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Packaging Corporation of America Reports First Quarter 2024 Results

Mark Kowlzan "Throughout the quarter, containerboard and corrugated products demand exceeded our expectations." – Mark Kowlzan, Chairman and CEO, PCA.

April 23, 2024 - Packaging Corporation of America (NYSE: PKG) [on April 22] reported first quarter 2024 net income of $147 million, or $1.63 per share, and net income of $155 million, or $1.72 per share, excluding special items. First quarter net sales were $2.0 billion in 2024 and 2023.

Reported earnings in the first quarter of 2024 include special items primarily for certain costs at the Jackson, Alabama, mill for paper-to-containerboard conversion related activities.

Excluding special items, the ($.48) per share decrease in first quarter 2024 earnings compared to the first quarter of 2023 was driven primarily by lower prices and mix in the Packaging segment ($1.33) and Paper segment ($.08), higher scheduled mill outage expenses ($.10), higher depreciation ($.03), higher expenses related to corrugated plant capital projects ($.02), and other expenses ($.04). These items were partially offset by higher volume in the Packaging segment $.71 and Paper segment $.06, lower operating and converting costs $.15, lower freight and logistics expenses $.04, lower interest expense $.07, and a lower tax rate $.09.

Results were $.18 above first quarter guidance of $1.54 per share primarily due to higher volume in the Packaging and Paper segments, lower operating and converting costs, lower scheduled mill outage expenses, and lower freight and logistics expenses.

In the Packaging segment, total corrugated products shipments with one less workday were up 9.2% and shipments per day were up 11.0% compared to the first quarter of 2023. Containerboard production was 1,162,000 tons, and containerboard inventory was down 15,000 tons from the first quarter of 2023 and down 24,000 tons compared to the fourth quarter of 2023. In the Paper segment, sales volume was up 18,000 tons from the first quarter of 2023 and up 17,000 tons compared to the fourth quarter of 2023.

CEO Comments

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, "Throughout the quarter, containerboard and corrugated products demand exceeded our expectations. We were able to service this higher demand from strong operational performance at our box plants and containerboard mills as well as from excellent execution of the conversion outage at our Jackson, AL mill, which enabled us to restart both machines earlier than planned. Despite these efforts, with the higher demand, we ended the quarter at a record low weeks-of-inventory supply for this time of year.

"Prices and mix in the Packaging segment moved slightly higher from fourth quarter 2023 levels, although less than we anticipated due to our total announced increase not being recognized in the published benchmark prices.

"Volume in the Paper segment was very good at about 13% above guidance estimates, and an improved mix moved prices slightly higher from the previous quarter, as expected. In addition, during the quarter we announced a price increase of $100 per ton across all of our paper grades, and we began implementing these increases on April 1st.

"The strong volume in both the Packaging and Paper segments along with the continued emphasis on cost management and process efficiencies across our manufacturing and converting facilities drove operating and converting costs lower, even with the persistent inflation we continue to experience across most of our cost structure."

Looking Ahead

"Looking ahead as we move from the first and into the second quarter," Mr. Kowlzan added, "in our Packaging segment we expect continued strong demand and higher corrugated products and containerboard shipments. Prices and mix will move higher due to our announced price increases and the increase in published domestic index prices, as well as higher export prices.

"Orders in our Paper segment are expected to remain strong however, volume will be lower due to a scheduled maintenance outage at our International Falls, Minnesota, mill during the quarter. Although we are implementing our recently announced paper price increases, average prices and mix are expected to be slightly lower due to the published decrease in index prices earlier this year and how that impacts contract triggers with certain customers.

"Operating and converting costs should be slightly lower primarily due to the sequential improvement in seasonal weather and wage and benefit timing expenses that we incurred in the first quarter, and scheduled maintenance outage expenses will be lower. Rail rate increases at six of our mills during the first and second quarters will result in higher freight and logistics expenses, and depreciation expense will be higher.

"Finally, our tax rate will be sequentially higher due to the tax-related benefit of share-based compensation vests in the first quarter. Considering these items, we expect second quarter earnings of $2.07 per share," Mr. Kowlzan concluded.

PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 86 corrugated products plants and related facilities.

SOURCE: Packaging Corporation of America (PCA)

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