Let me begin by saying how honored I am to be International Paper’s new chairman and CEO. During my 30 years with International Paper, I have personally experienced what a great company it is. Our long, rich 117-year history says a lot about who we are, what we stand for and the enduring value of the fiber-based products we make. I am proud of the outstanding work our team members around the world are doing every day to enable us to reward our shareholders and provide value to the stakeholders we serve.
Our transformation over the past decade has positioned us well to compete successfully in global packaging, paper and pulp markets. As the world around us changes, we must remain agile and adapt to meet the evolving and emerging needs of our stakeholders. To be the industry leader we want to be, International Paper has established six key enterprise-wide priorities for 2015. I’d like to share these priorities with you.
Our first priority is continuing to develop a culture where every team member is accountable for his or her own safety, where team members lead by example and where they are appreciated for boldly intervening when they see unsafe behavior or conditions. Second, we must generate strong, sustainable cash flow that allows us to strategically reinvest in our businesses, maintain a healthy balance sheet and return cash to our shareowners.
Next, we will continue to build an even more diverse and inclusive work environment that enables us to successfully compete for and retain the most talented employees around the globe, which in turn, will lead to better overall performance for the company. Also, to be the best, all of our team members, including myself, must set stretch goals that encourage us to think beyond business as usual. On the operations side, we must ramp up our manufacturing excellence initiatives to generate deliberate, continuous and sustainable improvement and apply what we learn across every area of the company. Finally, we must win with the right customers—those customers who are growing profitably and want us to grow along with them. We must go out of our way to delight them with our product quality, ability to innovate, customer service and day-to-day dependability.
As we look back, 2014 was a successful year for International Paper as we generated $2.1 billion of free cash flow, record cash from operations and record earnings from our industrial packaging business. We completed the successful spin-off of our xpedx business, from which we received more than $400 million in cash payments. Our foodservice business and Ilim joint venture each generated record revenue and our global papers business also posted much-improved year-over-year performance.
International Paper’s ability to generate strong, sustainable free cash flow provides the foundation for our ongoing commitment to return cash to shareowners, strategically reinvest in our businesses and maintain a strong balance sheet. In 2014, we returned more cash to our shareowners with a 14 percent increase in our annual dividend and bought back approximately $1 billion in shares.
In April, we acquired the remaining 25 percent share of Orsa International Paper Embalagens S.A. in Brazil from our joint venture partner. We are now in a position to fully optimize our system in alignment with our strategy to selectively grow our industrial packaging business globally in attractive markets. In North America, we broke ground on a 250,000 square foot expansion of our foodservice plant in Kenton, Ohio, and expect it to be operational in mid-2015. The expansion supports our customers’ organic growth in response to increasing consumer demand for renewable fiber-based packaging. We also announced an investment to restart the idled No. 3 paper machine at our Valliant, Okla., containerboard mill. The machine will provide greater flexibility in our North American containerboard system and enable us to grow in specialty markets and through our international box system. The machine should be production-ready by summer 2015.
Other recent investments continued to progress with excellent results. In 2014, our Ilim joint venture’s upgraded facilities in Russia continued operating at near full capacity to help meet growing, long-term demand for high-quality low-cost softwood pulp in north and central China. Ilim shareowners benefitted from solid results in 2014, as the Ilim board of directors elected to pay a dividend and International Paper received $56 million.
In Poland, International Paper began producing our new Alaska® Plus coated board brand on the rebuilt paper machine at the Kwidzyn Mill. These new lightweight products have quickly gained popularity in the marketplace and customers are realizing reduced costs and sustainability benefits.
After more than 40 years of service and a decade of outstanding leadership as chairman and CEO, John V. Faraci retired on December 31. John led the transformation of International Paper from a diversified set of businesses into the strategically focused, highly successful global packaging and paper company it is today. His strategic vision, drive for results and passion for doing the right things for the right reasons, will have a lasting impact.
We would also like to thank John F. Turner, who retired from International Paper’s board of directors on December 31, following nearly a decade of distinguished service. John’s wealth of experience as a public servant and conservationist has been a true asset to our board. We welcomed new board member Ray G. Young on October 1. Ray is executive vice president and chief financial officer for Archer Daniels Midland Company, one of the largest agricultural processors in the world. His broad based financial expertise, strategic acumen and deep knowledge of international operations add a unique and valuable perspective to the International Paper board.
I’m excited about 2015 and our investors, customers and team members should be as well. My commitment to you is this: as a market leader, International Paper, will continue to maintain our relentless focus on execution, leadership and delivering value across our entire enterprise.
Thank you for your continued support and ownership of International Paper.
Mark S. Sutton
Chairman and Chief Executive Officer