Photo courtesy of Packaging Corp. of America.
Lake Forest, Illinois-based Packaging Corp. of America (PCA) has reported fourth quarter 2018 net income of $205 million and full year 2018 net income of $738 million. The company’s year-end earnings per share figure checked in at $7.80, up from $7.07 in 2017.
PCA’s 2018 net sales reached $7.01 billion, up 8.8 percent compared with 2017 net sales of $6.44 billion. PCA says its reported fourth quarter and 2018 earnings “include special items primarily for certain costs related to discontinuing paper operations associated with the previously announced conversion of the No. 3 paper machine at our Wallula, Washington, mill to linerboard, as well as income from various tax-related items resulting from the December 2017 Tax Cut and Jobs Act.”
In its packaging segment, PCA says its total corrugated products shipments and shipments per day in the further quarter of 2018 were up 0.2 percent over last year’s fourth quarter. Containerboard production slightly surpassed 1 million tons for the quarter, while in its paper segment, compared with the fourth quarter of 2017, sales volume was 23 percent lower and production volume was 11 percent lower, primarily because of the idling of operations at the Wallula mill to prepare for the conversion.
“Our containerboard mills established a new fourth quarter production record while reducing our containerboard inventory by 26,000 tons from the end of the third quarter,” comments Mark W. Kowlzan, PCA’s chairman and CEO. “Our containerboard production allowed us to maintain our industry leading integration rate by supplying the necessary containerboard to achieve a new all-time quarterly record for box shipments per day,” he adds.
Continues Kowlzan, “Additionally, in 2018, we established new annual records for containerboard shipments, total box shipments and box shipments per day. The final phase of the containerboard conversion work at our Wallula Mill was very successful with the machine starting up on schedule. During the quarter, the machine operated at its design capacity, producing a high-quality virgin linerboard. Volume in our paper segment was seasonally lower as expected, but our market conditions were very good, and our prices and mix came in better than anticipated. The benefits of market conditions and good operational execution in both of our segments helped us offset higher inflation in many of our operating and converting costs as well as higher freight and logistics expenses.”
As 2019 gets underway, Kowlzan adds, “We expect continued strong demand in our packaging segment for both containerboard volume and corrugated products volume, and we expect strong market conditions in our paper segment to continue. We anticipate higher labor and benefits costs with annual wage increases and other timing-related expenses. Although we expect costs for freight and recycled fiber to be fairly flat, we do anticipate some inflation with most of our chemical and repair and materials costs, while seasonally colder weather will increase energy usage and wood costs. We also expect our tax rate to be slightly higher. Finally, the recent decrease in the published price for domestic medium will have a minimal effect on earnings. Considering these items, we expect first quarter earnings of $1.97 per share.”
PCA describes 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 95 corrugated products plants and related facilities.