International Paper Company (IP) Earnings Call Transcript & Summary

Good morning, everyone. I'm Anthony Pettinari, I'm Citi's Packaging Analyst. Thank you very much for coming to our Basic Materials conference. This is the first in-person conference that we've held since 2019, so it's great to see all of you in person. And we're very pleased to kick off our morning session with Mark Sutton, Chairman and CEO of International Paper. Mark, I'm going to turn it over to you to give kind of an introduction to IP, and then we'll go right into questions. We'll definitely have time later in the session for questions. So again, thank you.

Sounds great. Thank you, Anthony. And also thank you to everyone here in the room in New York and also to those that are listening on the webcast. I appreciate your interest on behalf of our team in International Paper. I've just got a few, as Anthony said, prepared remarks, just to set the stage for how we're looking at the company and what's ahead of us. So on Slide 2, you'll see our normal forward-looking statements. I think you're all familiar with those, and the GAAP and non-GAAP reconciliations are always on our website. So I'm going to move through those statements and on to Slide 3, for those of you following on the webcast. As we wrap up the year and look forward, I'm very confident in the resiliency of International Paper to successfully navigate through various macroeconomic environments. I'm also confident that we're well positioned to deliver long-term profitable growth. I say this for a number of reasons. Today, we are a significantly less complex company, probably less complex than most of the people in this room and on the webcast have ever seen, if they've been following and investing in or looking at International Paper. That focus and that simplicity allows us to focus on delivering superior and sustainable solutions for our customers across the Corrugated Packaging and Absorbent Pulp businesses, which we believe both offer long-term growth opportunities. There are no segments or businesses in International Paper now that are facing a secular declining end-use market. And also, and very importantly, we've significantly strengthened the company's financial footing by reducing our leverage below the low end of our long-term target range. And additionally, something we've been working on for several years since the recession 10 years ago, is getting our pension plan fully funded. We also have -- we've done that, and we also have very limited debt obligations over the next 10 years. So our balance sheet is very strong, which gives us the opportunity to invest throughout a business cycle, to grow our earnings and cash generation while also returning meaningful cash to our shareowners by maintaining our dividends and through opportunistic share purchases. And in the last 3 years alone, we've returned almost $4 billion of cash to our shareowners, and this remains a priority in our capital allocation framework. I'm also pleased to announce the successful start-up of our new Corrugated Box plant in Eastern Pennsylvania, which will allow us to continue to grow with our customers and to increase revenue by approximately $150 million once fully ramped, with an expected return on investment of about 20%. And going forward, we plan to make additional investments across our box plant system to support long-term profitable growth. This is a great example of the progress we're making on our build to better IP initiatives to accelerate value creation for our shareowners. Now I'll turn to Slide 4, which is one that I shared with you during our last earnings call as we recognized the emerging macroeconomic uncertainties that were ahead of us in the third quarter and as we end the year. I want to reinforce my confidence in the resiliency of IP and our ability to navigate through this dynamic environment. Our teams at International Paper know what it takes to successfully manage through a business cycle. We have a wide range of options and capabilities across our large system of mills, box plants and our supply chain, and we know how to optimize our system while continuing to take care of our customers. In the current demand environment, our teams across the company are taking very specific actions to shift production to our lowest-cost operations and shed high marginal costs across the system. Through our Building a Better IP initiatives, we're focused on continuing to invest in projects to drive structural cost reduction through efficiency improvements and accelerating profitable growth. Our commitment is to deliver $350 million to $400 million of incremental earnings through 2024. We set a target for 2022 of $220 million, and we will achieve that and probably the high end of that target. Another great example of this is the strong momentum we've achieved toward getting our Global Cellulose Fibers business to deliver value-creating returns. Our team in Global Cellulose Fiber delivered meaningful earnings growth this year and earned returns at the cost of capital in the third quarter, and they remain well positioned to build on this success. They're doing this by deploying a new go-to-market commercial strategy focused on building strategic relationships with key global and regional customers, aligning with the most attractive regions and segments and driving structural margin improvement by ensuring simply that we get paid for the value that we provide our customers. And finally, as I mentioned earlier, we have significantly enhanced our financial strength and flexibility. This strong foundation makes IP well positioned for success across a wide spectrum of economic environments and to deliver profitable growth for the long term. So with that, Anthony, I'll join you for Q&A.

Mark, thank you. Thank you for that overview. Industrial Packaging is your largest business. Can you talk a little bit about containerboard market conditions into year-end, and how IP is positioned?

