PCA's Q2 net income up 2.6% year-over-year to US$39M on 8% increase in net sales up to US$665M; results driven by higher containerboard, corrugated products price and mix, higher volume
LAKE FOREST, Illinois
July 18, 2011
– Packaging Corporation of America (NYSE:PKG - News) today reported second quarter 2011 net income of $39 million, or $0.39 per share, which included after-tax income of $1 million, or $0.01 per share, from an adjustment to reserves related to medical benefits, and a $1 million, or $0.01 per share, charge from asset disposals related to major energy projects. Reported results for the second quarter of 2010 were net income of $38 million, or $0.37 per share, including an after-tax charge of $1 million, or $0.01 per share, from asset disposals related to major energy projects. Net sales for the second quarter were a record $665 million, up 8%, compared to $615 million in 2010.
Excluding the reserve adjustment and asset disposal charges, second quarter 2011 earnings were $40 million, or $0.39 per share. Second quarter 2010 earnings, excluding asset disposal charges, were $39 million, or $0.38 per share. Compared to last year, higher containerboard and corrugated products price and mix ($0.09) and higher volume ($0.06) improved earnings. These improvements were essentially offset by higher costs for chemicals ($0.04), transportation ($0.03), labor ($0.03), energy ($0.02), recycled fiber ($0.01), and legal ($0.01).
Excluding the reserve adjustment and asset disposal charges, net income for the first six months of 2011 was $79 million, or $0.78 per share. Excluding income from biofuel credits and asset disposal charges, net income for the first six months of 2010 was $52 million, or $0.50 per share. Year-to-date net sales were $1.29 billion compared to $1.17 billion in 2010.
Corrugated products shipments were up 3.2%, and outside sales of containerboard were up 22,000 tons compared to last year’s second quarter. Containerboard production was 606,000 tons, up 17,000 tons over the second quarter of 2010. Containerboard inventories at the end of June were 18,000 tons below the end of the first quarter and 25,000 tons below 2010 year-end levels.
Mark W. Kowlzan, Chief Executive Officer of PCA, said, “Operationally, this was probably as difficult and successful a quarter that we’ve ever had considering the planned outages at all four of our mills and energy project work at our Counce and Valdosta mills. The mills performed exceptionally well with higher productivity and lower costs than expected. Our containerboard and corrugated products demand remained strong, pricing remained steady, and mix improved, as expected, over the first quarter. Cost inflation for input materials continued, however, and remains a concern.”
“Looking ahead to the third quarter,” Mr. Kowlzan added, “we expect higher sales volumes and increased mill production with less downtime than the second quarter, but Counce will be slowed back as a result of the recovery boiler rebuilds. Costs for recycled fiber, fuels and electricity are expected to be higher. Considering these items, we expect third quarter earnings to be about $0.43 per share.”
PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.44 billion in 2010. PCA operates four paper mills and 68 corrugated products plants in 26 states across the country.
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