Packaging Corporation of America (PKG) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 25, 2023 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and thank you for joining Packaging Corporation of America's Second Quarter 2023 Earnings Results Conference Call. Your host for today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session.

I'd now like to turn the floor over to Mr. Kowlzan. Sir, please proceed when you're ready.

Mark Kowlzan

Thank you, Jamie. Good morning, everyone, and thank you for participating in Packaging Corporation of America's second quarter 2023 earnings release conference call. Again, I'm Mark Kowlzan, Chairman and CEO of PCA and with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging Business; and Bob Mundy, our Chief Financial Officer. I'll begin the call with an overview of our second quarter results, and then I'll be turning the call over to Tom and Bob, who will provide further details. I'll then wrap things up, and then we'll be glad to take any questions.

Yesterday, we reported second quarter net income of $203 million, or $2.24 per share. Excluding special items, second quarter 2023 net income was $209 million, or $2.31 per share, compared to the second quarter of 2022 net income of $304 million, or $3.23 per share. Second quarter net sales were $2 billion in 2023 and $2.2 billion in 2022. Total company EBITDA for the second quarter, excluding special items, was $418 million in 2023 and $533 million in 2022. Second quarter net income included special items expenses of $0.07 per share for certain costs at the Jackson, Alabama mill for paper-to-containerboard conversion related activities and closure costs related to corrugated products facilities and design centers. Details of special items for both the second quarter of 2023 and 2022 were included in the schedules that accompanied our earnings press release.

Excluding special items, the $0.92 per share decrease in second quarter 2023 earnings compared to the second quarter of 2022 was driven primarily by lower volumes in the Packaging segment for $0.90 and Paper segment $0.07. Lower price and mix in the Packaging segment of $0.47 and higher depreciation expense, $0.09, and higher other converting costs, $0.03. These items were partially offset by lower operating costs of $0.34, primarily driven by lower fiber, energy and chemical costs. We also had higher prices and mix in the Paper segment for $0.12, a lower share count resulting from the share repurchase in the second half of 2022 for $0.13; lower scheduled maintenance outage expenses for $0.03 and a lower tax rate for $0.02. The results were $0.35 above the second quarter guidance of $1.96 per share, primarily due to lower operating costs resulting from efficiency and usage initiatives and lower freight and logistics expenses.