Packaging Corporation of America Q2 2025 Earnings Report

Packaging Corporation of America EPS Results

• Actual EPS: $2.48
• Consensus EPS: $2.44
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $2.20

Packaging Corporation of America Revenue Results

• Actual Revenue: $2.17 billion
• Expected Revenue: $2.18 billion
• Beat/Miss: Missed by -$11.98 million
• YoY Revenue Growth: +4.70%

Packaging Corporation of America Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 9:00AM ET

Packaging Corporation of America (NYSE:PKG) (NYSE: PKG) is one of North America’s leading producers of containerboard and corrugated packaging products. The company manufactures a broad range of paper-based packaging solutions, including recycled and virgin containerboard, custom corrugated shipping boxes, retail displays, and protective packaging. Its products serve diverse end markets such as food and beverage, consumer goods, industrial equipment, and e-commerce fulfillment.

PCA operates an integrated network of paper mills, corrugated sheet plants, medium plants, and finishing facilities across the United States, with additional sales offices in Canada and Mexico. The company sources raw materials from both recycled fiber and sustainably managed forests, supporting a circular paper production model. Its geographic footprint includes coastal and inland mills that supply regional and national customers with just-in-time packaging and logistics support.

Since its founding in 1959 as a spin-off from Union Bag and Paper Company, Packaging Corporation of America has grown through targeted capacity expansions and strategic acquisitions to meet rising demand for corrugated packaging. The company continually invests in production technology and environmental initiatives—including energy efficiency and water stewardship programs—to enhance manufacturing processes and reduce its environmental impact.

Headquartered in Lake Forest, Illinois, PCA employs approximately 15,000 people across its operations. The company is led by a seasoned management team with extensive experience in the pulp and paper industry, focused on delivering innovative packaging solutions and long-term value for its stakeholders.

Packaging Corporation of America Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Packaging Corporation of America reported second quarter net income of $242 million ($2.67 per share) and adjusted EBITDA of $451 million, beating guidance by $0.07 per share thanks to lower operating and fiber costs.
• Positive Sentiment: The Packaging segment delivered $453 million in adjusted EBITDA on $2 billion of sales (22.6% margin versus 21% a year ago) by tightly controlling costs, drawing down inventory and announcing the pending acquisition of Greif’s containerboard business.
• Neutral Sentiment: The Paper segment posted adjusted EBITDA of $30 million on $146 million of sales (20.8% margin), with price increases offsetting a planned maintenance outage that reduced volumes.
• Positive Sentiment: For third quarter 2025, PCA expects earnings of $2.80 per share, driven by higher corrugated shipments, increased containerboard production, flat prices, no scheduled outages and slightly lower fiber costs.
• Negative Sentiment: Customer ordering remains cautious amid global trade tensions and tariffs, leading to weaker export containerboard sales, although recent bookings are up 2% year-over-year with sequential cut-up rates improving.

Presentation

[Operator]

