Q2 2025 Packaging Corp of America Earnings Call
Thank you for joining packaging Corporation of America's second quarter of 2025 earnings results conference call.
Speaker Change: Your host today will be Mark Kam, chairman and chief executive officer of PCA.
Speaker Change: Upon conclusion of his narrative, there will be a question and answer session.
Speaker Change: I'll now turn the conference call over to Mr. Coen, please proceed, when you're ready.
Mr. Coen: Thank you, Joe.
Speaker Change: Good morning everyone and thank you all for participating. In packaging, Corporation of America's second, quarter 2025 earnings release conference call today,
Mark Kam: I'm Mark calls and chairman and CEO of PCA. And with me on the call today is Tom has further president and Kent flutter. Our Chief Financial Officer
Mark Kam: I'll begin the call with an overview of our second quarter results and then I'm going to be turning the call over to Tom and Kent who will provide further details.
Mark Kam: I'll be then wrapping things up and then we'll be glad to take questions.
Mark Kam: Yesterday, we reported second quarter, net income of 242 million or $2.67 per share.
Mark Kam: Excluding special items second quarter 2025. Net income was 224 million or 2.48 cents per share. Compared to the second quarter of 2024.
Mark Kam: Net income of 199 million or $2.20 per share. Second quarter, net sales were 2.2 billion in 2025 and 2.1 billion in 2024 total company. Ibida for the second quarter, excluding the special items with 451 million in 2025 and 404 million in 2024.
Mark Kam: Second quarter, net income included special, items income of 19 cents per share, primarily uh, for gains on the sale of real estate for corrugated products facilities that were previously closed.
Mark Kam: Uh, which were partially offset by costs relating to the pending acquisition of growth container board business.
Mark Kam: Details of the special items for both the second quarter of 2025 and 2024 were included in the schedules. That accompanied our earnings press release.
Mark Kam: Excluding the special items to 28 cents per share, increase in second quarter 2025 earnings compared to the second quarter of 2024 was driven primarily by higher prices and mix in the packaging segment for 98 cents.
Mark Kam: Lower fiber costs, 13 cents.
Mark Kam: Higher prices in mix in the paper segment, 4 cents and a lower tax rate for 2 cents.
Mark Kam: Partially offsetting these improvements were higher operating costs of 30 cents.
Mark Kam: And higher annual outage expenses, 21 cents with the change in the timing of the filer City outage from later in the year, which we moved up to the second quarter, other offsetting factors included, lower production and Export sales. Volume in the packaging segment for 13 cents.
Mark Kam: Hired. Depreciation expense 10 cents.
Mark Kam: Higher fixed and other expense 10 uh, 9 cents.
Mark Kam: Lower paper segment, Volume 2 cents, higher Freight, expense 2 cents and higher interest expense 2 cents.
Mark Kam: The results were 7 cents above the second quarter. Guidance of $2.41 per share primarily due to lower operating costs and lower fiber costs,
Mark Kam: looking at the packaging business IBA, excluding special items in the second quarter of 2025 of 453 million with sales of 2 billion resulted in a margin of 22.6% versus last year's ibida of 400 million and sales of 1.9 billion or 21%.
Mark Kam: Corrugated products price and volume were generally consistent with our expectations and as expected export container board sales were lower we ran to demand during the quarter producing 85,000 fewer tons of container board than the second quarter of 2024 and 55,000 tons fewer. Uh tons of container board than the first quarter of 2025.
Mark Kam: We drew down 17,000, tons of container board inventory, from the end of the first quarter putting us in excellent shape for the rest of the year.
Mark Kam: Efficiency improvements outstanding, sales, performance and capital, projects execution to deliver best-in-class results.
Mark Kam: On the Strategic front, we're very pleased to have announced our agreement to acquire the growth container board business and look forward to working with our new colleagues and serving our new customers at the highest level. It is Well capitalized business. That complements us nicely and we will provide uh and will provide us with very good growth platform for both container board and corrugated products.
Mark Kam: Uh we're targeting completion of the transaction by the end of the third quarter uh subject. Obviously to customary conditions, including regulatory approval.