So what I'll start with is what we referenced on our earnings call at the end of October. And what we were seeing exiting the third quarter, we said we thought we were seeing, based on our customer feedback of inventory destocking, of demand stabilizing at a lower level until some of this inventory works its way out of the system. And that's so far through the fourth quarter, that's what we're seeing, so no further deterioration. It looks like demand has stabilized at the lower level of the third quarter. Anecdotally, you hear and see and we talk directly to our customers, it looks like it's having a positive effect on inventories. Our inventories are okay, but our customers' inventories are what got high, and they're reporting back to us they're making progress lowering those inventories. And there's also, obviously, public reports of retailers that have said various things about where their inventories are moving. So we think that will play out through the fourth quarter and then things will stabilize, then you head into, for our industry and for our company specifically, a normal supply drawdown because of all the maintenance outages that start to occur in the late part of the first quarter. And so that should help keep everything balanced. But about what we said on the third quarter call was playing out.

Are there any end markets that you would cite as being particularly strong or where that destocking is happening quicker versus maybe weaker end markets, or?

You know, there are some isolated items in the food industry that are a little bit stronger or a little bit weaker, but they're usually -- there's an assignable cause. E-commerce is actually picking up a bit. There's always a potential pickup in the beginning of the fourth quarter. We're seeing that, but it's not at historical levels. And I think the reason it's not at historical levels is as our customers entered the fourth quarter with enough inventory. So some customers may have skipped on an order cycle, and it's a short-cycle business. I mean, they order every few weeks. So skipping one cycle is one of the ways that matches what you're hearing about inventory. They don't need to package anything else until they get their inventories down. So a slight pickup in the fourth quarter in certain segments that typically pick up, but not quite as much as what our historical average would be.

And then in terms of your containerboard system, can you talk about, in the near term, the challenges that you faced to hitting that 20% EBITDA target? And then longer term, can you talk about the levers that you can pull to improve profitability and returns over the cycle?

Yes. I think on the second quarter earnings call, I talked about IP being at 20% in the second half of the year and just in the second quarter, we were at just under 20%, about 18.5%, 19%. What changed from that statement to now is the -- and probably something we maybe underestimated was the persistent inflation finally caught up with the consumer. So lacking the demand decline, which seems to be somewhat inflation induced, and the consumer paring back what they spend on goods, with the price flow-through that's occurring in the second half of the year, we would be -- that was the reason for the statement. We would be at 20% margins. But when you have what we saw in the middle of the third quarter, a pretty quick decline in demand, now you've got a new set of cost issues to deal with that was not -- we didn't think that would be the case. So stable demand, pricing catching up with inflation, and we were a quarter or 2 away from that, and we're back at 20%. So there's not a whole lot that's got to be done. We've got to run well. We had some problems back in 2021 with weather-induced interruptions that took us a long time to recover from. But running well, normal volume, not this huge deceleration for inventory destocking, pricing overcoming inflation, which we've been largely able to do. I think we need a supply chain that's more predictable as well. An unpredictable supply chain results in higher operating cost to serve the customer, you use the wrong mode, and that's not fixed. It's getting better, but it's not fixed. So I'm very confident we can get back into that range. The question is just going to be timing, and that's partly dependent on the economy.

And then longer term, in terms of raising returns and profitability within Industrial Packaging, you talked about the investment in Pennsylvania. What levers can you pull? Do you think the focus is more on the box plants or the mills, or maybe geographic gaps, anything?