Thank you for joining Packaging Corporation of America's Second Quarter twenty twenty five Earnings Results Conference Call. Your host today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question and answer session. I will now turn the conference call over to Mr. Colzan. Please proceed when you're ready.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thank you, Joe. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's second quarter twenty twenty five earnings release conference call today. I'm Mark Colzan, Chairman and CEO of PCA, and with me on the call today is Tom Hassfurther, President and Kent Flutterer, our Chief Financial Officer. I'll begin the call with an overview of our second quarter results, and then I'm going be turning the call over to Tom and Kent, who will provide further details. I'll be then wrapping things up and then we'll be glad to take questions.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Yesterday, we reported second quarter net income of $242,000,000 or $2.67 per share. Excluding the special items, second quarter twenty twenty five net income was $224,000,000 or $2.48 per share compared to the 2024 net income of $199,000,000 or $2.2 per share. Second quarter net sales were $2,200,000,000 in 2025 and $2,100,000,000 in 2024. Total company EBITDA for the second quarter, excluding the special items, was $451,000,000 in 2025 and $4.00 $4,000,000 in 2024. Second quarter net income included special items income of $0.19 per share, primarily for gains on the sale of real estate for corrugated products facilities that were previously closed, which were partially offset by costs relating to the pending acquisition of Greif containerboard business.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Details of special items for both the 2025 and 2024 were included in the schedules that accompanied our earnings press release. Excluding the special items, the $0.28 per share increase in second quarter twenty twenty five earnings compared to the 2024 was driven primarily by higher prices and mix in the Packaging segment for $0.98 lower fiber costs, zero one three higher prices and mix in the Paper segment, zero four and a lower tax rate for $02 Partially offsetting these improvements were higher operating costs of $0.30 and higher annual outage expenses zero two one dollars 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 $0.13 higher depreciation expense, zero one zero higher fixed and other expense, dollars $0.09 lower paper segment volume, zero two higher freight expense, zero two and higher interest expense, zero two. The results were $07 above the second quarter guidance of $2.41 per share, primarily due to lower operating costs and lower fiber costs. Looking at the Packaging business, EBITDA excluding special items in the 2025 of $453,000,000 with sales of $2,000,000,000 resulted in a margin of 22.6% versus last year's EBITDA of 400,000,000 and sales of $1,900,000,000 or 21%.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Corrugated products price and volume were generally consistent with our expectations. And as expected, export containerboard sales were lower. We ran to demand during the quarter producing 85,000 fewer tons of containerboard than the 2024 and fifty five thousand tons fewer tons of containerboard than the first quarter of twenty twenty five. We drew down 17,000 tons of containerboard inventory from the end of the first quarter, putting us in excellent shape for the rest of the year. We operated exceptionally well during the quarter in all aspects of our business to control our operating costs, helping offset the effects of continued inflationary pressures across our cost structure as well as the negative effects of lower containerboard production.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Our employees continued to perform at the highest level, delivering cost and efficiency improvements, outstanding sales performance and capital projects execution to deliver best in class results. On the strategic front, we're very pleased to have announced our agreement to acquire the Greif containerboard business and look forward to working with our new colleagues and serving our new customers at the highest level. It is a well capitalized business that complements us nicely will provide us with a very good growth platform for both containerboard and corrugated products. We're targeting completion of the transaction by the end of the third quarter, subject obviously to customary conditions, including regulatory approval. I'll now turn the call over to Tom, who will provide further details on containerboard sales and corrugated business in general. Thanks, Mark.

[Thomas Hassfurther, President at Packaging Corporation of America]

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 containerboard and corrugated products prices and mix were $0.95 per share above the 2024 and up $0.41 per share compared to the first quarter of twenty twenty five. Export containerboard prices were up $03 per share versus last year's second quarter and up $01 per share compared to the first quarter of twenty twenty five. While customer ordering patterns remain somewhat cautious, corrugated demand remained solid and steady throughout the quarter. 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.

[Thomas Hassfurther, President at Packaging Corporation of America]

So it was a pretty tough comparable. Shipments also exceeded the first quarter of twenty twenty five. Total shipments were flat with 2024, which had one more workday. Our continued sales growth and full realization of our price increases helped drive higher margin performance in the Packaging segment. As expected, outside sales volume of containerboard was down 30,000 tons from the 2025 and down 24,000 tons from the second quarter of twenty twenty four.

[Thomas Hassfurther, President at Packaging Corporation of America]

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. I'd like to echo Mark's commentary on the pending Greif acquisition. We see tremendous strategic opportunities with the acquired business. In a corrugated network, there would be great potential to expand in areas where we would have needed to deploy considerable additional capital to grow and where Greif has well capitalized facilities. The business provides a complementary product offering and long standing customers with deep relationships who we look forward to serving.

[Thomas Hassfurther, President at Packaging Corporation of America]

Perhaps most importantly, this will be a great cultural fit with PCA, particularly with our shared dedication to serving the needs of our customers. I'll now turn it back to Mark.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thanks, Tom. Looking at the Paper segment, EBITDA excluding special items in the second quarter was $30,000,000 with sales of $146,000,000 or a 20.8% margin compared to the second quarter of twenty twenty four's EBITDA of $31,000,000 and sales of $150,000,000 or a 20.4% margin. We successfully and safely completed our maintenance outage at the International Falls Mill in June, which affected our volumes. Sales volume was 5% below the 2024 and seven percent below the first quarter of twenty twenty five. We've completed the implementation of our price increases during the quarter with paper prices and mix up 3% from the 2024 and one percent from the first quarter of twenty twenty five. I'll now turn it over to Kent.

