Packaging Corporation of America Reports Second Quarter 2023 Results
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Packaging Corporation of America ("PCA") reported second quarter 2023 net income of $203 million, or $2.24 per share, and net income of $209 million, or $2.31 per share, excluding special items. Second quarter net sales were $2.0 billion in 2023 and $2.2 billion in 2022.
Reported earnings in the second quarter of 2023 include special items for certain costs at the Jackson, Alabama mill for paper-to-containerboard conversion related activities and closure costs related to corrugated products facilities and design centers.
Excluding special items, the ($.92) per share decrease in second quarter 2023 earnings compared to the second quarter of 2022 was driven primarily by lower volumes in the Packaging ($.90) and Paper ($.07) segments, lower price and mix in the Packaging segment ($.47), higher depreciation expense ($.09), and higher other converting costs ($.03). These items were partially offset by lower operating costs $.34, higher prices and mix in the Paper segment $.12, a lower share count resulting from share repurchases in the second half of 2022 $.13, lower scheduled maintenance outage expenses $.03, and a lower tax rate $.02.
Results were $.35 above second quarter guidance of $1.96 per share primarily due to lower operating costs resulting from efficiency and usage initiatives and lower freight and logistics expenses.
In the Packaging segment, total corrugated products shipments and shipments per day were down (9.8%) compared to last year's second quarter. Shipments per day were up 2.7% versus the first quarter of 2023. Containerboard production was 1,112,000 tons, and containerboard inventory was down (11,000) tons versus the first quarter of 2023 and down (49,000) tons compared to the second quarter of 2022. In the Paper segment, sales volume was down (5,000) tons compared to the first quarter of 2023 and down (19,000) tons versus the second quarter of 2022.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, "Actual results versus our guidance for the quarter reflect the outstanding efforts by employees across the Company to manage our operations in an efficient and cost-effective manner as we continued to operate both our Packaging and Paper segments against a challenging demand environment.
"Results also reflect energy and virgin fiber prices being lower than anticipated, and our logistics and distribution personnel did a great job minimizing the effect of higher freight rates in certain regions as well as optimizing freight routes and transportation modes.
During the second quarter, we temporarily idled our Wallula, Washington mill as we continued to operate the Packaging segment based on our outlook for demand.
"Looking ahead as we move from the second and into the third quarter," Mr. Kowlzan added, "in our Packaging segment, although there is one less shipping day for the corrugated business, we expect shipments per day to improve versus the second quarter. However, prices will be lower as a result of the previously published domestic containerboard price decreases along with slightly lower export prices.
"We expect seasonally stronger volume in our Paper segment from back-to-school shipments, although prices are expected to trend lower based on the recent declines in index prices.
"Operating and converting costs should trend slightly higher primarily due to higher recycled fiber prices and seasonal energy cost.
"Scheduled outage expenses will be higher by approximately ($.06) per share driven by the scheduled maintenance planned at our International Falls, Minnesota mill.
"Finally, we estimate our depreciation expense and tax rate to be slightly higher as well. Considering these items, we expect third quarter earnings of $1.88 per share."