Well, I think there's -- the good thing is it's not one item. We have to invest in our box plant system, both in capability and capacity. So we're probably going to look at 4 or 5 new box plants, one a year until further notice. But that's only part of it. We have so many. We have several hundred sites. And in those sites, we add single lines of production capacity. So about every 5 or 6 single-line adds is a new plant. So we don't talk about a new plant like that. We talk about a new greenfield from dirt. But there's an opportunity for us because of the vast network. And we're out of capacity in certain very dynamic markets. The Southwest, the Texas market, some of the Northeast, that's why we built the plant in Pennsylvania. We probably need more there. In the past, pre-pandemic, we would deal with capacity issues, first, with labor. You just work a little more over time. You hire another shift, because most box plants don't run 24/7. You've always got a little bit of, like, capacity. And that formula allowed us to spend capital in our mill system, getting our cost right, getting our capabilities right, adding capacity like we did at Riverdale for the white-top liner, and we didn't have to invest in physical machinery as fast. What changed, as we all know, as labor is at a premium. It's not available. Over time, it's no longer looked at as a positive by employees. It's kind of like I've done this for 2 years during the pandemic, and I can't do anymore for a while. So our ability to run all of what we have with the same people isn't the same as it was pre-pandemic, and so that may return at some point in time. But physically, we're out of machine capacity in certain markets. So you'll see more investment in the converting. That will be the biggest driver. Profitability and growth in converting will be the biggest driver to improving returns. I believe we have enough containerboard and we have the right containerboard, the right grade, the right quality, the right mix between recycled and virgin liner for the foreseeable future at a 1% to 2% growth rate in the market, we're good on containerboard. There's always opportunities to invest to reduce cost. We'll have to see if this energy issue stays alive for a long time. There are some small investments we can make to basically disconnect ourselves from purchased natural gas and make as much of our own energy as possible with wood biomass. Normally, that's not the right economics on normal natural gas, but if it stays like this, it may be the right thing to do. So some of that capital expense could be to lower our fuel and energy cost. But those are the 2. It's not just investment, it's addressing the commercial opportunities. Part of that is capacity. Part of that is, again, continuing to refine how we go to market. And we believe the returns in our packaging business, they have reached the mid-teens in the past. ROIC, I'm speaking of. And that's a number we can achieve and maintain with the right approach, the right investment. And I'll take you back, Anthony, to -- you might ask, well, why haven't you done that before? One of the reasons we haven't invested in the converting as much as maybe we wish we would have and solving it with incremental labor is that balance sheet and that pension, and all that financial underpinning I talked about that every time you had a choice when you had sort of an economic slowdown or a recession, we believe maintaining our investment-grade credit rating was really important, so we shift CapEx to debt repayment. We shift CapEx to pension funding. And we said we can always do that project later. You can, but if you miss a market, you have a regret factor. Those days are over. We don't have to stop anything to fix the balance sheet, and that's what I'm really excited about. We can invest, we can return $4 billion in the last 3 years. Think about the last 3 years, anything but normal. We returned $4 billion. I think that's an under kind of reported or under-understood. It's not a word, but it's not well understood. So I want to say it again, we returned $4 billion in dividend share repurchase in the last 3 years alone.

And just wrapping up on the commercial piece. In terms of channel to market, whether it's forward integration rate domestically or into the export channel or just open market sales, can you -- is there a way to optimize that? Or is there sort of an ideal integration rate, or how do you think about that?

I think we don't solve for integration rate purely. If it's defined as containerboard made in the U.S. and converted by an IP-owned box facility in the U.S., we take a more broad view of integration, and it's definitely the most profitable channel. If you make the containerboard, which is the raw material for packaging -- package making, and you actually have the customer relationship either directly because it's our box plant or indirectly because it's a strategic converting partner who we have -- in some cases, we have equity ownership positions in, that's clearly the most profitable channel of the market. So we'd like to do as much of that as possible. And that -- guess that could lead to a theoretic 100% integration rate if you accept my definition of integration rate. It's not going to be 100% or 95% of IP-owned facilities because they are, quite honestly, some of our customers in converting business that are serving a niche in the market that I think they do a much better job than we could ever do given our scale, size and the complexity of a large company like IP. Their ability to service and touch customers in certain ways with our raw material, with our high-quality containerboard. And a long term, you're not bidding it out. You're not worried about the business every year. And in some cases, sharing in the profitability directly via an equity position really is the right way to go for us. On the export, this totally open market, no connection to IP customers in Europe, Latin America, Asia, kraftliner is growing 2% to 3% a year. It is the feedstock for the recycled fiber industry around the world. It's needed for certain applications, so our focus for kraftliner exports is that it's a legitimate business where the product is needed for performance and people are willing to pay for it. And we will never add capacity to do that. It will always be either high single digits or maybe it will get to 10% of our output in certain periods of time. But that part of it, the kraftliner, that's all we export. We don't explore any recycled because you can get that anywhere in the global containerboard industry. But you can't get kraftliner and you can't get U.S. pine kraftliner anywhere. And Asia, Europe, Latin America have certain needs where they have to have that. So unless that changes, unless kraftliner is not needed anymore, there's probably always going to be a delta between what we make and what we "have" as integrated.