Mark Kam: I'll now turn the call over to Tom who provide further details on container board sales and corrugated business in general.
Tom: Thanks Mark.
Tom: The performance of the packaging business was largely as we expected and it was a very strong quarter. We fully realized our earlier announced price increases and domestic container board and corrugated products, prices and mix were 95 cents per share above the second quarter of 2024 and up 41 cents per share. Compared to the first quarter of 2025 export, container board, prices were up 3, cents, per share versus last year's second quarter, and up 1 cent per share compared to the first quarter of 2025.
Tom: While customer order ordering patterns, remain, somewhat cautious, corrugated demand remains solid and steady throughout the quarter?
Tom: Shipments per day in our corrugated products, plants were up 1.7% versus last year's very strong second quarter. When per day shipments were up more than 9% over the previous year. So it was a pretty tough comparable.
Tom: Shipments also, exceeded the first quarter of 2025 total shipments were flat with 2024, which had 1 more workday, our continued sales growth and full realization of our price increases helped Drive higher margin performance in the packaging segment.
Tom: As expected outside sales, volume of container board was down, 30,000 tons from the first quarter of 2025, and down 24,000 tons from the second quarter of 2024 while domestic sales have been on plan, even with relatively low exposure to China and Europe. We've seen noticeably lower export sales with the global trade tensions, overhanging the market
Tom: I'd like to Echo Mark's commentary on the pending graph acquisition.
Tom: We see tremendous strategic opportunities with the acquired business, and a corrugated Network that would be great potential to expand in areas where we would have needed to deploy considerable additional Capital to grow. And where grief has well capitalized facilities, the business provides a complimentary product offering and long-standing customers with deep relationships who we look forward to serving, perhaps, most importantly, this will be a great cultural fit with PCA, particularly with our shared dedicated.
Tom: To serving the needs of our customers.
Mark Kam: And I'll turn it back to mark.
Mark Kam: Thanks Tom. Looking at the paper segment IBA, excluding special items in the second quarter was $30 million with sales of 146 million or a 20.8% margin compared to the second quarter of 2024 is ebida of 31 million and sales of 15 million or a 20.4% margin. We successfully and safely completed our maintenance outage at the International Falls Mill in June. Uh, which affected our volumes sales, volume was 5% below the second quarter of 2024 and 7% below the first quarter of 2025,
Mark Kam: We've completed the implementation of our price increases during the quarter with paper prices and mix up 3%. From the second quarter of 2024 and 1% from the first quarter of 2025, I'll now turn it over to Kent.
Kent: Thanks Mark.
Kent: Cash. Provided by operations was $300 million in the quarter and free cash flow was $130 million.
Kent: The primary payments of cash during the quarter including Capital expenditures of 170 million, dividends of 112 million and federal income tax payments of 109 million.
Kent: Our quarter inch cash balance, including marketable, Securities was 956 million with taking into account, revolver availability. Liquidity of approximately 1.3 billion dollars
Mark Kam: I'll now turn it back over to mark.
Mark Kam: Thank you, Ken.
Speaker Change: For our third, quarter profitable volume is going to be the key driver.
Speaker Change: Will continue to see lower export container board sales driven by the global trade environment. We will build some more inventory ahead of the fourth quarter, der, uh, maintenance outage that's planned. We expect prices in mix in the packaging segment to remain relatively flat in the paper segment. We expect flat pricing and higher production and sales volume with the completion of the International Falls outage in June. Uh, which impacted the second quarter as well as seasonal back to school orders.
Speaker Change: Uh, we have no scheduled maintenance outages during the third quarter and expect maintenance outage expense to be lower.
Speaker Change: Freight costs will be higher with the full effect of the rail rate increases at our Mills operating costs will be near second quarter levels and fiber costs will be slightly lower considering these items. We expect third quarter earnings of $2.80 per share, excluding special items.
Speaker Change: Our guidance does not include any possible impact from the pending acquisition of the growth container board business which is subject to satisfaction of certain conditions, including regulatory approval.
