Packaging Corporation Of America Reports First Quarter 2021 Results

Packaging Corporation of America (NYSE: PKG) today reported first quarter 2021 net income of $167 million, or $1.75 per share, and net income of $169 million, or $1.77 per share, excluding special items. First quarter net sales were $1.8 billion in 2021 and $1.7 billion in 2020.

Reported earnings in the first quarter of 2021 include special items for closure costs related to certain corrugated products facilities and specific costs related to discontinuing paper operations associated with the previously announced conversion of the No. 3 paper machine at our Jackson, Alabama mill to linerboard.

Excluding special items, the $.27 per share increase in first quarter 2021 earnings compared to the first quarter of 2020 was driven primarily by higher volume $.45 and prices and mix $.31 in our Packaging segment and lower annual outage expenses $.12. These items were partially offset by lower volume ($.28) and prices and mix ($.03) in our Paper segment, higher operating costs ($.15), higher freight and logistics expenses ($.12), higher converting costs ($.02) and other expenses ($.01).

In the Packaging segment, total corrugated products shipments with one less workday were up 6.6%, and shipments per day were up 8.3% over last year’s first quarter. Containerboard production was 1,195,000 tons, and containerboard inventory was up 14,000 tons from the fourth quarter of 2020 and up 41,000 tons compared to the first quarter of 2020. In the Paper segment, sales volume was up 5,000 tons from the fourth quarter of 2020 and down 48,000 tons compared to the first quarter of 2020.

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Packaging segment demand remained very strong throughout the first quarter as we set a new all-time quarterly record for containerboard volume and matched our all-time quarterly total box shipments record. The No. 3 machine at our Jackson, Alabama mill produced linerboard for the entire quarter, and the announced plans for permanently converting the machine from uncoated freesheet to linerboard are well underway. We were able to build some containerboard inventory ahead of our busiest planned outage quarter; however, we ended the quarter at a record low weeks-of-inventory supply for this time of year. The containerboard and corrugated products price increases we announced late in the fourth quarter of 2020 were implemented as planned, and in March we began the implementation of the price increases we announced earlier in the first quarter. In our Paper segment, volume and prices were lower compared to last year’s first quarter as expected, although late in the quarter we did begin to see the benefit of our announced paper price increases compared to the fourth quarter of 2020. Our mills and box plants did an outstanding job of meeting our customers’ needs by managing through the outages, raw material availability issues, and logistics challenges brought on by the winter storms and other weather-related events. However, we experienced higher inflation than we expected in most of our manufacturing and converting costs and significantly higher freight and logistics expenses. Overall, we were able to deliver solid results to start the new year.”

“Looking ahead as we move from the first and into the second quarter,” Mr. Kowlzan added, “in our Packaging segment we expect demand to remain strong, and we will continue implementing our previously announced price increases. We also expect export prices to move higher. In our Paper segment, we expect volumes to be fairly flat with higher average prices and mix as we continue the roll-out of our recently announced paper price increases. The second quarter will be our busiest of the year for planned annual outages in our Packaging segment with work scheduled at four of our mills. Outage expenses are estimated to be approximately ($.20) per share higher compared to the first quarter. We also anticipate continued inflation with freight and logistics expenses as well as most of our operating and converting costs. However, energy costs should improve as we move into seasonally milder weather.”
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