And on containerboard supply-demand, I mean, you took, I think, 400,000 tons of market downtime in 3Q, which is maybe the first time in a couple of years. And it appears that we have a significant amount of capacity being added to the industry maybe through the first half of next year. I guess 2 questions. First of all, can you talk about kind of your philosophy towards market downtime and balancing your system? And then in terms of the supply additions to the extent that they do or don't materialize, is there anything from maybe previous cycles that can help us sort of understand the potential impact? We had a price decline in pulp and paper [ week ], your stock went up. So presumably, a lot of people are already expecting.

Yes. So the first part is how do we think about running our system less than full. It's probably -- it gets a lot of press when we take lack of order downtime. But the way our system is most optimized for profitability and customer service standpoint is actually running at about 93%. 3% to 3.5% of planned maintenance outages to keep the facilities reliable. A pulp and paper mill is three factories in one, it's a power plant, so think about your public utility. It just can't fail routinely because you don't have any power. If it does, we make our own energy. It's a chemical plant, making all of the wood processing chemicals and then recovering those chemicals. And then it's just physical machinery and hydraulic machinery to actually make the paper. So the maintenance outages are really critical to keeping your average run time up and your -- the better you run, the lower your costs are. No upsets, no issues and obviously no repairs, so that's 3.5% of the time. The other reality is customer service, inventory, supply chain issues, having flexibility in the system and in our system of 17 mills and 14 million tons, we've calculated about another 3% to 3.5% of flexibility time. Allows us to respond to market changes, respond to weather events, hurricanes, whatever happens that takes us off of our perfect plan without having to just create chaos and spend lots of money shipping and moving. And so that's a perfect world for us. It never works that way. You're either running too much or not enough, but on average, that would be the perfect example. So now we have a demand signal that slows down. We will match our production to our demand, and there's some variables in there. One is where are inventories? If our inventories are low, we would take less downtime, and we've used that opportunity to reestablish our inventories in our box plants. Our inventories are pretty good right now, so we don't have to do that. The other thing we look out is about 1/4, what's happening? Well, we're getting ready to move into maintenance outage season. So we're going to take these mills down. Whether we take lack of order downtime or not, they're going down starting in late February. So we try to calculate, should we make what we're going to need when we take them down now? And then lastly, where we take downtime and how we take it. Shutting down versus slowing down. Which mill, which part of the country, there's 2 variables there. The type of grade the mill makes, they don't all make exactly the same thing; and two, the marginal cost. And with this type of inflationary input environment, marginal cost optimization is the primary objective we're solving for. So some people ask, why don't you just shut 2 or 3 mills completely? It -- wouldn't that save you more money? You have to do the analysis because in one case, it's shutting a mill completely requires more logistics and supply chain costs for all the other ones to ship where that mill used to ship. You may be no better off. And then you put your mill at risk, these plants are not -- they don't shut down completely very well and start back up. There's always risks because of the thermal issues and all that. Secondly, think about where we are now and what you saw us do in the third quarter was slowed down a number of our facilities. By doing that, we can match our own make energy with our energy demand. And if we can do that, we can cut off all purchase energy at every facility. So taking down production 5% or 10% across 17 mills and getting off of natural gas in this environment is the right answer. In another environment, it might be shut these 2 down for 2 weeks and run these full. So we've got a pretty sophisticated algorithm, a lot of analytics. What happened in the third quarter is the amount of downtime in a short period of time made it very difficult to optimize anything. That's normally not what happens, but we all know. We saw this huge deceleration in -- and at least the goods part of the economy, that came on pretty quickly.

And in terms of...

On the new capacity. Yes. The new capacity, hard to tell. There's some different projects, different types of owners. We always segment it into capacity that's coming online by companies that are already in the industry, like IP or one of the other integrated companies, is one type of capacity. Usually never an issue. They're bringing it on in their own system. We've done it several times. You never get the timing right. You build a facility and then the way cash flow returns work, you kind of got to start generating revenue. You can't wait until the market. So if you own like IP, we brought on Riverdale in the middle of the pandemic, needed it, and then we didn't need it. Well, we just adjusted our capacity at other places. It made a slightly different product, and no one even knows we added 500,000 tons. That's what companies that are in the industry do. Then there's a tranche of new entrants, truly new entrants that just would like to participate, and that's been a mixed bag. Some of them have already been acquired by other companies when they started up, some of them failed and some of them have made a regional play on freight arbitrage, where they will sell around their mill. So I think the jury is out on how hard or easy it is to enter a value chain. It's -- containerboard is not a product. Containerboard is immaterial to make a product. So saying I'm going to only do this part of the value chain when there is a very significant part, like making the box that's downstream, that in many cases, is in the hands of integrated raw material producers like IP, is a tough thing to do. And if you've got one mill, sometimes your value proposition is I've got 2 grades of paper. And most customers will say, well, I use 27 grades, and I've got suppliers that have all 27. So other than you're close to me or -- why would I buy from you at really any price. Why would I buy from you? And that's what a lot of the smaller new entrants have run into. And I would suspect a percentage of what's on the docket for next year, some of it is strategic investors. And they'll make it and they'll make high-quality product, and they'll probably be brought on in a really responsible way. Others, I think, are going to face that same challenge of trying to enter a value chain at one point and then realizing, I really don't have any access to the downstream where the product is actually made.

