. This reflected cash payments for the second quarter's heavy maintenance spending, annual interest payments on legacy DS Smith debt and an inventory build following our planned outage season. For the full year, we expect to generate free cash flow of approximately $100 million to $200 million.

Turning to Slide 6, Packaging Solutions North America increased adjusted EBITDA by 56% sequentially. Price realization and stronger operating performance drove the improvement despite softer demand and higher input costs. Price and mix were $141 million favorable, reflecting faster realization of previously published price increases announced through June.

Volume was $46 million unfavorable. The benefit of 1 additional shipping day was more than offset by softer demand, including food safety-related disruption in West Coast agriculture, weakness in protein, seasonally lower daily demand and lower exports.

Operations and costs were $85 million favorable. Improved mill efficiency was the key driver. Initial benefits from the Riverdale ramp-up and the absence of spending associated with the completed machine conversion also contributed. We also experienced additional benefits from a full quarter of NORPAC earnings, our 80/20 strategic initiatives and lower ongoing mill costs.

Inflation was higher than we anticipated during the third quarter. Higher diesel, OCC and energy costs drove a $55 million unfavorable impact on input costs. The temporary Pine Hill shutdown had a $20 million unfavorable impact in the quarter, including roof repairs and business interruption, that were partially offset by insurance recovery. We received most of the expected insurance recovery during the quarter. In total, Packaging Solutions North America delivered $663 million of adjusted EBITDA in the third quarter.

Moving to our fourth quarter outlook for Packaging Solutions North America on Slide 7. Price and mix are expected to be favorable, driven by the continued realization of previously published price increases. The September published price increase is expected to begin flowing through late in the fourth quarter based on our normal realization patterns.

Volume is expected to be favorable as seasonally higher daily demand is expected to more than offset 2 fewer shipping days. Operations and costs are expected to be slightly favorable sequentially, supported by the continued Riverdale ramp-up, NORPAC synergies and the absence of the third quarter Pine Hill expense. As a reminder, we also expect this to be the final quarter of Ixtac insurance proceeds as those benefits will not repeat in 2027. Seasonally higher labor and employee medical benefit costs are also expected to partially offset these benefits.

Our outlook assumes continued inflationary pressure, with input costs expected to be unfavorable, primarily driven by higher diesel and OCC costs. As noted in the footnote, our diesel assumptions reflect futures market pricing and U.S. Department of Energy projections published as of September 29. These items result in an adjusted EBITDA outlook for Packaging Solutions North America of approximately $700 million to $740 million for the fourth quarter.

Moving to Slide 8, I'd like to take you through our updated full year 2026 outlook for our Packaging Solutions North America business. The third quarter improvement was meaningful, and our execution confidence and output is improving. But higher inflation and weaker volume expectations have reduced our full year outlook.

Our full year adjusted EBITDA outlook is moving to $2.27 billion to $2.31 billion. Since our second quarter call, incremental headwinds of approximately $145 million have emerged. The largest drivers are higher diesel fuel and distribution costs, along with increased volume pressure. Those headwinds also include approximately $20 million from the third quarter Pine Hill event, net of insurance recovery, which was not included in our prior outlook.

The balance primarily reflects higher employee medical costs and an outage move from the first quarter of 2027 into the fourth quarter of this year. Partially offsetting these headwinds is $35 million of price benefit from faster realization of the June increase and partial realization of the September increase. Together, these items reduced the midpoint of our full year North America Packaging outlook by approximately $110 million.

Our 80/20 initiatives remain on track. We delivered a significant improvement in the third quarter and expect further progress in the fourth quarter from productivity gains, the Riverdale ramp-up and NORPAC synergies. Many of these actions supporting that improvement are already complete and contributing to results. That execution gives us confidence in the expected fourth quarter step-up even as demand and inflation remain challenging.

Turning to Packaging Solutions EMEA on Slide 9, third quarter results improved sequentially but were below our expectations, reflecting continued softness in market demand and persistent cost inflation. Price and mix were $27 million favorable sequentially, primarily reflecting the pass-through of previously published paper price increases and higher prices on external paper sales. Higher paper costs pressured box margins, partially offsetting these benefits.

