Packaging Corporation of America
CEO : Mr. Mark W. Kowlzan
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | -3.2% YoY | -14.4% | 1.3% | 2023-01-26 |
Mark Kowlzan says,
Financial Highlights
- Fourth quarter 2022 net income of $212 million or $2.31 per share
- Excluding special items, fourth quarter 2022 net income was $215 million or $2.35 per share compared to the fourth quarter of 2021 net income of $262 million or $2.76 per share
- Fourth quarter net sales were $1.98 billion in 2022 and $2.04 billion in 2021
- Total company EBITDA for the fourth quarter, excluding special items, was $409 million in 2022 and $463 million in 2021
- Excluding special items, total company EBITDA in 2022 was $1.9 billion compared to $1.7 billion in 2021
Factors Affecting Earnings
- Lower volumes in packaging and paper segments
- Higher operating costs primarily due to inflation on energy, chemicals, labor and benefits, supplies, repair materials and services, and other indirect and fixed costs
- Freight and logistics expenses were unfavorable
- Higher depreciation expense, converting costs, and scheduled maintenance outage expenses
- Higher prices and mix in the packaging and paper segments
- Lower share count resulting from share repurchases and lower interest expense
- Lower tax rate
Packaging Business
- EBITDA, excluding special items, in the fourth quarter of 2022 of $392 million with sales of $1.8 billion resulted in a margin of 21.7%
- Demand in the Packaging segment was below expectations for the quarter
- Total economic-related downtime for the fourth quarter was approximately 231,000 tons
- Conversion work at the Jackson, Alabama mill was completed successfully during the fourth quarter
- Second phase of the conversion work moved from this spring to next year in 2024
Thomas Hassfurther says,
Containerboard and Corrugated Products Prices and Mix
- Domestic containerboard and corrugated products prices and mix were $1.19 per share above the fourth quarter of 2021 and flat compared to the third quarter of 2022.
- Export containerboard prices and mix were down $0.01 per share compared to the fourth quarter of 2021 and down $0.02 per share compared to the third quarter of 2022.
Corrugated Product Shipments
- Corrugated product shipments were down 8.7% per workday and down 10.2% in total with 1 less workday compared to last year’s fourth quarter.
- Outside sales volume of containerboard was 131,000 tons below last year’s fourth quarter and 38,000 tons below the third quarter of 2022.
Lower Demand in Packaging Segment
- The lower demand in the Packaging segment was driven by several items.
- The inventory correction in both boxes and customers’ products has been more prolonged than what was originally anticipated.
- Consumer inflationary pressures have reduced consumers’ discretionary spending capabilities.
- Consumer behavior changed quickly as we exited the extreme COVID period, resulting in a preference towards travel, entertainment, and experience versus that of tangible goods.
- Containerboard and box demand continues to be negatively impacted from the deterioration in U.S. and global economic conditions, rising interest rates, and a cooler housing market.
First Quarter Shipments
- As we move from the fourth quarter into the first quarter, the rate of shipments per day is estimated to be fairly similar as many of these conditions are expected to continue.
- However, there are 4 additional shipping days in the first quarter, so total actual shipments will be higher when compared to the fourth quarter of 2022.
- Anticipate the first-quarter shipments to exceed the first quarter 2019 shipments by approximately 6% on a per-day basis.
Q & A sessions,
Paper Segment
- EBITDA, excluding special items in Q4 2022 was $39 million, compared to $26 million in Q4 2021
- Full year 2022 Paper segment EBITDA, excluding special items, was $132 million, compared to $72 million in 2021
- Prices and mix were up 21% from last year’s Q4 and 3% higher than Q3 2022
- Sales volume was about 11% below last year’s Q4 due to paper sales from the Jackson Mill’s #1 machine, which was included in last year’s results
Capital Investments and Process Improvements
- Significant cost reduction and process improvement projects at mills, including fiber flexibility projects and the first phase of #3 machine conversion to containerboard at the Jackson mill
- Completed numerous high return and high efficiency improvement projects in corrugated products plants
- Capital investments achieved numerous tactical and strategic benefits while improving industry-leading return on invested capital to just under 20%
2023 Outlook
- Expect box demand on a per day basis to be similar to Q4 2022 levels
- Anticipate lower export prices, slightly higher paper prices, and fairly flat sales volume in Q1 2023
- Labor costs and certain indirect costs will increase, but wood and recycled fiber prices, energy prices, and scheduled maintenance outage expenses are expected to decrease
- Expect higher interest and non-operating pension expenses and a higher tax rate, but will see some benefit from recent share repurchases
- Expect Q1 2023 earnings of $2.23 per share
Capital Spending
- Projected capital spending for 2023 will be around $400 million, a significant decrease from 2022’s $824 million
- Capital spending will likely remain in the $400 million range for the next few years
No bad stock 