Speaker Change: And with that would be happy to entertain any questions. But I must remind you that some of the statements we've made on the call today, constituted forward-looking statements, the statements were based on current estimates, expectations and projections of the company.
Speaker Change: 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 10K, which is on file with the SEC actual results could differ materially from those expressed in the forward-looking statements.
Speaker Change: And with that Joe, I'd like to have you go ahead and open up the call and uh we'll take questions.
Joe: Thank you.
Speaker Change: uh, to ask a question, please press star the 1 on your telephone keypad,
Speaker Change: If you're using a speaker-phone, please pick up your handset before pressing the keys and to withdraw question. You may press star, then 2
Speaker Change: We will not take our first question from George stosh with Bank of America. Please go ahead with your question.
George stosh: Thanks very much. Hi everyone. Good morning. Thanks for the details morning. Um,
Speaker Change: couple questions for me Mark. Um,
Speaker Change: First of all, can you or Tom talk a little bit about you know traditionally you know your comment on bookings and Billings to start the the new quarter what are you seeing there? And you mentioned that you were better than expected on guidance in the second quarter on operations and fiber costs. And while that gives us some color if you can give us a little bit more detail in terms of what was behind uh the better performance and I had 1 quick follow on.
Speaker Change: Good. I'll let Tom talk about where we are with, cut up. Yeah. George uh bookings right now are are trending at 2% over the Q2 of 2024.
Speaker Change: Uh, which is, which is a very good start considering the, uh, you know, the enormous increase we had in the third quarter of last year.
Speaker Change: Uh, so I remind everybody, we've got some very, very tough comps. Um, but interestingly enough, you know, is that as the last quarter, really kind of, uh, you know, tailed off a little bit in volume, uh, we're starting out this quarter sequentially, looking about 10% above, what we did in the last month of, of, uh, 2025. So, uh, you know, I think, uh, I think things are looking things, are looking pretty decent.
Speaker Change: And George regarding the your the second part of your question with uh with the operations, there were 2, 2 things 1. We as you would expect. Um, we operated at extremely high efficiencies uh approximately 99% uptime performance across the system.
Speaker Change: But in fact, if you think about that, we did run to demand. So we had a couple of the smaller machines down during the quarter, uh, 1 at Filer and 1 out of Wula. And so with that, um, there there was obviously the uncertainty about uh, how the uh, operating costs would look. And in fact the uh, the organization executed extremely well and uh we're able to really run the uh, the Mills very efficiently.
Speaker Change: In spite of having some of the operations down uh for lack of demand. And so we're very pleased with uh with the outcome from from the uh from the organization's efforts. That's that's really uh that's that's what was going on.
Speaker Change: thanks, Mark, the last 1 for me, you know, I
Speaker Change: In terms of, you know, the whys and wherefores there. Thanks very much, and good luck in the quarter.
Speaker Change: Hey, George. This time, I'll handle this. Um, no, I wouldn't really say it's a function of mix. Uh, it's it's a function of a number of different things primarily. If you think about the fact that, and I'm going to remind everybody, what we've talked about many, many times regarding price increases, uh, when we go into price increase mode, we're in total price increase mode, that's where we are. And, uh, and so you're seeing you're seeing that reflected in the uh, not only the revenue per ton but also the EBA per ton, if that's the way you want to measure it. And we're certainly, uh, in our margins. So, um, I think, you know, any any sales that, you know, are down, IE export, uh, would have helped contribute to that to that, uh, revenue and IBA. So, uh, you know, when, when that, when those do come back and we get this, you know, get some of the global, uh, issues behind us. Uh, that's, that's a good upside for us.
Speaker Change: Thank you very much.
Speaker Change: Thanks, George next question, please.
Speaker Change: Our next question will come from Mike roxland with truist, please go ahead.
Speaker Change: Uh, thank you Mark. Tom again for taking my questions.
Speaker Change: Um first question is wanted to follow up, you said, you know uh it sounded like Fox shipments.
Speaker Change: Sort of stated in June, um, wondering what happened. There is just a function of the, you know, consumers, increasing, tariff, concerns. I just want to understand how the trajectory of option is playing out during the quarter.
