No bad stock

Packaging Corporation of America
CEO : Mr. Mark W. Kowlzan

Quarterly earnings growth(YoY,%)

Tom Hassfurther says,

Impact of Packaging Segment Prices and Mix

• Total prices and mix in the Packaging segment were below expectations, with domestic containerboard and corrugated products prices and mix $0.32 per share below Q2 2022 and also $0.32 per share below Q1 2023.
• Export containerboard prices were down $0.15 per share compared to last year’s Q2 and down $0.07 per share compared to Q1 2023.

Impact of Packaging Segment Volume

• Corrugated product shipments were down 9.8% in total and per workday compared to last year’s Q2.
• Outside sales volume of containerboard was 62,000 tons below last year’s Q2 and 33,000 tons above Q1 2023.

Factors Impacting Demand

• Consumer buying preferences have shifted towards service-oriented spending, impacting the purchases of both durable and nondurable goods.
• Persistent inflation and higher interest rates are also negatively impacting consumer purchases.
• Inventory destocking, both in boxes and at customers’ products, is occurring across customer bases.
• The manufacturing index has remained in contraction territory for eight consecutive months.

Improvements Expected in Q3

• Despite the tough comparison period, second-quarter shipments improved almost 3% compared to Q1.
• Some improvement is expected in inventory destocking of both customer products and boxes.
• Positive momentum is expected in the current quarter, although there is one less work day compared to Q2.

Bob Mundy says,

Capital Spending

• In 2023, the company plans to wind down its capital spending on heavy projects that have been ongoing for the past ten years.
• Last year, capital spending was $824 million, but this year it is expected to be around $400 million.
• The company anticipates finishing the year with capital spending around the $400 million mark.
• For 2024, the company is already discussing the capital spending plan and expects it to be in the $400 million range, unless an outstanding opportunity arises.
• The company believes that maintaining capital spending in the $400 million range is beneficial for running the business and supports improvement opportunities and maintenance in mills and box plants.

Q & A sessions,

Impact on Stock’s Movement

• Strong July bookings, up 15% quarter-to-date, indicating a good start to the quarter
• Customers reporting that destocking is now over, suggesting more predictable volume going forward
• Challenging segments impacting volume: ag business, building product segment, single-use plastic products manufacturers
• Ag segment expected to recover, while e-commerce and food and beverage segments holding up better
• July trends showing more predictability and order patterns returning to pre-COVID levels
• Inventories are in a comfortable position, with the ability to flex depending on demand curves
• Cost improvement achieved through process efficiencies and practices, not capital investments
• Focused assessment of equipment running and project effectiveness leading to optimization and fine tuning