NEW YORK: Packaging Corporation of America (PKG.N) on Wednesday reported a better-than-expected quarterly profit, driven by higher prices in its packaging business and lower fiber costs, and said it expects earnings from its newly acquired Greif containerboard operations to improve.
The third-largest producer of containerboard products in North America said adjusted earnings for the third quarter were $2.73 per share, exceeding its own guidance of $2.80 per share and up from $2.65 a year earlier.
The results were buoyed by strong performance in its legacy packaging business, which saw higher prices and a favorable product mix. This helped offset a loss from the newly acquired Greif containerboard business, which the company bought on September 2.
“The legacy PCA packaging business had a very strong quarter,” Chairman and Chief Executive Officer Mark Kowlzan said in a statement.
The company has moved quickly to integrate the Greif assets, taking extended outages at the acquired mills to perform upgrades. While these actions dented September’s results, Kowlzan said the company is “already seeing the benefits of improved performance.”
For the three months ended Sept. 30, PCA’s net income was $226.9 million, or $2.51 per share, compared with $246.7 million, or $2.73 per share, on an adjusted basis which excludes costs tied to the Greif acquisition and facility closures.
Net sales rose to $2.3 billion from $2.2 billion a year ago.
Integration and Outlook
The Greif acquisition added complexity to the quarter. PCA reported a loss of $0.11 per share from the business for its first month of ownership, driven by depreciation, interest expenses, and the costs of the extended mill outages.
Looking ahead, PCA expects the acquired business to show “significant improvement” in the fourth quarter, benefiting from a full quarter of operations at one of the upgraded mills.
However, the company forecast fourth-quarter adjusted earnings of about $2.40 per share, citing seasonally lower packaging prices and volumes, higher maintenance costs, and the ongoing impact of the extended outage at the newly acquired Massillon mill.
In the Packaging segment, including the Greif assets, total corrugated products shipments rose 5.3% from the year-earlier period. The company’s legacy containerboard inventory ended the quarter at 417,000 tons, up 56,000 tons from a year earlier.
The Paper segment, a leading producer of uncoated freesheet, also delivered “another outstanding quarter,” according to Kowlzan, on strong sales volume.