Packaging Corp. of America Posts Lower 3Q Net Income on Higher Costs
Oct. 18, 2011 - Packaging Corporation of America [late yesterday] reported third quarter 2011 net income of $42 million, or $0.42 per share, which included after-tax charges of $1 million, or $0.01 per share, from asset disposals related to major energy projects. Net income, excluding these charges, was $43 million, or $0.43 per share, compared to third quarter 2010 net income of $62 million, or $0.60 per share, which excludes income from cellulosic biofuel credits and asset disposal charges.
Higher volume improved earnings by $0.04 per share compared to last year’s third quarter, but higher costs ($0.18), sales mix ($0.02) and price ($0.01) more than offset this improvement. The higher costs included transportation ($0.04), recycled fiber ($0.04), labor and benefits ($0.04), energy ($0.02), chemicals ($0.02) and other items ($0.02).
Excluding special items, net income for the first nine months of 2011 was $122 million, or $1.21 per share, compared to $113 million, or $1.10 per share in 2010. This earnings increase was driven by price and mix ($0.41), higher volume ($0.15), lower interest expense ($0.03) and lower energy usage ($0.03). These items were partially offset by cost increases of $0.51 per share for essentially the same items noted above for the third quarter.
Net sales were $671 million, up 4.4% compared to the third quarter of 2010, and year-to-date net sales were $2.0 billion, up 8.7% over 2010.
Corrugated products shipments were up 6.6%, including 1.4% from acquisitions, and outside sales of containerboard were equal to last year’s third quarter. Containerboard production was 650,000 tons, up 4,000 tons over the third quarter of 2010. Containerboard inventories at the end of September were 22,000 tons below 2010 year-end levels.
Commenting on results, Mark W. Kowlzan, Chief Executive Officer of PCA, said, “Our corrugated products demand remained strong throughout the quarter. Our mills and box plants ran exceptionally well setting quarterly records for production and sales. Cost inflation, however, continued to impact our results and remains a concern. Finally, our major energy projects at our Counce, Tennessee and Valdosta, Georgia linerboard mills remain on schedule for a December 1 completion.”
“Looking ahead to the fourth quarter,” Mr. Kowlzan added, “corrugated products volume and mill production should be lower than the third quarter with four less corrugated products shipping days and the normal seasonal decline in demand. We expect higher costs with lower mill and box plant volume, higher energy usage with colder weather, and higher interest expense. Recycled fiber costs should be lower, and we also expect some cost benefits as the energy projects start-up. Considering these items, we expect fourth quarter earnings to be about $0.37 per share.”
PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.44 billion in 2010. PCA operates four paper mills and 69 corrugated products plants in 26 states across the country.
SOURCE: Packaging Corporation of America