International Paper's Shutdowns: Sign of Expansion or Indication of Financial Trouble?

International Paper (IP) has revealed plans to shut down two of its packaging plants, located in Compton, California, and Louisville, Kentucky, as part of a broader effort to reduce expenses in response to sluggish demand. These facilities are set to close by January 2026, impacting 218 workers, with production being relocated to other nearby locations. The company

by relying on natural attrition, retirements, and internal transfers. Executive Vice President Tom Hamic recognized the difficulty of the move, saying, "We deeply appreciate the dedication of our departing colleagues and are fully dedicated to assisting them during this period of change" .

These closures are part of International Paper’s larger plan to transform its business, streamline operations, and prioritize sustainable expansion. The company, which

to bolster its presence in both North America and Europe, is consolidating its operations to improve service and efficiency. However, this decision comes amid financial headwinds: the company and is experiencing shrinking margins, with an operating margin at -0.04% and a net margin at -5%. , such as an Altman Z-Score of 1.47, placing the business in the "distress zone" and raising the possibility of bankruptcy within two years.

This move is a response to wider industry challenges. While demand for packaging in the U.S. has weakened, some recent reports show mixed signals: certain industry organizations report increased demand due to population growth and changes brought by the pandemic, yet

to the need for tighter cost controls. The company’s financial situation is further complicated by and a debt-to-equity ratio of 0.6, highlighting its vulnerability to economic cycles.

At the same time, investor attitudes in the stock market have shifted. While technology stocks driven by AI have struggled, industrial and financial shares have performed better,

in contrast to a 2.2% drop for the Invesco QQQ Trust (QQQ) over the last two weeks .

International Paper’s ongoing restructuring

by 2026 through operational improvements, though short-term obstacles—such as increased labor expenses and scheduled maintenance shutdowns—are expected to weigh on fourth-quarter results. Despite these hurdles, the company remains optimistic about its future, and prioritizing high-yield initiatives like the Riverdale lightweight containerboard project. , citing its low price-to-sales ratio of 0.66 and a price target of $47.48.