Q1 2023 Packaging Corp of America Earnings Call
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Upon conclusion of his narrative there will be a question and answer session.
Please also note today's event is being recorded.
At this time I would like to turn the conference call over to Mr. Coles and please proceed when you are ready.
Thank you Jamie.
Good morning, and thank you for participating in packaging Corporation of America's first quarter 2023 earnings release Conference call.
Again, I'm, Mark Colds, and chairman and CEO of PCA and with me on the call. Today is Tom has further executive Vice President who runs the packaging business.
And Bob Monday, our Chief Financial Officer, as usual I will begin the call with an overview of our first quarter results.
And then I will turn the call over to Tom and Bob will provide further details.
And then I'll wrap things up and we'd be glad to take questions.
Yesterday, we reported first quarter net income of $190 million or $2 11 per share.
Excluding special items first quarter 2023, net income was $198 million.
Or $2 20 per share compared.
Compared to the first quarter of 2022, net income of $256 million or $2 72 per share.
First quarter net sales were $2 billion in 2023, and $2 1 billion in 2022.
Total company EBITDA for the first quarter, excluding special items.
It was $405 million in 2023 and $467 million in 2022.
First quarter net income included special items expenses of <unk> <unk> per share primarily for the closure costs related to corrugated products facilities and design centers details.
Details of special items for both the first quarter of 2023 and 2022 were included in the schedules that accompanied our earnings press release.
Excluding these special items, the <unk> 52 per share decrease in first quarter 2023 earnings compared to the first quarter of 2022 was driven primarily by lower volumes in our packaging segment for 95.
And packaging and paper segment <unk>.
Although recycled fiber costs were lower than last year overall operating costs were 27%, 27% since higher primarily due to inflation on chemicals Les.
Labor and benefits supplies repair materials and services.
Energy costs, although trending down were also higher versus the first quarter of 2022.
In addition, we had higher depreciation expense of <unk> 11.
Freight and logistics expenses for.
Nonoperating pension expenses, <unk> and higher converting costs too.
These items were partially offset by higher prices and mix in the packaging segment for 58.
And paper segment 18.
A lower share count, resulting from share repurchases, we made in the second quarter of 2022 for 11.
Lower interest expense <unk> <unk> lower other expenses for <unk>.
Lower scheduled maintenance outage expenses for <unk> and lower tax rate <unk>.
The results were <unk> <unk> below the first quarter guidance of $2 23.
Per share primarily due to the lower volume and lower prices and mix in the packaging segment.
Looking at our packaging segment EBITDA, excluding special items in the first quarter 2023 of $392 million with sales of 181 billion resulted in a margin of 21, 7% versus last year's EBITDA of $464 million and sales of <unk>.
196 billion or 23, 6% margin.
Demand in our packaging segment was well below our expectations for the quarter, Tom will discuss this further in a moment.
The mills and corrugated products plants responded to the lower demand by remaining highly focused on efficient and cost effective operations as.
As we balanced our supply accordingly, our.
Our employees continued to deliver on numerous cost reduction initiatives.
<unk> improvements integration and optimization enhancements and capital project benefits.
To not only minimize the negative demand impacts on the short term, but also to remain in position to capitalize on our longer term strategic goals.
The accomplishments were achieved while building less inventory than we had planned and staying committed to ending the quarter at our targeted weeks of supply inventory.
I'll now turn it over to Tom who will provide further details on containerboard sales and our corrugated business.
Thanks Mark.
<unk> containerboard and corrugated products prices and mix were 64 cents per share above the first quarter of 2022, and we're down <unk> 50 per share compared to the fourth quarter of 2022.
Export containerboard prices were down <unk> <unk> per share versus last year's first quarter and down <unk> <unk> per share compared to the fourth quarter of 2022.
Corrugated product shipments were down 12, 7% in total and per workday compared to last year's first quarter outside sales volume of containerboard was 69000 tons below last year's first quarter and 33000 tons above the fourth quarter of 2022.
With the first quarter of 2022, setting a shipments per workday record as well as being our all time record for total shipments. We knew this would be a tough comparison period, however that being said the lower demand in our packaging segment that Mark spoke of was driven by several items the combined impact of which resulted in an <unk>.
Our volume is being much lower than we anticipated as we mentioned on last quarter's earnings call. It was difficult to predict the demand curve given the numerous variables with varying degrees of impact as noted in our earnings release yesterday, the shift of consumer buying preferences more towards service oriented spending.
