PACKAGING CORP OF AMERICA Q3 FY2024 earnings call

• Net income in Q3 2024: $238 million ($2.64 per share), excluding special items $239 million ($2.65 per share) vs Q3 2023 $185 million ($2.05 per share)
• Net sales in Q3 2024: $2.2 billion vs $1.9 billion in 2023
• Total company EBITDA excluding special items in Q3 2024: $461 million vs $388 million in 2023
• Packaging business EBITDA margin 22.2% in Q3 2024 vs 21.3% in 2023
• Paper business margin 27.0% in Q3 2024 vs 22.4% in 2023
• Cash provided by operations: $327 million, free cash flow $180 million
• Capital expenditures: $147 million, common stock dividends $112 million, tax payments $77 million, pension contributions $26 million
• Maintenance outage expense: Third quarter impact $0.17 per share (unfavorable to guidance), fourth quarter estimate $0.20 per share (favorable), total for year $0.87 per share

Packaging Segment

• EBITDA excluding special items in Q3 2024: $446 million, sales: $2 billion, margin 22.2%
• Last year: EBITDA $374 million, sales $1.8 billion, margin 21.3%
• Set new quarterly records for containerboard production, total box shipments, and shipments per day

Paper Segment

• EBITDA excluding special items in Q3 2024: $43 million, sales: $159 million, margin 27.0%
• Last year: EBITDA $35 million, sales $158 million, margin 22.4%
• Implemented price increases as planned, volume up 4% vs Q3 2023, 5% above Q2 2024

• Expect strong demand in Packaging segment with corrugated shipments per day strengthening and slightly higher containerboard volume, but corrugated shipments impacted by two fewer shipping days and Florida strawberry crop damage
• Attempt to build containerboard inventory as current inventory below target
• Paper segment expects lower shipments vs seasonally stronger Q3, prices and mix fairly flat, but operating and converting costs to increase due to higher energy and chemical costs
• Full-year earnings estimate: $2.47 per share

• Economic uncertainties impacting demand
• Hurricane damage in Florida affecting corrugated shipments
• Inventory levels below target despite efforts
• Maintenance outage variances affecting financial guidance

Q: Can you talk about where bookings and billings are to start the fourth quarter and end markets?

A: Bookings and billings per day up over 8% vs 2023. E-comm area growing nicely, while graphics mix (POP related) flat. Durables not performing as well as non-durables Q: What does crop damage mean to volume and CapEx?

A: Crop damage leads to delayed strawberry crop shipments into Q1 2025. CapEx invested where customers need, with ongoing capital projects in box plants and plans for new plants in Arizona and others over next few years Q: How should we think about volumes and when growth should normalize?

A: Plan to profitably grow revenue. Comps will be tougher next year, but focus on profitable growth. Capital expenditures based on customer needs provide opportunities Q: Can you give sense for swing in maintenance outage between H1 and H2 2025 and paper supply?

A: 2025 outage schedule lighter, normalizing from higher than normal outage in 2024. Confident in paper supply for next few years with long-term plans Q: Color on operating costs, maintenance outage, and price mix?

A: Operating costs affected by factors like Wallula startup and OCC costs. Maintenance outage normalizing. Price mix better than expected due to disciplined box price increase implementation Q: Insight on volume growth source (existing clients, new business)?

A: Growth primarily from existing customers, but also adding new clients due to reputation for quality and delivery