Volume was $32 million unfavorable sequentially as demand across the business remained soft and fell below our expectations. Operations and costs were $76 million favorable sequentially, reflecting cost-out actions, tighter management of controllable costs and lower variable costs associated with reduced volume. Input costs were $39 million unfavorable, primarily due to higher energy costs. All in, Packaging Solutions EMEA delivered $210 million of adjusted EBITDA in the third quarter.

As a reminder, considering the planned separation of the EMEA business and the subsequent U.K. regulatory requirements, we are no longer including our existing Packaging Solutions EMEA U.S. GAAP financial guidance in our guidance framework and do not anticipate providing such guidance in the future.

I'll now turn the call over to Andy to provide an update on the separation planning. Andy?

Andrew Silvernail

Thanks, Lance. Turning to Slide 10 and to the EMEA separation. We are advancing the EMEA separation and are on track to finalize execution. Earlier this month, we issued a press release confirming that we are evaluating a potential sale while continuing the spin-off work in parallel. The release was issued in accordance with U.K. requirements. As a matter of practice, we do not comment on ongoing M&A discussions, so I will not elaborate further beyond what we have already disclosed.

Work on the potential spin-off is progressing well. Under that scenario, we expect both companies to have investment-grade credit ratings, tailored investment and capital allocation strategies and compelling financial profiles. We plan for International Paper to retain approximately a 20% stake in the independent company, DS Smith.

Regardless of the path we ultimately take, we are moving swiftly forward with the separation. The progress reflects tremendous focus, discipline and commitment of the teams working on the separation. I want to thank everyone involved for the excellent work they're doing to prepare both companies for success.

As noted earlier, on November 3, the EMEA management team will host a DS Smith Capital Markets Day, providing a deeper look at the business, its growth strategy and its financial outlook following separation. This will be an important opportunity to showcase how DS Smith is preparing for the next chapter.

Let me close on Slide 11. Our third quarter improvement is meaningful and the trajectory will continue this year and next. Across both regions, we have lowered structural costs, eliminated inefficient capacity and invested to improve our customer experience. We have made substantial progress, and there's more to do. In North America, we expect further improvement in the fourth quarter and throughout 2027 as cost reductions, productivity gains and price realization help us offset inflation. We will continue to simplify the business, invest in customers and build strength in our most promising markets.

The upcoming separation creates the opportunity for 2 focused regional packaging leaders. EMEA will continue to focus on its self-help story with a step-function change in cost position and investing to leverage in its market position and customer relationships. The new International Paper will drive significant improvements in profitability and returns in Q4 and in 2027 by building on the progress we've made in cost transformation and commercial depth and breadth. Following the separation, we'll share more details on our financial outlook, capital allocation framework and strategic priorities.

Our confidence in future profitable growth is grounded in what we have accomplished and the actions already underway, not an assumption that the environment will get easier. We will be disciplined in execution and focused on creating lasting value for customers, our teammates and shareholders.

With that, let's open the call up for questions.

Operator

[Operator Instructions] Your first question comes from Phil Ng with Jefferies.

질의응답

Philip Ng

Well, Andy, great progress in 3Q in terms of the operations and the commercial side of things. That's pretty encouraging. But in terms of the outlook, what are you seeing in terms of what your customers are saying, whether it's in North America and Europe, appreciating 3Q got impacted by some of the ag dynamic? But have you seen that kind of bounce back? Just curious what kind of trends you're seeing in October, November, and the opportunity on the commercial side perhaps to win some new business in 2027 for North America as well.

Andrew Silvernail

Yes. So as I look at North America, what I would say is the market is stable. If I think sequentially, the market is generally stable. And we expect it's going to take some time to work through the fruit and vegetable issue on the West Coast. And what I mean by that is, obviously, you're starting to see demand at the consumer level picking back up, but that will take its time to work itself out through the supply chain and then the growing season next year, right? So it'll take a little bit of time there. But we don't see any big issues.

Protein was a little soft. And if you look at the beef folks as an example, they're getting squeezed right now, and consumers appear to be trading down. We're seeing that certainly in the marketplace. And so you're seeing softness there. But generally, I would say pretty flat sequentially.

Across the board, the biggest issue, both on the inbound side and hitting the customer, is inflation, right? That's the thing that they're wrestling the most with. And obviously, we are wrestling the most with input costs, and we're now seeing price flow itself through and becoming positive there. But we expect that to continue.

