PCA Reports Higher 4Q Income on Fuel Credits

Jan. 25, 2010 - Packaging Corporation of America today reported fourth quarter 2009 net income of $59 million, or $0.57 per share. Fourth quarter net income included $44 million, or $0.42 per share, from alternative fuel mixture tax credits, and after-tax non-cash charges of $1.2 million, or $0.01 per share, from asset disposals related to the announced major energy projects at the Counce and Valdosta mills. Net sales for the fourth quarter were $532 million compared to $546 million in the fourth quarter of 2008.

Excluding income from alternative fuel mixture tax credits and the asset disposal expenses, net income was $16 million, or $0.16 per share, versus fourth quarter 2008 net income of $30 million, or $0.30 per share. The decrease in earnings was driven by lower containerboard and corrugated products price and mix of $0.32 per share, which was partially offset by higher volume of $0.08 per share and lower costs for energy and transportation of $0.08 and $0.03 per share, respectively.

Net income for full year 2009 was $266 million, or $2.60 per share, and excluding alternative fuel mixture tax credits and the energy project asset disposal expenses, earnings were $96 million, or $0.94 per share, compared to $136 million, or $1.31 per share, in 2008. Net sales for 2009 were $2.15 billion compared to $2.36 billion in 2008.

Corrugated products shipments were up 8.3% and outside sales of containerboard were up 28,000 tons, or 29%, compared to last year’s fourth quarter. Containerboard production was 600,000 tons after taking 18,000 tons of downtime related to pulpwood shortages and market conditions. PCA ended 2009 with containerboard inventories on plan and about 6,000 tons above last year in anticipation of a mill outage at Valdosta in January related to the energy optimization project.

Paul T. Stecko, Chairman and CEO of PCA, said, “Our corrugated products demand was stronger than anticipated in the fourth quarter with shipments up 8.3% over last year and up 4.3% per workday over the third quarter of 2009. Outside sales of containerboard, particularly for export, were also very strong. Improved demand and lower costs helped to offset part of the earnings impact from the drop in prices that has occurred over the past year. Last Friday, however, Pulp & Paper Week, an industry trade publication, reported that prices for containerboard increased in January by $50/$70 per ton depending on region.”

“Looking ahead,” Mr. Stecko added, “We expect higher containerboard and box prices from announced increases, but most of the earnings benefit will not be realized until the second quarter when the pass-through to boxes is completed. Our Valdosta mill was down for five days in January for tie-ins for its energy project, and our Counce mill will be down for a week in March for its annual maintenance outage, which will increase costs and lower production. Much higher recycled fiber costs and higher energy and timing-related benefit costs are also expected in the first quarter. Considering these items, we currently estimate our first quarter earnings at about $0.12 per share.”

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.15 billion in 2009. PCA operates four paper mills and 68 corrugated products plants in 26 states across the country.

SOURCE: Packaging Corporation of America

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