Q2 2024 Packaging Corp of America Earnings Call
Good morning. Thank you for joining packaging Corporation of America's second quarter 'twenty 'twenty four earnings results Conference call. Your host today will be Mark Colson, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative there will be a Q&A session I will now turn the conference over to Mr. Cole.
And please proceed when you're already.
Good morning, everyone and thank you for participating in packaging Corporation of America's second quarter 'twenty 'twenty four earnings release Conference call again, I'm, Mark KOL, Zhang Chairman and CEO of Packaging Corporation of America and with me on the call. Today is Tom has further executive Vice President who runs our packaging business and.
And Bob Monday, our Chief Financial Officer, I'll begin the call with an overview of our second quarter results.
And then I'll be turning the call over to Tom and Bob Who'll provide further details and then I'll wrap things up and we'll be glad to take questions.
Yesterday, we reported second quarter net income of $199 million or $2 21 per share.
Excluding special items second quarter 2024, net income was $199 million.
Or $2 20 per share compared to the second quarter 2023, net income of $209 million or $2 31 per share.
Second quarter net sales were $2.1 billion in 2024 and $2 billion in 2023 total company EBITDA for the second quarter, excluding special items was $404 million in 'twenty, 'twenty, four and $418 million in 2023.
The details are special items for both the second quarter of 24, and 2023 were inclusion the schedules that accompanied the earnings press release.
Yeah.
Excluding special items, the 11 cents per share decrease in second quarter 'twenty 'twenty four earnings compared to the second quarter of 2023.
Was driven primarily by lower prices and mix in our packaging segment for 87 cents and paper segment seven cents.
Even with our constant focus on minimizing inflationary cost increases operating costs were higher by 31 cents per share.
This was particularly in the areas of recycled fiber and inflation driven increases on labor and benefits outside service expenses repair and operating material costs rents property taxes and insurance. We also had higher depreciation expense of <unk> and.
A higher tax rate up three cents.
These items were partially offset by higher volume in the packaging segment for 94 cents and paper segment seven cents.
Lower other converting costs seven cents.
Lower freight and logistics expenses six cents.
Lower interest expense six cents.
Looking at the packaging business EBITDA, excluding special items in the second quarter of 'twenty, 'twenty, four or $400 million.
With sales of 1.9 billion.
Resulted in a margin of 21% versus last year's EBITDA of $405 million and sales of 1.8 billion or 23% margin.
The strong market conditions in our packaging segment continued in the second quarter. This drove a new all time containerboard production record that was necessary in order to service the corrugated products and containerboard demand.
Also packaging segment prices and mix moved higher from the first quarter levels as we continued to implement our announced price increases.
Although still below target levels, we were able to build some inventory ahead of what we expect to be a very busy second half of the year.
In our mills and corrugated products facilities employees remain focused on an efficient and cost effective operations from thousands of initiatives as well as implementing the benefits and improvements from our capital spending strategy.
I'll turn it over to Tom who will provide further details on the containerboard sales and corrugated business in general.
Thanks Mark.
Along with the record setting containerboard production that Mark mentioned corrugated products demand strengthened throughout the quarter and ended with a new shipments per day record for the month of June.
In fact, we were just 110th of a percent away from our all time second quarter total shipments record shipments per day were up 9.2% over last year's second quarter and total shipments with one additional shipping day were up 10.9% outside sales volume of containerboard was 42000 tons above last year's second.
Order and 35000 tons above the first quarter of 'twenty 'twenty four.
Segment prices and mix moved higher as we continued to implement our price increases from February which was negatively impacted by the late fourth quarter 'twenty twenty-three decrease reported by the risky publication along with the more recent increase in June domestic containerboard and corrugated products prices and mix together were up nine cents per <unk>.
Share compared to the first quarter of 'twenty 'twenty. Four however, they were 84 cents per share below the second quarter of 2023 export containerboard prices were up three cents per share versus the first quarter and down three cents per share compared to the second quarter of 2020.
