The article discusses the fourth quarter and full-year 2024 earnings results for Packaging Corporation of America (PCA) during a conference call led by CEO Mark Kowlzan. In the fourth quarter of 2024, PCA reported a net income of $221 million, or $2.45 per share, which increases to $222 million, or $2.47 per share, when excluding special items. This compares to $192 million, or $2.13 per share, in the fourth quarter of 2023. Record net sales for the fourth quarter were $1 billion in 2024 and $1.9 billion in 2023, with total company EBITDA excluding special items reaching $439 million in 2024 compared to $394 million in 2023. For the full year 2024, PCA's earnings were $814 million, or $9.04 per share, up from $784 million, or $8.70 per share, in 2023. Full-year net sales were $8.4 billion in 2024, compared to $7.8 billion in 2023, with total EBITDA excluding special items at $1.6 billion for both years.

The paragraph provides an overview of the company's financial performance in the fourth quarter of 2024, highlighting a $0.34 per share increase in earnings compared to the previous year, driven by higher prices, mix, and volume in both the Packaging and Paper segments. Lower freight and logistics expenses contributed to this growth, though higher operating costs, maintenance expenses, and depreciation somewhat offset these gains. EBITDA for the Packaging segment reached $426 million on record sales of nearly $2 billion, maintaining a 22% margin similar to the previous year. For the full year 2024, the Packaging segment achieved $6 billion in EBITDA with $7.7 billion in sales, slightly reducing the margin to 21% compared to 2023. Strong demand, effective operations, and strategic capital investments helped counter inflationary pressures, while the Packaging segment saw record shipments both quarterly and annually.

In the third paragraph of the article, the company reports record-breaking performance in its mill containerboard systems, setting new quarterly and annual production records that helped meet customer demands and build inventory ahead of a scheduled mill outage in 2025. Total shipments increased by 9.1% from the previous year's fourth quarter and by 3.2% from the third quarter of 2024. While outside sales volume of containerboard was slightly down compared to the third quarter of 2024, annual records for corrugated shipments were set, both overall and per day, with a notable increase compared to 2023. Prices and product mix for domestic containerboard and corrugated products saw an increase, as did export containerboard prices compared to the same period last year. The company also notes ongoing strong demand and persistent inflation in their cost base, and announced a price increase for linerboard and medium effective January 1, 2025.

The paragraph discusses the discrepancy between actual price increases for containerboard and what was reported by the RISI Pulp and Paper Week publication, which did not acknowledge these changes. Despite most top producers announcing price hikes, the publication left benchmark prices unchanged, causing frustration due to potential inaccuracies in its small sample size analysis and confusing containerboard with box prices. The company is gradually shifting away from indexing its prices to the RISI publication to achieve more predictable pricing, although this transition will take time.

The article discusses the financial performance of a company's Paper segment in the fourth quarter and full year of 2024, highlighting improvements in EBITDA and sales margins compared to 2023. The fourth-quarter EBITDA was $39 million on sales of $152 million, and for the full year, EBITDA was $154 million on sales of $625 million. Price and mix increased by 2% from the previous year's fourth quarter, and volume rose by 5%. However, volume declined by 5% compared to the third-quarter of 2024. Customers were informed of a $60 per ton price increase for various paper types effective January 13. The management optimized inventory and operations effectively. Cash provided by operations in the quarter was $325 million, with free cash flow at $124 million after capital expenditures and other payments. For the full year 2024, cash from operations reached $1.2 billion, with $521 million in free cash flow. The year-end cash balance stood at $852 million, and the effective tax rate for 2024 was 24.4%.

The paragraph outlines financial estimates and business achievements for PCA. For the upcoming year, PCA projects dividend payments of $450 million, capital expenditures between $840 million and $870 million, and a DD&A of $565 million. Interest expenses and net cash interest payments for 2025 are estimated at $56 million and $65 million, respectively, with a book effective tax rate of 25%. Planned outages at larger mills in 2025 are expected to result in an impact of $1.18 per share, distributed across quarters. Mark Kowlzan highlights the company's 2024 accomplishments, including record shipment and production levels in their Packaging segment, successful machine conversions, and various improvement projects. Strategic capital initiatives are ongoing for 2025.

