Citing special items related to the costs of the impact of COVID-19 pandemic, Packaging Corporation of America reported a first-quarter 2020 net income of $141.7 million, down from the $186.8 million reported in the first quarter of 2019.
Strong demand in the packaging segment of drove its first quarter results, said its earnings report.
Mark W. Kowlzan, PCA chairman and CEO, said the company had record first quarter volume in its containerboard mills and a new all-time quarterly volume record in its corrugated products plants. He made the statements as part of the first quarter earning report.
“Our company’s liquidity position has never been higher nor has our confidence in the future success of PCA,” he said. “We are well positioned to manage through whatever lies ahead, while ensuring we take care of the needs and expectations of our employees, customers, suppliers and shareholders. However, the confidence does not translate to the same degree short-term predictability or guidance specifics that we normally provide at this time.”
Questions about the company’s International Falls paper mill and its preparedness for the pandemic went unanswered by the company’s local spokesperson in time for this publication.
On April 27, PCA reported first quarter 2020 net income of $142 million, or $1.49 per share, and net income of $143 million, or $1.50 per share, excluding special items. First quarter net sales were $1.7 billion in 2020 and 2019.
In the packaging segment, total corrugated products shipments with one additional workday were up 5.6 percent and shipments per day were up 3.9 percent over last year’s first quarter. Containerboard production was 1.047 million tons, and containerboard inventory was down 79,000 tons compared to the first quarter of 2019 and down 39,000 tons from the fourth quarter of 2019.
In the paper segment, sales volume was down 14,000 tons compared to the first quarter of 2019 and down 26,000 tons from the fourth quarter of 2019.
Kowlzan said the paper segment had lower as expected volume and prices, but both were slightly better than anticipated.
The scheduled maintenance outages at all mills went well, which he said helped the company meet the better-than-expected demand in the packaging and paper segments.
“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,” Kowlzan said in the report.
He said the uncertain scope and duration of the pandemic, and the timing of the global recovery and economic normalization, makes the company unable to properly quantify its outlook for the second quarter.
PCA temporarily idled both paper machines and the sheet-converting operation at its Jackson Mill in Jackson, Ala., for May and June, which is expected to reduce paper production by approximately 70,000 ton. The mill is expected to restart on July 6.
PCA’s Boise Paper paper mill in International Falls has continued to operate at capacity during this period.
“Due to the effects of the COVID-19 virus pandemic on paper consumption in schools, offices and businesses it’s critical that we balance the supply of our Boise Paper products with our customers’ demand for them,” Paul LeBlanc, vice president Boise Paper, said in a report April 1.
Kowlzan said last week he believes the actions will position the company properly for what “we anticipate right now for the second half of 2020. However, nothing is certain, especially now, and it may require further action to be taken.”
He said the company’s consistent approach towards prudent capital allocation and sound financial governance has served it well for many years
“PCA entered these uncertain economic times brought on by the COVID-19 crisis from a position of financial and balance sheet strength,” he said last week. “Our focus has been and will remain on preserving that strength through the actions and decisions we make as a management team.
He said while the implications of the pandemic could adversely impact PCA operations as well as the availability of services and products from suppliers, the products PCA provides are essential to the response efforts, recovery, and well-being of our country.
Meanwhile, Kowlzan said all PCA facilities operated in adherence to Centers for Disease Control and Prevention 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,” he said. “I am extremely proud of the effort, responsiveness, and sacrifices displayed by all PCA employees as well as our customers and suppliers.”
Excluding special items, the ($.48) per share decrease in first quarter 2020 earnings compared to the first quarter of 2019 was driven primarily by lower prices and mix in our Packaging segment ($.64) and Paper segment ($.05), lower volumes in our Paper segment ($.03), higher annual outage expenses ($.04), higher depreciation expense ($.04), other expenses ($.01), and a higher tax rate ($.01).
These items were partially offset by higher volumes in our Packaging segment $.14, lower operating costs $.09, lower converting costs $.04, lower freight and logistics costs $.01, and lower interest expense $.04 and non-operating pension expense $.02.
Results were $.30 above first quarter guidance of $1.20 per share primarily due to higher volumes in our Packaging $.03 and Paper $.01 segments, higher prices and mix in our Packaging segment $.02, lower operating costs $.15, lower freight and logistics costs $.03, lower converting costs $.02, lower annual outage costs $.02, and other expenses $.02.