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    PKG
    Earnings call· Jun 2026(Q2 FY26)

    PACKAGING CORP OF AMERICA PKG

    Jul 23, 2026 Source

    Executive summary

    Packaging Corporation of America Q2 FY26 — Strong Corrugated Volumes Drive Earnings Beat

    Packaging Corporation of America delivered a strong second quarter, surpassing earnings guidance driven by robust corrugated volumes and better-than-expected performance from the acquired Greif assets. The company navigated significant cost headwinds, particularly in freight and recycled fiber, by optimizing operations and implementing price increases. Management emphasized the tight market conditions and the ongoing strategic capital investments to enhance capacity and operational efficiency, aiming for appropriate returns on invested capital.

    Highlights

    5

    • Excluding special items, Q2 FY26 net income was $210 million or $2.35 per share, exceeding guidance of $2.33.

    • Total company EBITDA, excluding special items, increased to $486 million in Q2 FY26 from $451 million in Q2 FY25.

    • Corrugated shipments were up over 24% in total and per day versus last year, with the legacy business achieving an all-time record for total quarterly shipments (up 4.1%).

    • The acquired Greif business contributed $0.14 per share to earnings, exceeding expectations due to strong volumes and improved operating performance.

    • The new Ohio plant successfully started up earlier this month, ahead of schedule.

    Concerns

    4

    • Legacy business earnings decreased by $0.27 per share compared to Q2 FY25, primarily due to higher freight costs ($0.26) and higher corporate and other expenses ($0.12).

    • Production interruptions from utility power outages impacted containerboard production by approximately 10,000 tons.

    • Recycled fiber prices increased by about 70% since the beginning of the year, impacting costs.

    • Permitting for gas turbine projects at Riverville and DeRidder is expected to delay their online dates to early to mid-2028.

    Guidance & targets

    16
    CategoryTargetConfidence
    Q3 FY26 Adjusted EPS
    $2.91 per share
    high materiality
    High
    Full-Year FY26 Capital Expenditure
    $840 million to $870 million
    high materiality
    High
    Full-Year FY26 Depreciation, Depletion & Amortization
    around $710 million
    medium materiality
    High
    Q3 FY26 Maintenance Outage Expense
    $0.30 per share
    medium materiality
    High
    Q4 FY26 Maintenance Outage Expense
    $0.63 per share
    medium materiality
    High
    Full-Year FY26 Maintenance Outage Expense
    $1.41 per share
    medium materiality
    High
    Q3 FY26 Corrugated Products Volume
    increase
    medium materiality
    High
    Q3 FY26 Containerboard and Corrugated Products Prices
    higher
    high materiality
    High
    Q3 FY26 Paper Segment Volume
    lower
    medium materiality
    High
    Q3 FY26 Paper Segment Prices
    higher
    medium materiality
    High
    Q3 FY26 Freight Costs
    remain at or around elevated levels
    medium materiality
    High
    Q3 FY26 Recycled Fiber Prices
    continuing to increase
    medium materiality
    High
    Q3 FY26 Chemical and Purchased Electricity Prices
    higher
    medium materiality
    High
    Q3 FY26 Wood Fiber and Natural Gas Prices
    remaining relatively flat
    low materiality
    High
    Q3 FY26 Employee Benefits Costs
    some improvement
    medium materiality
    High
    FY27 Capital Expenditure
    in this range that we've been at
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Packaging
    EBITDA margin was 21.1% on sales of $2.3 billion, compared to 22.6% on $2 billion last year. Total containerboard production was 1,415,000 tons, with acquired mills significantly exceeding prior production. System-wide inventories were down 25,000 tons from Q1, but building in early July. Operational performance was mixed due to utility power outages.
    EBITDA (excluding special items): $489 millionContainerboard Production: 1,415,000 tonsLegacy Containerboard Production: 1,209,000 tonsAcquired Mills Containerboard Production: 206,000 tonsSystem-wide Inventories (down from Q1): 25,000 tons
    		$2.3 billion——21.1% EBITDA margin
    Paper
    EBITDA margin was 24.9% on sales of $157 million, compared to 20.8% on $146 million last year. Sales volume was approximately 3% below Q1 FY26 and 6% above Q2 FY25. Prices and mix were up 2% from both Q1 FY26 and Q2 FY25.
    EBITDA (excluding special items): $39 millionSales Volume (vs Q1 FY26): approximately 3% belowSales Volume (vs Q2 FY25): approximately 6% abovePrices and Mix (vs Q1 FY26): up 2%Prices and Mix (vs Q2 FY25): up 2%
    		$157 million——24.9% EBITDA margin