[Kent Pflederer, EVP & CFO at Packaging Corporation of America]

Thanks, Mark. Cash provided by operations was $300,000,000 in the quarter and free cash flow was $130,000,000 The primary payments of cash during the quarter included capital expenditures of $170,000,000 dividends of $112,000,000 and federal income tax payments of $109,000,000 Our quarter end cash balance, including marketable securities, $956,000,000 with taking into account revolver availability liquidity of approximately $1,300,000,000 I'll now turn it back over to Mark.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thank you, Kent. For our third quarter, profitable volume is going to be the key driver as it will affect our mill production and cost absorption. While we saw corrugated customers remain cautious in June into early July, over the last couple of weeks, we've seen steady improvement with our bookings and shipments as July has progressed, which we expect to continue for the remainder of the quarter. Therefore, we expect higher corrugated shipments, which will deliver higher containerboard production across our mill system. However, we will continue to see lower export containerboard sales driven by the global trade environment.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

We will build some more inventory ahead of the fourth quarter de riger maintenance outage that's planned. We expect prices and 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, which impacted the second quarter as well as seasonal back to school orders. We have no scheduled maintenance outages during the third quarter and expect maintenance outage expense to be lower. Freight costs will be higher with the full effect of the rail rate increases at our mills.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Operating costs will be near second quarter levels and fiber costs will be slightly lower. Considering these items, we expect third quarter earnings of $2.8 per share excluding special items. Our guidance does not include any possible impact on the pending acquisition of the Greif containerboard business, which is subject to satisfaction of certain conditions, including regulatory approval. And 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 constituted forward looking statements. The statements were 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 ks, which is on file with the SEC.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Actual results could differ materially from those expressed in the forward looking statements. And with that, Joe, I'd like to have you go ahead and open up the call, and we'll take questions.

[Operator]

Thank We will now take our first question from George Staphos with Bank of America. Please go ahead with your question.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thanks very much. Hi, everyone. Good morning. Thanks for the details. Good morning.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

A couple of questions from me, Mark. First of all, can you or Tom talk a little bit about traditionally your comment on bookings and billings to start 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 the better performance? And then I have one quick follow on.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Yes. I'll let Tom talk about where we are with the cut up.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes. George, bookings right now are trending at 2% over the Q2 of twenty twenty four, which is a very good start considering the enormous increase we had in the third quarter of last year. So I remind everybody, we've got some very, very tough comps. But interestingly enough, as that as the last quarter really kind of tailed off a little bit in volume, we're starting out this quarter sequentially looking about 10% above what we did in the last month of 2025. So I think things are looking pretty decent.

[Thomas Hassfurther, President at Packaging Corporation of America]

And George, regarding the second part of your question with the operations, there were two things. One, you

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

would expect, we operated at extremely high efficiencies, approximately 99% uptime performance across the system. 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, one at Filer and one out at Wallula. And so with that, there was obviously the uncertainty about how the operating costs would look. And in fact, the organization executed extremely well and were able to really run the mills very efficiently in spite of having some of the operations down for lack of demand. And so we're very pleased with the outcome from the organization's efforts. That's really that's what was going on.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thanks, Mark. The last one for me. When we look at revenue per ton and EBITDA per ton, they were up year on year. They're up a little bit versus where we were forecasting, which is neither here nor there. I mean, we should have had a little bit higher forecast.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

But was that just a function of mix, I. E, there was less external sales because you had pulled back some of as you said, you took some downtime at Filer and at Wallula. Was mix more or less comparable across the box system? Or did you actually see a bit of an uptick? And could you provide some narrative in terms of the whys and wherefores there? Thanks very much and good luck in the quarter.

