During the Packaging Corporation of America's Third Quarter 2024 Earnings Results Conference Call, led by CEO Mark Kowlzan, it was announced that the company's net income for the third quarter of 2024 was $238 million, or $2.64 per share. Excluding special items, the net income was $239 million, or $2.65 per share, compared to $185 million, or $2.05 per share, in the third quarter of 2023. The net sales for the third quarter of 2024 increased to $2.2 billion from $1.9 billion in 2023. Additionally, the company's EBITDA, excluding special items, rose to $461 million in 2024 from $388 million in 2023. Chief Financial Officer Bob Mundy and Executive Vice President Tom Hassfurther also participated in the conference call.

The paragraph details a $0.60 per share increase in third quarter 2024 earnings, primarily driven by higher volumes and favorable price/mix in the Packaging and Paper segments, as well as reduced expenses in logistics and outages. These gains were somewhat offset by increased operating, converting, and depreciation costs. The results exceeded expectations by $0.20 per share. In the Packaging business, EBITDA reached $446 million with a 22.2% margin, improving from last year's performance. Record production and shipments were achieved due to strategic capital investments and employee efforts, although inventory targets were not met due to strong demand.

The article discusses adjustments to the DeRidder Mill's outage plans, fewer corrugated shipping days in the fourth quarter, and a lighter schedule for 2025 as strategies to reach a year-end target. Tom Hassfurther reports strong demand and record-breaking performance in corrugated products, with significant increases in daily shipments and total shipments compared to last year and the previous quarter. Containerboard sales also exceeded expectations with higher volumes and successful implementation of price increases. While domestic prices remained stable, export prices slightly increased. Tom commends employees for their continuous improvement efforts in customer service, efficiency, and quality, contributing to industry-leading results, and emphasizes the importance of ongoing enhancements.

In the third quarter, the Paper segment achieved an EBITDA of $43 million on sales of $159 million, resulting in a margin of 27.0%. This is an improvement from the same period in 2023, where EBITDA was $35 million with a 22.4% margin on $158 million in sales. The company successfully implemented planned price increases, though prices were down 2% compared to Q3 2023. Volume exceeded forecasts, growing 4% year-over-year and 5% from the previous quarter, driven by back-to-school shipments and demand in printing and converting. Operational efficiencies were high, particularly in machine operations, chemicals, and energy usage. Financially, the company generated $327 million in cash from operations, with free cash flow of $180 million. Outlays included $147 million in capital expenditures and $112 million in stock dividends, among others. The company ended the quarter with $841 million in cash and a total liquidity of about $1.2 billion. Maintenance costs have slightly shifted due to adjustments at the DeRidder Mill, with an estimated annual outage expense of $0.87 per share.

The paragraph discusses the company's outlook as it transitions from the third to the fourth quarter. It predicts strong demand in the Packaging segment, with increasing corrugated shipments and containerboard volume. However, total shipments will be affected by two fewer shipping days and hurricane damage to strawberry crops in Florida. The company plans to build inventory levels before year-end while benefiting from prior price increases despite a less favorable seasonal mix. The Paper segment is expected to see lower shipments compared to the third quarter, with stable prices and mix but higher operating, converting, energy, and chemical costs. Scheduled outage costs and depreciation are expected to rise, leading to an anticipated fourth-quarter earnings of $2.47 per share. It cautions that these projections involve risks and uncertainties that could lead to different actual results. The paragraph concludes by opening the floor for questions, starting with George Staphos from Bank of America.

In the paragraph, Tom Hassfurther responds to a question about bookings and billings at the start of the fourth quarter, noting they've increased by over 8% compared to the previous year. He highlights growth in the e-commerce sector as a key contributor, mentioning that many customers have been engaged in e-commerce for years, resulting in continuous growth, especially reflected in big box stores and online shopping. In contrast, the graphics segment, particularly point of purchase displays, has remained flat. Overall, the company is experiencing nice growth, with some areas performing better than others.

The paragraph highlights a discussion between Tom Hassfurther and George Staphos about the impact of crop damage on business volume, particularly in Florida, which is an important market. The crop damage, caused by immature plants, will delay the harvest from the fourth quarter to the first quarter of the next year. In terms of investments, the company is committed to investing where customer demand requires, despite the challenging conditions. Tom compliments the employees for effectively managing capital projects and maintaining high service quality amid increased demand.

In the paragraph, Mark Kowlzan discusses the company's significant investments in its box plant system, including new corrugators, rebuilds, and converting lines, with 60 major projects planned for the year. He highlights ongoing efforts to build new operations in Glendale, Arizona, expected to start early next year, and plans for more big plants in the next few years, with $2 billion spent in the last five years. This reinvestment is crucial for enhancing the plants' capabilities and serving customers. In response to a question from Mike Roxland about volume growth, Tom Hassfurther states their intent to capitalize on every opportunity for profitable revenue growth, without providing a specific timeline for when growth normalization might occur.

The paragraph discusses a company's growth strategy, emphasizing their ability to meet customer needs, which has led to significant growth primarily from existing customers. They acknowledge that future growth comparisons will be challenging due to past successes but remain confident in achieving profitable revenue growth. The company's capital expenditures are made in response to customer demands, allowing for efficiency and new opportunities. Mark Kowlzan highlights the company's historical success in outperforming competitors in the packaging sector. Tom Hassfurther notes that their focus remains on customer needs rather than directly comparing with competitors. Additionally, a mention is made of plans to build new plants in the coming years.