    Operational metrics

    36
    Net Income (excluding special items)
    $210 millionvs $224 million in Q2 FY25
    Q2 FY26

    Reported net income excluding special items.

    Diluted EPS (excluding special items)
    $2.35vs $2.48 in Q2 FY25
    Q2 FY26

    Reported diluted EPS excluding special items.

    Net Income
    $192 million
    Q2 FY26

    Reported GAAP net income.

    Diluted EPS
    $2.15
    Q2 FY26

    Reported GAAP diluted EPS.

    Special Items Expense
    $0.20
    Q2 FY26

    Primarily for facilities closures, Wallula Mill restructuring, and Greif acquisition integration.

    Legacy Business Earnings Decrease
    $0.27vs Q2 FY25
    Q2 FY26

    Breakdown of factors contributing to the decrease in legacy business earnings.

    Greif Business Earnings Contribution
    $0.14
    Q2 FY26

    Contribution from acquired Greif business, including a depreciation benefit.

    Corrugated Products Prices and Mix
    $0.11 belowvs Q2 FY25
    Q2 FY26

    Impact of price and mix in the legacy corrugated business.

    Corrugated Products Prices and Mix
    up $0.04vs Q1 FY26
    Q2 FY26

    Impact of price and mix in the legacy corrugated business.

    Export Containerboard Prices
    $0.01 abovevs Q2 FY25
    Q2 FY26

    Export containerboard prices compared to prior year.

    Export Containerboard Prices
    $0.02 abovevs Q1 FY26
    Q2 FY26

    Export containerboard prices compared to prior quarter.

    Export Sales Volume of Containerboard
    30,000 tons lowervs Q1 FY26
    Q2 FY26

    Volume intentionally lowered mid-quarter to build inventory for corrugated plants.

    Export Sales Volume of Containerboard
    22,000 tons lowervs Q2 FY25
    Q2 FY26

    Volume intentionally lowered mid-quarter to build inventory for corrugated plants.

    Corrugated Shipments Growth
    over 24%YoY
    Q2 FY26

    Total corrugated shipments growth, including acquired business.

    Corrugated Shipments Growth
    4.1%YoY
    Q2 FY26

    Legacy business achieved an all-time record for total quarterly shipments.

    Cash Provided by Operations
    $376 million
    Q2 FY26

    Cash flow from operating activities.

    Dividend Payments
    $111 million
    Q2 FY26

    Cash payments for dividends during the quarter.

    Cash Tax Payments
    $78 million
    Q2 FY26

    Cash payments for taxes during the quarter.

    Net Interest Payments
    $54 million
    Q2 FY26

    Net cash payments for interest during the quarter.

    Share Repurchases
    —
    Q2 FY26

    The company did not repurchase shares during the quarter.

    Effective Tax Rate (excluding special items)
    25.7%
    Q2 FY26

    Effective tax rate for Q2 FY26, excluding special items.

    Effective Tax Rate (expected)
    approximately 26%
    Q3 FY26

    Expected effective tax rate for Q3 FY26.

    Special Items Depreciation Expense
    $56 million
    YTD Q2 FY26

    Year-to-date special items depreciation expense, primarily for Wallula Mill restructuring.

    Maintenance Outage Expense
    $0.34
    Q2 FY26

    Maintenance outage expense for the second quarter.

    Billings Growth
    1.5%
    Q3 FY26 (so far)

    Billings growth for the legacy business at the start of Q3.