[Thomas Hassfurther, President at Packaging Corporation of America]

Hey, George, this is Tom. I'll handle this. No, I wouldn't really say it's a function of mix. 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.

[Thomas Hassfurther, President at Packaging Corporation of America]

When we go into price increase mode, we're in total price increase mode. That's where we are. And so you're seeing that reflected in the not only the revenue per ton, but also the EBITDA per ton, if that's the way you want to measure it, and we're certainly in our margins. So I think any sales that are down, I. E, export, would have helped contribute to that revenue and EBITDA.

[Thomas Hassfurther, President at Packaging Corporation of America]

So when that when those do come back and we get this get some of the global issues behind us, that's a good upside for us.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thank you very much.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thanks, George. Next question please.

[Operator]

Our next question will come from Mike Roxland with Truist. Please go ahead.

[Michael Roxland, MD - Equity Research at Truist Securities]

Thank you, Mark, Tom and Ken for taking my questions. First question, just wanted to follow-up. You said, it sounded like box shipments sort of stated in June. Wondering what's happened there. Is that a function of the consumers increasing tariff concerns?

[Michael Roxland, MD - Equity Research at Truist Securities]

I just wanted to understand how the trajectory of auction is playing out during the quarter. And Tom, you also indicated, I want make sure I heard this correctly, that bookings are up 10% versus the last month of 2Q, if you could clarify that. Thank you.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes, that's they are up 10% versus the last month of Q2. And so we're off to a good start in comparison. And remember, we're running at record volume rates as it is. So you got to we got to keep all that in mind. Think your question around why did it fade a little bit in the second quarter, I think you saw a little bit of that in the first quarter as well.

[Thomas Hassfurther, President at Packaging Corporation of America]

I still think there's a lot of questions around tariffs and what's happened globally and everybody's just kind of waiting for something to that they can count on long term. So we've got a lot of customers who are managing their inventories very closely. So we're seeing some spikes and then some valleys during the quarter in terms of ordering patterns. And I think the other thing is, is you got to remember that there's a number of industries that have been quite impacted by just the global economy, the questions in the economy, those sorts of things. And so we've some areas that are off, some segments that are off, automotive being one, building products being off very highly because of this housing market that's existed that's basically stagnant.

[Thomas Hassfurther, President at Packaging Corporation of America]

And then in the food and beverage area, the salty snacks and the sugary beverages obviously have been under some duress and that's been in the news at lots of times. So you got some puts and takes here, but we're still advancing and moving forward and feel good about where we are. One of the indicators that I always look at in that regard too is what's our cut up look like on Friday going into a Saturday period. In the last couple of weekends, we've seen a nice movement upward in the volume that's coming out of the plants on Fridays and Saturdays. So, that's been again, compared to the month of May into June, when things had declined these last couple of weekends or the first Friday, Saturday periods we've seen that are really looking really strong.

[Michael Roxland, MD - Equity Research at Truist Securities]

Thank you, Mark and Tompkins for that detail. Just one quick follow-up. In terms of auto being off, building products being off, moving beds being off, is that a 2Q phenomenon? Was that something that's been off for a year and maybe last year? Just wondering if that's something if those people end markets have worsened relative to recent times?

[Michael Roxland, MD - Equity Research at Truist Securities]

And then just one quick question on the Greif acquisition. Can you talk about the capital avoidance that you'll be or the capital that you'll be avoiding spending by acquiring those assets and any initial expectations on 2026 CapEx? Thank you.

[Thomas Hassfurther, President at Packaging Corporation of America]

Take the Mike, I'll take this question. When you ask about automotive and building products and some of these other segments, some have gotten worse, Some have been kind of like that for quite some time. But even in the building products as an example, I mean that part of the industry has really struggled for quite some time now. As you know, we've said here with this with these interest rates that some would argue are quite high and haven't quite opened up markets, if you will. So, you know, I think there's a tremendous upside for us relative to getting these tariffs behind us and some interest rate movement, which will really catapult us going forward.

