Second Quarter

2006 Review

August 1, 2006

Second Quarter

2006 Review

August 1, 2006

John V. Faraci

Chairman & CEO

Marianne M. Parrs

Executive VP & CFO

John V. Faraci

Chairman & CEO

Marianne M. Parrs

Executive VP & CFO

Exhibit 99.2

2

Forward-Looking Statements

These

slides

contain

forward-looking

statements.

These statements reflect management's

current views and are subject to risks and uncertainties that could cause actual results to

differ materially from those expressed or implied in these statements. Factors that could

cause actual results to differ relate to: (i) the execution of sale transactions currently under

contract and the realization of anticipated sales proceeds thereunder, including the ability

to successfully consummate the transactions without a material purchase price

adjustment, the successful fulfillment (or waiver) of all conditions set forth in the sale

agreements, the successful closing of the transactions within the estimated timeframes,

and the ability to monetize the non-cash portion of the sale proceeds; (ii) the ability of the

Company to accomplish the transformation plan, including the ability to realize anticipated

profit

improvement

from

the

plan

and

the

ability

to

successfully

negotiate

satisfactory

sale

terms

for assets that are being evaluated for sale but are not currently under contract; and

(iii) the effect of economic and industry conditions on the Company generally, and on the

market

price

of

the

Company’s

stock,

including

unanticipated

events

(in

type,

scope

or

magnitude) that would have a material adverse impact upon the Company’s liquidity or

results of operations. We undertake no obligation to publicly update any forward-looking

statements, whether as a result of new information, future events or otherwise. These and

other factors that could cause or contribute to actual results differing materially from such

forward looking statements are discussed in greater detail in the Company's Securities

and Exchange Commission filings.

3

During the course of this presentation, certain non-

U.S. GAAP financial information will be presented.

A reconciliation of those numbers to U.S. GAAP

financial measures is available on the company’s

website at www.internationalpaper.com

under

Investors.

Statements Relating to

Non-GAAP Financial Measures

4

Agenda

Second Quarter 2006

Review

Third Quarter 2006 Outlook

Transformation Plan Update

Second Quarter 2006

Review

Third Quarter 2006 Outlook

Transformation Plan Update

5

Second Quarter 2006 Summary

Solid second quarter, strong revenue

Improving IP paper and packaging pricing

Comparable volume to first quarter 2006

Strong manufacturing operations

Lower raw material costs / higher freight costs

Lower land sales / higher tax rate

Coated Papers included in continuing

operations

Solid second quarter, strong revenue

Improving IP paper and packaging pricing

Comparable volume to first quarter 2006

Strong manufacturing operations

Lower raw material costs / higher freight costs

Lower land sales / higher tax rate

Coated Papers included in continuing

operations

6

0.00

0.10

0.20

0.30

0.40

0.50

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

0.00

0.10

0.20

0.30

0.40

0.50

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

2002

2003

2004

2005

2006

.13

.33

.27

.29

.14

.20

.21

.14

.12

.41

.32

.42

.35

.31

.28

.11

.20

.41

Diluted EPS from Continuing Operations

and Before Special Items

Best second quarter EPS results since 2000

$/Share

* A reconciliation to GAAP EPS is available at www.internationalpaper.com

under Investors

7

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

1Q'06

Price

Volume /

Downtime

Cost / 

Mix

Materials /

Freight

Land

Sales

Corporate

Items

Tax

Other

2Q'06

EPS $ / Share

Energy                  $0.04

Wood Cost           $0.02

Freight                 ($0.01)

Packaging             $0.05                    

Papers                   $0.07 

Wood Products    ($0.02)

1Q06 Tax rate 30%  

2Q06 Tax rate 34%

IP Realty       ($0.02)                  

Land Sales     $0.00

2Q’06 vs. 1Q’06

EPS from cont. ops before special items

$.20

$.10

$.05

$.00

$.41

$.00

($.02)

$.00

$.09

($.01)

8

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

6M'05

Price

Volume /

Downtime

Cost / 

Mix

Materials /

Freight

Land

Sales

Corporate

Items

Interest

Tax

Other

6M'06

EPS $ / Share

Packaging           $0.03    

Papers                  $0.10   

Wood Products  ($0.05)

2006 Tax rate 33%  

2005 Tax rate 26%

6M’06 vs. 6M’05

EPS from cont. ops before special items

$.67

$.08

($.30)

$.16

($.04)

($.06)

$.07

($.08)

$.05

$.05

$.60

Energy              ($0.13)

Freight              ($0.08)

Wood Cost        ($0.02)

Other                 ($0.07)

Land Sales       $0.09                  

IP Realty         ($0.02)

9

Raw Material & Freight Costs

EBIT impact 6M’06 vs. 6M’05

Total of $220 million or $0.30 per share

negative impact in 6M’06 versus 6M’05

(120)

(100)

(80)

(60)

(40)

(20)

0

(120)

(100)

(80)

(60)

(40)

(20)

0

Energy

Wood

Chemicals

EBIT ($MM)

(94)

(13)

(36)

(57)

Non-

U.S.

