Packaging Corporation of America Reports Third Quarter 2019 Results

"In our Packaging segment, we continued to run our containerboard system to demand in a very cost-effective manner. Our mills supplied the necessary containerboard to achieve new shipment records in our box plants, and our inventory was below last year's and second quarter levels." – Mark Kowlzan, Chairman and CEO, Packaging Corporation of America.

Oct. 23, 2019 - Packaging Corporation of America (NYSE: PKG) today reported third quarter 2019 net income of $180 million, or $1.89 per share, and net income of $182 million, or $1.92 per share, excluding special items. Third quarter net sales were $1.8 billion in 2019 and 2018.

Reported earnings include $.02 per share of special items expense in the third quarter of 2019, primarily for the disposal of certain fixed assets related to the previously completed conversion of the No. 3 paper machine at our DeRidder, Louisiana mill to containerboard, and $.05 per share in the third quarter of 2018, primarily for certain costs related to discontinuing paper operations associated with the conversion of the No. 3 paper machine at our Wallula, Washington mill to linerboard.

Excluding special items, the ($.31) per share decrease in third quarter 2019 earnings compared to the third quarter of 2018 was driven primarily by lower prices and mix ($.36), and lower volume ($.03), in our Packaging segment, lower volume in our Paper segment ($.03), higher converting costs ($.06), higher operating costs ($.01), and other costs ($.02). These items were partially offset by higher prices and mix in our Paper segment $.09, lower annual outage expenses $.09, and lower freight and logistics expenses $.02.

In the Packaging segment, corrugated products shipments were up 1.9% in total and per day, over last year's third quarter. Containerboard production was 1,070,000 tons, and containerboard inventory was down 30,000 tons from the second quarter of 2019 and down 51,000 tons compared to the third quarter of 2018.

In the Paper segment, lower volumes in the third quarter of 2019 compared to last year were 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 in a very cost-effective manner. Our mills supplied the necessary containerboard to achieve new shipment records in our box plants, and our inventory was below last year's and second quarter levels. Average domestic prices were about where we expected based on the changes in the published domestic containerboard prices from earlier this year, however our corrugated products mix was slightly better.

“In the Paper segment, volumes for our office paper and converting grades were slightly above the third quarter of 2018. Prices and mix were higher than last year's third quarter, but moved lower compared to the second quarter of 2019, although at a slower rate than the published index prices.”

“Looking ahead to the fourth quarter,” Mr. Kowlzan added, “in our Packaging segment we expect slightly lower prices as the remaining impact of the published domestic containerboard price decreases from earlier this year work through our system, and lower export prices. We also expect a seasonally less rich mix in corrugated products and slightly lower shipments with one less shipping day. Containerboard sales volume will be lower as we continue to run to demand and work towards building some inventory prior to year-end in preparation for first quarter 2020 scheduled maintenance outages at our three largest containerboard mills.

“In our Paper segment, volumes are expected to be seasonally lower along with lower average prices. With anticipated colder weather, energy costs will be higher, and we expect certain other operating and converting costs to be higher as well, which includes the costs associated with the start-up of our new Richland, WA box plant during the quarter. Scheduled maintenance outage costs are also expected to be higher than the third quarter. Considering these items, we expect fourth quarter earnings of $1.70 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, visit: www.packagingcorp.com.