PCA reports healthy containerboard demand in Q3

Lake Forest, Illinois-based Packaging Corp. of America (PCA) has reported third-quarter 2020 net income of $139 million, or $1.46 per share, and net income of $149 million, or $1.57 per share, excluding special items. According to the company’s latest earnings report, PCA achieved third-quarter net sales of $1.69 billion, which is down slightly from $1.75 billion it earned in the third quarter of 2019.

The company says Hurricane Laura, which made landfall Aug. 27 about 100 miles south of PCA’s mill in DeRidder, Louisiana, added some costs and expenses in the third quarter. PCA's mill production was down for 12 days for Hurricane Laura preparations.

Within PCA’s Packaging segment, the company reports that total corrugated products shipments were up 6.4 percent and shipments per day were up 4.7 percent compared with the third quarter of 2019. Containerboard production was 1.048 million tons, and containerboard inventory was down 58,000 tons from the third quarter of 2019 and down 55,000 tons compared with the second quarter of 2020.

“In the Packaging segment, demand was very strong throughout the quarter as we set new all-time quarterly records for total box shipments and shipments per day,” says Mark Kowlzan, chairman and CEO of Packaging Corp. of America. “We were able to overcome the hurricane-related issues at our DeRidder mill to avoid any disruptions to our customers. However, with this supply disruption along with strong demand, we ended the quarter with much lower inventory than anticipated. This will require us to postpone the mill’s previously announced discretionary outage planned for the fourth quarter of this year.”

Within PCA’s Paper segment, sales volume was down 55,000 tons compared with the third quarter of 2019 and up 56,000 tons compared with the second quarter of this year.

“Market conditions in our Paper segment continue to be challenged due to the nationwide responses to help control the spread of the pandemic,” Kowlzan says. “Although demand did increase from the second quarter, it was still well below last year’s levels. As a result, we kept our Jackson mill idle for the entire third quarter.”

Additionally, Kowlzan states in the company’s latest earnings report that he thinks the company’s employees are doing an “outstanding job” in response to this year’s pandemic.

“What makes this even more remarkable is that our employees’ focus on these new work requirements is occurring while we are experiencing unprecedented demand within our Packaging business, and they continue to successfully meet the expectations of our containerboard and box customers,” he says. “Everyone has worked very hard to overcome the challenges and obstacles we’ve faced this year, and I couldn’t be more proud of our entire organization as well as the strong partnerships we have with our customers and suppliers.”

Looking ahead, Kowlzan says the company expects corrugated products demand to remain strong in the fourth quarter of the year.

“Although shipments will be lower than the third quarter with three less shipping days, volume should be higher than last year’s record fourth-quarter shipments,” he says. “Higher containerboard production will help us build some inventory prior to year-end as we prepare for first quarter of 2021 scheduled maintenance outages and expected continued strong demand.”

He notes that earlier this month, PCA announced price increases to its containerboard and box customers. He says these price increases will be implemented during the fourth quarter and into 2021. He adds that he expects export prices to remain high in the fourth quarter.

Within the company’s Paper segment, Kowlzan says he expects demand to be lower in the fourth quarter compared with the third quarter.

PCA reports that it is the third-largest producer of containerboard products and the third-largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 93 corrugated products plants and related facilities.