<unk> inflation.
At higher interest rates continued to negatively impact consumer's purchases of both durable and non durable goods. In addition, there is a varying degree of inventory destocking across our customer base, both in boxes and our customers' products.
The inventory Destocking situation has been a longer term issue than we originally anticipated.
Manufacturing index has remained in contraction territory for several months now and as you know we have a large presence in the AG business in the Pacific Northwest and also down at Florida, where both of these regions have been dealing with significant weather events.
As we look to the second quarter, we expect the inventory destocking of both customer product and boxes to be near completion, we expect to see recovery in our AG business and we have received some positive feedback from our customers regarding improvements in their business. Our April volume as we see it today supports that position.
I'd also like to point out that the capital spending and optimization strategy within our box plant system that we have been focused on over the last few years continues to remain one of our top priorities. The current demand trends will not cause us to lose our focus in this area. The investments from this strategy and provide the products and service needs.
That our customers desire it allows them to grow while focusing on the mix of customers, we want to profitably grow our revenues with.
I'll now turn it back to Mark.
Thanks, Tom.
Looking at our paper segment EBITDA, excluding special items in the first quarter was $41 million with sales of $151 million or a 27 two.
27, 2% margin compared to the first quarter of 2022, EBITDA of $29 million and sales of $153 million or an 18, 9% margin.
Yeah.
Paper prices and mix were 18% higher than last year's first quarter and about 3% above the fourth quarter of 2022.
Sales volume was about 17% below last year's first quarter, which included some of the inventory that had been sold from our Jackson, Alabama Mill and just over four 5% below the fourth quarter of 2022.
The efforts of our employees to optimize the cost structure inventory and product mix in our paper business helped minimize the inflationary cost increases compared to last year and deliver solid returns for the quarter I'll now turn it over to Bob.
Thanks Mark.
For the first quarter, we generated cash from operations of $280 million.
And free cash flow was $168 million.
The cash payments during the quarter included capital expenditures of $112 million in common stock dividends of $112 million.
We ended the quarter with $520 million of cash on hand, including marketable securities.
I want to update you on a revision to the scheduled mill maintenance outage guidance, we provided on last quarter's call.
Current plans and the scope of work with a scheduled maintenance outages at our containerboard Mills has changed.
Resulting in a revised total company estimated cost impact.
For the year of <unk> 75 per share versus the <unk> 67 per share we've mentioned previously.
The actual impact in the first quarter was <unk> 13 per share.
And our revised estimate impact by quarter for the remainder of the year is now 18 per share in the second quarter 24 in the third.
<unk> 20 per share in the fourth quarter.
I'll now turn it back over to Mark.
Thanks, Bob.
Looking ahead as we move from the first and into the second quarter. Although there is one less shipping day for the corrugated business. We expect improved volume in our packaging segment. However prices will be lower as a result of the previously published domestic containerboard price decreases along with lower export prices.
Sales volume as well as prices and mix in the paper segment are assumed to be slightly lower based on lower demand.
Although we do look for most operating cost to trend lower or converting costs scare.
Scheduled maintenance outage expense and depreciation expense will be higher.
Primarily due to recent increases in contract rail rates at most of our mills, we expect higher freight and logistics expenses compared to the first quarter.
During these items, we expect second quarter earnings of $1 96 per share with that we'd be happy to entertain any questions, but I must remind you that some of the statements. We've made on the call constituted forward looking statements the.
The statements were based on current estimates expectations and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in the annual report on Form 10-K on file with the SEC. The actual results could differ materially from those expressed in these forward looking statements and with that Jamie I would like to own.
On the call up for questions. Please.
Ladies and gentlemen at this time, if you'd like to ask a question. Please press star one to withdraw your question you May Press Star two.
We're using a speaker phone we do ask you. Please pickup your handset prior to pressing the keys to ensure the best sound quality.
What those instructions in mind I'd like to ask a question. Please press star one.
Our first question today comes from George Staphos from Bank of America Securities. Please go ahead with your question.
Thanks, Hi, everyone. Good morning, Thanks for the details.
Mark question for you normally.
<unk> is up sequentially from <unk>.
When we look back historically over time, the only time that we saw a down to Q.
If we're correct was the Covid second quarter, even if we went back to the great recession.
No way to know <unk>, you add up <unk> versus <unk> as you sit here today and if you were in our seat what is the bigger the biggest driver of the drop off to Q versus <unk> is it the timing effect.
