Paper Firm to Shrink Operations

International Paper Co. announced a sweeping restructuring plan Tuesday that would shrink the world’s largest paper company in an effort to boost profit and cut debt by focusing on core businesses.

The strategy involves selling $8 billion to $10 billion in assets, including millions of acres of forestland around the country, closing mills and possibly relocating its headquarters. Substantial job cuts are expected.

“It’s potentially almost half of the company’s earnings and cash flow,” said Steven Chercover, research analyst with D.A. Davidson & Co. in Portland, Ore. “International Paper will look very different.”

The move is the latest effort to cope with weak demand and higher costs in the paper industry. International Paper and other firms have shut plants, cut thousands of jobs, sold timberlands and other assets and consolidated in recent years.

“This isn’t about being big. It’s about being successful,” Chief Executive John Faraci said. “We’re not waiting for the market cycle to improve.”

Faraci said earnings per share should be 30% higher by 2007 as a result of the strategy. International Paper had a loss of $35 million, or 7 cents a share, last year and warned last month that its second-quarter profit would not meet Wall Street expectations.

The businesses that may be sold represent about 30% of 2004 sales and $925 million, or 40%, of operating profit.

Shares of International Paper rose $1.56 to $32.22.

The company said it would make portfolio changes to focus on uncoated papers and industrial and consumer packaging.