[Thomas Hassfurther, President at Packaging Corporation of America]

Obviously, all of our assets are dedicated to America and we'll be the ultimate winner out of this. So I think there's some really good upside for us there. And that kind of leads us into the Greif acquisition as well. So when we talk about capital avoidance, 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 what used to be being able to put a box plant together for $100,000,000 is now closer to $300,000,000 And mill used to be $300,000,000 on the cheap, and now you can now it's it's going to cost you every bit of $1,000,000,000 So things have changed quite dramatically from a capital point of view. And so the number is quite significant

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

for us in terms of capital avoidance with the Greif assets. The one 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 very large plant down there, similar to what we just did in Arizona and what we're doing in Ohio. And yet, with the acquisition with Greif, we've got the platform already sitting there that we can build out with just some converting equipment going into the new plant that Greif has down in Dallas.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

So, that's another example of where we'll avoid some big capital.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes. And also, I'd say the Greif integration level is very good. And although it will give us some additional tons, which we will need, we can manage that quite elegantly, I think, going forward.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. Thank you very much.

[Thomas Hassfurther, President at Packaging Corporation of America]

Thank you. Next question, please.

[Operator]

Our next question will come from Gabe Hodgeshoe with Wells Fargo. Please go ahead with your question.

[Gabe Hajde, Research Analyst at Wells Fargo]

Good morning,

[Thomas Hassfurther, President at Packaging Corporation of America]

Good morning.

[Gabe Hajde, Research Analyst at Wells Fargo]

I apologize. For the avoidance of doubt, I think you said bookings up 2% versus Q2 twenty twenty four. I presume you meant Q3 twenty four and same day shipments were up 11.5% in that period?

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes, did. I'm sorry, misstated there. Thank you. Thank you, Gabe.

[Gabe Hajde, Research Analyst at Wells Fargo]

No, I wasn't trying to I just want to make sure that we're clear. Because of 10 versus what could have been a depressed June number, I think is causing a little bit of confusion for folks. That's why I asked the question. Okay.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes, I was just trying to indicate Gabe, I was just trying to indicate that the trend is clearly up from the trend that was taking place in Q2.

[Gabe Hajde, Research Analyst at Wells Fargo]

Understood. Anything specific on the Greif acquisition from a financial standpoint, cash tax specifically, that could be advantageous to you on the acquisition?

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

As far as CapEx?

[Gabe Hajde, Research Analyst at Wells Fargo]

No, no, no. Cash taxes, Mark.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

I'm sorry. We couldn't hear you.

[Thomas Hassfurther, President at Packaging Corporation of America]

You're not coming through clearly, Gabe. What was that?

[Gabe Hajde, Research Analyst at Wells Fargo]

I apologize. Cash tax. Oh, tax. Yep. And the big beautiful bill.

[Kent Pflederer, EVP & CFO at Packaging Corporation of America]

Oh, okay. Yeah, two things there. Yeah, Gabe, two things. It's Kent. Number one, the acquisition will largely be structured as an asset acquisition, meaning that we will we'll get the depreciation shield there.

[Kent Pflederer, EVP & CFO at Packaging Corporation of America]

So that's number one. Number two, yes, we're going to get an opportunity with the bill to take bonus depreciation at the higher level than what was in force. Yes.

[Gabe Hajde, Research Analyst at Wells Fargo]

Thank you. Then I guess last one, back to the nuts and bolts of what you guys do on a day to day basis, making boxes and keeping customers happy. We read about a large e commerce customer potentially moving suppliers. I'm just curious if you're seeing more instances of bidding out there given sort of what appears to be a little bit of a volatile environment.

[Thomas Hassfurther, President at Packaging Corporation of America]

Gabe, I would say no. I think it's just basically kind of business as usual from the customer's point of view. But I will remind everybody that with the recent announcements in the industry relative to mills and box plants, I think that supply has become very much in line with demand as it exists today.

[Gabe Hajde, Research Analyst at Wells Fargo]

Understood. Thank you.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thanks, Gabe. Appreciate it. Next question please.