Finally, some of you may have seen news about an investment we made in the Phoenix, Arizona area in order to serve a growing market and to grow with our existing customers. We are in the process of replacing our current Phoenix corrugated products plant with a modern state of the art facility like many of our strategic projects. The Fenix project improves the.
<unk> technology and equipment in the plant gets us aligned properly and the right marketplaces addresses the needs of our customers. So that we both grow profitably and improve the efficiencies and cost within our system.
I'll now turn it back tomorrow.
Thanks, Tom looking at our paper segment EBITDA, excluding special items in the second quarter was $31 million with sales of $150 million or a 20.4% margin compared to the second quarter of 2023, EBIT EBITDA of $39 million.
And sales of $143 million or a 27, 2% margin.
Paper segment prices and mix as well as volume came in as expected.
And as we mentioned last quarter, although we are implementing a recently announced paper price increases the published decrease in index prices earlier, this year and how that impacts our contract triggers with certain customers would initially delay the timing of realizing the increases.
Overall average prices and mix were essentially flat with the first quarter 'twenty 'twenty four levels and down five 6% versus the second quarter of 2023.
Market conditions versus last year were solid with volume up 12% versus the second quarter of 'twenty twenty-three driven somewhat by the timing of seasonal back to school business.
Volume was 8% below the first quarter of 'twenty 'twenty four impacted by the scheduled maintenance outage at the International Falls, Minnesota Mill as well as exceptionally strong volume in the first quarter.
Similar to the comments I made regarding the packaging business employees in the paper business remains focused on very efficient and cost effective operations and executed the outage at international falls, very well and slightly below our cost estimates I'll now turn it over to Bob.
Thanks, Mark cash provided by operations during the quarter totaled $278 million and free cash flow was $33 million.
The primary payments of cash during the quarter included capital expenditures of $245 million.
Bob: Dividend payments of $112 million.
Cash taxes of $100 million and interest payments of 37 million.
Excluding the invested cash proceeds from the bond transaction will use to retire the 400 million dollar bond that matures in September.
Our quarter end cash balance, including marketable securities was approximately $800 million with liquidity of $1.1 billion.
We mentioned on last quarter's call that today, we would provide an update on our capital spending guidance.
We are revising our full year guidance from a range of $470 million to $490 million to a range of $670 million to $690 million.
The increase is primarily attributable to additional high return profitable growth and mix enhancement opportunities within our box plants as well as the new Greenfield box plant in Phoenix that Tom spoke of.
Spending for these projects fits in very well with our expected cash flow.
And balanced approach towards cash allocation.
In order to grow profitably, our company and maximize returns to our shareholders.
Now I'll turn it back over to Mark.
Thank you Bob.
Looking ahead as we move from the second quarter into the third quarter prices and mix in both our packaging and paper segments will move higher as we continued to implement previously announced increases.
Along with higher containerboard export prices.
Although there is one less shipping day for the corrugated business, we expect shipments per day to continue to strengthen potentially setting a new third quarter record. We also expect higher containerboard volume with.
With current containerboard inventory below our target levels. While we will also attempt to build some inventory ahead of the scheduled maintenance outage at our Deridder mill in October.
Bob: Paper volume will be slightly lower primarily due to timing of back to school business that was received in the second quarter.
Operating and converting costs should be higher primarily due to seasonal electricity usage and prices and slightly higher recycled fiber costs with scheduled outage expense expected to be slightly lower.
Considering these items, we expect third quarter earnings of $2 45 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 today constitute forward looking statements. These statements are based on current estimates expectations and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on form.
10-K.
Which is on file with the SEC actual results could differ materially from those expressed in the forward looking statements and with that Alan I'd like to open up the call for questions. Please.
We will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. It. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from George Staphos of Bank of America Securities. Please go ahead.
Hi, everyone. Good morning, Thanks for taking my questions.
