International Paper's Strategic Restructuring and 2025 EBITDA Outlook: Operational Efficiency and Geographic Optimization Drive Transformation

International Paper (IP) has embarked on an aggressive strategic restructuring campaign in 2025, prioritizing operational efficiency and geographic footprint optimization to position itself for long-term profitability. By divesting non-core assets, shuttering underperforming facilities, and reinvesting in high-margin segments, the company aims to streamline its operations and deliver robust EBITDA growth. This analysis evaluates the financial and operational implications of these moves, drawing on recent disclosures and market data.

Strategic Restructuring: A Focus on Core Competencies

At the heart of IP's 2025 strategy is the divestiture of its Global Cellulose Fibers (GCF) business, sold to American Industrial Partners for $1.5 billion-a transaction expected to close by year-end. This exit aligns with IP's pivot toward sustainable packaging solutions, a sector with stronger growth potential. The GCF sale, however, came with a $1 billion impairment charge in Q3 2025, underscoring the short-term pain of long-term gain.

Simultaneously, IP has accelerated facility closures in the U.S. and Europe. The shutdown of its Savannah and Riceboro, Georgia containerboard mills-along with the Savannah packaging facility-will reduce annual containerboard capacity by one million tons and eliminate 1,100 jobs. These closures are part of a broader effort to consolidate operations in geographies where IP can leverage scale and cost advantages. In Europe, the company has already closed five German sites as part of its DS Smith integration, affecting 500 roles, and is pursuing further rationalization in the U.K.

Operational Efficiency: Cost-Out Initiatives and Capital Reallocation

The restructuring has yielded measurable cost savings. IP reported a $675 million accelerated depreciation expense in Q3 2025, primarily from the Savannah, Riceboro, and Red River mill closures. While this hit short-term earnings, the company offset some of these costs through a $60 million cost-out benefit in Q4 2025, contributing to a projected $600 million in adjusted EBITDA for the period.

A key reinvestment is the $250 million conversion of the Riverdale mill in Selma, Alabama, to produce lightweight containerboard-a project expected to enhance cost competitiveness and customer value. This $250 million investment, slated for completion by Q3 2026, reflects IP's commitment to modernizing its asset base. Management has emphasized that such upgrades will secure an "advantaged cost position" in the packaging sector.

Geographic Optimization: Balancing Short-Term Pain and Long-Term Gain

IP's geographic footprint optimization is not merely about cost-cutting but also about realigning with high-growth markets. The closures of Compton, California, and Louisville, Kentucky packaging facilities-set for January 2026-will eliminate 218 jobs but are expected to reduce operational redundancies. CEO Mark Sutton has framed these decisions as necessary to focus on "geographies, customers, and products where we can create the most value."

The financial benefits of this strategy are beginning to materialize. North America adjusted EBITDA surged 28% sequentially in Q3 2025, driven by price realization and cost-out initiatives. For full-year 2025, IP has revised its targets to $24 billion in net sales and $3 billion in adjusted EBITDA, reflecting confidence in its restructuring trajectory.

2025 EBITDA Outlook: A Path to Resilience

Despite the $60 million unfavorable commercial impact in Q4 2025-linked to mill closures-the company's EBITDA outlook remains cautiously optimistic. The proceeds from the GCF sale will be reinvested in the Packaging Solutions business and used for debt reduction, further strengthening balance sheet flexibility. With operational efficiencies already contributing to EBITDA growth and capital discipline underpinning reinvestment, IP is positioning itself to outperform in a cyclical industry.

However, risks remain. The integration of DS Smith in Europe and the execution of mill conversions require precise operational execution. Any delays in the Riverdale project or unanticipated costs from closures could pressure margins. That said, the current trajectory suggests IP's restructuring is on track to deliver its stated goals.

Conclusion

International Paper's 2025 strategic restructuring underscores its commitment to operational efficiency and geographic optimization. By exiting non-core businesses, rationalizing its asset base, and reinvesting in high-margin capabilities, the company is laying the groundwork for sustainable EBITDA growth. While short-term challenges persist, the long-term benefits-evidenced by improved cost structures and a refocused business model-position IP as a compelling case study in industrial transformation.