    Billings Growth Expectation
    about 2%
    Q3 FY26

    Expected billings growth for the legacy business for Q3.

    Recycled Fiber Content
    30% to 35%
    Current

    Current mix of recycled to virgin fiber in the system.

    OCC/DLK Recycled Fiber Price Increase
    about 70%since beginning of year
    YTD

    Increase in prices for Old Corrugated Containers (OCC) and Double-Lined Kraft (DLK) recycled fiber.

    First Price Increase Realization
    70% to 75%
    Q3 FY26

    Percentage of the first price increase expected to be realized in Q3.

    Second Price Increase Realization
    majority
    Q4 FY26

    The majority of the second price increase is expected to be realized in Q4.

    Greif Synergies Run Rate
    exceed $30 million
    by year-end

    Expected run rate for synergies from the Greif acquisition by the end of the year.

    Greif Mill Production Improvements
    5% to 10%improved reliability
    Current

    Improved reliability leading to better production at the acquired Greif mills.

    Unplanned Utility Outage Production Impact
    10,000 tons
    Q2 FY26

    Estimated lost production due to utility power outages.

    Corporate Costs Variance (Benefits Obligation)
    $0.05vs forecast
    Q2 FY26

    Higher than forecast mark-to-market obligation on compensation and benefits.

    Total Capital Spend
    $10 billion
    15-17 year period

    Total capital spent on mills and box plants to enhance PCA's capability.

    Total Capital Spend
    $6 billion
    8-9 year period

    Capital spent on box plants and mills to recapitalize, build new plants, and optimize converting/mill systems.

    Industry KPIs

    7
    MetricValueDetails
    Dividends$111 millionUSD
    Share buybackNone
    Unit cash costs$0.34per share
    CAPEX capital program$206 millionUSD
    Volume production growth1,415,000 tonstons
    End market demand driversVery strong
    Adjusted underlying EBITDA$486 millionUSD

    Deals & partnerships

    1
    GreifAcquisition of containerboard business

    Integration of the acquired business is progressing, with the transition services agreement expected to conclude by year-end 2026. Mill production improvements of 5-10% in reliability have been observed.

    Capital programs

    4
    Jackson Mill Gas Turbine Projectin construction

    Benefit: reduce/eliminate reliance on grid

    A new winder project is also coming online later this year at Jackson mill, bringing incremental tons.

    Riverville Gas Turbine Projectpermitting

    Benefit: reduce/eliminate reliance on grid

    Expected to be delayed due to environmental permitting process.

    DeRidder Gas Turbine Projectpermitting

    Benefit: reduce/eliminate reliance on grid

    Expected to be delayed due to environmental permitting process.

    New Ohio Plantstarted up

    Benefit: 550,000 square foot facility, enhance capabilities, improve operational efficiency

    Successfully started up earlier this month, ahead of schedule.

    Risks & headwinds

    11
    Higher Freight CostsQ2 FY26, expected to remain elevated in Q3 FY26

    $0.26 per share impact on legacy business earnings in Q2 FY26

    Mitigation: Managed costs very well in areas like the box plant system to offset.

    Higher Corporate and Other ExpensesQ2 FY26

    $0.12 per share impact on legacy business earnings in Q2 FY26; $0.05 per share variance from forecast due to benefits obligation

    Lower Price and Mix in Packaging Business (Legacy)Q2 FY26

    $0.11 per share impact on legacy business earnings in Q2 FY26

    Mitigation: Price increases rolling through Q3 and Q4.

    Higher Labor and Operating CostsQ2 FY26

    $0.05 per share impact on legacy business earnings in Q2 FY26

    Higher Depreciation and Amortization ExpensesQ2 FY26

    $0.03 per share impact on legacy business earnings in Q2 FY26

    Higher Fiber CostsQ2 FY26, continuing to increase in Q3 FY26

    $0.02 per share impact on legacy business earnings in Q2 FY26; Recycled fiber (OCC, DLK) prices up about 70% YTD

    Mitigation: Maximizing virgin craft system, taking advantage of OCC/DLK systems to fiber up mills.

