Packaging Corporation of America (PCA) has reported net sales of $2.4 billion for the year 2008, compared with the net sales of $2.3 billion in the previous year-end. It has also reported a net income of $135.6 million, or $1.31 per diluted share, for the year 2008, compared with the net income of $170.1 million, or $1.61 per diluted share, in the previous year-end.
The company has reported fourth quarter 2008 net income of $30 million, or $0.30 per share, compared to fourth quarter 2007 net income of $44 million, or $0.42 per share. Fourth quarter 2008 net sales were $546 million compared to fourth quarter 2007 net sales of $580 million.
Lower fourth quarter earnings, compared to 2007, and were driven by the severe downturn in the economy which significantly lowered volume and increased production downtime and costs, reducing earnings by about $0.21 per share. In addition, higher costs for energy, chemicals, and labor and benefits reduced earnings by $0.11 per share. These items were partially offset by higher prices for containerboard and corrugated products which improved earnings by $0.18 per share, and a lower tax rate which improved earnings by $0.03 per share.
Corrugated products shipments were down 9.9%, or about 50,000 tons, and outside sales of containerboard were down about 35,000 tons compared to last year’s fourth quarter. PCA’s containerboard mills produced 533,000 tons, and took approximately 90,000 tons of market-related downtime to match supply with the lower demand. Year-end containerboard inventories were 2,000 tons below 2007 year-end levels.
Paul T. Stecko, chairman and chief executive officer of PCA, said, The past quarter was the most difficult quarter PCA has ever faced operationally, with box volume down almost 10% and mill downtime and slowbacks amounting to 90,000 tons. Despite these conditions, PCA was able to generate $0.30 per share of income and end the year with containerboard inventories 2,000 tons below year-end 2007 levels. In fact, even with unusually high cost inflation during the first half of the year, and the severe economic downturn in the fourth quarter, PCA’s full year 2008 earnings were the second best since becoming a stand-alone company in 1999.
Looking ahead to the first quarter, Stecko added, our Valdosta mill will be down for its annual maintenance outage and, in addition, market-related downtime is likely. Energy usage will be higher with colder weather, and we also expect higher chemical costs. Certain timing-related benefit costs are the highest in the first quarter, and we expect a higher tax rate. With the current economic conditions and the associated level of uncertainty, we currently estimate our first quarter earnings at about $0.20 per share.