PCA(PKG) - 2025 Q3 - Quarterly Results

Third Quarter 2025 Earnings Summary Consolidated Financial Highlights Packaging Corporation of America reported Q3 2025 net income of $226.9 million, or $2.51 per share, on net sales of $2.3 billion, with adjusted net income at $246.7 million, or $2.73 per share | Metric | Q3 2025 | Q3 2024 | | :----------------------------- | :------------ | :------------ | | Net Sales | $2.3 billion | $2.2 billion | | Net Income (GAAP) | $226.9 million | $238.1 million | | Diluted EPS (GAAP) | $2.51 | $2.64 | | Net Income (excl. special items) | $246.7 million | $238.8 million | | Diluted EPS (excl. special items) | $2.73 | $2.65 | Diluted EPS Performance Analysis The $0.08 per share increase in Q3 2025 diluted EPS, excluding special items, was primarily driven by improvements in PCA's legacy business earnings, partially offset by initial impacts from the Greif acquisition - Increase in Diluted EPS (excluding special items) YoY: $0.08 per share[3][4] - Drivers of PCA's legacy earnings increase (per share): - Higher prices and mix (Packaging): $0.73[4] - Lower fiber costs: $0.16[4] - Higher prices and mix (Paper): $0.02[4] - Lower maintenance outage expense: $0.01[4] - Offsetting factors (per share): - Higher operating costs: ($0.33)[4] - Lower production and sales volume (Packaging): ($0.16)[4] - Higher depreciation expense: ($0.07)[4] - Higher freight expense: ($0.07)[4] - Higher fixed and other expense: ($0.07)[4] - Higher interest expense (excluding Greif acquisition debt): ($0.02)[4] - Lower production volume (Paper): ($0.01)[4] Greif Acquisition Impact The Greif containerboard business acquisition, completed on September 2, 2025, negatively impacted Q3 2025 earnings by $0.11 per share, primarily due to depreciation, interest expense, and costs associated with extended mill outages and income recognition timing - Greif acquisition impact on Q3 2025 earnings: ($0.11) per share[4] - Specific Greif-related costs: - Depreciation and amortization expense: $12 million ($0.09 per diluted share)[5] - Additional interest expense: $8 million ($0.06 per diluted share)[5] - Outages and timing effects: approximately $12 million ($0.10 per diluted share)[5] Performance Against Guidance Excluding the Greif acquisition and special items, Q3 2025 results exceeded guidance by $0.04 per share, driven by favorable price and mix in the Packaging segment and lower freight costs - Q3 2025 results (excluding Greif acquisition and special items) were $0.04 per share above guidance[6] - Third quarter guidance: $2.80 per share[6] - Primary reasons for outperformance: Favorable price and mix in the Packaging segment and lower freight costs[6] Segmental Operational Overview The Packaging segment saw increased operating income and total shipments (including acquired business), while the Paper segment experienced a slight decrease in operating income despite a QoQ sales volume increase Packaging Segment Operations This section details the operational and financial performance of the Packaging segment, including income, EBITDA, and shipment and production volumes | Metric | Q3 2025 | Q3 2024 | | :------------------------------------ | :------------ | :------------ | | Segment Operating Income (GAAP) | $327.5 million | $320.7 million | | Segment Operating Income (excl. special items) | $347.9 million | $321.6 million | | EBITDA (excl. special items) | $491.8 million | $445.6 million | - Legacy PCA corrugated products shipments: Down 2.7% per day and 1.1% overall compared to Q3 2024[8] - Total corrugated products shipments (including acquired business): Up 3.7% per day and 5.3% in total[8] - Containerboard production: - Legacy PCA mills: 1,255,000 tons[8] - Acquired mills: 47,000 tons[8] - Containerboard inventory in legacy PCA system: 417,000 tons (up 56,000 tons from Q3 2024 and 15,000 tons from Q2 2025)[8] - Inventory at newly acquired facilities: 86,000 tons[8] Paper Segment Operations This section outlines the financial and operational performance of the Paper segment, including operating income, EBITDA, and sales volume trends | Metric | Q3 2025 | Q3 2024 | | :------------------------------------ | :------------ | :------------ | | Segment Operating Income (GAAP) | $35.6 million | $38.5 million | | Segment Operating Income (excl. special items) | $35.6 million | $38.5 million | | EBITDA (excl. special items) | $40.1 million | $43.1 million | - Sales volume: Down 0.7% from Q3 2024, but up 10% compared to Q2 2025[8] Management Commentary CEO Mark W. Kowlzan highlighted a strong quarter for the legacy PCA packaging business with improving corrugated volume and efficient mill operations, also noting the successful closure and initial integration efforts for the Greif acquisition, despite significant short-term impacts from mill refurbishment - Legacy PCA packaging business had a 'very strong quarter' with corrugated volume improving and largely on plan[9] - Export containerboard sales volume remained relatively low due to continued trade uncertainty[9] - Containerboard mills operated very efficiently, ending the quarter at targeted inventory levels[9] - Paper segment delivered an 'outstanding quarter' with strong sales volume and operating performance[9] - Greif acquisition integration involved extended outages at Massillon (five weeks for refurbishment) and Riverville (five days for reliability improvements), significantly impacting September results but showing improved performance benefits[9] - Acquired corrugated business achieved strong volumes and pricing consistent with expectations[9] Fourth Quarter 2025 Outlook For Q4 2025, PCA anticipates earnings of $2.40 per share, excluding special items, with expectations including higher per-day corrugated shipments, increased export containerboard sales (though still relatively low), lower legacy containerboard production due to maintenance, and seasonally lower Packaging segment prices and higher energy/fiber costs - Expected fourth quarter earnings: $2.40 per share, excluding special items[11] - Corrugated shipments: Expected to be higher per-day, but with three fewer shipping days than Q3[10] - Export containerboard sales: Expected to be higher than Q3, but relatively low compared to traditional Q4 volume[10] - Legacy containerboard production: Slightly lower than Q3 due to a maintenance outage at the DeRidder mill[10] - Maintenance outage expenses: Expected to be higher by approximately ($0.29) per share[10] - Packaging segment prices: Expected to be lower due to a seasonally less rich mix[10] - Energy and fiber costs: Expected to be seasonally higher[11] - Freight and other operating costs: Expected to be relatively flat[11] - Paper segment: Expected to have lower production and sales volumes than the seasonally stronger Q3, with flat pricing[11] - Acquired business results: Expected to show significant improvement, despite continued lower production and higher maintenance from the Massillon mill outage and seasonally lower corrugated volumes[11] - Special items: Expect to incur acquisition and integration-related costs for the Greif acquisition and charges related to corrugated products facilities closures[11] Company Profile Packaging Corporation of America is a leading North American producer of containerboard products and uncoated freesheet paper, operating ten mills and 93 corrugated products plants - Market position: Third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America[12](index=12&type=