On the pricing and just how that's flowing through or is it the demand.
Affect the continued demand effect being worse than expected if you could give us some qualitative comments on that that'd be helpful. And then a couple of follow ons.
Yes, Joe let me start that out and I think again, if you look at the November December and February price decreases and how they've rolled in.
I think in the past 20, plus years, we only had one or two incidents.
This kind of timing of price decreases, but Bob can give you some real detailed color on.
How that's impacting but that's that's pretty much what's happening yeah youre right Mark.
And.
And the magnitude of that $70, Georgia, the timing of that.
As you look at going from <unk> to <unk>, it's just unprecedented in the company's history.
And we mentioned on last quarters call that the vast majority of those price declines would show up in the second quarter and that's exactly what's happening. So it's sort of an unprecedented drop in price just based on the timing of the published decreases.
Is really what's driving that in.
That's pretty much the answer.
Understood and I appreciate the color there could you give us a sense for how much demand might have been off relative to your prior expectations and what the.
Bookings and billings look like.
Early into Q.
Yes, Tom why don't you go ahead and kick.
Yeah, George Let me give you a little let me give you a morning, Tom around that.
If you recall on our call last quarter, we were starting out in January .
Decent in the bookings.
And as the quarter rolled on I mean, it just got a little bit weaker each each month. So that was that was disappointing and of course you know what.
What I told you back then was it was impossible to predict what was happening happening and the destocking.
What was really happening in terms of consumer demand and if you look all of those indicators, whether it was consumer demand or the manufacturing index.
The purchasing managers index. They all really kind of got more negative is that as the months went on and.
At correlated exactly with kind of what the what the volume situation was.
The good news is is that there's been a there's been a big turnaround starting in April and so we've got a good look 13 days into the month and.
Our bookings right now just over March alone are up 11% and Theyre up 10% over the over the first quarter.
Still down 6% compared to April of 'twenty, two but April of 'twenty. Two was our all time all time record so just to calibrate everybody.
The volume continued to increase significantly because of Covid all the way through April and then finally started to turn the other way so we're.
Got that we've still got that really tough comp.
Coming in the month of April but.
Given the fact that we are double digits ahead of where we are in March is a huge improvement.
And it's across all of the sectors now we've still got some laggards in there. If you talk home improvement are you talk homebuilding, where some of these other areas, but the other big.
Plus for US is that we suffered badly in that first quarter and that AG business as as we alluded to.
Down in Florida from the from the Hurricanes in the in Northern California from the significant rain and flooding that they had and of course in the Pacific Northwest.
Because of the cold weather and that's coming that's coming back as well so I think that we've got some.
I think we're towards the end of that of that big problem relative to the volume situation. Thank you Toms last quick one I'll turn it over just from an operational standpoint can you talk a little bit about the facility closures kind of what they're allowing more optimizing for PCA and given the shift in recycled cost.
Virgin cost question comes up periodically on your calls how are you flexing your system.
Relative to lower cost recycled and lower cost recycled board recognize your customers ultimately dictate what kind of box. They won that ultimately dictates the board I'll, let it I'll, let it go there thanks for everything Okay. Thanks George.
Yes relative to the plant and the design center closure that we announced in the first quarter.
That is typical of the evaluation that we do have our footprint at all times and it's part of our capital planning process. So these are these are not knee jerk reactions to the lets just say a volume demand change or anything like that these are all part of our part of our capital planning.
Process, where were trying to optimize our system of course, we've made acquisitions over the years and other things like that so we do have.
We do have some.
Implicit in some of the markets that we want to we want to fix and so it's been a continuous it's been a continuous process that we've been doing this.
Relative to the recycled versus Virgin.
What PCA has been and I've said this before what we have been focused on for years now in our mill system is to be able to match. The just the right amount of fiber to the performance that's necessary in the marketplace.
Some of those proprietary products and some of the things that we've done in our mill system has served us incredibly well in the marketplace and is ultimately even more competitive than recycled and most of those.
Virtually all of those markets. So I'm very very pleased with with what we've been able to do in the mill system. It's been an outstanding performance by by all of our people and we've talked about our engineering expertise, we talked about our paper tech expertise and that's provided us and of course the flexibility.
We have in these mills.
We will flex back and forth, obviously with OCC to the degree we can win.
When that when the prices.
Nature that that makes the most seth.
Thanks, Tom.
Next question our next question.
Our next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question.
Thank you good to hear that.
