Packaging Corporation of America Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Completed the acquisition of the Greif Containerboard business on September 2, with 1 month of the acquired operations included in third quarter results.
• Packaging segment performance was driven by higher prices and mix, but offset by higher operating costs, lower production/sales volume, etc.
• Paper segment had seasonally stronger third quarter but lower volume compared to the prior year.
• Cash provided by operations was a record $469 million, free cash flow was a record $277 million. Revised capital forecast for the year is approximately $800 million, down from previous forecasts.

Segment Performance

• Packaging Business: Excluding special items, third quarter 2025 EBITDA was $492 million with sales of $2.1 billion, resulting in a margin of 23.1%. Last year, EBITDA was $446 million with sales of $2 billion and a margin of 22.2%. Corrugated volume was on plan, and the acquired mills produced 47,000 tons in September.
• Paper Segment: Excluding special items, third quarter 2025 EBITDA was $40 million, with sales of $161 million and a margin of 24.9%. Last year, EBITDA was $43 million, sales were $159 million, and the margin was 27.1%. Sales volume was 1% below the third quarter of 2024 and 10% above the second quarter of 2025.

Guidance

• Expect fourth quarter earnings excluding special items to be $2.40 per share.
• Packaging segment expected to have lower prices and mix due to seasonality.
• Paper segment expected to have seasonally lower production and sales volume, flat pricing, and higher energy and fiber costs.
• Significant improvement expected from the acquired business, but impacted by the Massillon mill outage and seasonally lower volume in the corrugated business.

Risks

• Uncertainties in the economy, including the direction of the economy and other risk factors identified in the company's Form 10-K, which could materially affect actual results from forward-looking statements.

Question and Answer

Q: Can you talk about bookings and billings as we're starting fourth quarter?

A: Tom says right now the blend of bookings and billings is a little over 1% up, and it's tough comps.

Q: Any comments on Greif integration?

A: Culture fits well, operational improvements seen, synergies on track with historical Greif performance and projected synergies.

Q: Details on CapEx and energy projects?

A: Details to be shared in January, with energy projects involving gas turbines for improved efficiency.

Q: Box plant wins and capacity closures?

A: Continuing to earn wins by serving existing accounts, and rationalizing box plants to rightsize to demand.

Q: Energy projects and electricity sales?

A: No major PCA mills are selling significant amounts of electricity back to utilities yet, details to be shared in January.

Q: Inventory and EBITDA from Greif?

A: Inventory will be reduced over the next couple of quarters, and EBITDA from the acquired business is expected to improve.