[Operator]

Our next question will come from Mark Weintraub with Seaport Research Partners. Please go ahead.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Thank you. Wanted just to follow-up a little bit on the Greif acquisition. I know the press release, etcetera, had talked about, the run rate of that business having been $212,000,000 during that May through April period and that you had outlined $60,000,000 in synergy potential. Two points of clarification. One, you just raised the Dallas facility.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

I know that Greif had talked about that potentially making $30,000,000 but I don't think it was making much money in the time period covered the $212,000,000 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. And then I guess that $212,000,000 is sort of backward looking. Is it fair to say that given the price increases and some other variables that sort of the look forward run rate you would anticipate at this point to be higher than that? And if you kind of talk about what the key variables we should be focused on as we do that analysis, that would be super helpful.

[Thomas Hassfurther, President at Packaging Corporation of America]

Hey, Mark, this is Tom. First of all, you know, the $2.12, is there upside to that? Yes. Did they capture some upside to that? Yes.

[Thomas Hassfurther, President at Packaging Corporation of America]

So we'll be we're heading in better shape there. Did we build Dallas into our synergies? Yes, to some extent, quite conservatively, but we see some tremendous upside with that Dallas facility, as Mark mentioned, because it can be expanded dramatically beyond where it is right now with Greif. So does that essentially answer your question, Mark?

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

It does. And then I guess the last part and then maybe you did sort of address it. Obviously, we've had some price increase. I guess it wasn't quite clear when you say that they, so they're already making, it's already making more so the benefit of the price increases are already visible and showing up. Wasn't quite clear what you

[Thomas Hassfurther, President at Packaging Corporation of America]

said, Well, know what the estimates are. That's all we know at this stage of the game. But the estimates were for greater than the So two obviously, they were still flowing through price increase after our agreement.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Understood. That's helpful. Thank you. And then just lastly, mean, one thing is when I look at last year, there was like a 4% step up in your box shipments from the second quarter to the third quarter. And so, you presumably have a pretty tough comp this quarter, even tougher than the second quarter as well.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

And so, I think you had talked about still expecting to be up year over year in the third quarter. So that would actually seem to suggest continued sequential, pretty strong sequential improvement. And just want to make sure I'm getting that right and the comment about improving to the third quarter wasn't just a sequential comment.

[Thomas Hassfurther, President at Packaging Corporation of America]

The improvement to the third quarter was a sequential comment. But the and so the '25 over '24 will be relatively flat. I mean, it might be up just a little hair, but it's going to be relatively flat as we estimate right now. And again, as we indicated, our estimates are based on a lot of unknowns right now with the tariffs and the global structures and things like that. So that could change quite dramatically, I think, by the end of the third quarter.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

And just in terms of change, risk to the upside or downside? Maybe just

[Thomas Hassfurther, President at Packaging Corporation of America]

Upside, yes. To the to the upside. Because I think as soon as we get some certainty to some of these to some of these issues that exist 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's to the upside. I think most are all operating on a very conservative nature right now.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

And Mark, as I said a few minutes ago, the last few Friday, Saturday periods, we've had the best couple of Friday, Saturday periods that we've had in four months. You'd have to go back to the March, April period. And so we've seen that significant movement just through the end of the week cut up.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes. And what Mark's really talking about is having to work into Saturdays as opposed to just being off being straight five days a week. We're getting into six days a week now.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

All right. So I mean, it sounds to me like you think maybe there's this like pent up demand that's potentially there, but that you want to see the green lights on tariffs and then people would

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes, yes. And I think one of the things that really exist and you've seen it in other downturns is when people pull pulling their horns and really manage their inventory incredibly tight because they can't really predict what's going to happen to their business over the long haul, those inventories change almost overnight to upside. And then our customers can get out and start moving product forward. I mean, think as an example, if interest rates come down and that impacts the housing market, I mean, just the building products segment is going to just jump dramatically because it's down double digits in the last few years.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Very helpful. Thanks a lot.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thank you. Next question, please.

[Operator]

Our next question will come from Anojja Shah with UBS. Please go ahead.

[Anojja Shah, Director - Equity Research at UBS Group]

Good morning. I wanted to Good morning. Good morning. 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.

[Anojja Shah, Director - Equity Research at UBS Group]

Is that right? And if so, are there puts and takes to that flat estimate, that flat guidance?