I guess the first question I had.
Gentlemen is on on costs.
You highlighted the 31% year on year negative variance in operating costs converting costs were a little bit lower.
By seven so the net of that was still a negative 24 cents if.
If I look at the first quarter year on year, you were still seeing positives I think kind of netting those two that you showed last quarter was 15 cento almost like a 40 <unk> swing in one quarter in terms of comparisons.
Along with OCC.
Gentlemen, what was the biggest factor in terms of costs that you've been trying to manage around.
And what's the outlook you said higher operating costs into the third quarter. There is a way to size what's happening the third quarter on those on those factors that I had a couple of follow ons.
Yeah. George This is Bob the I think what Youre seeing is year over year in the second quarter, we ran well Lula full in this second quarter, whereas last year. They ran only one month of the quarter and of course as you know well Lula is our highest cost.
Our meals. So it was a big mill mix impact that affected cost plus I think the year over year on energy and like you said OCC that was higher in the second quarter than it was in the first and I think that will pretty much close that gap when you look at it that way.
Okay. So and then and then going from the second to the third I think you'll see that your other question. You know, we Didnt mentioned a lot in the in the guidance relative to cost because it should be you know fairly stable up slightly but like we said for you know for OCC and are more electrical usage and rates.
But you know.
Other than that you know it should be should be fairly maybe chemicals up a little bit, but not as much sequential movement as we've seen in the past.
Just holding out a very very high level, yes, yes exactly.
Understood.
Secondly, jumping around a bit can you talk a little bit about <unk>.
Bookings and billings as you normally do early in the quarter and how it.
Kind of what the exit rate was in.
The momentum out of <unk>.
Georgia, Tom Ah, Yeah bookings bookings remain very robust bookings and billings both remain very robust.
Through 12 days were up 12, 5% so far in in July. So you know an incredibly good start to the quarter. A you know we had a we had a very good start to last quarter, we exited at a higher rate and we're continuing that higher rate as you see going into the third quarter.
Bob: Okay.
My last one and I'll turn it over and related to sort of the volume outlook.
Can you talk at all.
As to how.
Your mix of business may have changed if at all.
You know now versus a year or two years ago and frankly the question that was behind the question EKG as always.
Seemingly done better than the industry over the years, but the gap is quite stark when you look at it relative to the still the macro data that's out there. So what do you attribute you know what.
What's been very very strong growth for PK G relative to a very mixed outlook, where we look around the rest of consumer packaging.
And how is mix changing.
And can you talk little bit about external sales, which look like they are up is that a factor here in terms of what's happening with with your revenue base. Thank you guys. Good luck in the quarter.
Thanks, George now Oh, I'll, just I'll address what I can okay. Yeah to give you to give you as much color as I, possibly can.
You know what's happening with their mix is is that the growth the growth we see within our existing accounts.
And some of the new business that we brought on is primarily in the Brown area and if you look at what's happening overall as we see it in the marketplace some of that specialty business, which would be graphics oriented in some of those sorts of things have remained relatively stable, whereas our you know the other growth has been has been primarily in brown.
So you know from a mixed standpoint, it's a it's a slight change it's not this big dramatic change or anything like that but you know this as you know this this you know our our growth as a result of the team working incredibly well performing at a very high level remaining incredibly focused on the customer and aligning ours.
Shelves with the markets and the customers that we choose to do business with.
Very much.
Okay. Next question. Please our next question comes from Mike <unk> of Truest. Please go ahead.
Thanks, Mark Thompson, Bob for taking my questions and congrats on.
Another good quarter.
Thank you.
Just wanted to get a sense.
Your Q2 guidance.
During one key events.
Got it that youre, extending you wound up through 'twenty wondering what occurred during the quarter relative to your expectations that drove the beat.
Well again, Mike.
Volume was the big factor.
Obviously, our operational efficiencies but are.
The big Big volume boost was the.
Positive there.
