By the numbers: Q1 2024
Net sales: $1.98B
Up 0.2% year over year
Packaging segment sales: $1.8B
Down 0.6% year over year
Packaging segment income: $203.8M
Down 24% year over year
- Q1 demand and destocking trends: Demand for containerboard and corrugated products in the first quarter of 2024 exceeded Packaging Corp. of America’s expectations, CEO Mark Kowlzan said during a Tuesday earnings call. Demand improved across all sectors, he added. Total corrugated product shipments were up 9.2% year over year and shipments per day were up 11%. While PCA experienced numerous quarters of negative effects from customers’ lingering destocking, customers “have now recovered at a very rapid rate. So that’s been very helpful to us,” said Tom Hassfurther, executive vice president of corrugated products.
- Opening and closing: In Q1, PCA reopened the two machines at its paper mill in Jackson, Alabama, earlier than planned. It had shut them down starting in 2022 to convert the facility to a linerboard mill. In Q1, the company incurred $10.4 million in charges related to that conversion and $1.2 million related to discontinuing production of uncoated freesheet paper grades there. PCA expects to see a Q2 financial impact from scheduled maintenance on its mill in International Falls, Minnesota, which is slated for temporary closure in June.
- Pricing: Executives again addressed impacts from price increases that PCA and competitors announced earlier this year. They expressed frustration with Fastmarkets RISI’s price index not fully reflecting the increases. The index in February showed a $40 per ton increase for some grades and not the full $70 per ton announced, so the price increase “did not occur quite as quickly as as we'd hoped and not in the same amount, because of the index,” Hassfurther said. Executives reiterated that RISI’s index covers only the open market — a single-digit percentage of the greater fiber market — and customers are open to using alternative models to determine pricing in their contracts. “It's going to take some time. But we're still pressing forward with that,” Hassfurther said.
- Competition: Executives declined to comment when asked about potential effects from what analysts called the company’s two largest competitors, International Paper and WestRock, being involved in international M&A transactions that are expected to close later this year. When asked about whether PCA sees opportunities for a similar international deal, Kowlzan said PCA takes advantage of opportunities as they come along. “We know what we need to do in our marketplace, and that’s what we’re focused on executing,” he said. “A better part of 30 years we’ve concentrated on the lower 48 states and we’ve grown our business significantly ... and we’ll continue to do so.”
- Outlook: Demand in April continues to increase, albeit at a lesser rate than during Q1, executives said. The capital spending and optimization strategy that PCA has implemented over the last few years for its box plants “has us on pace to set a new record for box shipments per plant,” Hassfurther said.