Speaker Change: And Tom you also are indicated. I want to make sure I heard this correctly. That bookings are on 10% versus the last month of 2q. Let's see if you could clarify that. Thank you.
Speaker Change: Yes, that's they are up. 10% versus the last month of uh
Speaker Change: Of Q2 and uh, so we're we're off to a good start in comparison and remember, we're running, we're running at record volume rates as it is. So, uh, you know, you got to, we got to keep all that in mind. Um,
Speaker Change: I think your question around, uh, you know, why did it fade a little bit in the second quarter, I think you saw a little bit at in the first quarter as well. I still think there's a lot of questions around tariffs, and what's happened globally, and, and everybody's just kind of waiting for something to, uh, you know, that they can count on long term. Uh, so we've got a lot of customers who are managing their inventories very closely. Uh, so we're seeing, you know, we're seeing some spikes and then some valleys, you know, uh, during the
Speaker Change: During the quarter in terms of ordering patterns, and I think the other thing is, is you got to remember that. There's, you know, there's a number of industries that have been, you know, quite impacted by
Speaker Change: Just the, uh, the global economy, the questions in the economy, those sorts of things. And so, uh, you know, we've got some, we've got some areas that, uh, are off some segments that are off.
Speaker Change: Uh, Automotive being 1 Building Products, you know, being off very highly because of this housing market that's that's existed, that's basically stagnant. Uh, and then uh, and then in the food and beverage area, the salty snacks and the sugary beverages, uh, obviously have been under some duress and that's, you know, been in the news at at lots of times. So you got some puts and takes here, but uh, we're still, uh, you know, we're still advancing and moving forward and, uh, feel good about
Speaker Change: where we are 1 of the indicators that I I always look at in that regard, too is uh
Speaker Change: What's our cut up? Look like on Friday, going into a Saturday period in the last couple of weekends. We've seen, uh, a nice movement, uh, upward in in the volume, that's, uh, coming out of the plants on on Fridays and Saturdays. So, so that's been, uh, again compared to the, uh, the month of May into June when things had declined. The these last couple of weekends of the first, um, Friday Saturday periods. We've we've seen that are um really uh, looking really strong.
That is, uh, thank you Marcus for, for that detail. Just 1, quick follow-up. Um, in terms of Auto being off building products, being off food in bed beds being off. Is that, um, a 2q phenomenon was that said it's been off school year and maybe last year. Um, just wondering if that's if something if those particular end markets, have worsened relative to uh to the recent times and then just 1, quick question on the growth acquisition, they talk about the capital avoidance that you'll be. Oh, the capital that you'll be avoiding spending by acquiring those assets and any initial expectations on on, on 2026 FX. Thank you.
When you ask about automotive and building products and some of these other segments, some have gotten worse, uh, some have been kind of like that for quite some time. But uh, even in the building products as an example, I mean that that that part of the industry is really struggled for quite some time. Now, as you know, we've sat here with this, with these interest rates that uh,
Speaker Change: That some would argue are quite high and uh, haven't quite opened up markets if you will. So uh, you know, I think there's a tremendous upside for us.
Speaker Change: Uh, relative to getting these tariffs behind us and some interest rate movement, which will really catapult us going forward. Uh, obviously, all all of our assets are, uh, you know, dedicated to America and, uh, we'll be the ultimate winner out of this. So I think there's, I think there's some really good upside for us there and that kind of leads us into the growth acquisition as well. So, um, you know, when when we talk about Capital avoidance, I want to remind everybody. And we've been talking about this for quite some time that the capital intensity in this business is tremendous. And uh you know, what used to be, you know, being able to put a box plant together for a hundred million dollars is now now closer to $300 million and uh Mill used to be million dollars at on the cheap and now you can now it's no, you know, it's going to cost you every bit of a billion dollars. So, um, you know, things have changed quite dramatically from a capital point of view and, uh, you know, so the number is quite significant for us.
Speaker Change: In terms of capital avoidance with the uh, with the growth assets.