The man looking better in April , but did want to follow up a little bit on George's question, and I realize it's a bit of an overlap but.
In the third quarter, and the fourth quarter as well your year over year box shipments were a bit below the industry and we don't have the industry data yet, we'll get that I guess on Friday, but certainly the 12, 7%.
Price us to the downside and you guys as well.
As if you look back over the last six months or so.
And any thoughts as to why you might have been.
Showing reduced market share.
Recognizing that over time, you have actually outgrown the industry very substantially and very very profitably and whether it's the AD business or what where are you coming up with in terms of as to what might have been going on with your book of business.
Yes, Mark just remember back in 2008 into the 2009 period.
We saw a more rapid downturn in volume than our competitors.
And then when we started seeing the improvement in the spring, we came back stronger and faster than our competitors and I believe most of that has to do with the.
Predominantly local book.
Specialized local accounts smaller local account business that we have.
These accounts are much more tuned into what's happening with their own business. They can move very quickly they are very nimble, but.
Let Tom elaborate on that because again, it's it's not as simple as it seems.
Yes, Mark I think that the one of the things that I think is really important is number one is we haven't lost any volumes. So we're not losing any market share that's not that's not taking place, but if you think about the thing that we've talked about many times, we take great Pride in is the broad base of business that we have.
And the broad base of sectors that we deal across now in this particular during COVID-19.
We had some of those sectors were up as much as 200%.
And once Covid ended of course, those are going to be down significantly. So you.
Just depends on the sector.
And that's why we've that's why we've had to sort through this volume situation a little longer than what we would've hoped but you do have a lot of these some of these some of these various sectors are down significantly some of them has stayed level some of them are up slightly but for the most part.
That's the biggest that's the biggest factor the other thing that we did during Covid is we had to run a lot of business that we could not get supplied from the outside which we traditionally would have done.
And we now have that business placed back on the outside again, so even though we keep the revenue and we keep the and we keep the income.
It's a drag on our volume and that's just kind of.
Kind of funny math, if you will based on the way it has to be reported to the SBA, but that's that's another factor that's that's affecting us.
Does that help.
Just two quick follow ups, one is you mentioned.
Not lost volume, where you're basically saying you haven't lost customers. Obviously your volumes are down.
We haven't lost we haven't lost any we haven't lost any customers in terms of what you would call market share in terms of customers or things like that obviously, our volume is down but it's down we haven't we haven't lost any share within those accounts or anything like that it's just that some of that broad based business. Some of those sectors are down significantly and as I mentioned.
We've never had a period, where we got hit with with.
Ed.
Getting hit like it did in the regions, where we have big footprints all at the same time got it and then just maybe a little bit of clarification.
Why would you get given that demand has been weak and you certainly have the capability to have.
Fulfill needs, which may be we're being fulfilled from the outside and now apparently you're fulfilling from the outside I guess I'm a little puzzled why you would given you've got <unk>.
Plenty of capability I would think too.
It internally or maybe I don't understand exactly what the reason is the reason is because we have to produce that at a much higher cost and we can get done on the outside.
And so it doesn't make sense for us to do that but in order to take care of our customers. We opted to do it at a much much higher cost point.
So that's why that's why that's why we're doing it and then of course, we want to we want to maintain the run our plants as efficiently as we possibly can so it just it just from a cost standpoint, it makes the most sense.
Okay. Thanks.
Thanks, so much.
Your next question.
Our next question comes from Phil <unk> from Jefferies. Please go ahead with your question.
Good morning, Mark Bob Tom This is John on for Phil.
I appreciate all the details. Thank you guys and I want to first start off asking how much economic downtime you guys took in <unk> given the last couple of quarters, you've called that out and it's been a bit outside is that is that something you can quantify and maybe how can we think about trends for that in <unk> with some of the demand starting to Nord.
Emily.
Bob.
Yes, it was.
About 110000 tons in the first quarter.
Okay.
Any insights on how to think about <unk>.
No.
As we always done we're just going to run to demand and what we've got to do to satisfy.
Our customer base.
You go back and look at the first quarter. When we were in the January period of time anticipating that volume was starting to settle down and improve we anticipated going through our winter spring annual shutdowns it would have.
Greater need so our plan was to build a little more inventory as a matter of fact I think the number was about 30000 tons more inventory through the first quarter that we ended the year last year, but in fact as we saw the deteriorating volume.
Especially in February and March.
Certainly didn't need that extra volume, so we trimmed back and scaled back operations and only ended up 6000 tons at the end of <unk> as opposed to where we thought it would be so.
