"Demand in our Packaging segment remained very strong, with our corrugated products plants delivering record fourth quarter total shipments and an all-time record shipments per day..." – Mark Kowlzan, Chairman and CEO, Packaging Corporation of America.
Jan. 26, 2022 - Packaging Corporation of America today reported fourth quarter 2021 net income of $217 million, or $2.28 per share, and net income of $262 million, or $2.76 per share, excluding special items. Fourth quarter net sales were $2.0 billion in 2021 and $1.7 billion in 2020.
Full year 2021 net income was $841 million, or $8.83 per share, and net income of $894 million, or $9.39 per share, excluding special items. Full year net sales were $7.7 billion in 2021 and $6.7 billion in 2020.
Reported earnings in the fourth quarter and full year 2021 include special items primarily for costs associated with the Company's debt refinancing completed in October 2021, and for certain costs at the Jackson, AL mill for paper-to-containerboard conversion related activities. The refinancing extended the Company's overall debt maturity from 8.5 years to 16.3 years and decreased the Company's overall interest rate from 3.9% to 3.5%. Gross debt remained unchanged at $2.5 billion.
Excluding special items, the $1.43 per share increase in fourth quarter 2021 earnings compared to the fourth quarter of 2020 was driven primarily by higher prices and mix $2.17 and volume $.35 in our Packaging segment, higher prices and mix in our Paper segment $.09, a lower tax rate $.04, lower non-operating pension expense $.03, lower interest expense $.02, and other items $.02. These items were partially offset by higher operating costs ($.68), higher freight and logistics expenses ($.24), higher scheduled maintenance outage expenses ($.14), lower volumes in our Paper segment ($.11), higher converting costs ($.08), and higher depreciation expense ($.04).
Results were $.72 above fourth quarter guidance of $2.04 per share primarily due to higher volumes and higher prices and mix in our Packaging and Paper segments, lower wood fiber and energy costs, lower scheduled maintenance outage expenses, and a favorable tax rate.
In the Packaging segment, total corrugated products shipments and shipments per day were up 0.1% over last year's fourth quarter. Containerboard production was 1,243,000 tons, and containerboard inventory was down 9,000 tons from the third quarter of 2021 and up 42,000 tons compared to the fourth quarter of 2020. In the Paper segment, sales volume was down 12,000 tons compared to the third quarter of 2021 and down 29,000 tons from the fourth quarter of 2020.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, "Demand in our Packaging segment remained very strong, with our corrugated products plants delivering record fourth quarter total shipments and an all-time record shipments per day that exceeded last year's extremely strong fourth quarter. We utilized the capability of both machines at our Jackson, AL mill to produce containerboard for the entire quarter yet inventories, including the additional containerboard inventory from our December acquisition of Advance Packaging, moved lower from the end of September. Throughout the quarter, implementation of our previously announced containerboard and corrugated products price increases was executed extremely well. Although unprecedented inflation in most all of our operating cost categories and freight cost continues, we were able to offset some of this impact by taking advantage of the strong market conditions with great operational execution in both our mills and corrugated products plants as well as from favorable weather patterns helping with our wood and energy costs.
"Across the company, the commitment and dedication exhibited by our employees to meet our customers' needs while overcoming the difficulties and challenges brought on by on-going labor shortages, now exacerbated by the Omicron variant, supply chain bottlenecks, and logistics constraints has been outstanding.
"Finally, during the quarter we utilized the remaining $193 million of share repurchase authorization to buyback over 1.4 million shares of our stock at an average price of $133.79 per share. Our board of directors recently approved a new $1 billion repurchase authorization."
"Looking ahead as we move from the fourth and into the first quarter," Mr. Kowlzan continued, "in our Packaging segment we expect to benefit from higher corrugated products shipments with three additional shipping days, and we expect shipments per day to be higher than last year's first quarter as demand remains strong, along with slightly higher domestic and export prices and mix.
"Additionally, in our Paper segment, we expect higher prices and mix from our previously announced price increase that was implemented beginning last November. There should also be a small benefit in the first quarter from our most recent price increase announced last week.
"Scheduled outage expenses will be lower, and we expect a small benefit from our recent share repurchases. However, continued higher inflation across most all operating and converting costs as well as freight and logistics expenses more than offset these benefits. We estimate this to be the largest inflation-driven sequential cost increase in our history. In addition to the inflation-related impact, labor and benefits costs will also be higher due to timing-related increases as we start a new year, and seasonally colder weather should increase energy and wood costs.
"Considering these items, we expect first quarter earnings of $2.50 per share. This does not include any potential benefit from a $70 per ton price increase across all liner and medium containerboard grades that we communicated to our customers within the last few days."
Packaging Corporation of America's complete Fourth Quarter and Full-Year 2021 Results can be found on the company's website: www.packagingcorp.com.
PCA (NYSE: PKG) is one of the largest producers of containerboard and corrugated packaging in the United States and the third largest producer of uncoated freesheet in North America, based on production capacity. The company has approximately 15,200 employees, with operations primarily in the United States.
PCA’s Packaging segment includes six containerboard mills, one containerboard machine at its Jackson, Alabama, white paper mill, and 89 converting operations. In 2020, PCA produced about 4.3 million tons of containerboard and shipped about 62.8 billion square feet (BSF) of corrugated products.
PCA’s Paper segment operates under the trade name Boise Paper, a Division of Packaging Corporation of America. The Division manufactures and sells white papers, including both commodity and specialty papers, at two white paper mills located in the United States.
To learn more about PCA, visit: www.packagingcorp.com.
SOURCE: Packaging Corporation of America
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