Speaker Change: You know, you know the, the 1 example is the Dallas Metroplex region. We're currently finishing out a project in Ohio that will start up next summer. And then we'd already been looking at what we would be doing down in the Dallas region, which would have entailed more than likely building out, a new new, very large, Plant down there, similar to what we just did in Arizona, what we're doing in, in Ohio, and yet, with the acquisition, uh, with growth. Uh, we've got the platform already sitting there that we can build out, uh, with just some converting equipment going into the, uh, the new plant that that gripe has done in Dallas. So that's another example of where we'll avoid some big Capital. Yeah. And also, and also, I'd say the, the grippe integration level is, you know, is very good and uh, although it'll give us some additional tons which we will need. Uh, you know, we can, we can manage that quite elegantly, I think going forward.
Thank you very much.
Speaker Change: Thank you. Next question, please.
Speaker Change: Our next question will come from Gabe Hodo with Wells. Fargo. Please, go ahead with your question.
Gabe Hodo: Uh, good morning, gentlemen.
Speaker Change: Um, I apologize.
For the avoidance of doubt, I think you said bookings up 2% versus Q2 24. I presume you meant Q3 24, um, and same day shipments were up, 11 and a half percent in that period.
Speaker Change: Uh, yes, I did. I'm sorry. I I misstated there. Thank you. Thank you Gabe. No, no, I I wasn't trying to. I just want to make sure that we're, we're clear. Okay. Um, yes. Because
Speaker Change: Versus what could have been a depressed June number? Um, I think is causing a little bit of the
Speaker Change: Forks. So that's why I asked the question. Um okay, yeah, I was just, I was just trying to indicate Gabe. I was just trying to indicate that, you know, the trend, the trend is clearly up from the trend that was taking place in in Q2.
Speaker Change: Understood um, anything specific on the growth acquisition, from a financial standpoint, um, cash tax specifically, um, that could be advantageous to you, um, on the acquisition.
Speaker Change: As far as capex.
Speaker Change: No, no CA cast taxes mark.
Gabe Hodo: I'm sorry. We couldn't hear you. You're not coming through clearly Gabe. What what was that? I I apologize cast cast taxes. Oh tax.
Speaker Change: Okay. Yep. And the big beautiful bill.
Oh okay. So yeah 2 2 things there, yeah, Gabe 2 things, it's Kent. Um number 1,
Speaker Change: The the acquisition will largely be structured as an asset acquisition meaning that we will, you know, we'll we'll we'll get the depreciation Shield there. So that's that's that's number 1, number 2. Yes. We're going to get an opportunity with the bill to take bonus depreciation at at the higher level than what was in force. So, yes.
Speaker Change: Of, um, bidding out there given sort of what appears to be a little bit of a volatile environment.
Speaker Change: Uh, Gabe. I would say, I know I I think it's just basically, you know, kind of business as usual from uh, from the customer's point of view. But but I will remind everybody that, you know, with, with the recent announcements in the industry relative to uh,
Speaker Change: You know, to to Mills and box plants. Uh, I think that uh you know Supply is is become very much in line with demand as it exists today.
Speaker Change: Understood, thank you.
Speaker Change: Thanks Gabe. Appreciate it. Next question, please.
Speaker Change: Our next question will come from Mark, Winrow? With C Port research Partners. Please go ahead.
Mark Kam: Thank you, uh, want to just to follow up a little bit on the, the graph acquisition. Um, I, I know the the press release Etc had talked about, uh, you know, the, the Run rate of that business having been 212 million during that, that may through April, uh, period and um, that you, uh, you had outlined 60 million in Synergy, uh, potential 2 2 points of clarification, um, 1. Um, you, you just raised the Dallas facility. I know that that graph had talked about that potentially, um, making 30 million but I don't think it was making much money and and the time period uh, which covered the 212 million.
Mark Kam: Million. So just wanted to clarify that and whether you think that's a reasonable type of number and whether that was included in your synergies or not. Um, and then, um, I I guess that 212 million is sort of backward-looking. Um, is it fair to say that um, given the price increases and and some other variables, that sort of the, the look forward run rate? You would anticipate at this point to be higher than that and and if you kind of talk about what the key variables, we should be focused on. As we, we do that analysis. That'd be super helpful.
