![pca corrugated boxes](/remote/aHR0cHM6Ly9naWVjZG4uYmxvYi5jb3JlLndpbmRvd3MubmV0L2ZpbGV1cGxvYWRzL2ltYWdlLzIwMjMvMDQvMjYvcGNhYm94ZXNuZXd3ZWIuanBn.I07dfK6T4Vk.jpg?w=948&h=533&format=webp&mode=pad&anchor=middlecenter&scale=both&bgcolor=F0F1F2)
Photo courtesy of Packaging Corp. of America
Lake Forest, Illinois-based Packaging Corp. of America (PCA) has reported first quarter 2023 net income of $190 million, which is down 25 percent from the $254 million earned in the first quarter of last year. The company also says its packaging board shipments declined 12.7 percent year-on-year.
PCA says it produced slightly more than 1 million tons of containerboard in this year’s first quarter In its Paper segment, which includes its Boise Paper uncoated freesheet operations, sales volume was down 23,000 tons from the first quarter of 2022 and down 6,000 tons compared with the fourth quarter of 2022.
“Packaging segment demand was below our expectations for the quarter,” says Mark W. Kowlzan, board chair and CEO of PCA. “Consumer spending continues to be negatively impacted by higher interest rates and persistent inflation, along with consumer buying preferences skewed more towards services versus durable and non-durable goods.
“After a strong start in January, consumer spending was increasingly softer as the quarter progressed, similar to our box shipments during the quarter. In addition, the purchasing managers index (PMI) indicates manufacturing has remained in contraction territory for the last five months and continued to decline.”
Kowlzan portrayed PCA as working to navigate the changing board market. “We ran our system in a very cost-effective manner based on this lower demand, and we managed containerboard inventories to our targeted weeks-of-inventory supply,” he says.
“Price and mix in our Packaging segment are still above last year’s levels, although the positive impact was lower than expected primarily due to a price decrease in the published benchmark containerboard grades after our guidance was provided,” Kowlzan adds. “However, even with these unanticipated market headwinds, we were able to offset most of the negative impact through our cost management and process efficiency optimization efforts at our mills and corrugated products plants, along with energy prices being lower than expected.”
Regarding its Boise Paper operations, Kowlzan says, “The Paper segment had outstanding results driven by continued realization of our previously announced price increases and the benefits of our newly optimized paper business.”
In the current quarter, Kowlzan says, “Although there is one less shipping day for the corrugated business, we expect improved volume in our Packaging segment. However, prices will be lower as a result of the previously published domestic containerboard price decreases along with lower export prices. Sales volume as well as prices and mix in the Paper segment are assumed to be slightly lower based on lower demand.
“Although we do look for most operating costs to trend lower, our converting costs, scheduled maintenance outage expense and depreciation expense will be higher. Primarily due to recent increases in contract rail rates at most of our mills, we expect higher freight and logistics expenses compared to the first quarter.”
After PCA’s earning per share checked in at $2.11, Kowlzan says, “Considering these items, we expect second quarter earnings of $1.96 per share.”
PCA produces containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 88 corrugated products plants and related facilities. Per its 2021 Responsibility Report, PCA says it consumed 1.2 million tons of recovered fiber that year, representing a 20.7 percent jump from its 2020 volume.
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