In Europe, it's much the same, just more volatility, right? I think that's just fair to say. More volatility on the input costs and more volatility that the customer is experiencing in the marketplace. And you've -- everyone have seen the news of what's going on over there. So there's hesitancy in the marketplace.

But generally, North America, pretty flat sequentially. Europe, a very modest uptick that we have seen thus far in October. But I wouldn't say anything to get real excited about at that stage.

Philip Ng

Okay. Helpful. And appreciating some of the dynamics you're seeing in North America is timing, right? I mean you've got a pretty good box price realization in 3Q and that will continue to build. I think at one point you were talking about aspirationally 20%-plus type EBITDA margins in North America. Is that still a realistic goal for 2027 given the pricing you've realized already? Or do you need kind of more help on that for it to kind of get to that type of profitability in that business?

Andrew Silvernail

Yes. We're not doing anything in terms of guidance for 2027 at this stage. I think that's prudent given what we're seeing happening with inflation in the marketplace. But I think the trajectory that we're on and our ability to get to something with a 2 in front of it, I still very much believe that that's possible in the business.

And just across the board, we're starting to see traction operationally, which is really good. And if I go back in time, really throughout this entire year, in the mill system in particular, it's been clouded a little bit with a couple of events in terms of the ice storm and with Pine Hill, but if you look at the underlying operational improvements over the past year with that, the team has just done a terrific job. And we're now seeing that momentum. If I think back to this time last year, right, we were talking about a lot of the issues that had been consistent in that mill system from under-investment, and we're seeing fewer of those. They're not 0, and I don't expect them to be 0 because the investments take time to build. But I really like what we're seeing there.

And if you look across the entire system, right, we've -- in the U.S., we have closed 20 facilities in total, box plants and mills. And we've really lost no business along that process. And in fact, we've won business. And most importantly, we're seeing the kind of productivity that we talked about in the second quarter and the first quarter. We saw it again in the third. We believe we're going to see it in the fourth, and we'll see it significantly into next year as we lap some of the big projects that we did this year as we bring up NORPAC, as Riverdale continues to ramp. And so we feel good about the trajectory that we're on in terms of margin improvement.

Operator

Your next question comes from the line of Mark Weintraub with Seaport Research Partners.

Mark Weintraub

Andy, you sort of got in front of my question a little bit, saying you don't want to provide any guidance for next year, which I understand. Trying to work that out. So maybe the controllables and what as we think about, obviously, where costs go, that's very hard to predict. But we still have a lot of the flow-through from price. And is it fair to say that you don't have a lot of the September increase baked into box prices for the fourth quarter? Is that fair?

Andrew Silvernail

That is correct. Yes, that's fair.

Mark Weintraub

And I think you mentioned Riverdale, you mentioned NORPAC as something that can continue to ramp higher. Are there other things in terms of actions you've done and/or have already signaled that we should be contemplating in terms of what can drive earnings higher next year in North America?

Andrew Silvernail

Yes, Mark, it's not kind of big nameplate things like facility closures that we've mentioned in the past. But we're now moving to really aggressive reinvestment in productivity. And that's what we're seeing show up now, right? And so our expectation is that we are going to be delivering kind of trend line productivity here into 2027, and feel very good about that as I think about the investments and the costs that we've had in 2024, '25, now '26, we're definitely seeing that ramp in productivity. So you should not expect to see kind of, again, big nameplate things, but you should expect to see meaningfully above trend line improvements in productivity.

Lance Loeffler

Yes. I'd also add, Mark, that next year too will also be the continuation of eliminating the tails on that operating cost for the facilities that we have closed as we continue to sell the real estate and actually fully exit a lot of those decisions, that will continue as well. So those layers mean a lot. Maybe not in isolation, but as you stack up 20 of them on a monthly basis, it's a meaningful number. And so we expect to make significant progress in that area too.

Mark Weintraub

Okay. That's helpful. And just maybe if we think about -- I guess you're really not talking about Europe at all, but as that process happens, is there anything on like the corporate expense side as you run North America separately that we should be thinking about that would change in '27 versus '26?

Andrew Silvernail

Yes, Mark, so there's an extensive part of this, right, that's aimed at watching the stranded costs and eliminating those as we go into the course of next year. So that's something that we have been focused on that we're planning for and that we will continue to execute so that those stranded costs don't become a weight on the new IP.

