PCA first quarter net income down slightly year over year

However, net sales were flat year over year at $2 billion; EVP of corrugated products says demand improved “across the board.”

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Packaging Corp. of America net sales were flat year over year at $2 billion; EVP of corrugated products says demand improved “across the board.”
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Lake Forest, Illinois-based paper and packaging company Packaging Corp. of America (PCA) released its first quarter 2024 results this week, and while the company’s net income is down year over year, results were $0.18 above its first-quarter guidance of $1.54 per share primarily because of higher volume in its packaging and paper segments, lower operating and converting costs, lower scheduled mill outage expenses and lower freight and logistics expenses.

PCA is reporting $147 million in net income for the quarter ended March 31 compared with $190 million in the first quarter of 2023. However, its year-over-year net sales were flat at $2 billion.

Mark Kowlzan, PCA chairman and CEO, said during an earnings call April 23 that, throughout the quarter, containerboard and corrugated products demand exceeded the company’s expectations, but the successful conversion of its No. 3 paper machine in Jackson, Alabama, to produce virgin kraft linerboard allowed the company to service this high demand, as well as “strong operational performance at our box plants and containerboard mills.”

“Despite these efforts, with the higher demand, we ended the quarter at a record low weeks-of-inventory supply for this time of the year,” Kowlzan said. “We do expect to build our inventories back to targeted levels by the end of this quarter.”

PCA’s packaging segment sales were essentially flat year over year at $1.8 billion in both the first quarter of 2024 and 2023, while its paper segment sales were up from $151 million in 2023 to $164 million in 2024.

According to Thomas Hassfurther, executive vice president of corrugated products at PCA, the company’s corrugated product shipments per workday were up 11 percent this quarter while total shipments were up 9.2 percent.

“Compared to the pre-COVID period of the first quarter of 2019, shipments were up over 10.4 percent on a per-day basis,” he said. “Outside sales volume of containerboard was 40,000 tons above last year’s first quarter and 15,000 tons below the first quarter of 2023.

“Our order backlog remained incredibly strong throughout the quarter, and although demand continues to be challenged by constant inflation, higher interest rates and other factors, we expect to continue this positive momentum as we enter the second quarter.”

Kowlzan added that orders in PCA’s paper segment are expected to remain strong into the second quarter, but said volumes will be lower because of scheduled maintenance at its International Falls, Minnesota, mill during the quarter.

“I can tell you, the demand improved across the board, believe it or not,” Hassfurther added. “When we look at the various segments, whether it's [e-commerce], [agriculture], food, even in the heavier manufacturing area, we had significant improvement across the board.”

Kowlzan credited momentum garnered years ago when PCA focused on capitalizing on the mill side, and noted the company will continue that progress on the box plant side.

“[Continuing] to capitalize on the box plant opportunity will continue infinitum for us,” he said. “That's part of our growth strategy. That's how we'll continue to provide value for our customer base.

“In the last 5 years, since 2019, we've installed 69 new converting machines. We've replaced or completely upgraded 25 of our corrugators. We've built four new plants—Marshfield [Wisconsin], Richland [Washington], Landisville [Pennsylvania] and Salt Lake City, especially. … It's all done to grow with the customer and take care of what the customer’s needs are, but we have this capability, and we'll continue to capitalize on the strength.”

PCA’s full first quarter 2024 earnings report can be found here.