Mark Kam: Hey Mark, this time. Uh, first of all you know the uh the 212 is there upside to that? Yes. Uh, did they capture some upside to that? Yes.
Mark Kam: So, uh, we're we'll be, uh, you know, we're heading in in, in better shape there. Did we build the did we build Dallas into, uh, into our synergies? Yes. To some extent quite conservatively, but we see some tremendous upside with that. Dallas facility is is Mark mentioned, uh, because, uh, it can be it can be expanded dramatically Beyond where it is right now with gripe. So uh, the that does that essentially? Answer your question mark.
It, it does. Um, and then I guess the, the last part, um, and, and maybe you did sort of address it, obviously, and we've had some price increase. I, I guess it wasn't quite clear when you say that. They, so they're already making.
Speaker Change: It's already making more. So the benefit of the price increases are already visible and showing up in. I wasn't quite clear. What you we we know what we know what the estimates are. That's all we know at this stage of the game, but uh, the estimates were for, you know, uh, for greater than the, than the 212. So obviously, they were still flowing through price increase after that, after, after our agreement, that that's helpful. Thank you. And then, um, and then, just just, let's say, I mean, 1 thing is when I look at, um, you know, last year, you know, there was like a 4% step up in your Bot shipments from the second quarter to the third quarter.
Um and so um you you presumably have a a pretty tough comp this core even tougher than the second quarter as well. Um, and so, you know, I I think you had talked about still expecting to be up year-over-year um, in the third quarter so that that would actually seem to suggest, you know, you know, continued to sequential, you know that you know, pretty strong sequential Improvement and just want to make sure I I'm I'm getting that right? And and the comment about improving to the third quarter, it wasn't just a sequential comment.
Speaker Change: The, the Improvement of the third quarter was a sequential comment but the and so the third quarter of 25 over third quarter of 24 will be relatively flat. I mean, it's might be up just a little hair, but it's going to be relatively flat as we estimate right now. Uh, and again, you know,
Speaker Change: As we as we indicated our, uh, our estimates are based on a lot of unknowns right now, uh, with the, with the tariffs and, and the global structures and things like that. So, that could change quite dramatically. I think, by the end of the third quarter,
Speaker Change: Just out there and this is you know, and I'm just telling you what our customers are telling us as well is that, you know, they they can try to get back to what, what we would consider more business as usual and have more predictability going forward and all of that to the upside, I think most are all operating on a very conservative nature right now.
Speaker Change: You know, and Mark, as as, as I said, uh, a few minutes ago, the last few Friday, Saturday periods, we we've had the best couple of Friday Saturday periods that we've had in 4 months.
Speaker Change: He did have to go back to the, uh, you know, March April, period. And so we've seen that significant movement just uh, uh, through the end of the week cut up. Yeah. And what and what Mark's really talking about is, is having to having to, uh, you know, work into Saturdays, uh, as opposed to, uh, just being off, you know, being straight. Straight 5 days a week. Uh, we're getting into 6 days a week now.
Speaker Change: All right, so I mean it sounds to me like you think, maybe there's this like pent up demand that that's potentially there but that you want to see the green lights on on tires and then people would yes, yes, yes. And yes. And I, I think 1 of the things that you, that really exists is and you've seen it in other downturns is when people pull their pull in their horns and really manage their inventory incredibly tight because they can't really predict what, what's going to happen to their business, uh, over the Long Haul, those inventories change almost overnight to the to the upside. And, uh, and then and then, you know, our customers can get out and start moving, moving product forward. I mean, just think as an example, if interest rates
Speaker Change: Great to come down and that impacts the housing market. I mean, just a building products.
Speaker Change: Segment is going to just jump dramatically because it's down double digits in the last few years.
Speaker Change: Very helpful. Thanks a lot.
Thank you. Next question, please.
Speaker Change: Our next question will come from a know, just sha with UBS, please go ahead.