Mark Weintraub

Okay. And any color...

Andrew Silvernail

Let me finish. Like that would also include the impact of GCF too, remember. So we sold GCF earlier this year. And so it's a combination of the stranded costs associated with carrying GCF and our European business.

Lance Loeffler

Yes, as they come off the TSA. Yes, that's -- and we'll give more specific guidance when we execute the separation, whether it's a spin or a sale, we will have more information for everybody to give -- kind of help you with the modeling more specifically.

Andrew Silvernail

Correct.

Operator

Your next question comes from the line of George Staphos with Bank of America.

George Staphos

I want to -- if you -- understanding that you're not going to guide on '27, I wanted to come back a little bit to maybe some of the individual buckets in terms of the bridge. And in particular, let's call it the 80/20 cost piece or productivity piece as we look out. Is there a way to size what in North America that benefit was this year, '26, and what it could look like in '27, and what the ongoing cost inflation that you've got to hurdle every year might look like and what it looked like this year?

Andrew Silvernail

Yes. I think -- so George, if you take a look at -- if you look at everything we've published so far to date, including the third quarter today and the expectations in the fourth quarter, if you go back and put those bridges together, that will answer the first part of your question really explicitly. And then...

George Staphos

I just want to get at -- but an 80/20, you do include some commercial, I think. So just on the cost outside of that is where I was going with that, Andy, what you would look like?

Andrew Silvernail

I think that's trying to parse it too finely, right? Because you're -- you really need to look at cost as a total. And I would break it down between input costs and structural costs, and that's how we have it broken down by line item in the deck. So you can see kind of all that. And to ascribe a specific number to a specific action, I don't think is the right thing to do because these things are tied together in all the different work that we're doing.

And as specific to 2027, again, we'll guide '27 when we do the fourth quarter call at the end of January.

George Staphos

Okay. Appreciate the thoughts on that. Let me try a different area or topic. So looking to the fourth quarter, you guided to what you should do from a volume standpoint in North America and where you think the market is. And you're dealing with significant inflation and raising pricing, and we understand that point. What impact do you think is occurring to your volume or maybe the market as a whole from the impact of pricing on demand? And as you think about the next couple of years in North America from a demand standpoint, what do you think the algorithm looks like? If traditionally we grew 1.5%, how much do we shave off because of inflation at the consumer level or GLPs? What can that growth rate look like given all the work that you're doing to try to raise pricing, understandably?

Andrew Silvernail

George, appreciate that. A few things in there that I think are important. So number one, kind of I think the question is what do we believe kind of the long-term demand profile looks like in the business. And our view is it's somewhere in the neighborhood of 0.5 point to 1 point of volume growth. That's our view. Right now, because of the inflation that is out there and the pressure on that mid-level and lower-level consumer, we expect the markets to be pretty flattish. That's our expectation as we stand here right now.

But they certainly are pressuring. So if you think about that K-shaped economy that all of us have talked about so much, the bottom of the K is hurting, there's no doubt about it. And those folks are making really specific choices about their goods purchases.

So I think as I kind of think about the near term, the next quarter into the early, certainly, part of 2027, all indicators would say that folks are going to continue to be under pressure as we think about elevated energy costs, whether it's oil, it's natural gas, right, it's diesel, you pick it. There's no reason at this stage to believe that that's going to fall off in a meaningful way. And that's how we're planning the business, is to expect that we'll be living in an elevated level.

To be clear, right, the gyrations around the energy equation have been, I mean, really incredible since February. If you look at the ups and downs, and obviously, we're all reading the news and hearing about what may or may not happen post election in the Gulf. Obviously, we have no control over that, but that volatility is what we're managing, and I think managing quite well actually.

But I expect there to be continued pressure on the consumer, which will create pressure on the customer. And we need to continue to drive cost out of our system and raise prices appropriately as we see as the market forms and how we think about the business. So that's how I would characterize it.

George Staphos

While we would have liked a little bit more color on the cost-outs, you're certainly doing a really good job on that both in terms of EMEA and North America. You did a great job there managing against that. And we'll mark the progress in '27.

Operator

Your next question comes from the line of Detlef Winckelmann with JPMorgan.

