NEW YORK (AP) – International Paper Co. reported a fourth-quarter loss as a deepening recession forced it to shut mills that are struggling with tepid demand for paper and packaging.

IP, the nation’s biggest paper and forest products company, has closed mills and facilities from Louisiana to Canada, joining industry rivals in reducing capacity.

While these shutdowns curb the volume of goods sold and bring charges against earnings, they also help cash flow and allow producers to raise prices.

Still, the industry has been hammered, partly by customers who supplied themselves through existing stockpiles during the quarter.

International Paper posted a loss of $452 million, or $1.07 per share, in the quarter ended Dec. 31. It earned $327 million, or 78 cents per share, a year earlier.

Quarterly sales, meanwhile, rose 12 percent to $6.54 billion as higher prices offset lower sales volumes.

The company recorded numerous one-time charges during the last three months of 2008, including restructuring costs, plant shutdowns and goodwill impairment charges related to the company’s U.S. and European coated paperboard business Excluding those items, IP earned 21 cents per share.

matching Wall Street expectations. The same group of analysts polled by Thomson Reuters expected revenues of $6.96 billion.

The response was mixed from Wall Street analysts. Deutsche Bank-North America analyst Mark Wilde said the results were “about in-line with low expectations,” while Frost & Sullivan analyst Vivek Tapuriah called the revenue increase impressive.

Shares of the Memphis, Tenn.-based company closed down $1.10, or 9.5 percent, at $10.52. The stock has declined by two-thirds from a 52-week high of $33.77 last February.

International Paper also said it is suspending merit raises in 2009 for white-collar employees and will match contributions to employees’ savings plan with company stock rather than cash.

The company’s printing papers business, which makes envelopes and business forms, lost $40 million as sharply lower global demand offset higher paper prices. A year earlier, the business saw operating profit of $243 million.

International Paper’s industrial packaging segment, which makes boxes for shipping car transmissions as well as fruits and vegetables, posted an operating profit of $111 million, as prices rose and the acquisition of Weyerhaeuser Co.’s packaging business boosted volumes.

Consumer packaging, a segment that includes perfume containers and electronic gadget containers, lost $3 million, including $4 million of costs from reorganizing a Canadian asset, as weak demand and higher costs offset stronger pricing.

Earlier in the week, Smurfit-Stone Container Corp., another big producer of cardboard box materials and packaging, filed for Chapter 11 bankruptcy protection. Although struggling with a huge debt burden, the company also cited what it called an “unprecedented global economic recession” that has weakened packaging demand.

International Paper’s distribution business’s operating profit fell $2 million to $26 million on lower volumes, and its forest products’ operating profit fell 78 percent to $38 million as the recession slowed land sales.

For the full year, International Paper said net income plunged to $57 million, or 13 cents per share. Excluding charges, 2008 earnings came to $2.01 per share. Sales for the year rose 13 percent to $24.83 billion.

Analysts called for a full-year profit $2 per share on sales of $25.24 billion.

Chief Executive John Faraci declined to give earnings or revenue forecasts, but said free cash flow last year climbed to a record. He also said the company has no plans for stock buybacks.

“We’re well positioned to weather a real down and dirty first-class recession with a credit freeze layered on top of it,” he said in a conference call.

AP-ES-01-29-09 1849EST

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