Got it okay. So it really does that.
But also some of the concentration.
There's nothing that he mentioned markets at thousands of opportunities.
The combination of those two really drove you to be relative to your initial expectations.
Yes exactly.
Got it and then just.
Quickly I wanted to get your thoughts around your competition, which seems to be changing and there's a lot of them are seem to be echoing the strategy that you're pursuing for some time in terms of targeting smaller local challenge trying to get more value over volume.
Do you have any concerns.
Terms of this company pursuing a similar strategy do you think it would be a huge competition, but what do you what do you think it that way.
What he is going to happen and what are you doing to prepare if they become more aggressive and try to compete in your backyard.
Yes, yes personally I don't have any concerns about that people people have talked about that for a number of years, but again, Tom why don't you weigh in on that also well Mike I would just say listen I mean, we you know we don't really comment on our competition or what our competition is doing we have we have our strategy. We go execute our strategy in the marketplace and you know and that is as.
I've mentioned before aligning with the right customers in the right segments. That's what we try to do and what our competition is working honors is doing at the moment is really there their plan their program and you know so I I've got very little to comment on that.
Thank you very much.
Thank you next question. Please the next question comes from Mark Weintraub of Seaport Research partners.
Please go ahead. Thank you. Thank you good morning, So you mentioned with Lula.
Negative mill mix impact.
We're also ramping up Jackson and or have ramped it up and can you kind of give a sense as to how much of a positive impact that has perhaps already had and is there more that's likely to show up and when would you expect it to be really operating it.
High levels of productivity efficiency cost position.
Jackson's delivering exactly what we needed to do.
Speaker Change: When we talked about this project two years ago. We said it was a 2000 tonne a day project are quite frankly, we've exceeded that we've proven that the machine can run upwards of 2400 tons, a day, which would be a 800000 ton a year run rate currently for the last couple of months, we've been running in the 1900 ton a day up to two.
Speaker Change: <unk> thousand tons, a day area, which is again, what the C. A R promised but it's all about running to demand we make a lot of our specialty grades on that particular machine and that machine is doing everything we needed to do right now and the good news is that it will help us and be available to grow.
Speaker Change: <unk> into the marketplace over the next year or two as we need the additional tons off that machine, but it's performing quite well and it's delivering everything.
Everything that we needed it to deliver on a earnings basis and performance basis.
And can you remind us you had talked about EBIT type contribution from Jackson.
Whats is there an updated thought or potentially beat the contribution is there an updated thoughts now that you've seen that the scope of production could even be higher than what was originally.
Hum.
Speaker Change: Again, I think you know markets, it's delivering what what we've talked about for the last year and a half to two years in terms of the model, but as I said, there's upside opportunity with the incremental tons that will feed into our into the converting system over the future is.
Out of 400 ton a day opportunity as we go forward, which is say 100 hundred plus thousand tons a year over the next couple of years as we feed that through so that'll be upside in EBITDA, but right now it is delivering what our models are told us it would deliver and I think what what are some of you analysts had been modeling.
Got you. Thank you and then on that the increased Capex is there any a little bit more color.
In terms of the types of returns you might expect on on this.
Increased capital spend.
Yes.
We don't get into the exact returns obviously, we have a history of high return projects or is it the project that Tom mentioned down in Arizona, we have been looking at an opportunity and a solution for a couple of years to to move out of some older inefficient.
Yeah operating facilities and so that's come about we've also been aggressively pursuing some converting installations and new corrugator is and so.
All I'll say is these are very high return a great opportunities in line with our historical.
Capital spend.
Okay, and then it sounds like a mix of cost and increased capacity is that fair.
Yeah, Let me I will point out if you know for people that are wondering.
If you went back 10 years ago, you could build a a full line plant for probably $80 million to $90 million.
The cost to build a full line state of the art.
Plant now has significantly increased in some cases.
Starting to approach double what it was 10 years ago, just to just to put things in perspective about what it cost to you.
