PCA ends 2016 with slight profit gain

Lake Forest, Illinois-based Packaging Corp. of America (PCA) has reported fourth quarter 2016 and full year 2016 financial results that include net sales of $5.78 billion in 2016 compared to 2015 net sales of $5.74 billion.

For the fourth quarter of 2016, PCA has reported net income of $111 million, or $1.17 per share (and $1.23 per share excluding special items). Fourth quarter net sales were $1.5 billion in 2016 and $1.4 billion in 2015. Full year 2016 earnings were $450 million, or $4.75 per share, and $4.88 per share excluding special items.

The company says reported earnings include the impact of 6 cents per share of special items expense in the fourth quarter of 2016 and 1 cent per share of special items expense in 2015. Excluding special items, the 15 cents per share increase in fourth quarter 2016 earnings compared with the fourth quarter of 2015 was driven primarily by higher containerboard and corrugated products volume, higher white paper prices and mix, lower fiber costs and lower annual outage costs, says PCA.

“Our containerboard mill and corrugated products plant volumes were new all-time records while inventories, including our new acquisitions, were flat with year-end 2015 levels,” says Mark W. Kowlzan, PCA chairman and CEO, of the fourth quarter. “Packaging segment prices, which had been declining throughout the year, moved higher as we began implementing the announced price increases to our containerboard and corrugated products customers throughout the fourth quarter. Our paper segment also performed exceptionally well, maintaining good cost control during the seasonally slower fourth quarter.”

In the packaging segment, total corrugated products shipments were up 9.7 percent, or 11.5 percent per workday, over PCA’s 2015 fourth quarter. Packaging segment price and mix was lower compared to the fourth quarter of 2015 and up compared to the third quarter of 2016. Containerboard production was 962,000 tons, and containerboard inventory was flat compared to year-end 2015 levels.

Paper segment price and mix was higher than the fourth quarter of 2015 and flat compared with the third quarter of 2016. Paper volume was lower compared to the fourth quarter of 2015, primarily in light of the fourth quarter shutdown of market pulp operations at PCA’s Wallula Mill, and down versus the seasonally stronger third quarter of 2016.

“Looking ahead to the first quarter, we expect to realize the vast majority of our previously announced packaging segment price increases and we expect higher corrugated products shipments,” says Kowlzan. “We will have lower containerboard and paper production volume as we have scheduled maintenance outages on one of our machines at both the Counce and DeRidder packaging mills and on one of our machines at our Jackson, Alabama, paper mill. We expect higher freight costs as well as higher labor and benefits costs with annual wage increases and other timing-related expenses. We also anticipate continued price inflation on recycled fiber, energy and certain chemicals, and seasonally colder weather will increase wood and energy costs. Considering these items, we expect first quarter earnings of $1.26 per share.”

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PCA describes itself as the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. The company operates eight mills and 95 corrugated products plants and related facilities. The company is celebrating 150 years in business in 2017, with roots that trace back to the startup of the North Star Mill in Quincy, Illinois, in 1867.