Detlef Winckelmann

Maybe to start just with your free cash flow guidance that you've given us. I know it's now down to, call it, $100 million to $200 million. Are you able to kind of talk through the moving parts? Because if I'm looking at it, obviously, you've got an EBITDA line item, we've got tax and interest. We've got your CapEx guidance. But there still seems to be a bit of a gap of, call it, I don't know, $300 million to $400 million. Is that just working capital? Anything else I might be missing on that side? And then I've got one follow-up, if you don't mind.

Lance Loeffler

Yes, I think that's the one filler. And for us, particularly in the third quarter, right, what you saw in our free cash flow number was the catch-up, right? So on inventory and the build that we have been trying to -- that did not happen. So remember, we had a huge turnaround quarter in the second quarter. Normally, we would be preparing for that and building inventory in the first quarter. We were unable to do that because of the winter storm. And so the third quarter is really that -- the catch-up quarter for us from an inventory perspective. So working capital was a big draw.

As you think to the fourth quarter, 2 perspectives, Detlef. One is the outlook change, which is, I'd say, fundamentally is driven off of the -- a direct result of the lower earnings outlook, right, for the business for the year, based on the things that we've already discussed on the call. But in terms of cash flow itself for the fourth quarter, I would characterize it as stronger operating results, right, generally speaking, with a big working capital swing back to the positive, right, now that we've got that inventory build behind us. And then this will be probably the lowest CapEx quarter for us for the year. So those -- all those events were to combine to a much stronger free cash flow profile in the fourth quarter.

Detlef Winckelmann

Okay. Great. And then maybe just one just technical question in terms of EMEA. Nothing regarding the outlook, just in terms of where do you have your carrying value for EMEA now. I mean, my calcs are saying about $3.6 billion, but I just want to confirm.

Andrew Silvernail

No, let's get back to you and make sure we get that accurately. But that number is going to be very low.

Operator

Your next question comes from the line of Anthony Pettinari with Citi.

Anthony Pettinari

Just following up on CapEx. I understand you're not giving guidance on '27, but as IP becomes kind of North American stand-alone, I was just wondering if you could kind of talk about sort of the CapEx needs of the North American business as you see it. At the Analyst Day, I think you gave kind of a 6.5% of sales kind of benchmark out there. But I'm just wondering how we should think in the future about where you are from kind of a CapEx cycle perspective.

Andrew Silvernail

Yes, Anthony, I think the 6.5% you're remembering was specific to Europe, to EMEA. We've said that we're going to be elevated in North America here for a couple more years. And I think that the range that we're in right now, we should expect to see this year, next year, and we'll figure out '28 based on the capitalization needs and the opportunities. But I would say, generally, this -- the range that we're going to have this year will be similar in 2027 for North America.

Anthony Pettinari

Okay. That's very helpful. And then just as a follow-up, I don't know if I missed this, but how much of a headwind was West Coast ag on volumes in the quarter? And then did you mention how volumes have been in October from a North American box side?

Andrew Silvernail

Yes. We haven't broken out the impact of West Coast ag specifically. We've just noted it in more general terms. We see it within our book of business customer by customer, so we can kind of see it like that. But we haven't aggregated it as a singular piece and said it's x percent. So we haven't broken that out to that discrete level.

And then as you think -- look right now, what I would say is, look, things are generally kind of similar in the U.S. as I look through the month. It just doesn't look a whole lot different, right? It feels like the consumer and, therefore, the customer is generally cautious in dealing with inflation.

Operator

The next question comes from the line of Hillary Cacanando with Deutsche Bank.

Hillary Cacanando

In terms of pricing, when would you expect to have substantially all of the September price increase reflected in box pricing?

Lance Loeffler

Yes, Hillary, this is Lance. It, for us, it's probably fully realized, it's probably the beginning of Q2, end of Q1, something like that. It takes us about 4 or 5 months to fully realize and work it through.

Hillary Cacanando

Got it. And then in terms of your expectation to have outperformance versus the industry, is it primarily share gains? Or is there like a mixed component there as well?

Andrew Silvernail

It's mostly share gains. So it's business that we've won in prior periods that are now flowing through between large and small customers. So it's been pretty consistent there.

Operator

Your next question comes from the line of Anojja Shah with UBS.