Freight

(20)

10

Printing Papers

$1,915

254

Sales

Earnings

2Q’06

1Q’06

$ Millions

$ Millions

$

1,895

128

2

U.S. operations only   

3

Europe is average commodity cut-size price, excluding Russia   

Average IP realization (includes the impact of mix across all grades)

Uncoated

Pulp

Europe  (uncoated)

Volume

Realizations/ton

2Q’06 Change vs 1Q’06:

2Q’06 Change vs 1Q’06:

(2)%

2%

(10)%

$60

$25

€20

1

Includes a $31 million benefit from the elimination of Coated Paper’s depreciation expense

2

3

1

2

11

Industrial Packaging

Average IP realization (includes the impact of mix across all grades)

$

1,240

100

Sales

Earnings

2Q’06

1Q’06

$ Millions

$ Millions

$

1,170

38

Containerboard

U.S. Container

$50

$35

Volume

Realizations/ton

2Q’06 Change vs 1Q’06:

2Q’06 Change vs 1Q’06:

(12%)

3%

1

U .S. operations only

1

12

Consumer Packaging

Average IP realization (includes the impact of mix across all grades)

$  795

41

Sales

Earnings

2Q’06

1Q’06

$ Millions

$ Millions

$  775

35

Coated Paperboard

Flat

Volume

Realizations/ton

2Q’06 Change vs 1Q’06:

2Q’06 Change vs 1Q’06:

3%

Converting Businesses

Sales Revenue

4%

2

U.S. operations only

1

Includes a charge of $8 million for Shorewood Packaging asset write-off

2

1

13

Distribution

$ 1,690

36

Sales

Earnings

2Q’06

1Q’06

$ Millions

$ Millions

$ 1,650

27

xpedx reported record earnings for month,

quarter and six-month period

Revenues improved 8% vs. second quarter

2005

Expenses down, margins up

14

Forest Products

Average IP realization (includes the impact of mix across all grades)

$  595

184

Sales

Earnings

2Q’06

1Q’06

$ Millions

Lumber  (mbf)

Plywood (msf)

($15)

($5)

Volume

Realizations/unit

$  630

226

2Q’06 Change vs 1Q’06:

2Q’06 Change vs 1Q’06:

6%

3%

1

U.S. operations only

1

15

Special Items –

After Tax

•

Transformation Plan Costs & Other

(70)

•

Divestitures

Gain on Conservation Tracts

39

Estimated Loss on Coated Paper Sale

(53)

Special Items Total

(84)

($0.17)

Discontinued Operations (Kraft Papers)

•

Earnings

9

•

Estimated Loss on Sale

(10)

Discontinued Operations Total

(1)

$0.00

Special Items –

After Tax

•

Transformation Plan Costs & Other

(70)

•

Divestitures

Gain on Conservation Tracts

39

Estimated Loss on Coated Paper Sale

(53)

Special Items Total

(84)

($0.17)

Discontinued Operations (Kraft Papers)

•

Earnings

9

•

Estimated Loss on Sale

(10)

Discontinued Operations Total

(1)

$0.00

$MM

EPS

Special Items & Discontinued

Operations –

2Q’06

16

Earnings from Continuing Operations

and Before Special Items

$0.41

Special Items

(0.17)

Earnings from Continuing Operations

0.24

Discontinued Operations 

0.00

Net Earnings

$0.24

Earnings from Continuing Operations

and Before Special Items

$0.41

Special Items

(0.17)