In the paragraph, Mark Kowlzan discusses the company's plans regarding maintenance schedules and production capacity. He mentions that the maintenance outage schedule for the first half of 2025 will be lighter, as they won't have significant outages like the one previously at the Jackson facility, which involved extensive rebuild work. This is contrasted with the difficulties they have faced in rebuilding inventories and maximizing production capacity, leading to a potential need to purchase paper from the open market. Kowlzan acknowledges the investment efforts in their systems and reaffirms their strategy to remain over-integrated.

The paragraph discusses the company's routine maintenance plans for the year, expecting it to be lighter without specifying details. They are confident about meeting containerboard supply and customer needs in the coming years. Gabe Hajde inquires about capital allocation and share repurchases, noting an $851 million balance sheet. Bob Mundy explains that the company evaluates capital allocation for shareholder returns and strategic plans, being opportunistic with share repurchases, and indicates Mark may have additional input on this strategy.

In the paragraph, Mark Kowlzan discusses the company's increased capital spending, which rose from the initially projected $470 million to around $680 million due to new opportunities in areas like Glendale and other plant enhancements. He emphasizes that these investments are being directed towards high-return, valuable opportunities that are the best use of excess cash, with investor support. In response to a question from Mark Weintraub about containerboard production, Kowlzan confirms that all mills, including Wallula, were fully operational in the third quarter, despite a significant shutdown at Jackson. The company is also consistently seeking optimization opportunities across its mills.

The paragraph discusses the company's strategic planning and investment in its paper production facilities. Mark Kowlzan explains the company's confidence in its current and future plans for containerboard supply, mentioning potential expansion projects like upgrading the Counce Mill and Valdosta machines. He also highlights the exceptional performance of their Paper segment, particularly the high EBITDA margins from the I Falls facility, and notes that this performance is comparable to a peak from a couple of years ago.

The paragraph discusses the performance of a paper mill in I Falls, which is producing around 500,000 tons of uncoated freesheet paper annually, with 75% of that being cut size for copy machines. It is described as well-managed and well-capitalized. Bob Mundy mentions that maintenance outages this year cost $0.87 and expects them to be lower next year, with production potentially increasing by 100,000 tons. Philip Ng from Jeffries questions the rise in operating costs despite strong quarterly performance and suggests inefficiencies, particularly at the Jackson site, could have contributed to this year's challenges but might improve by 2025.

In the paragraph, Bob Mundy discusses the company's costs, noting that while there has been a slight increase in costs due to inflation, they have remained relatively stable. He highlights that costs this year were impacted by running the Wallula mill, which added approximately $30 million in expenses compared to the previous year when it was shut down. Mundy is cautious about predicting future cost trends but mentions the potential for moderation in cost increases in the coming quarters. Philip Ng inquires about potential cost changes in 2025 and mentions the influence of energy prices. Mundy responds that, aside from energy and another cost factor, expenses seem stable.

The paragraph is part of a conversation about the implementation and impact of box price increases and business strategies. Tom Hassfurther from the company explains their disciplined approach to implementing box price increases by customer and item, ensuring proper execution. Most increases will be in place by the end of the third quarter, with some extending into the fourth quarter due to annual contract triggers. Additionally, he mentions improvements in product mix efficiency. Philip Ng seeks clarification on the timing of annual contract triggers. Anthony Pettinari then asks about the company's growth and business wins in e-commerce, noting that PCA, historically focused on virgin materials, can also pivot to using recycled materials.

In the conversation, Tom Hassfurther discusses the company's flexible approach to using recycled versus virgin materials, focusing on meeting customer needs rather than sticking to a particular strategy. The company has improved its mill capabilities to handle lightweight materials effectively. They prioritize performance and customer demands, which gives them a competitive edge over fully recycled board producers. Meanwhile, Anthony Pettinari seeks clarification on inventory levels, noting that while inventory was expected to be built up ahead of an October maintenance outage, it remained below target possibly due to stronger than anticipated demand, with no mention of operational or technical issues contributing to the shortfall.

Mark Kowlzan discusses the unexpected demand growth they experienced this year, which has kept inventory levels lower than desired. However, he sees the lower inventories as beneficial since it keeps everyone engaged and highlights the importance of every minute of machine production. Charlie Muir-Sands from BNP Paribas asks about the sources of volume growth, whether from existing or new clients. Tom Hassfurther responds that most growth comes from existing customers, but new clients have also contributed significantly. He emphasizes their reputation for quality and reliability as a key factor in attracting clients. Ryan Fox from Bloomberg asks for more details about the increased operating and converting costs.

In the paragraph, Tom Hassfurther and Mark Kowlzan discuss cost factors affecting their business, including higher old corrugated container (OCC) costs, labor and benefits, and other expenses like building rentals and professional fees. They also mention a record quarter for containerboard production, achieving nearly 1.3 million tons, and emphasize their capability to meet customer demand in the coming years. Responding to a question about future paper supply strategies, Mark Kowlzan suggests that they will focus on optimizing existing operations in the short term and undertake larger projects in the following years to support growth.

In the paragraph, Mark Kowlzan thanks participants for joining the conference call and looks forward to discussing the full year 2024 and fourth quarter results at the end of January. The operator then concludes the call, thanking everyone for attending and instructing them to disconnect their lines.

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