And as we think about supply-demand, and ultimately, the impact on pricing, is there any context you can give us for -- maybe just looking at the last couple of pricing down cycles versus maybe what you saw prior to the GFC and maybe how the industry kind of performed in -- before, the kind of consolidation that you saw [indiscernible], and the....

Well, I think before the industry on the containerboard and box side became more consolidated, I think there was a lot more volatility. And I think most people that modeled the industry, the correlation statistically was very high. Looked at inventories, supply in the system of containerboard, so at the mill and at the box plant. And that number, that absolute inventory number correlated pretty highly with future pricing actions. In the recent 10 years or 7 years, that correlation is not nearly as meaningful anymore, and it's kind of obvious why. You've got lots of reasons why companies for supply chain reasons, cost reasons, customer service reasons, they moved their inventories around. But no one puts, as I said, containerboard, which is not really a product in and of itself, it's a raw material to a value chain step, would sell more of that into a market that doesn't need it. Market needs to need a box for anybody to make containerboard profitably, and I think that fact, that business model, is pretty well understood. That's the way we operate. So our containerboard system -- I get asked all the time, are you worried that you're not running full? Absolutely not. We need to have the containerboard. And it's never going to be perfect because we didn't predict the pandemic, and we didn't have and no one had enough for a short period of time, but now we have enough. So you figure out what your capacity is and then you figure out how to make money if it's running 100%, 102% where you're running stuff faster than it's supposed to run, and 90%. And the way you do that is you let the market tell you what it needs. And then you as an operator, as a process industry operator, adjust your cost structure, Variabilize as much of your fixed costs as you can. And if you have a big system like ours, you can -- you have the luxury of doing the marginal cost approach. If you have 2 mills, you don't. That's a different equation for them. But for us, it's about making money at 90% operating and making money at 100% operating. And not trying to say that we designed the business to run full, that's a fallacy. In fact, if you design the business to run full, you're going to disappoint your customers on a regular basis.

Last question on containerboard for me. As we think about Europe, you have a containerboard system, a box system in Europe, you export to Europe. If we think about the winter and we think about extremely high energy costs, maybe recession kind of market conditions, how does that sort of impact containerboard trade flows? How could it impact your system? Is there sort of an opportunity there because a lot of European production is shut down? Does the demand impact negate that? Just like, how does that -- that could play out?

There is opportunity. If this energy issue, which is really hitting a lot of those mills, some of the big public companies have talked about they're managing the energy issue because they had a hedging strategy and all that for the interim period. So some people are surviving it better than others. But if this stays for a while, and if the Ukraine issue is a catalyst for that, then I think you're just going to have cash flow issues with some of the recycled mills and maybe even some of the Scandinavian kraftliner mills. That should create some opportunities to service their containerboard needs from the U.S. or from somewhere else. The real question though is the second part of your question, if the demand is there. Because if the same conditions that are causing them to have to shut down because of high cost are putting a burden on the consumer and box demand goes down, then you might find that it matches up. If demand is resilient, there's probably an opportunity for a period of time to have some incremental exports help fill their need. The demand is the question that we really need to have answered.

And then just switching to Cellulose Fibers. Can you talk about -- you talked about hitting cost of capital in that business. Can you talk about kind of the commercial strategy there and the kind of what inning you're in, and maybe some of the activities that you've pursued there to profitability?

