IP Expects 4Q Profit Ramp on Riverdale Progress, Pricing, 80-20 Across Regions

IP: Drivers of the expected 4Q profit ramp, diesel assumptions, 80/20 progress, and the 2026 vs. 2027 outlook

1) What drives the expected 4Q profit ramp (roughly +50% from the 3Q midpoint to 4Q)

Management described the 3Q-to-4Q step-up as being driven by a handful of reinforcing items (especially in North America), with the ramp reflecting both operational progress and improving realized pricing/cost dynamics.

A. Riverdale ramp-up continues (North America)

The ramp is “driven by” continued progress at Riverdale as the company brings the machine online and works toward “full run rate by early next year,” implying the 4Q profit step is partly a function of utilization/throughput improvement as the conversion matures. ¹²

B. Pricing “flow-through” strengthens into year-end

They also attributed the ramp to strengthening pricing flow-through into the end of the year from “pricing publications through June,” with momentum building as more realized pricing is added “across our box system into the end of the year.” ²

C. Maturation of cost-out initiatives adds incremental profit momentum

A further contributor is the “constant maturation” of cost-out initiatives across the business that “continue to layer on” during the back half. ²

D. In addition to the above: the company has already completed key milestones in 1H 2026

In the prepared remarks, the company noted that by mid-year it had completed milestones including “our heaviest outage quarter and the Riverdale conversion,” while realizing prior price increases and continuing to execute 80/20 initiatives—supporting confidence in the remaining 2026 ramp. ³

E. Quantification of the back-half improvement framework (ties to the ramp)

On the financial bridge for the back half of 2026, management cited an improvement of approximately $600 million from first half to second half (excluding the Pine Hill impact), driven by elevated transportation spot rates, higher OCC/diesel/employee medical costs, etc. ³
That magnitude is consistent with why they see a substantial step-up from 3Q to 4Q (within the broader 2H upshift). ³⁴

2) Diesel-price assumptions baked into guidance (and whether inflation was assumed)

A. Diesel is assumed using the “strip” (simplified assumption)

When asked what they factored in for potentially higher diesel “even since June 30,” management said they took “a stance… hard to predict where that goes” due to geopolitical uncertainty, so they “basically… taken in our assumptions, the strip,” and kept it “relatively simple” from an assumption perspective. ²

B. Specifically: diesel cost assumption = “today’s strip”

In a later Q&A clarification, management reiterated that their “diesel cost… is really the assumption that [they]’re driving there [is] just today’s strip.” ⁵

C. OCC cost assumptions are expected to rise later in the year (but diesel is tied to strip)

They also said they expect “some cost increase… around OCC” in the latter half of the year, while reiterating that diesel is the “strip” assumption. ⁵

D. No clear “baked-in” diesel inflation beyond the strip

Because they explicitly anchored diesel to the strip and avoided trying to forecast geopolitical escalation beyond it, the most defensible reading from the excerpts is: diesel was not modeled with an additional discretionary inflation overlay; it was modeled using the forward market curve (“strip”). ²⁵

3) 80/20 progress across Europe and North America (and what’s expected for 2026 and “what will be left” for ’27)

What’s available in the excerpts

The excerpts confirm that 80/20 work has been central to their ramp strategy. ⁶ They also describe Europe progress with fairly specific operational headcount/facility actions.

Europe: facility rationalization quantified

Management said Europe has focused on “facility rationalization” and “reducing the people cost intensity,” citing 31 facilities and over 3,000 people impacted. ⁶
They also framed continued progress as enabling “significant profit increases through the second half of the year” and carrying into next year’s improvement. ⁶

North America: described more as optimization after structural changes

For North America, they said they already made “major structural changes” to mill/plant footprint (i.e., taking out big chunks), and are now in an “optimization” phase—“continually driving optimization” and “tuning” facilities for incremental profitability and efficient working capital/capital use. ⁶

2026 level vs. remaining for 2027: not numerically stated in the provided excerpts

In the excerpt set, management does reference progress and the question about how much remains for 2027, but the excerpts do not provide a specific quantified “80/20 achieved percent” for either Europe or North America, nor do they state exactly “what will be left for ’27” in numerical terms. ¹⁶
So, based strictly on the provided text, the best supported summary is qualitative: Europe is actively executing facility rationalization with large headcount impact and expects continuing movement into 2H 2026 and beyond, while North America has largely completed structural footprint changes and is now focused on incremental optimization. ⁶

(Note: if your intent is to extract exact 80/20 percentages/remaining amounts for 2026 vs. 2027, the needed figures are not included in the excerpts you provided.) ¹⁶

4) Outlook: 2026 vs. 2027 (what management signals, and what’s uncertain)

A. 2026: confidence supported by momentum + execution

Management tied confidence for the remainder of 2026 to the combination of:

• completing key milestones (heavy outage quarter; Riverdale conversion), ³
• realizing prior price increases, and ³
• continuing 80/20 execution while mitigating macro headwinds. ³

They also laid out that demand expectations in 2H 2026 are “muted” (affordability/inflation and lower end of the economy), with North America expected to be “effectively flat” and Europe “up modestly” in the second half. ⁷

B. 2027: limited explicit guidance; reliance on “pricing math” and proxies

When pressed on 2027 implications (e.g., supply response to higher pricing and how it plays out), they warned against offering detailed forward-looking scenarios due to uncertainty (Middle East/input costs, etc.). ⁸ They did note a long-standing pricing proxy: “about $9 is a good proxy” for doing the math on pricing flows. ⁸

C. Why the 2027 outlook is described as more uncertain than 2026

Management explicitly emphasized caution because of uncertainty in “what’s going on with everything in the Middle East” and “input costs and everything else,” choosing not to provide likelihood detail for the second half of next year. ⁸

D. Diesel/inputs uncertainty mainly affects modeling, not the qualitative ramp story

The company again reinforced that diesel assumptions were anchored to “the strip” specifically because it’s difficult to predict geopolitical-driven volatility. ²⁵ This affects how confidently they can forecast 2027 outcomes versus relying on market-implied inputs for near-term modeling.

Bottom line comparison (as supported by excerpts)

• 2026 outlook: supported by measurable operational progress (Riverdale conversion/ramp, outages behind them) and continuing cost-out/80/20 execution, despite a muted demand environment. ³⁷
• 2027 outlook: management is more circumspect; they reference using a pricing proxy for math but avoid providing detailed forward demand/supply response forecasts given geopolitical and input-cost uncertainty. ⁸

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