Hi, good morning. Um I wanted to clarify running. I you said that you expect prices in the packaging segment to be flat in Q3 sequentially. I thought there was a little bit of the February price increase that was rolling into Q3. Um, is that right? And if so, are there puts and takes for that flat estimate, that's that guidance.
Speaker Change: Uh, there are you know we we we're putting it in as flat right now because arguably we've got the complete pass through done. Typically in our fashion we get it faster than the rest of the industry but um you know so we've we've essentially got that price increase in place. There may be a little there may be a slight upside but uh, but that's it.
Okay, great. Thanks for clarifying. And then just going back to the e-commerce question. Can you give a sense of what the growth in e-commerce has been? Like so far this year? And maybe if you can your outlook for the rest of the year?
I can't tell you exactly what the entire e-commerce industry has done. I can tell you that our customers continue to grow, uh, and and that's a good thing. Uh, so if you, uh, if you went indicated off of our customers, they're still growing uh, mid single digits uh, so far this year. So uh, and and it's going to be really Ecom is when you talk about this year, it's a little more difficult because Ecom is more of a second half business.
And, uh, and that's really kind of driving our industry to be more of a second half industry, quite frankly. So, uh, you know, that creates that creates a, again, perhaps a little more upside to where we are right now, in terms of this, you know, questionable environment. But, um, so I can answer the ecomm question a lot easier at the end of, at the end of the year than I can midyear, but, uh, so far so far, it's still, uh, it's still up and, uh, and obviously, you know, it's a big part of, you know, big part of the, uh, the Box business today, given given the way people shop.
Speaker Change: Yeah, thanks very much. I'll turn it over.
Speaker Change: You're welcome. Thank you next question, please.
Speaker Change: Our next question, will come from Anthony petar with City, please go ahead.
Anthony Petar: Uh, good morning.
Anthony Petar: Morning morning, if it's possible to. Hey, I'm wondering if you can say, where pca's recycled, mix will be
Speaker Change: Before. And after the grippe acquisition, and then just from a high level, the gripes Recycled capabilities, open up, you know, new customer sets, or where they hitting some segments of the markets, or you really couldn't compete before, there's any thoughts there.
Speaker Change: I'll comment and then Tom can add to that you know we've we've historically been around that. 20% level Depending on time of year and and price of OCC might be as low as 15% but with with gripe will will theoretically be moving up to around that 30% level.
Speaker Change: Just add that uh do does it. Uh yeah, yeah. I mean it's going to it's it's not we've never been prevented from certain markets but uh but it's going to provide some, it's going to provide some better opportunities for us. Especially since they've got 100% recycled Milling in masselin and we can swing that between liner and medium. If we want we could do a lot of things. And we've got a lot of plant strategically located very close by. So, uh, you know, we'll be we'll be, uh, Freight positive and fiber positive, quite frankly out of that, out of that facility. You know what Tom's saying is that, uh, our big ashel implant is, like, 44 miles away from masselin and the new plant down in Newark is like 90 miles away. So we'll be in a position just to shuttle.
Speaker Change: Uh, PCA shuttle uh, roll stock in and out. Uh, so uh we'll be again, considerable savings right there.
Speaker Change: Okay, that that's very helpful. Um, and then just following up on gabs question. I mean, we have seen a number of closure announcements this year, some of them pretty large and, you know, not not asking you to comment on your competitor's business. But I'm just wondering if any of these closures have
Speaker Change: allowed you to pick up some business, or impacted you in other ways. Or if there's any maybe specific regions that are performing better than others, just any follow-ups there.
Speaker Change: Uh, difficult question to respond to Anthony, but a good 1 from your standpoint, much, more difficult for me to respond to. But, uh, yeah, uh, I would say that, uh,
Speaker Change: No, I it's hard to tell at this, at this point, quite frankly, because, uh, I, I think what you're looking at is, is you're looking at what we've been talking about for a long time and that is that it's a very small limited outside Market, uh, for container board today in the United States. Uh, and so, if there, if, if you're, if you're focused on that that there's little upside to that. And, uh, and then of course, you've got the export situation and what's going on globally, and, uh, if you're focused in that market, you got some real challenges as well. So, uh, so I think, I think those 2 things wrap together along with where we are, in current demand, uh, you know, probably led to some of those decisions.
