PCA Q3 income rises from one year ago

Packaging Corp. of America (PCA), a Lake Forest, Illinois-based producer of paper and board, has reported third quarter 2024 net income of $238.1 million. That figure represents a 30 percent increase from the $183.2 million income the company netted in the third quarter of last year.

In addition to the income increase, PCA also has reported a year-on-year third quarter net sales rise, from $1.9 billion in last year’s third quarter compared with $2.2 billion in sales in this year’s July through September time frame.

The company says its earnings increase “was driven primarily by higher volume and prices and mix” in its Packaging segment (the majority of the increase), plus higher volume in the (graphic) Paper segment, lower freight and logistics expenses, lower scheduled outage expenses and lower interest expense.

In terms of challenges to the firm’s third quarter bottom line, PCA cites higher operating and converting costs, lower prices and mix in its Paper segment and higher depreciation expenses.

In the PCA Packaging segment, corrugated products shipments per day were up 11.1 percent over last year’s third quarter and total shipments (with one additional shipping day) were up by 12.9 percent, the firm reports.

The company’s shipments per day also increased compared with the previous quarter, rising by 5.8 percent compared with the spring months.

PCA says its containerboard production, much of it consuming old corrugated containers (OCC) and other recovered paper grades, reached nearly 1.3 million tons during this year’s third quarter while at the end of the quarter its inventory was down slightly (3,000 tons) compared with the end of the prior quarter.

“In the Packaging segment, we had great implementation of our previously announced containerboard and corrugated products price increases,” says Mark W. Kowlzan, PCA board chair and CEO.

“Very strong demand throughout the quarter led to all-time quarterly records for containerboard production, total box shipments and shipments per day,” says the CEO. “We were able to meet this demand, and our customers’ quality and service needs, through the operational benefits of our capital spending program and the continued great focus and execution by our sales, customer service, mill and corrugated products plant employees.”

Regarding the company’s Paper segment in the third quarter, Kowlzan describes it as having had “excellent results, with our previously announced price increases implemented as planned, volume above forecasted levels and well-managed mill operations. Fortunately, none of our facilities were significantly impacted by the two hurricanes during the quarter.”

Continues the CEO, “Looking ahead as we move from the third and into the fourth quarter, we expect demand in our Packaging segment to remain strong, with corrugated shipments per day continuing to strengthen and slightly higher containerboard volume. However, total shipments for the corrugated business will be impacted by two less shipping days and recent hurricane damage to the strawberry crops in Florida. With current containerboard inventory below our target levels, we will also attempt to build some inventory prior to year-end.”

Adds Kowlzan, “In our Paper segment, shipments will be lower versus the seasonally stronger third quarter while prices and mix should be fairly flat. Operating and converting costs are expected to increase driven by higher seasonal energy costs and chemical costs.”

Concludes the CEO, “Considering these items, we expect fourth quarter earnings of $2.47 per share.” That would represent about a 6.4 percent drop from the $2.64 earnings per share in this year’s third quarter.

PCA describes itself as the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. The firm operates eight mills and 86 corrugated products and related facilities.

In its 2023 Responsibility Report, PCA says its mills consumed more than 1 million tons of recovered fiber last year. In that report, the company says it has been “adding capacity to process OCC at our mills located in DeRidder, Louisiana; Wallula, Washington; and Jackson, Alabama. PCA consumed 440,000 additional tons of OCC in 2023 compared with 2013, a 143 percent increase.”