Packaging Corporation of America (NYSE: PKG) today reported third quarter 2021 net income of $251 million, or $2.63 per share, and net income of $257 million, or $2.69 per share, excluding special items. Third quarter net sales were $2.0 billion in 2021 and $1.7 billion in 2020.
Reported earnings include $.06 per share of special items expense in the third quarter of 2021, primarily for certain costs at the Jackson, AL mill for paper-to-containerboard conversion related activities, and $.11 per share of special items expense in the third quarter of 2020, primarily for costs associated with Hurricane Laura which made landfall approximately 100 miles south of the DeRidder, LA mill, resulting in production being down a total of approximately 12 days.
Excluding special items, the $1.12 per share increase in third quarter 2021 earnings compared to the third quarter of 2020 was driven primarily by higher prices and mix $1.58 and volume $.62 in our Packaging segment, higher production volume $.06 and prices and mix $.05 in our Paper segment, lower non-operating pension expense $.03, and lower interest expense $.01. These items were partially offset by higher operating costs ($.84), higher freight and logistics expenses ($.23), higher converting costs ($.10), higher scheduled outage expenses ($.04), and lower sales volume in our Paper segment ($.02).
Results were $.32 above third quarter guidance of $2.37 per share primarily due to higher realization of prices and mix in our Packaging segment.
In the Packaging segment, total corrugated products shipments and shipments per day were up 2.3% over last year’s third quarter. Containerboard production was 1,256,000 tons, and containerboard inventory was up 91,000 tons from the third quarter of 2020 and up 17,000 tons compared to the second quarter of 2021. In the Paper segment, sales volume was down 33,000 tons compared to the third quarter of 2020, and up 2,000 tons compared to the second quarter of 2021.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Packaging segment demand remained strong and our teams did a tremendous job of implementing our previously announced containerboard and corrugated products price increases. The containerboard mills set an all-time quarterly sales volume record, and our box plants set new third quarter records for total corrugated products shipments as well as shipments per day. By utilizing the capability of both machines at our Jackson, AL mill to produce containerboard, we were able to reach our desired inventory levels to better serve customer demand, help minimize the transportation challenges we continue to experience, and build some inventory ahead of the DeRidder mill’s planned outage. We had great execution of numerous initiatives and capital projects to reduce costs through efficiency, productivity, and optimization improvements across our manufacturing locations. We continue to put tremendous effort into managing certain material, equipment, and labor availability issues to keep our customers supplied with their needs and our capital projects on track. With no relief from the supply chain obstacles that we, our customers, and our suppliers continue to face along with unprecedented inflation-related challenges, the combination of all these efforts are critical to our success. The improvements and execution our employees deliver constantly, across many fronts, is what allows us to continuously improve our margins.”
Mr. Kowlzan continued, “Looking ahead as we move from the third and into the fourth quarter, we will continue to implement our previously announced price increases for domestic containerboard, corrugated packaging, and paper, and we also expect average export containerboard prices to move higher. Packaging segment volume will be lower due to three less shipping days as well as the scheduled outage at our DeRidder Mill, and Paper segment volume will be lower as the Jackson Mill is not expected to produce any paper grades. With higher gas prices and anticipated colder weather, energy costs will increase. Wood costs, especially in our southern mills, will be higher due to the previous wet weather, low inventory and high demand. We also expect inflation to continue with most of our other operating and converting costs, along with higher freight and logistics expenses. And lastly, as we have mentioned previously, we expect scheduled outage costs to be approximately ($.25) per share higher than the third quarter. Considering these items, we expect fourth quarter earnings of $2.04 per share.”
details at: http://ir.packagingcorp.com/news-releases/news-release-details/packaging-corporation-america-reports-third-quarter-2021-results