![dollar signs on blue background](/remote/aHR0cHM6Ly9naWVjZG4uYmxvYi5jb3JlLndpbmRvd3MubmV0L2ZpbGV1cGxvYWRzL2ltYWdlLzIwMjQvMDEvMjYvZG9sbGFyc2lnbl9hZG9iZXN0b2NrXzM0NjQ0NzY0X3dlYi5qcGc.8vni7D-GIUw.jpg?w=948&h=533&format=webp&mode=pad&anchor=middlecenter&scale=both&bgcolor=F0F1F2)
©Carsten Reisinger | stock.adobe.com
In its recently concluded fourth quarter, Packaging Corp. of America (PCA) saw stronger-than-expected demand, particularly in its packaging segment, and expects that trend to continue into the first quarter of 2024.
The Lake Forest, Illinois-based paper and packaging company released its fourth-quarter and full-year earnings Jan. 24 and reports similar sales numbers to those of 2022. In the fourth quarter of 2023, PCA brought in $1.94 billion in net sales compared with $1.98 billion in 2022, and its fourth-quarter net income in 2023, excluding special items, was $192 million compared with $215 million in 2022.
Special items primarily included costs at the company’s Jackson, Alabama, mill for conversion-related activities as the mill switched from paper to containerboard, as well as the closure and other costs related to corrugated products facilities and design center.
“I’m very proud of the outstanding results PCA delivered in 2023 under very challenging demand conditions,” CEO Mark Kowlzan said during an earnings call Jan. 25. “We successfully completed numerous cost-reduction and process improvement projects along with other key strategic initiatives at containerboard mills and corrugated products plants.”
The company’s full-year earnings in 2023, excluding special items, were $784 million compared with $1.04 billion in 2022, and net sales were $7.8 billion compared with $8.5 billion in 2022.
But according to Tom Hassfurther, executive vice president of corrugated products at PCA, demand in January already is shaping up to be “very strong.” He noted the company currently is booking and billing about 8 percent above a year ago and sees that trend continuing throughout the quarter.
PCA also reported lower scheduled maintenance outage expenses and lower freight, logistics expenses and higher volumes in its packaging segment, supporting results 37 cents above its $1.76 fourth-quarter guidance.
“Looking ahead, as we move from the fourth and into the first quarter … we expect continued positive momentum in demand, along with two additional shipping days in the first quarter, to drive higher total corrugated product shipments.”
Packaging segment
Throughout the fourth quarter, Kowlzan said demand in PCA’s packaging segment was stronger than its expectations. That higher volume, along with operational benefits of its capital spending program and emphasis on cost management and process efficiencies across its manufacturing and converting facility system, drove down operating and converting costs.
This fall, PCA restarted its mill in Wallula, Washington, after idling the facility in May, citing economic conditions at the time. The mill produces about 1,800 tons of unbleached paper and corrugated medium per day and consumes about 1,000 tons per day of old corrugated containers.
“We had an excellent restart of the Wallula, Washington, mill and the No. 3 machined during the latter part of October and ran exceptionally well during the November, December period,” Kowlzan said. “That helped us meet the stronger demand and build some needed inventory during the quarter to ensure that our customers were supplied with their needs.
PCA plans to restart its No. 2 machine at the Wallula mill in the first quarter of 2024 to help “manage expectations” for continued strong demand along with scheduled mill maintenance outages and the final phase of its containerboard conversion at its mill in Jackson, Alabama.
The company’s corrugated product shipments per workday were up 5.1 percent in the fourth quarter of 2023 compared with the fourth quarter of 2022, and compared with the third quarter of 2023, shipments per day were up 5.2 percent while total shipments were up 3.4 percent.
“Our order backlog and containerboard cut-up remained incredibly strong throughout the quarter,” Hassfurther said. “Although demand continues to be challenged by persistent inflation, higher interest rates and other factors, we expect our shipments to continue this positive momentum as we enter the first half of 2024.”
Paper segment
Prices and mix in PCA’s paper segment were down 3 percent from last year’s fourth quarter, which Kowlzan said was driven by declines in index prices that occurred throughout the year, and although it was slightly better than the company’s fourth-quarter guidance, sales volume was 3 percent below last year’s fourth quarter and down about 6 percent compared with the “seasonally stronger” third quarter of 2023.
“The management team and all the employees of our paper business have done a tremendous job over the last several quarters to optimize our inventory and product mix and remain focused on efficient and cost-effective operations in order to continue delivering outstanding results during 2023,” Kowlzan said.
PCA expects and improved mix to move prices slightly higher with flat sales volume in the paper segment, and Kowlzan said recycled fiber and energy prices will be higher.
According to Recycling Today's 2023 list of the largest recovered paper consumers in North America, PCA was No. 10 on the list, consuming 1.12 million tons of recovered paper last year.
Latest from Recycling Today
- Hensel Recycling, Mastermelt Ltd. announce collaboration
- Nederman MikroPul’s commitment to clean air solutions
- Nederman MikroPul’s FS Baghouse Technology: The preferred solution for secondary aluminum
- Nederman MikroPul’s FS Dust Collector with Secondary Filtration
- Tomra e-book looks at aluminum sorting tech
- Norske Skog mill conversion project is behind schedule
- Ecovery adds secondary aluminum capacity
- Sibanye-Stillwater Group integrates recently acquired Abington Reldan Metals LLC