Earnings from Continuing Operations

0.24

Discontinued Operations 

0.00

Net Earnings

$0.24

Reconciliation to 2Q’06

Diluted

Earnings Per Share

Diluted EPS

17

Third Quarter 2006 Outlook

Volume –

Continued solid, inventories in good

shape

Implementing IP’s previously announced price

increases in paper and packaging

Continued progress in improving operations

Costs remain high, outlook mixed

Volume –

Continued solid, inventories in good

shape

Implementing IP’s previously announced price

increases in paper and packaging

Continued progress in improving operations

Costs remain high, outlook mixed

18

Transformation Plan Update

Continued focus on improving our key platform

operations

Communicated details on returning value to

shareholders on July 13, 2006

•

Board authorized up to $3 billion share repurchase

•

Plan to spend $6-7 billion to strengthen balance sheet

•

Disciplined approach to strategic opportunities for

selective reinvestment

Divestment program on track

Continued focus on improving our key platform

operations

Communicated details on returning value to

shareholders on July 13, 2006

•

Board authorized up to $3 billion share repurchase

•

Plan to spend $6-7 billion to strengthen balance sheet

•

Disciplined approach to strategic opportunities for

selective reinvestment

Divestment program on track

Second Quarter 2006

19

Carter Holt

Harvey

Forestlands

Coated

Papers

Beverage

Packaging

Kraft Papers

Wood

Products

Arizona

Chemical

Consider

Strategic

Options

Distribute

Sales

Book

Evaluate

Final

Bids

Sales

Agreement

Announced

Close

on

Sale

-

Phase completed

5.7 MM acres

Inpacel

(Brazil)

Proceeds

$1.1B

$6.6B*

*Estimated proceeds to be received in 3Q’06 and 4Q’06

$1.4B

$0.2B

Could reach

decisions regarding

these assets within

the next 90 days

Sales Agreed To Date $9.3B

Transformation Plan Update

Divestments status as of August 1, 2006

20

Q & A

Q & A

21

Appendix

Appendix

22

Capital Spending

Depreciation & Amort.

Net Interest Expense

Corporate Items

Effective

Tax

Rate

Capital Spending

Depreciation & Amort.

Net Interest Expense

Corporate Items

Effective

Tax

Rate

$ 1.2 B

$ 1.2-1.3 B

$ 600 MM

$ 700-750 MM

33%

2006 Est.

Key Financial Statistics

$ 1.2 B

$ 1.4 B

$ 650 MM

$ 595 MM

27%

2005

$ 1.2 B

$ 1.4 B

$ 710 MM

$ 470 MM    

26%

2004

1

Excludes Carter Holt Harvey results

2

Includes impact of all businesses except Coated Papers and Kraft Papers for entire year

3

Before special items

Updated as of August 1, 2006

1

1

3

3

2

23

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

Containerboard

Uncoated Papers

Pulp

Coated Paperboard

European Papers

Coated Papers

*Includes indefinitely closed uncoated papers capacity at Pensacola, FL, Bastrop, LA and Jay, ME in 2Q05

(72,000 tons), 3Q05 (108,000 tons) and 4Q’05 (108,000 tons).  Permanently closed at end of 4Q’05.

168

44

49

232

Lack of Order Downtime

59

90

236

173

5

10

5

35

95

M  Short Tons

2002

2003

2004

2005

274*

270*

194*

28

2006

25

24

Earnings by Industry Segment

Earnings by Industry Segment

Printing Papers

$215

$128

$156

Industrial Packaging

100

38

84

Consumer Packaging

49

35

53

Distribution

36

27

18

Forest Products

184

226

205

Other Businesses

16

10

7

Operating Profit

600

464

523

Interest Expense

(148)

(148)

(166)

Minority Interest

2

3

2

Corporate Items, net

(174)

(176)

(133)

Earnings from continuing operations

before income taxes, minority

interest & special items

$280

$143

$226

Earnings by Industry Segment

Printing Papers

$215

$128

$156

Industrial Packaging

100

38

84

Consumer Packaging

49

35

53

Distribution

36

27

18

Forest Products

184

226

205

Other Businesses

16

10

7

Operating Profit

600

464

523

Interest Expense

(148)

(148)

(166)

Minority Interest

2

3

2

Corporate Items, net

(174)

(176)

(133)

Earnings from continuing operations

before income taxes, minority

interest & special items

$280

$143

$226

$ Millions

1Q’06*

1Q’06*

2Q’05*

2Q’05*

2Q’06

2Q’06

Before special items & Coated Papers depreciation expense

*Industry segment information has been reclassified to conform with minor changes in 2006 organizational structure

as well as to reflect the Kraft Papers business as a discontinued operation and Coated Papers as a continuing operation.