In 2024, the company achieved record margins in its paper business, similar to 2023, due to optimized operations and cost efficiency. It ended the year with $1.2 billion in liquidity and a strong balance sheet, allowing financial flexibility. The company plans to continue a balanced approach to capital allocation to grow profitably while maintaining a conservative balance sheet. Looking forward, the Packaging segment expects record shipments despite seasonal slowdowns, though containerboard volume will decrease due to fewer operating days and maintenance outages. Domestic prices will rise, although export prices are expected to remain stable. In the Paper segment, volume will slightly decrease with stable prices, but cost inflation is anticipated across various operating areas due to cold weather.

The article paragraph discusses anticipated cost increases for the first quarter, including higher labor and benefits costs due to annual increases, payroll taxes, and share-based compensation expenses. Additionally, rail rate hikes at three mills will elevate freight and logistics costs, and depreciation expenses are expected to rise. However, outage expenses should be slightly lower, and a low corporate tax rate is assumed. The earnings forecast for the first quarter is $2.21. The statement emphasizes the forward-looking nature of these projections, which depend on current estimates and carry risks and uncertainties. It notes that actual results could differ significantly. The paragraph ends by transitioning to a question-and-answer session, with George Staphos from Bank of America Securities posing the first question about bookings, billings, and potential inefficiencies due to high volumes experienced by PCA. Tom Hassfurther is indicated to respond.

The paragraph discusses the positive start to the year with an 8% increase in bookings and billings in January. Despite certain cost inefficiencies due to ongoing capital projects and business shifts, the team has managed these challenges effectively. Mark Kowlzan highlights significant achievements in 2024, including the installation of new equipment, major reconfigurations, and rebuilds across various plants, along with developments in Salt Lake City and Glendale. Around 60 major projects have been maintained annually within the corrugated business, with this investment pace being crucial for growth. George Staphos acknowledges this as the growth engine and asks about the impact of cost factors moving from Q4 to Q1, including input costs and incentive compensation.

The paragraph discusses price increases set to take effect in January, with some sensitivity around discussing competitors' actions. The speakers address questions about price protection or delays for customers. Robert Mundy explains cost movements from the fourth to the first quarter, highlighting higher costs due to factors like mill mix, severe weather in January, wage increases, and tax benefits. He estimates that 65% of these costs, which increased operating and converting expenses by $0.50 to $0.60, will largely reverse in the second and third quarters. Thomas Hassfurther further clarifies that the price increases relate specifically to linerboard and medium within the Containerboard segment, and that they are already billing at those increased prices.

The paragraph discusses pricing strategies for a company's products, specifically boxes. The company is paying higher prices for invoices, influenced by both domestic and overseas specialty products. The speaker expresses frustration with discussions about box price increases, which are kept between the company and its customers and are not publicly announced. Historically linked to RISI reports, the company is moving away from this method due to reduced open market relevance and potential reporting confusion. The segment ends with a question from Mike Roxland, congratulating the company on a strong year and inquiring about their current operating rate amid strong demand.

In the paragraph, Mark Kowlzan discusses the capacity expansion plans at Counce and Valdosta, emphasizing their flexibility and potential timing over the next few years, though no final decisions have been made yet. He highlights the company's ability to optimize its current seven mill system, following the completion of the Jackson reconfiguration, to meet growing demand. Kowlzan also notes that while they are not operating at full capacity, they are running efficiently and have options to optimize their system and purchase from open markets when necessary. High integration and demand growth provide opportunities for high returns on these projects.

The paragraph features a discussion among industry professionals about volume growth expectations and pricing dynamics. Thomas Hassfurther mentions that while volume growth will be steady through 2025, the year-over-year growth percentage may decline due to tougher comparisons later in the year. However, he highlights ongoing projects and capacity expansions to support growth. Mike Roxland acknowledges the points and wishes them luck. The conversation shifts to Gabe Hajde, who addresses Mark Kowlzan about potential price realizations and mix adjustments. Hajde's calculations suggest a $50 per ton price realization in 2024, implying a $30 million unfavorable mix, which he finds unusual for the company. He seeks confirmation or clarification on this observation.