[Thomas Hassfurther, President at Packaging Corporation of America]

There may 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 so we've essentially got that price increase in place. There a slight May upside, but that's it.

[Anojja Shah, Director - Equity Research at UBS Group]

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?

[Thomas Hassfurther, President at Packaging Corporation of America]

I can't tell you exactly what the entire e commerce industry has done. I can tell you that our customers continue to grow, and that's a good thing. So if you indicated off of our customers, they're still growing mid single digits so far this year. So and it's going to be really e commerce when you talk about this year, it's a little more difficult because e commerce is more of a second half business. And that's really kind of driving our industry to be more of a second half industry, quite frankly. So that creates again, perhaps a little more upside to where we are right now in terms of this questionable environment. But so I can answer the e comm question a lot easier at the end of the year than I can mid year. But so far, it's still up. And obviously, you know, it's a big part of the box business today given the way people shop.

[Anojja Shah, Director - Equity Research at UBS Group]

Yes. Thanks very much. I'll turn it over.

[Thomas Hassfurther, President at Packaging Corporation of America]

You're welcome.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Thank you. Next question please.

[Operator]

Our next question will come from Anthony Pettinari with Citi. Please go ahead.

[Anthony Pettinari, Research Analyst at Citigroup]

Good morning. Good morning, Anthony. I'm wondering if it's possible to hey, I'm wondering if you can say where PCA's recycled mix will be before and after the Greif acquisition? And then just from a high level, did Greif's recycled capabilities open up new customer sets? Or were they hitting some segments of the markets where you really couldn't compete before? Just any thoughts there.

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Yes. I'll comment and then Tom can add to that. We've historically been around that 20% level depending on time of year and price of OCC might be as low as 15%. But with Gripe, we'll theoretically be moving up to around that 30% level.

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes. And I'll just add that does it yes, I mean, it's going to it's not we've never been prevented from certain markets, but it's going to provide some better opportunities for us, especially since they've got 100% recycled mill in Massillon, 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 plants

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

strategically located very close by. So we'll be freight positive and fiber positive, quite frankly, out of that facility. What Tom is saying is that our big Ashland plant is like 44 miles away from Ashland, and the new plant down in Newark is like 90 miles away. So, we'll be in a position just to shuttle PCA shuttle roll stock in and out. So it'll be, again, considerable savings right there.

[Anthony Pettinari, Research Analyst at Citigroup]

Okay. That's very helpful. And then just following up on Gabe's question. I mean, we have seen a number of closure announcements this year, some of them pretty large. And not asking you to comment on your competitors' business, but I'm just wondering if any of these closures have 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-up thoughts there.

[Thomas Hassfurther, President at Packaging Corporation of America]

Difficult question to respond to, Anthony, but a good one from your standpoint. Much more difficult for me to respond to. But, I would say that, no, it's hard to tell at this point quite frankly, because 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 for containerboard today in The United States. And so if there if focused on that, that there's little upside to that. And then of course, you've got situation and what's going on globally.

[Thomas Hassfurther, President at Packaging Corporation of America]

And if you're focused in that market, you got some real challenges as well. So I think those two things wrapped together along with where we are in current demand, probably led to some of those decisions. And obviously, it's positive to us going forward, but that's just the way we see it.

[Anthony Pettinari, Research Analyst at Citigroup]

Okay. I'll turn it over. Thank you.

[Thomas Hassfurther, President at Packaging Corporation of America]

Thank you. Next question, please.

[Operator]

Our next question will come from Phil Ng with Jefferies. Please go ahead.

[Philip Ng, Managing Director at Jefferies Financial Group]

Hey Mark, Tom and Kent, this is John on for Phil. Really appreciate all the detail. Good morning. I wanted to start off just kind of going back to the volumes on a year over year basis. I mean, you called out box shipments were going to be about flat year over year.

[Philip Ng, Managing Director at Jefferies Financial Group]

But is the containerboard production expected to be down? I know you talked about a little bit of a ramp up sequentially ahead of DeRidder, but I'm just thinking about on a year over year basis with some of the economic downtime that you've been taking, is that something that's going to be down year over year?