Engaging in this world that we're living in now.
Right and is that is that the size of the plant similar or is that still like an 80000 type through proud or what type of throughput. So are you talking about with the dual class shares.
Down in Arizona, when we're done with it will be a couple of million square feet a year opportunity for us.
Okay, Great and then lastly.
So obviously, we got pricing in February and <unk> got it in June.
Undoubtedly that's helping the third quarter.
Is there much that you would expect of the increases that have already been reflected MPW to show up in <unk> and beyond and maybe could you help us start to quantify how to frame it.
Mark This is Tom I'll, just tell you that you know are our increase that we're going through right now it will roll through as it usually does for P. C. A over a 90 day period. So we'll see we'll begin to see the the Mac that most of the results of that towards the end of the third quarter and certainly realized in the fourth quarter.
You know one of the confusing things and as I mentioned in my comments relative to the first $40 is a lot of that was offset by the $20 that was announced late last year and I E. Because it didnt trigger in a lot of contracts. So so that kind of hurt us in the first half of the year, but but now this $40.
You know, we'll we'll roll through and it will roll through in the normal 90 day period in the non contractual stuff will roll through in a 30 to 45 day period.
Super Thank you.
Thank you Mark next question. Please our next question comes from Anthony Pettinari of Citi.
Please go ahead, hi, good morning.
Good morning, Good morning, Hey.
Hey, just following up on Mark's question in terms of the kind of incremental 200 million on Capex is primarily all of that or the vast majority of that.
The Arizona project.
And I guess, that's the first question.
No no. The that's a piece of it we've also as the year progressed, we continue.
Continue to identify ongoing opportunities at existing plants.
Speaker Change: And it's in line of our new Corrugator, new converting lines and so we we again aggressively pursued.
A lot of those opportunities there's some spending in the mills.
That we also identified as immediate a high return opportunity that we've deployed some of that extra capital into and so it's it's a it's a mix across the board, which again gives you a good.
Good opportunity and mitigates the risk of any one big project.
Got it got it and in terms of sort of a timeline for completion.
For Arizona, and then obviously, you're not giving capex guidance for 'twenty, five but should we think directionally about capex.
Capex may be maintaining at these levels going forward stepping down maybe in 'twenty five or are we kind of in a capex cycle or.
Just any kind of color you could give there would be helpful.
Yeah as far as the level of spending as long as we have opportunities, we're going to spend to the opportunities and we'll call that out as we have to we will give you an update in October what the year's starting to finish up at and then in January we will clue into a 2025, but I think again, we've got a history of delivering.
<unk> and again I think for the time being we're in this this level of spending but again, it's it's immediate high return it feeds into this tremendous growth that we're seeing and so we get immediate return for it as far as the project down in Arizona, I think Tom where we're kind of looking at a late next spring.
Type of right you know early part of next year of getting that plant started up early probably a late late first quarter early second quarter.
Got it got it and I guess the last question. When you look at your end markets and really the strong volumes you've seen you know between consumer industrials durables logistics are are there.
Specific markets or customer set that is really.
Driving that strength or has you know where the strength of demand has surprised you maybe.
Yeah, Anthony I don't think anything has surprised us other than probably that the consumer and has held up a lot better than probably anybody had forecast and the consumer themselves have held up a little bit better now that said they may be they may be spending more from credit card and cutting into their savings account a little bit but the cause.
Tumors remained pretty damn healthy Ah I think durables have been had been a little less less healthy only because housing starts have been down.
And I think some of the remodeling and just in and actually you know getting supply has been has been a bit of a problem on the on the durable side. So but overall you know I mean, when we look at our mix I mean is there there's minor adjustments back and forth and like I said on the on that specialty graphics side, that's that's kind of flatlined quite a bit, but but it's still there.
Still healthy and it's still similar to a year ago.
Okay.
Okay. That's very helpful I'll turn it over.
