PKG Reports a Favorable 4Q

Packaging Corporation of America (PKG - Snapshot Report) reported net income (excluding income from bio-fuel tax credits and asset disposal charges) of $39.0 million or 40 cents per share in the December quarter of 2011 compared with $54.9 million or 54 cents per share in the year-ago quarter and $41.3 million or 42 cents per share in the previous quarter. The results beat the Zacks Consensus Estimate of 37 cents per share.

Net sales came in at $654 million in the fourth quarter of 2011, rising 4% year over year. Corrugated products’ shipments were up 9.0% year over year. Outside sales of containerboards were the same as last year. Containerboard production was 640,000 tons, up 2000 tons year over year. Packaging Corporation ended the year with its containerboard inventories of about 11,000 tons, below the 2010 levels.

Gross margin fell to 20.5% from 23.5% in the year-ago quarter and almost flat sequentially. Selling and Administrative Expenses amounted to $48.9 million compared with $46.3 million in the previous year quarter.

Management stated that major energy projects at its Counce, Tennessee and Valdosta, Georgia linerboard mills were completed this quarter. Moreover, the quarter saw a new corrugated products plant at Reading, Pennsylvania and a corrugated products plant was also acquired in Denver, Colorado. Solid results were observed in both, containerboard production and corrugated product shipments in the December quarter.

In 2011, Packaging Corporation’s reported net income (excluding special items) came in at $162 million or $1.61 per share compared with a net income of $205.4 million or $2.00 per share in 2010. Revenues in FY11 were $2.6 billion, up 8.0% year over year. Gross margin amounted to 20.7% compare with 21.9% in FY10.

Management expects earnings per share of 40 cents in the first quarter of 2012, after considering enhanced fiber and energy costs associated with cold weather and increased timing related benefit costs and a higher tax rate.

Going forward, management stated that corrugated products volume and mill production would be higher than the last quarter as there will be four more corrugated products shipping days, and high revenue yields are expected from the energy projects.

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