In the second quarter of 2024, Packaging Corporation of America reported a net income of $199 million or $2.21 per share, excluding special items. This is a decrease from the second quarter of 2023, where net income was $209 million or $2.31 per share. Net sales were $2.1 billion in 2024 and $2 billion in 2023. EBITDA for the second quarter, excluding special items, was $404 million in 2024 and $418 million in 2023. The decrease in earnings was primarily due to lower prices and mix in the Packaging and Paper segments, as well as higher operating costs.

In the second quarter of 2024, the company faced challenges in the areas of recycled fiber and inflation-driven costs, but also saw increases in volume and decreases in other expenses. The Packaging segment had a strong quarter, with record containerboard production and increased prices. The corrugated products business also saw increased demand and set a new record for shipments in June.

In the second quarter, shipments and sales for the Paper segment were up compared to the same period last year. Prices and mix for containerboard and corrugated products increased, although they were still lower than the second quarter of 2023. The company also announced an investment in a new facility in Phoenix, Arizona to better serve their customers and improve efficiency. In the Paper segment, EBITDA and sales were slightly lower than the same period last year, but in line with expectations.

The company reports on their paper business, stating that they have implemented price increases but are experiencing delays due to index price decreases. Volume has increased compared to the same quarter last year, but has decreased compared to the previous quarter due to a maintenance outage and high volume in the first quarter. The company's employees remain focused on efficient operations. Cash flow and expenditures for the quarter are reported, and the company revises their full year capital spending guidance.

The increase in profits is due to growth opportunities in the box plants and the new greenfield plant in Phoenix. The company plans to use its cash flow to continue growing and maximizing returns for shareholders. Moving into the third quarter, prices and mix are expected to increase in both the Packaging and Paper segments. The company also plans to build inventory ahead of a scheduled maintenance outage. Third quarter earnings are expected to be $2.45 per share. The company reminds listeners that some statements made during the call are forward-looking and involve risks and uncertainties.

The speaker discusses the difference between actual results and forward-looking statements, and then opens up the call for questions. The first question is about costs, specifically the $0.31 year-on-year negative variance in operating costs, which is attributed to higher costs at the Wallula mill and increased energy and OCC prices. The speaker expects costs to be stable in the third quarter, with a slight increase in OCC and electrical usage rates.

The company's bookings and billings have remained strong, with a 12.5% increase in July. The company's mix of business has changed, with growth primarily in the brown area. The company has been performing well compared to the industry, but the reasons for this are unclear.

In the marketplace, the specialty business has remained stable while the growth has been primarily in brown. The company's growth is a result of a focused team, strong customer relationships, and alignment with chosen markets. In the second quarter, the company beat their guidance of $2.07 per share, with volume and cost efficiencies being the main factors. There is competition from companies pursuing a similar strategy, but the company remains focused on their own strengths and customer relationships.

Mark Kowlzan and Tom Hassfurther discuss their competition and their strategy in the marketplace. They also mention the positive impact of their Jackson project, which has exceeded expectations and is currently running at a high level to meet demand. This project will continue to help them grow in the marketplace over the next year or two.

The company is performing well and meeting expectations in terms of earnings and performance. There is potential for increased EBITDA from the Jackson project, and the company is also investing in new projects that will provide high returns. These projects include upgrading facilities and installing new corrugators. The increased capital expenditure will also help increase capacity.

The cost of building a state-of-the-art plant has significantly increased in the past 10 years, approaching double the cost from before. The new plant in Arizona will have a capacity of a couple billion square feet per year. The pricing increase in February and PPW in June will start to show up in the third quarter and fully realize in the fourth quarter. The $200 million increase in CapEx is primarily for the Arizona project.

Kowlzan explains that in addition to the new Arizona plant, the company has identified opportunities for new corrugators and converting lines at existing plants. They are aggressively pursuing these opportunities and also investing in high-return projects at their mills. He notes that the level of spending will depend on the opportunities available, but they are currently in a cycle of high spending. The Arizona plant is expected to be up and running in late first quarter or early second quarter of next year. The strong volumes in various end markets are driven by a mix of consumer, industrial, durable, and logistics customers.

Tom Hassfurther, Anthony, says that nothing has surprised the company except for the fact that consumer demand has held up better than expected. The consumer remains healthy, but durables have been less healthy due to housing starts being down. The company has a 95% integration rate and internalizing the remaining 500,000 tons of capacity could result in an incremental profit of around $200 per ton. The company is not affected by new legislation in the EU as they are not located there.

The speaker discusses the potential impact of global trade flows and the use of recycled materials on OCC (old corrugated containers) prices. They mention that the Europeans may have to revisit their legislation on recycled materials and that the company is not currently concerned about it. The speaker also mentions that their approach to capital remains the same, with a balanced approach to dividends, share repurchases, and potential acquisitions. They state that they are in a good position to take advantage of opportunities that arise. The next question is from an analyst asking about the company's plans for returning cash to shareholders.

Tom Hassfurther, a representative of Philip Ng's company, responds to Ng's congratulations on their strong quarter. Hassfurther explains that their company has a specific go-to-market strategy that focuses on aligning with customers that have long-term growth potential. They also have a consistent strategy of capital spending to take advantage of opportunities in the marketplace. This may not align with macro trends, but it has been successful for their company.

Philip Ng asks Tom Hassfurther about restocking from customers and the ramp-up curve for CapEx investments. Mark Kowlzan responds that customers are holding conservative inventory levels and the benefits from CapEx investments will be seen this year and next year. He also mentions that the company is currently executing on a portfolio of activity in box plants and there is always a lag in seeing the benefits of these investments. The company is considering both building and buying opportunities.

The speaker is asked about potential acquisitions and responds that there are always opportunities, but he does not want to speculate. The next question is about the new Arizona box plant, and the speaker says it will more than double the capacity of the existing site. They are out of capacity in that market and need to do something different to service their customers.

Mark Kowlzan discusses the opportunities in the company's portfolio, particularly in the region of Arizona. He mentions the company's success in increasing productivity and cutting costs in older plants, and sees the new plant in Arizona as a significant opportunity. The conference call ends with Kowlzan thanking participants and looking forward to the next call in October.

This summary was generated with AI and may contain some inaccuracies.