Speaker Change: And, and, and obviously, it's obviously, obviously, it's obviously it's positive to us, you know, going forward, but that's, uh, you know, that's just the way we see it.
Speaker Change: Okay, I'll turn it over. Thank you.
Speaker Change: Thank you. Next question, please.
Speaker Change: Our next question will come from Phil Ang with Jeffrey's. Please go ahead.
John: Hey Mark, Tom and Kent. This is John on for Phil uh really appreciate all the details.
John: Just kind of going back to the uh volumes under year-over-year basis. I mean you called out
Pop shipments. We're going to be about flat year-over-year but is the contender board production expected to be down. Um, I know you talked about a little bit of a ramp up sequentially. I had a derp but I'm just thinking about on a year-over-year basis, uh, with some of the economic downtime that you've been taking, you know, is that something that's going to be down year-over-year?
With we'll probably 25 30,000 tons down compared to last year and that's primarily the the export uh sales of container board that we again under the current market situation with tariff. We we choose not to participate in right now.
John: Makes sense. Okay and then um from your perspective on the demand front are your customers done, destocking, like do you have any insights on their inventory levels and you know, just thinking about as we maybe get some clarity on these uh, Power of negotiations. And and maybe we see some uh, pullback in in rates if uh, if that could lead to a good amount of torque coming through, maybe back up this year going into next year.
John: Yeah, our customers. Our customers are through the docking part. As I said they're carrying incredibly lean inventories and, uh, you know, going forward, if we just get some certainty and in in, you know, in the global economy and, of course, get any kind of interest rate movements. Uh, here domestically, I, I think things are going to things are going to open up quite dramatically.
John: Great. Appreciate it. I'll turn it over. Thanks.
John: Thank you. Next question.
Our next question will come from Charlie mure. Sims with BNP paraba, please go ahead.
Speaker Change: Obviously, just closed the 800,000 tons of milk capacity.
John: and uh, alluded to the integration rate, but can you just
Clarify, how much, um, corrugated production or or capacity, uh, or both, uh, the company has or what levels of integration that that operation had. Um, and then the secondly on that,
Obviously, it's a 1.8 billion dollar acquisition funded from cash and borrowing of. Can you just give any kind of steer on the marginal cost of of that um, for our modeling?
John: And, uh, regarding the, uh, regarding the grave Assets in the integration level. The integration level is probably in that 7075 percent range. Uh, so as I said, there will be there will be some available tons that that we're going to need in this uh, in this acquisition.
John: Great. Thanks and um, given the
Or comments about seeing a pickup in in demand and therefore sort of extra shifts coming on, on late on Fridays or into Saturdays. Can you just, um, talk about how we should think about operational, leverage or de-lever on that marginal growth? If you do see a demand pick up, um,
John: You know, with the leverage of the fixed costs, mean that it's an incrementally, more profitable business, or do you end up having to pay overtime and therefore, it's it's, you know, it doesn't really sort of drop through a greater than your epidural margin. Just any color there, thanks.
Speaker Change: Well, Charlie, the only thing I tell you is is that, you know, most of most of our costs are covered at at some point and so when you go beyond that point I mean a lot of that falls directly to the bottom line because we've already covered those costs. So uh you know, you might get a small incremental, uh, addition, you know in overtime or something like that but that's but that's minuscule compared to all the other costs that you've already absorbed.
Many thanks.
Speaker Change: Anything else, Charlie?
Speaker Change: That was it. Thank you very much.
Thank you. Oh, thank you.
Speaker Change: Joe, any more questions?
Speaker Change: From Mr. Cosan, I see that. There are no more questions. You have, any closing comments?
Speaker Change: Yes, I'd like to thank everybody for joining us today on the call and I look forward to speaking with you in October. When we uh we'll cover the third quarter uh have a nice day. Thank you very much.
Speaker Change: Thank you.
The conference has now concluded, thank you for attending today's presentation. You may now disconnect your lines.