Again, we will just continue running to demand.
Okay. That's helpful. And then I just wanted to pivot over to the cost side you guys have done a very good job taking out costs in the system, but in terms of the.
On the guidance just a couple of questions first I want to get a better understanding of what's driving the higher converting costs does that maybe more on the labor side.
And then on the.
Rail rate increases.
Is that is that something that you can maybe give us a little bit better understanding of the structure of those contracts like how long those rates will kind of be in place when they get renegotiated how much maybe it was weighing on <unk>.
<unk> and going into <unk>.
Just to give us some better tool to forecast the model now.
Yes, John spot.
So on the rail rate increases most of that is somewhat some of it occurred during the first quarter and then we had some that just started at the beginning of the second so.
It's a large impact as you move from <unk> to <unk>, because you will have all of those pretty much higher.
As we start.
The second quarter.
So that's what's driving the.
The freight costs up higher.
Your first question was.
I guess just to stay on that for a second are those are those contracted rates for the next year next couple of years, yes, typically yes, typically typically that's probably a good way to think about it.
Okay.
And.
First question was around the converting costs and what's driving it.
Yes really.
Labor benefits, obviously with just that.
That's just that's part of it.
The other is really had starch starch starch prices are just skyrocketed and.
That is something that we had another big increase this year.
And as we.
Expect to our volume to start improving in the box plants and so forth then youre using more of those types of things and so that's what's driving labor and some of your.
Some of your material cost that are also included in that converting converting number.
Is the start starting to turnover or it's still.
No it's not.
No.
I appreciate the insight thank you all.
Thank you next question.
Once again, if you would like to ask a question.
Please press Star and then one our next question comes from Anthony Pettinari from Citi. Please go ahead with your question.
Hi, good morning.
Good morning.
Kraft liner prices have been stable for a couple of months now.
And I understand you don't so much board in the open market and I'm not asking about forward pricing, but I was just wondering if you had any thoughts about kind of where containerboard markets kind of feel like they are right now I mean, you've seen a number of cycles.
Maybe some of these capacity projects have started up and maybe are being sort of absorbed I just wanted to get your sense of.
<unk> markets versus maybe where we were a few months ago.
Anthony This is Tom I'll take this one.
Yes prices have stabilized there is no question about it in fact I.
I can make an argument that.
Yeah.
There hasnt been there really hasnt been a whole lot of activity.
Relative to price in the past.
I'm not a predictor of price going forward, but I can just tell you that.
I think the outlook is more positive of course, you've seen the industry really adjust dramatically to demand and as I've said many times I mean, the open market as a small open market today.
So.
Those that those that have excess capacity are either taken the downtime or theyre looking to.
Export markets to try to figure out how to sell into those markets, which are also under some duress, but.
I think that the.
I think the market in general.
Is different than the past.
Given given the.
The small open market that we have today and.
And I think that leads towards much more stability.
Got it got it that's helpful. And then just I Wonder if you could talk a little bit given the balance sheet flexibility that you have about capital allocation.
And from a capital return perspective, I mean, you are paying an attractive dividend I don't know if you can talk about maybe opportunities for repurchases and then in terms of investing in the business you are coming off maybe a big capex cycle, where you're doing a lot of internal projects.
Just wondering if you could kind of talk about where youre seeing the opportunities and capital allocation and capital return.
This year.
Nothing's changed.
As we've talked about for the last year, our plans were to bring capital down this year and we're in that $400 million range.
I would anticipate that working through into next year also.
We've done most of the big projects that we could foresee in the mills and we're just going to continue with the box plant optimization as far as utilization.
Utilization of cash in terms of other opportunities dividends share repurchases acquisitions will remain flexible on.
Any and all opportunities in that regard as we go forward.
As we've done for many many years now we've got that.
Flexibility to take advantage of.
All of these opportunities as they present themselves and that's.
That's how we look at it day to day.
Okay. That's helpful I'll turn it over.
Thanks next question.
Our next question is a follow up from George Staphos from Bank of America Securities. Please go ahead with your follow up.
Hi, Thank you so much actually Anthony.
Took my next question.
So I will turn it over to the next person. Thank you so much.
Thank you next.
And once again, if you would like to ask a question. Please press star and one. Our next question is also a follow up from Mark Weintraub from Seaport Research Partners. Please go ahead with your follow up.
Thank you.
A little bit about how I believe your volumes ended up being down.
