March 2 (Bloomberg) -- International Paper Co., the world’s largest maker of cardboard boxes and office paper, slashed its quarterly dividend 90 percent and announced the sale of U.S. timberland as it conserves cash to repay debt.

The cut to 2.5 cents a share from 25 cents will save about $100 million each quarter, Memphis, Tennessee-based International Paper said today in a statement. The dividend is payable June 15 to shareholders of record as of May 18. International Paper said in a separate statement it would divest 143,000 acres of timberland in the southeastern U.S.

Chief Executive Officer John Faraci has curtailed output of office paper as the economic crisis and rising Internet use reduced demand. As of Jan. 29, International Paper had $11.7 billion of debt after its $6 billion acquisition of Weyerhaeuser Co.’s industrial-packaging and recycling businesses last year.

“Demand for most of IP’s products continues to drop at an unprecedented pace and a stronger U.S. dollar poses significant risks,” Mark Wilde, an analyst at Deutsche Bank Securities in New York, said today in a note to clients.

International Paper fell 57 cents, or 10 percent, to $5.12 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 57 percent this year.

International Paper idled almost a quarter of its global manufacturing capacity in the final three months of 2008 as demand for boxes, paper and pulp plunged, the company said Jan. 29.

‘Slap in the Pocketbook’

The economic crisis “has been a worldwide slap in the pocketbook for the paper and forest-products industry,” Dennis Ruggles, a credit analyst at Fitch Inc. in Chicago, said today in a telephone interview.

Packaging Corp. of America, the fifth largest U.S. maker of containerboard, said Feb. 26 it would cut its dividend by half to 15 cents to preserve cash. Smurfit-Stone Container Corp., North America’s second-largest maker of containerboard, filed for bankruptcy in January to reorganize its debt.

International Paper’s dividend cut “reflects our strong commitment to maintaining our current credit ratings,” Faraci said in the statement. “While our cash balances and cash flows remain strong, we believe it is prudent to manage cash conservatively in this uncertain time.”

The timberland assets that International Paper is divesting will be managed in a fund operated by American Timberlands Co. of Columbia, South Carolina.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

Last Updated: March 2, 2009 17:19 EST