NEW YORK (Reuters) - International Paper Co (IP.N) earned more than expected in the second quarter as higher prices on its packaging and paper offset a drop in volume, pushing its stock up nearly 4 percent.
The results bode well for the broader global packaging industry, especially outside of North America, and show that demand continues to climb.
China and Russia continue to perform especially well, IP Chief Executive John Faraci told Reuters on Thursday.
“Inventories are low, operating rates are solid, and that’s an environment where pricing can move up in certain situations,” he said.
The company’s cash reserve jumped 16 percent to $2.4 billion. Faraci said he’s open to spending more money in North America, but demand has to return.
“This is not about confidence, or regulation or anything like that,” Faraci said. “It’s really about demand and consumer spending.”
And as the United States considers how to handle its debt-spending limit and deficit, Faraci said he favors a plan from House of Representatives Speaker John Boehner.
Boehner’s plan, which is slated to be voted on later on Thursday, would extend the Treasury’s borrowing authority by a few months, something President Barack Obama has said is unacceptable.
“I hope the Boehner plan is voted on by the Congress and passes,” Faraci said. “I think it’s the best plan out there.”
For the second quarter, the company posted net income of $224 million, or 52 cents per share, compared with $93 million, or 21 cents per share, in the year-ago period.
Excluding the loss on the sale of a business and other one-time items, IP earned 80 cents per share.
By that measure, analysts expected earnings of 67 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 9 percent to $6.65 billion. Analysts expected $6.63 billion, according to Thomson Reuters I/B/E/S.
Volumes did fall in the company’s breadwinner, its corrugated packaging unit, as well as the U.S. uncoated paper and recycling units. Those drops were offset by the price increases.
IP launched a hostile tender offer earlier this month for rival Temple-Inland TIN.N after Temple’s management rejected a $3.3 billion takeover offer.
The U.S. Department of Justice issued a second request for material related to the Temple-Inland bid on Wednesday.
“We don’t consider if a roadblock. We consider it expected. We were ready for it. We’re still highly confident that we’re going to get approval,” Faraci said.
Shares of Memphis-based IP rose 3.8 percent to $31.02 in morning trading. The company’s shares have traded between $19.33 and $33.01 in the past 52 weeks.
Reporting by Ernest Scheyder, editing by Maureen Bavdek, Dave Zimmerman