On October 24, 2023, Packaging Corp of America (PKG, Financial) released its earnings report for the third quarter of 2023. The company reported a net income of $183 million, or $2.03 per share, and net income of $185 million, or $2.05 per share, excluding special items. This represents a decrease from the third quarter of 2022, where the company reported a net income of $262.5 million, or $2.80 per share. Net sales for the third quarter were $1.9 billion, down from $2.1 billion in the same period last year.
Financial Performance and Challenges
The decrease in third quarter 2023 earnings compared to the third quarter of 2022 was driven primarily by lower price and mix ($1.33) and volume ($.09) in the Packaging segment, higher depreciation expense ($.11), lower volume in the Paper segment ($.04), a higher tax rate ($.02), and other expenses ($.02). These items were partially offset by lower operating costs $.58, a lower share count resulting from share repurchases in the second half of 2022 $.11, higher prices and mix in the Paper segment $.04, lower converting costs $.04, lower scheduled maintenance outage expenses $.04, and lower freight and logistics expenses $.02.
Segment Performance
In the Packaging segment, corrugated products shipments per day were up 1.9% over last year’s third quarter and total shipments, with two less shipping days, were down (1.3%). In the Paper segment, sales volume was down 10,000 tons compared to the third quarter of 2022.
“We were able to exceed our guidance for the quarter with better demand in our Packaging and Paper segments and by remaining focused on process efficiency optimization efforts across our mills and corrugated products facilities," said Mark W. Kowlzan, Chairman and CEO of Packaging Corp of America.
Looking Ahead
For the fourth quarter, the company expects earnings of $1.76 per share. This is based on expectations of less market-related downtime, higher shipments per day in corrugated products facilities, lower average prices, and an increase in operating and converting costs driven by higher recycled fiber prices, seasonal energy costs, and the re-start of the Wallula mill.
