Packaging Corporation of America (PCA) reported Q2 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. Q2 net sales were $2.0 billion in 2023 and $2.2 billion in 2022.
Excluding special items, the ($.92) per share decrease in Q2 2023 earnings compared to the Q2 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 Q2 guidance of $1.96 per share primarily due to lower operating costs resulting from efficiency and usage initiatives and lower freight and logistics expenses.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Actual results versus our guidance for the quarter reflect the outstanding efforts by employees across the Company to manage our operations in an efficient and cost-effective manner as we continued to operate both our Packaging and Paper segments against a challenging demand environment. Results also reflect energy and virgin fiber prices being lower than anticipated, and our logistics and distribution personnel did a great job minimizing the effect of higher freight rates in certain regions as well as optimizing freight routes and transportation modes. During the Q2, we temporarily idled our Wallula, WA mill as we continued to operate the Packaging segment based on our outlook for demand.”
“Looking ahead as we move from the second and into the Q3,” Mr. Kowlzan added, “in our Packaging segment, although there is one less shipping day for the corrugated business, we expect shipments per day to improve versus the Q2. However, prices will be lower as a result of the previously published domestic containerboard price decreases along with slightly lower export prices. We expect seasonally stronger volume in our Paper segment from back-to-school shipments, although prices are expected to trend lower based on the recent declines in index prices. Operating and converting costs should trend slightly higher primarily due to higher recycled fiber prices and seasonal energy cost. Scheduled outage expenses will be higher by approximately ($.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 Q3 earnings of $1.88 per share.”
PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 86 corrugated products plants and related facilities.