In the discussion, Robert Mundy explains that price changes from 2024 will impact Q1 2025 prices, particularly when considering inventory and export vs. domestic volumes. There was a net $60 per ton change, factoring in a $20 per ton drop at the end of 2023. Price increases are influenced by customer, product, and seasonal mix changes. Gabe Hajde clarifies whether the company's Q1 2025 guidance includes price increases on open market tons and the converted box side. Mundy confirms that open market changes happen immediately with any price variation and that the guidance includes some box side price increases taking effect in Q1 2025, along with January's price adjustments, although not yet recognized by RISI.

In the paragraph, Gabe Hajde discusses with Mark Kowlzan the company's capital expenditures (CapEx) plans, including an increase in spending through 2025. They mention that the costs for a new box plant, like the Glendale facility, are higher than previously expected, ranging from $240 million to $260 million. Despite this, Kowlzan assures there will be incremental improvements in capacity through various small projects at the mills, rather than one large project, as part of optimizing existing operations. The focus is on extracting maximum value from previous expenditures with the help of the technology team. Overall, the cost and scope of projects have evolved significantly compared to a decade ago.

The paragraph discusses the company's recent and ongoing investments in its corrugated products business. They have started construction on a new box plant in Newark, Ohio, anticipating it to be operational by the end of next year. Additionally, there are significant renovations planned for an existing plant in the Northeast and reconfiguration on the East Coast. In total, there are four major projects underway, alongside around 50 smaller projects aimed at optimizing and enhancing the business rather than just maintaining it. The capital investment includes funds for new business growth. The paragraph also addresses maintenance expenses, indicating that larger mills planned for this year require more downtime, making them more costly compared to the previous year, while past operations focused on meeting demand.

The paragraph discusses the financial impact of market downtime and maintenance outages on a company's profit calculations. During market downtime, profits per ton are not included in maintenance outage penalties because sales couldn't occur anyway. This year, however, profits per ton are factored into outage calculations, leading to higher costs compared to 2024. Gabe Hajde appreciates the detailed explanation and Ohio investment, and a subsequent question from Mark Weintraub focuses on understanding how much of the anticipated containerboard price increase, set for January, has been incorporated into the first-quarter guidance. Thomas Hassfurther explains that due to contract timing and RISI-related agreements, the company must take a conservative approach for Q1, and non-contractual business prices are being implemented now, though specific agreements remain confidential.

The paragraph discusses the impact of containerboard price changes on contracts, with Mark Weintraub inquiring about the potential upside beyond the first quarter if RISI doesn't publish a price increase. Thomas Hassfurther explains that while there is potential upside, the company is taking a conservative approach. He elaborates on moving customers off indexes, indicating that it's a mixed approach involving negotiations with frustrated customers. Despite challenges, the company is confident in reaching agreements on future pricing with its customers.

The paragraph discusses the ongoing efforts by a company to transition its customers off the RISI index, a pricing benchmark. Mark Kowlzan highlights the mutual inflation and cost pressures faced by both the company and its customers, emphasizing the benefits of the company's capital spending for customers. Anthony Pettinari asks about the percentage of customers moved off RISI, and Thomas Hassfurther explains that the process began about a year ago and will take time due to long-term customer contracts and relationships. The company is carefully managing this transition to ensure it benefits both parties, but specific percentages for progress are not provided.

In the paragraph, Anthony Pettinari asks Mark Kowlzan about the capital expenditure (CapEx) allocation of $840 million to $870 million, specifically inquiring about the portion dedicated to four big box plant projects, including in Ohio and Glendale. Mark Kowlzan states that about $250 million is allocated to these projects for the year, noting that the Ohio greenfield project is the largest. Another discrete project involves a $70 million reconfiguration of a plant. Kowlzan also highlights that $370 million of the $445 million assigned to the corrugated sector for 2024 is for growth opportunities with existing customers, not speculative expansions. Thomas Hassfurther adds that these investments are based on existing customer growth, not on anticipating new business. The paragraph concludes with the operator introducing the next question from Philip Ng at Jefferies, who comments on the exciting growth projects and asks Mark Kowlzan about how the contributions from these projects will start impacting the business.

The Phoenix, Arizona box plant is set to start operations this spring, replacing three existing locations and significantly increasing efficiency and production capability. This consolidation is expected to be immediately beneficial in terms of quality and cost structure. Existing employees will transition to the new plant. Other projects in New Jersey, New York, and Pennsylvania are more disruptive and could cause short-term issues but are expected to provide substantial benefits over the next decade. The specific timing for these is unclear, but they might fully ramp up by 2025.

