Packaging Corporation of America reported third quarter 2016 net income of $119 million, or $1.26 per share and $1.30 per share, excluding special items.
Third quarter net sales were $1.5 billion in 2016 and 2015 according to the company, based in Lake Forest, Ill.
Reported earnings include the impact of $.04 of special items expense in the third quarter of 2016 and $.05 of special items income in 2015.
“We had an excellent quarter, even with lower pricing and mix in our containerboard and corrugated products,” PCA Chairman and CEO Mark W. Kowlzan said. “Our packaging mills ran very well, and we set all-time record volumes in our corrugated products plants while reducing inventory levels as we quickly integrate our containerboard volume through our new corrugated products plants from the TimBar acquisition.”
Kowlzan said the paper segment EBITDA, or earnings before interest, taxes, depreciation and amortization, margin increased as the company grew its paper volume, and achieved additional operational efficiencies while continuing to improve prices since the second quarter 2016 price increase announcements.
He said that, in the fourth quarter, PCA expects seasonally lower volumes for containerboard and corrugated products, which includes four less shipping days, as well as a seasonally less rich mix in corrugated products, compared to the third quarter. But there will be three months of TimBar activity in the fourth quarter versus only one month in the third quarter.
Also, PCA announced a price increase of $50 per ton effective October 1 to containerboard customers, and a price increase to corrugated products customers.
“We expect seasonally lower volumes and a less rich mix in white papers and, with colder weather, wood and fuel costs are expected to be seasonally higher along with some price inflation on recycled fiber,” Kowlzan said. “Our annual outage costs also will be higher with the scheduled maintenance work at our Filer City, Mich., containerboard mill. Considering these items, we expect fourth quarter earnings of $1.15 per share. In addition, as previously announced, we are on track to close the acquisition of Columbus Container during the fourth quarter. ”
Kowlzan said PCA expects special items in the fourth quarter to include fees, expenses and accounting charges relating to the TimBar and Columbus Container acquisitions and other facilities closures. Additional special items may arise due to fourth quarter events.
Excluding special items, the $.04 per share increase in third quarter 2016 earnings, compared to the third quarter of 2015, was driven primarily by higher containerboard, corrugated products and white paper sales volumes ($.04), higher white paper prices and mix ($.03), lower costs for energy ($.03), fiber ($.07) and freight ($.03), lower annual outage costs ($.01) and a lower share count resulting from share repurchases ($.04).
These items were partially offset by lower domestic containerboard and corrugated products prices and mix ($.13), lower containerboard export prices ($.02), lower paper production volume ($.02), and higher costs for labor and fringes ($.04).
In the packaging segment, corrugated products shipments, excluding TimBar, set all-time records for both total shipments as well as shipments per day with shipments up 1.7 percent over last year’s record third quarter with the same number of workdays.
Packaging segment price and mix was lower than the third quarter of 2015 and the second quarter of 2016. Containerboard production was 950,000 tons, and containerboard inventory was down 11,000 tons compared to the end of the second quarter of 2016 and 16,000 tons below the third quarter of 2015.
Paper segment price and mix was higher than the third quarter of 2015 and the second quarter of 2016. White paper sales volume was higher and pulp volumes were lower compared to the third quarter of 2015 while both paper sales volume and pulp volumes were up versus the second quarter of 2016.
PCA is the fourth-largest producer of containerboard and corrugated packaging products in the U.S. and the third-largest producer of uncoated freesheet paper in North America.
The company operates eight mills, including one in International Falls, and 93 corrugated products plants and related facilities.
