IP's loss from its stake in Russia's Ilm Group increases to US$31M in Q1 from US$11M a year ago, mostly due to reappraisal of dollar-denominated debt obligations; for first time, IP's report does not estimate cost to buy remaining 50% stake in Ilim

Debra Garcia

ST. PETERSBURG, Russia , May 8, 2014 (Interfax) – International Paper saw losses of $31 million in January-March 2014 from its stake in Russia's Ilim group, the American company said in a report.

The corporation's loss from participating in the Russian JV in Q1 last year was $11 million, meaning 180% year-on-year growth was seen this year.

According to the report, loss was incurred largely due to a reappraisal of the company's dollar-denominated debt obligations. In addition, decline in the volume of paper cellulose sales on the domestic market in January-March 2014 was partly compensated by an increase in paper sales.

Ilim brought International Paper loss of $46 million in 2013 as a whole versus profit of $56 million in 2012.

Ilim's Russian shareholders, Zakhar Smushkin and the brothers Boris and Mikhail Zingarevich, setup the joint venture on a 50/50 basis with International Paper in the autumn of 2007.

The shareholders' agreement provides for purchase of 50% by one side from the other under certain conditions. In its earnings statements, International Paper reports the potential cost of such a transaction, which has steadily declined: $1 billion-$1.05 billion in Q1 2012, $800 million-$850 million in Q2, and $400 million-$450 million in Q3, and just $250 million-$300 million in Q1 2013 (amounting to $500 million-$600 million for the entire company). In its latest report, International Paper does not give an exact estimation.

Ilim Group, which specializes in pulp and paper, completed its reorganization at the beginning of July 2007. It was set up with Ilim Pulp assets by consolidating OJSC Kotlassky Pulp and Paper Co. (MOEX: KCBK), OJSC Cellulose-Cardboard Combine, OJSC Bratskkomplekskholding, and OJSC PO Ust-Ilimsk Timber Industry Co., and merging them with OJSC Ilim Group.

International Paper comprises three companies that produce container cardboard and 27 plants that produce corrugated cardboard packaging in France, Italy, Morocco, Spain and Turkey. It also manages three paper production complexes in France, Poland and Russia (Svetogorsk Pulp and Paper Mill).

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