• Fourth Quarter Net Income: $221 million or $2.45 per share.
• Fourth Quarter Net Income (Excluding Special Items): $222 million or $2.47 per share.
• Fourth Quarter Net Sales: $2.1 billion.
• Fourth Quarter EBITDA (Excluding Special Items): $439 million.
• Full Year 2024 Net Sales: $8.4 billion.
• Full Year 2024 Earnings (Excluding Special Items): $814 million or $9.04 per share.
• Packaging Segment Fourth Quarter EBITDA (Excluding Special Items): $426 million.
• Packaging Segment Fourth Quarter Sales: Almost $2.0 billion.
• Packaging Segment Full Year 2024 EBITDA (Excluding Special Items): $1.6 billion.
• Packaging Segment Full Year 2024 Sales: $7.7 billion.
• Paper Segment Fourth Quarter EBITDA (Excluding Special Items): $39 million.
• Paper Segment Fourth Quarter Sales: $152 million.
• Cash Provided by Operations (Fourth Quarter): $325 million.
• Free Cash Flow (Fourth Quarter): $124 million.
• Year-End Cash Balance: $852 million.
• Liquidity: $1.2 billion.

• Warning! GuruFocus has detected 4 Warning Signs with PMMAF.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Packaging Corp of America (NYSE:PKG) reported a record fourth quarter net income of $221 million, or $2.45 per share, up from $192 million, or $2.13 per share, in the same quarter of 2023.
• The company achieved record fourth quarter net sales of $2.1 billion, an increase from $1.9 billion in the previous year.
• Strong demand in the Packaging segment led to record shipments and production levels, with a 9.1% increase in total shipments compared to the previous year.
• The company successfully completed the conversion of the No. 3 machine to containerboard at the Jackson mill, enhancing production capabilities.
• Packaging Corp of America (NYSE:PKG) ended the year with $1.2 billion in liquidity, maintaining a strong balance sheet and financial flexibility for future opportunities.

Negative Points

• Higher operating costs due to inflation impacted the company's cost structure, offsetting some of the gains from increased sales and pricing.
• Scheduled maintenance outage expenses and depreciation costs were higher, contributing to increased operational expenses.
• The company faced challenges with the RISI Pulp and Paper Week publication not recognizing industry-wide price increases for linerboard and medium, causing frustration.
• Despite strong demand, the company experienced inefficiencies due to the influx of volume and ongoing capital projects, impacting cost management.
• The company anticipates higher costs in 2025 due to increased labor, benefits, and energy expenses, as well as significant rail rate increases.

Q & A Highlights

Q: Can you discuss the current bookings and billings and any inefficiencies due to increased volume? A: Bookings and billings are up 8% in January, indicating a strong start. The increased volume, coupled with ongoing capital projects, has caused some cost inefficiencies. However, our team has managed these challenges effectively. (Thomas Hassfurther, Executive Vice President - Corrugated Products)

Q: How are cost factors moving from Q4 to Q1, and how are price increases being implemented? A: Costs are higher due to mill mix, seasonal weather impacts, and timing items like wage increases. About 65% of these costs are expected to reverse in subsequent quarters. Price increases for containerboard are being implemented, and customers are paying the higher prices. However, some box prices are still tied to RISI index changes, which we are moving away from. (Robert Mundy, CFO; Thomas Hassfurther, Executive Vice President - Corrugated Products)

Q: What is the current operating rate, and what are the plans for adding capacity at Counce and Valdosta? A: We are running hard but not at full capacity, with room to optimize the system. Projects at Counce and Valdosta are under consideration for the next couple of years, providing flexibility in adding capacity as needed. (Mark Kowlzan, CEO)

Q: Can you elaborate on the impact of the January price increase and the process of moving customers off the RISI index? A: The January price increase is being implemented, but the impact on contracts tied to RISI will depend on when the index reflects the increase. We are working to move customers off the RISI index, which will take time due to long-term contracts. (Thomas Hassfurther, Executive Vice President - Corrugated Products)

Q: What is the breakdown of the $840 million to $870 million CapEx for 2025, and how much is allocated to box plant projects? A: Approximately $250 million is allocated to four major box plant projects, including a new plant in Ohio and the Glendale project. These projects are part of our growth strategy and are expected to enhance efficiency and capacity. (Mark Kowlzan, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.