Thank you next question.
The next question comes from Gabe Haid of Wells Fargo.
Please go ahead.
Mark Tom Good morning.
Good morning Gabe.
Hopefully a couple of quick ones. One is kind of based on run rate production or I'm going to call. It directionally 5 million tons of capacity.
You mentioned I think you rattle off 43000 tons I think of year over year increase sales to outside.
Our non integrated tons or are you at about 90% integrated at this point and then on that call. It 500000 tons that you're not to the extent that you do integrate it should we be thinking about maybe $200 a ton of incremental profit that you realize when you internalize that and.
Now that that's that's question.
I think I'm getting the number we're using internally is about a 95% integration and as far as the value to us I think you're in the ballpark.
Speaker Change: Bob.
Bob: I think that's maybe a little more than that gave but yeah.
Okay. Thank you and then.
We've got some new legislation regulation in the EU and I appreciate youre not in Europe.
But just to the extent that it impacts kind of maybe global trade flows.
Or an implied values of Virgin assets here in the U S.
Do you see that putting maybe incremental upward tension on OCC over time.
As people look to use more and their furnish or are they.
Does that not even coming to your thought process can you focus on the U S.
I'm very familiar with with what you're talking about we've been paying attention to that Oh at a F. N P. A for the last year again I think that's the Europeans are now realizing some of the unintended consequences of trying to trying to do the right thing and I think now that the election cycles of the of our.
When completed in Europe, I think the reality is they're going to have to revisit that whole legislation and understand.
What the impact is at the end of the day.
Okay. Thank you and last one just on capital even with the increased spending on our model kind of has you guys still it at one times Levered.
You've always obviously taken a balanced approach with the dividend and share repurchase being a little bit more opportunistic.
Change either on the M&A front or.
Different perspective on on capital as you look out over the next 12 months.
To return cash or value to shareholders.
Every everything remains the same we look at all opportunities, whether it's acquisitions, our capital spending opportunities a dividend or share buyback wherever it makes sense at any given time, we are we're in.
In a great position to be able to take advantage of just about anything that comes along so.
Nothing's changed.
But we also again on the capital side, we have the organization that can quickly quickly execute and take advantage of the ideas that currently come about and the needs that we have to work with our customers.
Thanks.
Speaker Change: Okay. Next question. Please the next question comes from Phil <unk> of Jefferies. Please go ahead.
Hey, guys. Congrats on another strong CT strong quarter.
I guess the way you guys characterize demand for your major end markets consumer hanging in there and durable goods still a little squishy.
It doesn't exactly the lineup to the acceleration of box volumes, you've seen call. It the last two to three quarters. So my question is are you starting to see customers restock or are these the customers you're aligned.
Speaker Change: Just growing faster or just the investments you've made really allowed you to take share in a more meaningful fashion, just because it seems to be lining up a little different from some of the macro data we see currently.
Phil: Phil This time I would you know I'm going to go back again, just to reemphasize the fact that.
We haven't we have a particular strategy our go to market strategy is a particular, one it's we try to align with the right customers and by that I mean, the customers that we see that are going to grow going forward.
And.
We.
Worked very closely with them to help make us both very successful.
In the long run and those are those have proven to be very beneficial to us.
Phil: We have shied away from some of the other ones that are very seasonal or perhaps are you now.
A little more a little more jagged in terms of there.
Demand in and fall over over periods of time.
So you know this has been a long long term strategy that we've had and and we continue to execute very well on that I think theres been a lot of discussion about the capital spend.
And you know that's that's been a long term strategy of PCA has to been to consistently capital spend where the opportunities present themselves our financial flexibility allows us to do that sort of thing.
And and those and then consequently, we can take advantage of the opportunities when they present themselves.
With the marketplace. So that's really it that really describes his best what we're seeing in the marketplace and I know that some of our growth may not be consistent with with which you might see in a macro trend, but I think when you dig deep and you see certain industries or certain segments, you'll see you'll see significantly more growth in some of them.
