PCA Q1 earnings down from 2019

Lake Forest, Illinois-based Packaging Corp. of America (PCA) has reported first-quarter 2020 net income that is below that of 2019’s first quarter, citing “special items primarily for certain costs related to the impact of the COVID-19 pandemic on our business.”

The company’s first-quarter 2020 net income of $141.7 million was down 24.1 percent from the $186.8 million figure of the first quarter of 2019. First-quarter net sales were $1.7 billion in both 2020 and 2019, says PCA.

“Strong demand in our Packaging segment drove first-quarter results,” states Mark W. Kowlzan, PCA chair and CEO. “We had record first-quarter volume in our containerboard mills and a new all-time quarterly volume record in our corrugated products plants. The integration rate of our mill’s volume into our plants was 95 percent, and our containerboard inventory was at the lowest level since our acquisition of the Boise packaging business.”

Conditions were not as strong in the company’s printing and writing paper business unit. “In our Paper segment, volume and prices were lower as expected, but both were slightly better than anticipated. The scheduled maintenance outages at all mills went very well, which helped us meet the better than expected demand in our Packaging and Paper segments.”

Regarding the impacts of COVID-19, Kowlzan says, “Both the mills and the corrugated products plants did a great job of running their operations safely and in a cost-effective manner while facing the unprecedented conditions brought on by the COVID-19 pandemic. All facilities operated in adherence to CDC [Centers for Disease Control] guidelines and followed a strict protocol for workplace operations as well as notification of and response to potential issues. So far, we have not experienced any material disruption in our operations or our supply chain due to the pandemic. I am extremely proud of the effort, responsiveness and sacrifices displayed by all PCA employees as well as our customers and suppliers.”

Adds Kowlzan, “These may be the most unpredictable and unprecedented times that, hopefully, we will ever encounter. Not a day passes that we realize something new being impacted in a way we had never thought of or imagined. PCA entered these uncertain economic times brought on by the COVID-19 crisis from a position of financial and balance sheet strength. Our company’s liquidity position has never been higher, nor has our confidence in the future success of PCA. We are well-positioned to manage whatever lies ahead while ensuring we take care of the needs and expectations of our employees, customers, suppliers and shareholders.”

While expressing confidence, Kowlzan also cautions investors, “This confidence does not translate to the same degree of short-term predictability or guidance specifics that we normally provide at this time. Due to the uncertain scope and duration of the pandemic, and the timing of the global recovery and economic normalization, we are not able to properly quantify our guidance for the second quarter.”

Although the company used more than 1 million tons of recovered fiber in 2018, PCA used some 14 million tons of virgin fiber that year. Kowlzan says, “While recycled fiber prices began moving significantly higher during the first quarter [of 2020], our position as a primarily virgin fiber producer minimizes this impact compared to other producers.”

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 94 corrugated products plants and related facilities.