The paragraph discusses the completion and benefits of several projects aimed at increasing efficiency and capacity within a company. Mark Kowlzan and Thomas Hassfurther mention the closure of inefficient plants and consolidation of operations to enhance customer service and market reach, particularly in areas like Phoenix and Ohio. Philip Ng inquires about demand and box shipments, noting the company's momentum going into 2024 and its ability to outperform market recovery. He asks about the potential for further market share gains amidst industry disruptions and consolidation, seeking insight into the company's strategies for capitalizing on these opportunities.

In the paragraph, Thomas Hassfurther discusses the company's strategy of focusing on their core customer base by being the most reliable and high-quality supplier, which provides opportunities for growth. He notes that traditionally, customers have been hesitant to rely on a sole supplier but that this is changing. The company views its strong partnerships and customer-focused approach as a competitive advantage, supported by financial flexibility to expand rapidly. In response to Philip Ng's question about market mix, Mark Kowlzan mentions that e-commerce activities impacted the mix in the fourth quarter, but improvements are expected in the first half of the year, with another increase in e-commerce activities anticipated later. Hassfurther adds that their mix remains steady overall.

In the article paragraph, Charlie Muir-Sands from BNP Paribas asks about the proportion of maintenance capital expenditure within the overall budget for the year. Robert Mundy responds that typically, maintenance CapEx constitutes about 60-65% of total spending, though this year it will be less due to several large projects in the packaging sector focused on growth rather than maintenance. The discussion then shifts to the impact of weather, with Mark Kowlzan noting that while severe cold weather has been experienced, particularly in the deep south, it is uncertain if it will incur more costs compared to last year.

The paragraph discusses the impact of cold weather on business operations, particularly in the Gulf Coastal area, where Interstate 10 was shut down from Houston to Florida for a few days. This disruption affected energy usage, raw material consumption, and general commercial activity. Despite running well operationally, the colder winter increased operational expenses. Mark Kowlzan addresses a question from Ryan Fox regarding a decrease in revenue per produced ton from 2023 to 2024, despite an increase in the containerboard index. Robert Mundy responds that the decrease is likely closer to $40 per ton rather than $50, taking into account inventory changes.

The paragraph discusses the complexities of pricing in the containerboard industry over a two-year period. Despite price increases, there's a discrepancy when comparing the prices to an index, influenced by factors such as export volume declines, inventory changes, and product mix. The industry measures in tons, whereas the company sells by MSF (thousand square feet), adding another layer of complexity. Prices initially decreased significantly but have partially recovered, adding to the overall challenge of aligning price movements with the market index.

In the paragraph, the discussion revolves around the challenges and perspectives in the containerboard market. Ryan Fox questions the apparent overcapacity in the market and why there would be higher prices. Thomas Hassfurther explains that there's a disconnect between market perceptions and reality, highlighting that their company sells by MSF, not tons, and emphasizes the importance of long-term relationships to secure specific types of containerboard. He also remarks on the lighter basis weight of containerboard, which contributes to differences in production efficiency and may continue to impact operations in the future.

In the discussion, Thomas Hassfurther sees efficiency improvements as a fact of life, while Mark Kowlzan views them as opportunities, highlighting increased production with less fiber due to past capital investments. George Staphos inquires about pricing, noting an increase from last year. Robert Mundy clarifies that it's closer to $55 per ton. Staphos asks about cost inflation despite capital investments for efficiency, seeking insights on cost pressures and strategies to address them moving forward.

The paragraph discusses the challenges a company faces in managing rising costs due to inflation across various sectors such as energy, fiber, labor benefits, transportation, and services. Despite investments in capital to maintain their market position, these efforts are insufficient to counteract all inflationary pressures. Energy costs are highlighted as particularly significant, alongside chemicals, which are also experiencing price hikes. The company is focusing on strategic decisions, such as the precise location of new plants, to optimize operations amid increasing expenses.

In the paragraph, Mark Kowlzan discusses the significant benefits achieved from high spending over the past several years, emphasizing the plan to maintain this spending pace despite widespread inflation. He notes that without appropriate pricing, it will be challenging to keep up with inflation costs. The conversation concludes with George Staphos wishing Mark good luck for the quarter, after which Mark thanks the participants and looks forward to the next discussion at the end of April. The conference call is then officially concluded by the operator.

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