25

Before Special Items

Q1

143

(44)

(4)

95

30%

486.3

0.20

Q2

311

(106)

(5)

200

34%

487.2

0.41

Special Items

Q1

(1,310)

36

-

(1,274)         3%

486.3

(2.62)

Q2

(129)

45

-

(84)

35%

487.2

(0.17)

Earnings from Continuing Operations

Q1

(1,167)

(8)

(4)

(1,179)

(1%)

486.3

(2.42)

Q2

182

(61)

(5)

116

34%

487.2

0.24

2006 Earnings from Continuing

Operations

Pre-Tax 

Tax

MI

Net

ETR          Average

Diluted

Shares

EPS

$ MM

MM Shares

$/Share

$ MM

$ MM

$ MM

MI

–

Minority

Interest;

Net

–

Net

Income;

ETR

–

Effective

Tax

Rate;

EPS

–

Earnings

per

Share;

NM

–

Not

Meaningful

1

A

reconciliation

to

GAAP

EPS

is

available

at

www.internationalpaper.com

under

Investor

Information

2

Assuming dilution

2

1

26

* U.S. only      

Average IP realization (includes the impact of mix across all grades)

Average Sales Realizations       

(Preliminary)

Forest

Products

$/ton

Packaging

$/ton

Printing

Papers

Segments*

300

369

721

437

499

803

1Q’06

Average Sales Realizations

300

406

726

450

496

813

2Q’05

285

347

772

502

528

885

Jun 06

Plywood, $/MSF

Lumber, $/MBF

Corrugated boxes

Containerboard

Pulp

Uncoated

Grades

293

372

754

489

525

862

2Q’06

309

416

721

442

475

810

Jun 05

27

Forest Resources

Earnings Sources –

Gross Margin

•

Forestland Sales

$101

$103

$67

•

Harvest & Recreational Income

61

72

62

Forestland Expenses

(31)

(30)

(39)

Land Utilization (real estate),

Net of Expenses

29

45

39

Total EBIT

$160

$190

$129

Earnings Sources –

Gross Margin

•

Forestland Sales

$101

$103

$67

•

Harvest & Recreational Income

61

72

62

Forestland Expenses

(31)

(30)

(39)

Land Utilization (real estate),

Net of Expenses

29

45

39

Total EBIT

$160

$190

$129

$ Millions

1Q’06

1Q’06

2Q’05

2Q’05

2Q’06

2Q’06

1

Excludes U.S. forestlands identified for sale as part of transformation plan 

1

28

Raw Material & Freight Costs

EBIT impact 2Q’06 vs. 1Q’06

Total of $37 million or $0.05 per share

positive impact in 2Q’06 versus 1Q’06

(10)

(5)

0

5

10

15

20

25

30

(10)

(5)

0

5

10

15

20

25

30

Energy

Wood

Other

EBIT ($MM)

24

15

2

(4)

Freight

29

0

50

100

150

200

250

300

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

Index: Jan 2003 Natural Gas Costs = 100

2003

2004

Natural gas costs

peaked in October

Natural Gas Costs

2005

Trended lower in 2Q’06

2006

* U.S. pulp & paper mills average

30

90

100

110

120

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

U.S. Mill Wood Costs

Index: Jan 2003 Wood Costs = 100

2003

2004

* Delivered cost to U.S. pulp & paper mills

Trended lower in 2Q’06

2005

U.S. mill wood costs

decreased in 2Q’06

2006

31

0

100

200

300

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

Index: Jan 2003 Caustic Soda Costs = 100

2003

2004

Caustic soda costs

remain historically high

Caustic Soda Costs 

2005

Trended lower in 2Q’06 

2006

* Delivered cost to U.S. facilities

32

Global Consumption 

Key input indicative annual purchase levels

Natural Gas

MMbtu

37,000,000        16,000,000

# 6 Fuel Oil

BBL

5,000,000

440,000

Coal

Tons

1,600,000             230,000

Wood

Tons

65,000,000          5,700,000

OCC

Tons

600,000             310,000

Caustic Soda

Tons

315,000                60,000

Sodium Chlorate

Tons

290,000                40,000

LD Polyethylene

Tons

100,000                        -

Latex

Tons

41,000                  4,000

Energy

Energy

Fiber

Fiber

Chemicals

Chemicals

Units

Units

U.S.

U.S.

Non-

U.S.

Non-

U.S.

3

Old corrugated containers

1

2006

Run Rate

2

Includes Coated Papers business

3

2

1

33