Q1 2023 Packaging Corp of America Earnings Call

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 normalize.

Especially in February and March we 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.

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 Ah <unk> and going into <unk> just.

Just to give us some some better tool to forecast the models out.

As we start start the second quarter.

Freight costs up higher.

I'm sorry, your first question was.

Yeah really.

Labor benefits, obviously with just you know that's just that's part of it.

That is something that we had another big increase this year and as we.

And understanding you don't so much board in the open market and I'm not asking you about forward pricing, but I'm. 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 containerboard markets versus maybe where we were a few months ago.

I think the outlook is more positive of course, you've seen the industry really adjust dramatically to demand.

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.

Hi, Thank you so much.

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.

You know sequentially, which would've suggested about down 6.5% 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've been about half of that like a 40 or so no. Its not negative had no that volume is.

It's not just it's not just box shipments right. It's.

You know theres export volume there's there's.

It.

Directionally, yes, it would be a higher number but you would also have a lot better probably cost within your system because your mills would be running more full.

Your box plants would be running more more food, so youre converting cost your direct variable costs all of those types of things.

Your unabsorbed costs would not be as high would more than offset any any additional decline that you would see in that price variance if that makes sense because of higher volumes.

It does that sort of comes back to the point that you were only three cents off what your guidance had been yep.

If you want to look at it sort of simply.

The 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 when that price the published price drops pretty much hits, our outside containerboard immediately you know theres no no delay.

So.

If you sort of do the math there was about three cents just from that price decline that occurred after we gave our guidance.

Yeah.

Right and so what I'm trying to get get to is if we get this sort of rebound in demand.

And and and and.

It would seem that are you know the bounce back in earnings could be you know very very dramatic relative to sort of that 223 type of run rate you had suggested in a in a down.

$6.

Absolutely Mark Yeah, absolutely.

That's what we would anticipate.

Okay.

I apologize for the fairly convoluted questioning here, but that thank you.

Yeah.

And our next question.

A follow up from Phil <unk> from Jefferies. Please go ahead with your question.

Hey, guys. This is Sean 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 you know maybe this next quarter, where we should see another down double digit type of volume year over year, I'm, just kind of what 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 are our paper business now it had become just the international falls mill up in Minnesota and that that mill is capable of little over 500000 tons year, and that's pretty much what we're selling to we're down slightly off of that peak capability.

But what that allows us to do really is just a run and optimize the market and where we choose to sell in.

You know, where we want to sell to maximize profit. So we really have the luxury of.

Being the fourth largest player and we we are we don't have to do anything that I would say, where we're in a real sweet spot right now down just 50000 tons.

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.

Oh, 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.

And then Bob Thanks, very much and good luck on the quarter.

Yes, yes, Georgia, that's correct.

Excellent. Thanks, guys. Good luck on the quarter. Thank.

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.