Packaging Corporation of America Reports Second Quarter 2019 Results
"In our Packaging segment, we continued to run our containerboard system to demand, and our mills supplied the necessary containerboard to achieve a second quarter record for box shipments per day while lowering our inventory from first quarter levels." – Mark Kowlzan, Chairman and CEO, Packaging Corporation of America.
July 24, 2019 - Packaging Corporation of America (NYSE: PKG) today reported second quarter 2019 net income of $194 million, or $2.04 per share. Second quarter net sales were $1.8 billion in both 2019 and 2018.
Reported earnings in the second quarter of 2018 include $.11 per share of special items expense primarily for certain costs related to discontinuing paper operations associated with the previously announced conversion of the No. 3 paper machine at our Wallula, Washington mill to linerboard.
The ($.04) per share decrease in second quarter 2019 earnings compared to second quarter 2018, excluding special items, was driven primarily by higher operating costs ($.27), higher converting costs ($.05), lower Paper segment volume ($.04), higher annual outage expenses ($.06), and a higher tax rate ($.01). These items were partially offset by higher Packaging segment volume $.09 and prices and mix $.08, higher Paper segment prices and mix $.16, lower Wallula No. 3 paper machine conversion-related costs $.04, and lower freight costs $.02.
In the Packaging segment, total corrugated products shipments with one less workday were down (1.3)% and shipments per day were up 0.3% over last year's second quarter. Containerboard production was 1,063,000 tons, and containerboard inventory was down 5,000 tons from the first quarter of 2019 and up 29,000 tons compared to the second quarter of 2018. In the Paper segment, compared to the second quarter of 2018, sales volume was 13% lower and production volume was 6% lower, primarily due to discontinuing the paper business at the Wallula Mill.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “In our Packaging segment, we continued to run our containerboard system to demand, and our mills supplied the necessary containerboard to achieve a second quarter record for box shipments per day while lowering our inventory from first quarter levels. Average prices and mix were above last year, although export prices and the published domestic containerboard prices did move lower during the quarter.
“In the Paper segment, volumes for our office paper and converting grades were slightly above the second quarter of 2018. Prices and mix continued to move higher early in the quarter, but we began to see some softening late in the quarter.
“Overall, we were able to deliver solid results despite on-going increases with labor-related costs as well as several indirect operating expenses across the Company that negatively impacted us during the quarter.
“Looking ahead to the third quarter,” Mr. Kowlzan added, “in our Packaging segment we expect seasonally higher containerboard and corrugated products shipments, with lower prices as a result of the published domestic containerboard price decreases, and lower export prices. In the Paper segment, volume should be seasonally stronger, but prices and mix are expected to move lower. Converting and other costs should be slightly higher, but operating costs and scheduled maintenance outage costs should be lower. Considering these items, we expect third quarter earnings of $1.91 per share.”
PCA is the third largest producer of containerboard products and the third largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 94 corrugated products plants and related facilities.To learn more, please visit: www.packagingcorp.com.
SOURCE: Packaging Corporation of America