Containerboard: IP Discusses Cost Headwinds; PKG On-Track for 3Q Guide

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10 Sep 2026 10:13:22 ET │ 13 pages

Containerboard

IP Discusses Cost Headwinds; PKG On-Track for 3Q Guide

CITI'S TAKE

IP & PKG appeared at an investor conference this morning and discussed

cost inflation and some soft spots in demand. While demand conditions

appear somewhat lighter than discussed on the 2Q earnings calls, given

the recent move in diesel and OCC (+$1.00/gallon and +$10/ton over the

last 30 days, respectively), we expect full implementation of the third

industry price increase (P&PW publishes September benchmark prices

9/18). We are Buy-rated on SW & IP.

Anthony PettinariAC

Bryan Burgmeier

Landry Moore

• IP pointed to $400-$500mm annualized impact to NA from diesel

($1.00/gallon = $95mm EBITDA) & OCC and noted Europe has "a lot more

energy volatility." Demand feels "squishy" in both regions citing soft July

European consumer spending and weaker fruits/vegetables on the US

West Coast. In prepared remarks, IP stated "The incremental margin that

you would like to see that has really been pushed into 2027 as our efforts to

drive down our cost structure, which have been incredibly aggressive, have

offset an awful lot of that."

• Based on trends through August, PKG expects to meet or exceed 3Q EPS

guidance (FactSet cons. $2.93 vs. guide $2.91) on packaging price increases

and mill operating performance; demand has been impacted by weaker

agriculture volume, while freight & fiber cost increases align with forecasts.