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Well, probably 25,000, 30,000 tons down compared to last year. And that's primarily the export sales of containerboard that we again, under the current market situation with tariff, we choose not to participate in right now.

[Philip Ng, Managing Director at Jefferies Financial Group]

Makes sense. Okay. And then from your perspective on the demand front, are your customers done destocking? Like do you have any insights on their inventory levels? And just thinking about as we maybe get some clarity on these tariff negotiations and maybe we see some pullback in rates if that could lead to a good amount of torque coming through maybe back half of this year going into next year?

[Thomas Hassfurther, President at Packaging Corporation of America]

Yes. Our customers are through the destocking part. As I said, they're carrying incredibly lean inventories. And going forward, if we just get some certainty in the global economy and of course, get any kind of interest rate movements here domestically, I think things are going to open up quite dramatically.

[Philip Ng, Managing Director at Jefferies Financial Group]

Great. Appreciate it. I'll turn it over. Thanks.

[Thomas Hassfurther, President at Packaging Corporation of America]

Thank you. Next question?

[Operator]

Our next question will come from Charlie Muir Sams with BNP Paribas. Please go ahead.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

Hi, good morning. Thank you very much for taking my questions. Firstly, just on the Greif acquisition, I'm not too familiar with the assets. You've obviously disclosed the 800,000 tons of mill capacity and alluded to the integration rate. But can you just clarify how much corrugated production or capacity or both the company has or what levels of integration that operation had?

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

And then secondly on that, obviously, it's a $1,800,000,000 acquisition funded from cash and borrowings. Can you just give any kind of steer on the marginal cost of that for our modeling? And then I have one follow-up question.

[Kent Pflederer, EVP & CFO at Packaging Corporation of America]

Yes, Charlie, it's Kent. We are modeling about 5.5% interest rate on the new debt. So around 100,000,000 incremental interest there.

[Thomas Hassfurther, President at Packaging Corporation of America]

And regarding the Grayfe assets and the integration level, the integration level is probably in that 70%, 75% range. So as I said, there'll be some available tons that we're going to need in this acquisition.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

Great. Thanks. And given your comments about seeing a pickup in demand and therefore sort of extra shifts coming on late on Fridays or into Saturdays, can you just talk about how we should think about operational leverage or deleverage on that marginal growth if you do see a demand pickup with the leverage of the fixed costs mean that it's an incrementally more profitable business? Or do you end up having to pay over time and therefore it's it doesn't really sort of drop through a greater than your EBITDA margin? Just any color there. Thanks.

[Thomas Hassfurther, President at Packaging Corporation of America]

Well, Charlie, the only thing I'd tell you is that most of our costs are covered 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 you might get a small incremental addition in overtime or something like that, but that's minuscule compared to all the other costs you've already absorbed.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

Many thanks.

[Thomas Hassfurther, President at Packaging Corporation of America]

Anything else, Charlie?

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

That was it. Thank you very much.

[Thomas Hassfurther, President at Packaging Corporation of America]

Thank you. Thank you. Joe, any more questions?

[Operator]

Mr. Colzan, I see that there are no more questions. Do you have any closing comments?

[Mark Kowlzan, Chairman, CEO & Director at Packaging Corporation of America]

Yes. I'd like to thank everybody for joining us today on the call and look forward to speaking with you in October when we will cover the third quarter.

[Thomas Hassfurther, President at Packaging Corporation of America]

Have a nice day. Thank you very much.

[Kent Pflederer, EVP & CFO at Packaging Corporation of America]

Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Participants

Executives

• Mark Kowlzan, Chairman, CEO & Director
• Thomas Hassfurther, President
• Kent Pflederer, EVP & CFO

Analysts

• George Staphos, Managing Director at Bank of America Merrill Lynch
• Michael Roxland, MD - Equity Research at Truist Securities
• Gabe Hajde, Research Analyst at Wells Fargo
• Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners
• Anojja Shah, Director - Equity Research at UBS Group
• Anthony Pettinari, Research Analyst at Citigroup
• Philip Ng, Managing Director at Jefferies Financial Group
• Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas