A couple of recurring themes run through this earnings season. Yahoo!
On Friday, USG
Monday morning, International Paper
Higher energy and wood costs hit IP's top two units the hardest. IP's Printing Papers unit saw operating earnings decline 33% to $120 million, while Industrial Packaging took a 13% hit. Including distribution, weaker demand also caused sales at the top three units -- which accounted for 79% of sales -- to decline 2.3%.
In other words, while IP has taken steps to cut costs internally, earnings have been hit by factors beyond its control.
And there were a few bright spots. Forest Products sales grew 7.4% to $800 million, while operating earnings rose 23% to $201 million. Sales at the 50.2% owned Carter Holt Harvey business also rose 18% to $590 million.
No doubt, weak demand hurts, and rising energy and raw materials costs don't help. But the bottom line is that IP is positioning itself to prosper when conditions improve. Management, which expects this theme to carry over into the fourth quarter, spies a general improvement in the economy in 2004.
Jeff Hwang owns shares of USG, and can be reached at JHwang@fool.com.