Anojja Shah

I wanted to ask about your tons in the back of your deck. So I noticed that on a sequential basis, your box tons fell by about 5%, but your containerboard tons increased by about 14%. Can you just talk about what's happened...

Operator

Pardon the interruption, Ms. Shah, your connection, we cannot understand you.

Anojja Shah

How is this? Can you hear me better now?

Andrew Silvernail

No, it's broken up. Let's have her come back on at the end.

Operator

Understood. Your next question comes from the line of Mike Boland (sic) [ Roxland ] with Truist Securities.

Michael Roxland

Lance, if I heard you correctly, you mentioned that 4Q should benefit from $35 million to faster realization of the June price increase and also partial realization of the September price increase. Just in terms of the faster realization for June, what has allowed you to realize the June price increase at a faster pace?

Lance Loeffler

I think it's just the way that we have forecasted the business. And we look at traditional patterns and the way that we realize it. I think our teams have done a really good job of working the contracts, being forward with the customer and just executing quicker.

Andrew Silvernail

Yes. If you think about it, Mike, right, these things are generally written into contracts, and then you have a piece that's written in the contracts and then you have a piece that is not, right? And when you get faster realization, one of 2 things tends to happen, either with the piece that isn't contractual, right, you're able to get it into the market and you're able to get it to stick quicker, which is, again, to Lance's point, we've done that a little bit faster than what our expectation would be. Not enormously faster, but a little bit faster.

And on the contract side, what it really is, is just diligence of making sure that you execute to the contract, right? Because if not, it can take longer, right? That can lag. And so we've got to make sure that we go -- we're working with our customer base and executing the contract. So those 2 things typically are the levers, and we're just seeing a little bit better uptake on the first piece. And on the second, we're just keeping discipline with the execution within the contract language.

Michael Roxland

Got it. And Andy, would it be fair to say that maybe there could be some upside with the September price increase as well? I know Lance called out late 1Q, early 2Q. Could that be even pulled forward if you guys are on top of enforcing...

Andrew Silvernail

I think what we've guided, we feel pretty good about, generally. So I think that's the number I would use.

Michael Roxland

Got it. Great. Perfect. And one quick follow just a follow-up. In terms of Riverdale, how is that mill operating? When do you expect to be at full utilization? And can you just remind us what the start-up costs for in 3Q and when those should wind down?

Andrew Silvernail

Start-up cost, do you have that handy?

Lance Loeffler

Start-up costs in 3Q was -- yes.

Andrew Silvernail

I'll have to get back to you on that, Mike. Sorry, don't have that number specifically. But in terms of the ramp, right, if you recall, it basically ramps up through first quarter and second quarter of next year in the full ramp. But what I'll say is the team is doing a really nice job, right? We are on schedule, kind of no major issues. And so kudos to the team. Those of you who are really familiar with the stuff, this is very complex and the team has done an excellent job.

And same thing on Pine Hill, right? That mill operations team, if you think back over the last 6 months, or 9 months, what they have handled, and handled very, very well. And Jason Handel, who is the leader of the business, he's just done an exceptional job, he and his team. And so real kudos to them.

Operator

Ladies and gentlemen, that does conclude our question-and-answer session. I would now like to turn it back over to Andy Silvernail for closing comments.

Andrew Silvernail

Well, thank you very much. And Anojja, I'm sorry, you got cut off, but we look forward to talking to you separately in our one-on-one sessions.

Just thank you to everybody for your attention to IP and your interest in IP, and really thank you to the teams. This has been an incredibly turbulent time over the last couple of years in terms of what's happened in the external markets and how the teams have focused and executed. And we're seeing that start to ramp now and hit in the sequential numbers that we've seen and what we believe will happen in the fourth quarter and as we look forward into 2027.

And so look, the markets are going to be soft. We're going to be dealing with accelerated inflation. We all know that at this stage. We don't believe there's anything that's going to change that. But our focus is controlling what we can control, and that is the main thing, is commercially and operationally, is for us to be laser-focused on the things that we can control and the levers that we can pull and enable us to get the kind of operating leverage that we know is possible in the business.

So again, thank you to everybody involved, and we look forward to talking to you in a quarter. Thank you.

Operator

Once again, we'd like to thank you for participating in International Paper's Third Quarter 2026 Earnings Call. You may now disconnect.