    Higher Tax RatesQ2 FY26

    $0.02 per share impact on legacy business earnings in Q2 FY26

    Higher Interest ExpenseQ2 FY26

    $0.01 per share impact on legacy business earnings in Q2 FY26 (excluding Greif acquisition indebtedness)

    Production Interruptions from Utility Power OutagesQ2 FY26

    Approximately 10,000 tons of lost production in Q2 FY26

    Mitigation: Execution of gas turbine projects at key facilities to reduce reliance on the grid.

    Permitting Delays for Gas Turbine ProjectsExpected completion early to mid-2028

    Riverville and DeRidder units delayed to early to mid-2028

    High Inflationary Environment and Cost of CapitalOngoing

    Cost of capital keeps going up

    Mitigation: Disciplined and selective customer growth, ensuring appropriate returns for investments.

    What to watch in Q3 FY26

    5

    Greif Integration Completion

    by year-end 2026
    CurrentRemaining few corrugated plants and one mill facet to be integrated in Q3/Q4
    TargetTSA concluded, full integration achieved

    Why it matters

    Full integration is expected to maximize efficiencies and synergies from the acquisition.

    The transition services agreement is running through the end of the year as we bring the last few corrugated plants and one facet of the mills on the PCA system.

    Q&A highlights

    7

    Asked for an update on Q3 bookings/billings trends, reasons for Q2 revenue per ton mix being lower than expected, and how PCA views its fiber flexibility given rising recycled fiber costs.

    Tom Hassfurther stated Q3 billings are up 1.5% so far, expecting 2% for the quarter in the legacy business, noting Prime Day timing shifted. He attributed Q2 mix impact to e-commerce driven Prime Days and a $20 RISI reduction. Mark Kowlzan explained PCA's fiber mix is 30-35% recycled, 70-65% virgin, and that recycled fiber costs are up 70% YTD, making virgin craft more cost-predictable.

    “Yes, billings are up 1.5% so far, and we're expecting for the quarter, this is in the legacy business and up about 2%.”

    asked by George Staphos · answered by Thomas Hassfurther

    2 min read5 chapters

    Detailed Narrative

    01

    Greif Integration Progress

    The acquired Greif business is now viewed as totally integrated, operating as one unit with legacy PCA. The transition services agreement (TSA) is expected to conclude by year-end 2026, with the remaining few corrugated plants and one mill facet being brought onto the PCA system in Q3 and Q4. This integration has led to better visibility and optimization of supply between PCA and Greif facilities, contributing to exceeding synergy targets.

    02

    Utility Power Outages Impact

    The company experienced at least five distinct utility power outage situations at various mills during Q2, including one that shut down a mill for nearly a full day and another due to a regional system shutdown during forest fire season. These unplanned outages resulted in approximately 10,000 tons of lost production, highlighting the critical need for the ongoing gas turbine projects to reduce reliance on the grid.

    03

    New Ohio Plant Startup

    PCA successfully started up a new 550,000 square foot facility in Ohio earlier in July, ahead of schedule. This state-of-the-art plant is expected to enhance capabilities to serve customers in a strategic area and improve long-term operational efficiency.

    04

    Fiber Flexibility and Recycled Content

    PCA's fiber mix is currently around 30% recycled to 70% virgin craft, flexing up to 35% recycled at times, especially with increased system push. Management noted that recycled fiber (OCC, DLK) prices are up about 70% since the beginning of the year, making the virgin craft system more advantageous for cost predictability. The company is not planning large capital expenditures for fiber at this time.

    05

    Long-Term Capital Allocation and Returns

    Over the past 8-9 years, PCA has spent approximately $6 billion on box plants and mills to recapitalize and optimize its converting and mill systems. Over a 15-17 year period, total capital spend on mills and box plants is estimated at $10 billion. Management emphasized the need for appropriate returns on this significant investment and highlighted the capital-intensive nature of the business, stressing discipline in customer growth and pricing to earn the cost of capital.

    AI-generated summary of the company’s earnings call. Not investment advice.