About twice what you had.
Anticipated back in January I think you had been talking about.
Flat average day.
So it would have been like six or 7% down and you ended up down 12, 7%.
Is it fair to therefore, if you talked about the negative impact year over year on volumes being about 95.
To pay for that.
<unk> you.
Was that the incremental negative impact from the.
Additional demand weakness that you experience so that had in fact the volumes come through as you anticipated.
In theory, you might have been closer to $2 70, particularly if we add the fact that you had the pricing down by.
$20 in February which would have had some small impact and then if that is the case and I realize that maybe that that math doesn't work, but if that was the case I mean, that's a huge difference from sort of the 223 and presumably that that relates to all the the operating.
Adjustments that you've made and sort of just trying to get a sense to whether that's something you can hang onto or those were measures taken because of what was going on in them in the business and maybe a little bit less certain types of spend that you could defer sort of.
Just trying to get a sense of that underlying earnings power.
In a future type of environment.
Yeah. Mark. This is Bob is there was a lot going on there.
If you say you're worth our volumes were higher.
Closer to what we had anticipated youre looking at that 95 since being something a lot larger.
Well.
I believe you had you had stated during the January call that you were looking for average daily box shipments to be flat.
On.
Sequentially, which would have suggested about down six 5% rather than the down 12, 7% right. So basically I'm, saying well does that mean that instead of being a 95 cent negative hit it would have been about half of that 47% negative.
That volume is not just it's not just box shipments right. It's.
Theres export volume there as there is.
Trade there is domestic outside volume so that would not be a good way to look at it. However.
Sure.
Directionally, yes, it would be a higher number but you would also have a lot better probably cost within your system, because youre mills would be running more full.
Your box plants would be running more more full so.
Youre converting costs Youre direct variable costs all of those types of things.
Youre unabsorbed cost would not be as high.
Would more than offset.
Any additional decline that you would see in that price variance if that makes sense because of higher volumes.
It does sort of comes back to the point that you are only three cents off what your guidance had been.
If you want to look at it sort of simply.
The published price dropped $20 a ton after we gave our guidance.
And if you sort of do the math on that and as we said before.
That price the published price drops pretty much hits, our outside containerboard immediately.
No delay.
So if.
If you sort of do the math there was about <unk> just from that price decline that occurred after we gave our guidance.
Right and so what I'm trying to get get to is if we get this sort of rebound in demand.
And.
And then what.
It would seem that are the bounce back in earnings could be.
Dramatic relative to sort of that.
223 type of run rate you had suggested in a down.
$6.
Absolutely Mark.
Absolutely.
That's what we would anticipate.
Okay.
I apologize for the.
Fairly convoluted questioning here with that thank you.
And our next question.
A follow up from Phil <unk> from Jefferies. Please go ahead with your question.
Hey, guys. This is John again I appreciate you taking the follow up I just wanted to quickly shift over to the paper segment.
Demand was a bit lower than we had expected just kind of what can I get some insights on how the paper segment volumes are trending.
It looks like maybe this next quarter, where we should see another down double digit type of volume year over year.
Just kind of what's going on and maybe what are the main factors impacting demand on the paper side.
Again, as we spoke last year that we our paper business now it's become just the international Falls mill up in Minnesota and.
That mill is capable of little over 500000 tons a year.
It's pretty much what we are selling two were down slightly off of that.
Pic capability, but what that allows us to do really is just run and optimize the market and where we choose to sell in.
Where we want to sell to maximize profit. So we really have the luxury of.
Being the fourth largest player.
We don't have to do anything.
I'd say were in a real sweet spot right now down to 3000 tonnes.
We were last year.
Okay. Thanks I appreciate it.
Thank you.
Any other questions. Please.
And our final question comes from George Staphos. Once again, a follow up from Bank of America Securities. Please go ahead with your follow up.
George.
I'm sorry, you've had a technical issue here. Thanks, guys. So I just wanted to reaffirm the guidance on the paper segment is for pricing and volume to be down slightly sequentially was that the comment Mark and Tom.
Bob Thanks, very much and good luck on the quarter.
Yes, George that's correct.
Excellent. Thanks, guys. Good luck in the quarter.
Thank you. Thank you.
Any other questions. Please.
Mr. <unk> I see no more questions at this time do you have any closing comments.
Thank you everybody for joining us on the call today and appreciate your time and we look forward to talking with you in July and covering the second quarter earnings results have a nice day. Thank you.
And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.