Lake Forest, Illinois-based Packaging Corp.of America (PCA) has reported second quarter 2018 net income of $187 million, or $1.97 per share, and net income of $197 million. The firm says its second quarter net sales were $1.8 billion in 2018 compared with $1.6 billion in 2017.
PCA says its second-quarter earnings include a deduction amounting to 11 cents per share pertaining mostly to the costs of temporarily discontinuing operations at its Wallula, Washington, mill before its No. 3 paper machine there is converted to linerboard production.
Excluding special items, a 56-cents-per-share increase in second quarter 2018 earnings compared with second quarter 2017 was driven primarily by higher prices and mix in its packaging segment, the firm says. PCA also experienced slightly higher prices and mix in its paper segment. Lower wood and recycled fiber costs and a favorable tax rate resulting from tax reform changes also contributed to the improved results.
The income growth was held at bay in part by higher operating costs, higher freight expenses and the Wallula No. 3 paper machine conversion-related costs.
“Packaging segment demand remained strong with all-time record sales volumes in both our containerboard mills and corrugated products plants,” says PCA Chairman and CEO Mark W. Kowlzan. “The benefits of these strong market conditions helped us offset higher inflation in many of our operating and converting costs and higher freight expenses. The scheduled maintenance outages at two of our containerboard mills went very well, and the first phase of our linerboard conversion work on the No. 3 paper machine at our Wallula Mill was executed extremely well both from a ramp-up curve perspective as well as an operating cost perspective.”
In the PCA packaging segment, total corrugated products shipments were up 8.3 percent and shipments per day were up 6.6 percent compared to 2017’s second quarter. Containerboard production was slightly more than 1 million tons while in the PCA paper segment, office paper and printing and converting paper sales volumes were deemed flat by the company.
“Looking ahead as we move from the second and into the third quarter, we anticipate continued strong demand in our packaging segment,” says Kowlzan. “However, corrugated products shipments will have one less shipping day during the quarter,” he adds.
“We expect continued inflation in most of our operating costs, including slightly higher recycled fiber prices and incremental wage pressure with a tighter labor market,” the CEO continues. “In addition, we anticipate higher freight and logistics expenses, higher scheduled maintenance outage costs, as well as a slightly higher tax rate. Considering these items, we expect third-quarter earnings of $2.14 per share.”
PCA bills itself as the third largest producer of containerboard products and the third largest producer of uncoated freesheet paper in North America. The company operates eight mills and 94 corrugated products plants and related facilities.