So the commercial strategy was -- before we made some of the changes starting in 2020 was a mix of what we were doing in legacy IP before we acquired Weyerhaeuser and the way Weyerhaeuser was approaching the market. And what we found, we tried that for a couple of years. And the first year after the acquisition, it seemed to be working okay, very good customers. I mean, really A listed customers, high-quality products. But what we found was in the next regular commodity pulp cycle that occurred, and it will always occur. What we found was that the Specialty Absorbent Pulp was much too connected to Commodity Pulp. There was a differential, but the curves of pricing, not demand, pricing. So demand was stable. Pricing was following a commodity curve. And so what you have to do and what we did, it takes a while because you got 3 and 2 and whatever long-term contracts, we had to find all those connection points with customers, with segments. And as large as we were or we are, what was our behavior in the market doing to contribute maybe, unknowingly contribute to that connection? We identified all those connections. We mapped the ecosystem and starting in 2020 at each opportunity to deal with each customer, each region in a way that disconnects as much as possible absorbent pulp from market softwood pulp, we made those changes. And that has resulted -- and '23 will be the test to see, because there'll be more movement in pulp. We'll see how resilient some of these changes we've made in our go-to-market strategy. It's part the customers and how they're interrelated, the regions of the world. So what we do in the Middle East in what we might call a spot market, smaller regional companies, has an effect on a large multinational customer 6 months later in the form of where price is discovered and pricing indexes and all of those things that are interrelated. So what we try to do in our go-to-market strategy is issue by issue, and just imagine a diagram. Everywhere, there was a connection. Why is fluff pulp related to market pulp? It's not even anywhere close to the same product. It's not even used by the same people. It shouldn't be that connected. We started to break those connections, and with our market position, we were able to have some success. That's led us to the first stage of can this business be value creating, which is get it to the cost of capital. We're there. We're not stopping. We know we need to be above that. When we get above that, and I think we will very soon, then we will look at putting some investments in the mills to lower cost. We haven't done any of that since the acquisition because we had to fix the commercial go-to-market first. And then after that, at a 2% to 3%, 4% market growth, 2 or more years from now, we may need to look at where is the next tranche of capacity come for. So I don't know what inning we're in. If it's a 9-inning game, we're probably in the third or fourth. But if it's an extra innings game, we're a little further away. But we are not declaring victory. What we're saying is we're making progress, and it's real progress due to actions we've taken collaboratively with our customers. They really need this product. They need it to be safe. These end-use products, diapers and feminine hygiene and adult products are super important. The worst thing in the world for our customers is to have brand reputation damage because one of the key raw materials was not appropriately sourced, and we should get paid for that.

Mark, you talked about capital return. I'm just wondering if you could touch on the dividend? And can you remind us what you've said about sort of the target paid out and what that means in the cycle, and sort of where you are now?

So we got a question or 2 on the earnings call about that. There's been a few things written by whatever the business press about whether or not a company that has such a strong dividend like IP can weather and keep that dividend through different periods of time. I think what's catching people is we talked about our dividend not as a policy, but as a guideline in the principle being, over time, 40% to 50% of our free cash flow. And any time you put a number out, you immediately wish you could reel it back in because we never said it would always be 40% to 50%. We said over time, it will be 40% to 50%. That means sometimes it could be 100% of our free cash flow, and sometimes it could be 25%. But over time, we try to target it because the dividend is not something we want to change arbitrarily. We'd like to raise it. We'd never like to lower it. So that's what that guideline is. So we're very comfortable in the cash generation potential of the company, the balance sheet comments I made at the beginning of this discussion and our ability to maintain our dividend through -- I mean, I guess there's always a scenario you could dream up where it just would be an apocalypse. But if you just look at what is likely to occur in different scenarios and different business conditions, our dividend is really important to our investors. It's important to us. We made a slight adjustment when we did our paper spin-off, way less than the calculation would have indicated we should have done because we knew it was important. We didn't touch it during the pandemic when a lot of companies panicked. And the first thing they did, we don't know what's going on, let's cut our dividend. We didn't know was going on either, but we didn't cut our dividend. We said, let's see what's going on. We're paid to figure out uncertainty. So the dividend is really important. 40% to 50% is a long-term guideline. It's not a in the moment annual target, so that's what I'll say about the dividend. And we're quite confident that we've got a lot of levers to pull between all of the metrics around cash we generate and then how we use it in a given period of time. And that's how we look at it. It's really, really important to our investors and really, really important to us for people to not think about -- not worry about or think about the dividend at IP.

I think we're coming up on time. I don't know if there's one last question from the group. So Mark, thank you so much for your time, and thank you for the update on IP.

Thank you. Appreciate it. Thanks, everyone.