INTERNATIONAL PAPER CO /NEW/

The following tables present net sales and business segment operating profit (loss), which is the Company's

measure of segment profitability and is defined as earnings (loss) before income taxes and equity earnings (losses),

including the impact of less than wholly owned subsidiaries and excluding interest expense, net, corporate

expenses, net, net special items and non-operating pension expense. Business segment operating profit (loss) is a

measure reported to our management for purposes of making decisions about allocating resources to our business

segments and assessing the performance of our business segments and is presented in our financial statement

footnotes in accordance with ASC 280 - "Segment Reporting." For additional information regarding business

segment operating profit (loss), including a description of the manner in which business segment operating profit

(loss) is calculated, see Note 21 - Financial Information by Business Segment of Item 8. Financial Statements and

Supplementary Data.

Demand for our products is closely correlated with non-durable industrial goods production, as well as with demand

for e-commerce, processed foods, poultry, meat and agricultural products. In addition to prices and volumes, major

factors affecting profitability are raw material and energy costs, freight costs, mill outage costs, manufacturing

efficiency and product mix.

PS NA

PS NA 2025 results include sales of $611 million and business segment operating profit (loss) of $(346) million for

the DS Smith business. For legacy IP PS NA, sales increased in 2025 compared with 2024, driven by higher sales

prices, partially offset by lower volumes reflecting the impact of our box go-to-market strategy and mill strategic

actions. Cost of products sold decreased by $241 million and was impacted by lower volumes, lower planned

maintenance downtime costs and lower input costs, partially offset by higher operating costs. Operating costs were

higher primarily due to increased costs on materials and services and increased spending on maintenance and

reliability, partially offset by lower economic downtime. Input costs were lower, driven by lower recovered fiber and

wood costs, partially offset by higher energy and chemical costs. Selling and administrative expenses were $52

million lower due to lower incentive compensation expense. Distribution costs were $37 million lower driven by

lower sales volumes. Depreciation and amortization expense was $564 million higher, driven by accelerated

depreciation associated with our mill and other strategic actions.

Looking ahead to the first quarter of 2026, compared with the fourth quarter of 2025, sales volumes for corrugated

boxes are expected to be lower due to seasonality and the exit of non-strategic markets. Operating costs are

expected to be flat. Planned maintenance outage costs are expected to be higher due to the timing of planned

outages. Operating and input costs are expected to be relatively flat.

PS EMEA

PS EMEA 2025 results include sales of $7.2 billion and business segment operating profit (loss) of $(321) million for

the DS Smith business. For legacy IP PS EMEA, sales were lower in 2025 compared with 2024, reflecting lower

volumes in a soft demand environment and an unfavorable product mix. Cost of products sold decreased $54

million and was impacted by lower volumes, lower operating costs and lower input costs, primarily for energy costs.

Selling and administrative expenses were $12 million lower driven by incentive compensation expense. Distribution

expense was $25 million lower driven by lower sales volumes.

Entering the first quarter of 2026, compared with the fourth quarter of 2025, sales volumes are expected to be

higher due to known customer wins. Average sales margins are expected to be higher, reflecting a favorable

product mix. Operating costs are expected to be higher primarily driven by the timing of energy subsidies and

increased volumes. Planned maintenance outage costs are expected to be lower due to the timing of planned

outages. Input costs are expected to be higher primarily driven by elevated energy costs.