PCA Reports Lower 1Q Earnings on Less Volume

April 21, 2009 (Press Release) - Packaging Corporation of America [yesterday] reported first quarter 2009 net income of $26 million, or $0.25 per share, compared to first quarter 2008 net income of $32 million, or $0.31 per share. Net sales for the first quarter were $512 million compared to $577 million in the first quarter of 2008.

Lower first quarter earnings, compared to 2008, were driven by the severe downturn in the economy which significantly lowered containerboard and corrugated products volume and increased downtime, reducing earnings by about $0.20 per share. In addition, higher costs for chemicals and labor and benefits reduced earnings by $0.05 per share. These items were partially offset by higher prices for containerboard and corrugated products, which increased earnings by $0.13 per share, and lower costs for recycled fiber and transportation, which increased earnings by $0.05 and $0.02 per share, respectively.

Corrugated products shipments were down 11.2% per workday and 12.6% in total, and outside sales of containerboard were down about 37,000 tons compared to last year’s first quarter. PCA’s containerboard production was 515,000 tons after taking approximately 90,000 tons of annual maintenance outage and market-related downtime. PCA increased its containerboard inventories by approximately 9,000 tons during the quarter to help compensate for the loss of almost 40,000 tons of containerboard production that will occur in April from annual maintenance outages at Counce and Tomahawk, its two largest mills.

Paul T. Stecko, Chairman and CEO of PCA, said, “Both our mills and box plants did an outstanding job in managing costs while adapting to and running at significantly lower operating rates. This allowed us to generate higher earnings than we originally expected entering the quarter. Published prices for containerboard fell by more than we anticipated during the quarter, but this decline had a much smaller effect on first quarter earnings than it will have on the second quarter.”

“Looking ahead,” Mr. Stecko added, “our second quarter earnings will be impacted primarily by lower selling prices resulting from previously published changes in prices for containerboard. In addition to Tomahawk and Counce, our Filer City mill will be down for its annual maintenance outage in May. We’ve seen a significant pick-up in corrugated products demand so far in April, but some market-related mill downtime is still likely. Considering these items, we currently estimate our second quarter earnings at about $0.15 per share.”

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.4 billion in 2008. PCA operates four paper mills and 67 corrugated products plants in 26 states across the country.

SOURCE: Packaging Corporation of America

PaperAge. Copyright © O'Brien Publications, Inc. All rights reserved.