Those then you might and others.
Are you seeing any restocking from your customers at this point.
Restocking our customers typically are keeping a a what I would consider to be a very conservative inventory, we got through that whole destocking probe process, you know quite some time ago now and they are holding their there they they replenished some inventory, but I would I would term it to be.
Phil: On the historically lower side of inventory is what they're holding right now.
That's helpful.
And then the step up in Capex Mark appreciate it.
Paul.
Telling us.
How the ramp up curve on Capex, but can you give us a little color in terms of the EBITDA contribution ramp up I mean, some of these are smaller as you pointed out though should we start seeing some of that benefit this year or is it more of a 2025 me that I know the Arizona facility is going to come up some.
Sometime in spring, but there is startup costs associated with that so how should we kind of think about the investments you're making in terms of the ramp up curve.
These projects are we're doing currently in the box plants with some of the converting lines in corrugator, you'll see benefits. This year and then a full benefit going forward into next year. So without quantifying that these are again, a very very immediate quick return opportunities.
And again some of the longer term projects like the project down in Arizona will be next year, but are we.
We currently have a portfolio of activity going on in the box plants, who we've been executing on an ongoing basis, all year and as the year rolled on we observed more opportunities than we were able to take advantage of that and so theres always a somewhat of a laggard, but it's always in terms of months not years.
Super.
Thinking about build versus buy at this point I mean.
A lot of.
A lot of your private competitors are adding a lot of capacity in recent years, a very low cost mills, but not much of a book of business.
Any opportunities on the acquisition front potentially out there.
I don't want to comment about that again, that's there's always opportunities and we will take advantage of opportunities when we need to take advantage of them but.
I don't want to speculate on anything.
Okay I appreciate the color. Thank you.
Thank you next.
Next question.
As a reminder, if you'd like to ask a question. Please press Star then one.
The next question comes from Charlie Muir Sands of BNP Paribas. Please go ahead.
Speaker Change: Thank you very much for taking my questions.
Two please firstly on the you aren't going to box plant set the capacity of the new site would be 2 billion square feet per annum.
Can you just.
Tell us what kind of upgrade that is whats the capacity of the existing shine site.
Your clothing.
And then secondly, just on.
Back on the competitive landscape I. Appreciate you don't like to talk about individual capacitors, but it does seem to be as a general trend towards.
Speaker Change: Pushing price a bit more.
Is that something that you are tempted or able to fall out or are you more inclined towards gaining market share and driving off pricing leverage. Thank you.
On your second part there were not going to talk about price, but on the first part of your question.
We're going to more than double the capacity down in Arizona time, you want to give you more details on that yeah. That's there's not there's not a lot there's not a lot to talk about other than the fact that we were clearly out of capacity in that marketplace, we're not able to service to customers.
Locally like we'd like to we're having to pull from a lot of different plants and you know most of the plants are quite far away.
You know in the in the L a region or something like that in order to service that market and that's not sustainable long term. So you know with with the opportunities we have and with the customers that we have in that marketplace.
Speaker Change: They've they've indicated that we need to do significantly different things, which we will do and you know that will that will give us. Some you know obviously.
Obviously, some great opportunities in that region and then you know if he if you look back at our portfolio of opportunities over the last six years.
In general we've taken a lot of these older plants that needed to be recapitalized and we've we've increased productivity on a unit labor hour basis.
We've tripled quadrupled the productivity coming out of these plants and cut costs and done it with a lot less labor hours. So it's.
Again, the plant in Arizona will be.
Speaker Change: Really big opportunity for us to take care of that hope that whole region.
Many thanks.
Thank you next question.
Mr. Coles in I see there are no more questions do you have any closing comments.
Alan Thank you and again every.
Alan: Body that participated I want to thank you for joining us today and look forward to talking with you in October to review the third quarter call have a nice day bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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