Packaging Corp. of America reports Q4, full-year results

Packaging Corp. of America (PCA) has released its fourth quarter 2022 and full-year results, which the Lake Forest, Illinois-based company says include special items primarily for costs related to the conversion of the No. 3 machine to containerboard at its Jackson, Alabama, mill.

For the fourth quarter, PCA reports $212 million in net income ($215 million excluding special items) and full-year 2022 net income of $1.03 billion ($1.04 billion excluding special items). Fourth quarter net sales were $1.98 billion, compared with $2.04 billion in the same period in 2021, while full-year net sales were $8.5 billion in 2022 compared with $7.7 billion in 2021.

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“Although demand in our packaging segment was below our original expectations and we operated our system based on this lower demand, we were able to offset the negative impact through outstanding cost management and process optimization efforts at our mills and corrugated products plants,” PCA Chairman and CEO Mark W. Kowlzan says.

“The scheduled annual maintenance outage the first phase of the conversion project on the No. 3 machine at our Jackson, Alabama, mill were executed extremely well,” he adds. “Also, during the quarter we repurchased over 3 million shares of our stock at an average price of $126.70 per share.”

PCA announced in late 2020 the conversion of its No. 3 paper machine in Jackson to produce 700,000 tons per year of high-performance, virgin kraft linerboard in a $440 million project phased over the course of three years. Previously, the machine produced 365,000 tons per year of uncoated freesheet (UFS).

Key elements of the project include the installation of an old corrugated containers (OCC) plant for recycling OCC, various pulp mill modifications, paper machine modifications to the forming and press sections, headbox and dryer section as well as winder upgrades. The facility’s No. 1 paper machine will continue to produce UFS products.

In mid-November, PCA laid off nearly all of the 400-plus workers at the Jackson site and idled the mill, citing “economic conditions and lower demand for our products,” in a report from The Clarke County Democrat. The mill resumed production Jan. 9 and called employees back to work.

Results are $0.13 above fourth-quarter guidance of $2.22 per share because of what PCA says is higher prices and mix in the packaging segment, lower freight and logistics expenses, a lower share count resulting from share repurchases and a lower tax rate.

Shipments in PCA’s packaging segment were down 8.7 percent and total corrugated products shipments were down 10.2 percent compared with the fourth quarter of 2021. Containerboard production was down 961,000 tons and containerboard inventory was down 66,000 from the previous quarter and down 46,000 tons compared with the fourth quarter of 2021.

In its paper segment, PCA reports sales volume down 14,000 tons compared with the previous quarter and down 15,000 tons from the fourth quarter of 2021.

“Looking ahead we move from the fourth and into the first quarter, in our packaging segment we expect box demand on a per-day basis to be similar to fourth-quarter levels, although we expect higher total volume with corrugated plants having four additional shipping days,” Kowlzan says. “Prices will move lower as a result of the recent decreases in the published domestic containerboard prices, and we are assuming lower export prices as well.”

“Lastly, we expect higher interest and nonoperating pension expenses and a higher tax rate, but we will see some benefit from our recent share repurchases,” he adds. “Considering these items, we expect first quarter earnings of $2.23 per share.”