Packaging Corp of America Jefferies Global Industrials Conference 2026

Yeah. Thanks, Phil, and as usual, I have probably 5 minutes of prepared remarks that I want to go through, and then I want to spend more time on the fireside chat piece of this. As usual, we will go through a presentation. We are not going to do the slide-by-slide review. We have posted the presentation on the website, and have hard copies available if anybody needs anything. Before I begin, though, I do have to remind you about forward-looking statements disclosure in the presentation. The statements are made as of today, and actual results could differ materially from any expression in any forward-looking statement. I do not have nearly as much to say as when we were out on the road in the second quarter. So far, 3Q has progressed consistently with what we called out in the July earnings call.

We continue to see very tight containerboard market conditions, and we are in a much better inventory position than where we were coming out of 2Q. We had all of the outages going on during that period of time. We continue to run incredibly well. We have had two excellent operating months now in the mill system in July and August with no maintenance outages or any other meaningful interruptions. We have been able to restock our inventory. We had a tough early part of the year trying to take care of our box plants and our customer needs because of the outages and the strong demand. Where we are right now, even though we are running well, we need to rebuild, continuing into the fall right now because we have a significant outage schedule ahead, starting actually this month.

We have got one of the containerboard mills down, and then 4Q, we have got three mills down. That is against the backdrop of stronger corrugated demand as we go through the holiday season right now, and that is what we are seeing. Through August, we are on track to meet or exceed our third-quarter earnings guidance that we called out on the July earnings call. Costs across the board are favorable to forecast. We took the elevated freight and recycled costs that we are experiencing into account when we built the forecast. We did anticipate that diesel, as an example, OCC, some of those elements would probably continue creeping up. Our forecast and our guidance that we gave on the July call did take that into account, and we are glad we did that.

We've done an excellent job implementing our packaging price increases, and we're ahead on forecast in terms of price realization. We are below our initial expectation on corrugated volume. Think about this. Due in part to the expected sales in the ag sector with the drought and then crop effects. Everybody knows most of the news coming at us on a daily basis through a lot of July and August was about some of the ag products and what it was doing to people. Again, it's been a tough ag summer. Then just the ag year, Florida had a tough winter. They never recovered. The Pacific Northwest, as an example. The apple crop, cherry crop, those were not as big as the expectation.

Ag's been a drag on us, but we're still having a strong quarter, but we're just off slightly from what we guided when we talked on the July earnings call. Still, if you put it in perspective year-over-year with the Greif acquisition, we're up 24% over last year with Greif, but we're down just slightly from what we had hoped to be because of primarily ag and farm-related activity. Then last but not least, white paper. We're having a very good quarter across the board in terms of sales volume, price, and mill operations. Then kind of summarizing, when you are thinking about us for the rest of the year, I want to remind everybody, containerboard markets remain tight, and we continue with the lower export shipments. Corrugated volume seasonally improves, but mix seasonally gets weaker. Just the nature of the business.

More e-commerce. Again, volume remains strong in that regard. Corrugated volumes seasonally improve, again, because of the mix changing. That's truly just the e-commerce effect of what we always see, and it starts in August, generally. We expect price improvement from the continued implementation of the earlier price increases and the beginning of the realization of the most recent price increase in corrugated later in the fourth quarter. We resume our outage schedule this month, as a matter of fact, with the Riverville mill in International Falls, which is a white mill, going down this month. Then DeRidder, Valdosta, and Massillon mill will be down in Q4. Consistent with what we told you on the earnings call, the earnings impact for the outages is about $0.30 to $0.35 higher sequentially 4Q over 3Q.

That's again, just the nature of the accounting with the work we do. We continue to see elevated freight and recycled prices. The question remains, how elevated? We'll obviously have more insight into that when we talk to you on the October earnings call. We'll also get seasonally higher input costs in the mills as the year goes on, as the weather simply gets colder. You're always using more energy, more fuels as fall rolls on into the November, December period. White paper should sequentially improve with the completion of the 3Q maintenance outage. So September is the annual outage at I Falls. So this 3Q in the paper side of the business, when we report earnings, people are going to wonder, again, the earnings were down in 3Q, but it was just the effect of the outage that we have.

We won't guide for Q4 until October, but we remind you that Q4 is normally lower than Q3 in terms of earnings due to the outage impact and mix effects, as well as just higher input costs, as I mentioned with seasonality. Assuming freight is within reason, this year should not be as pronounced as last year, with expected price improvement partially offsetting the cost factors. With that, Phil, I'll turn it into chat.

Yeah. Again, everything we've seen with some of our volume being slightly off was really related to the ag and what happened with the impacts of, as you just said, lettuce in particular, and some of the other food crops. But the rest of the business is strong. We've seen a huge impact with e-commerce picking up in August, and we expected that. So in general, across the board, if you think about our customer base, we're still seeing very strong demand with the pricing activity that we're currently going through. I do want to point out, and we've said this before publicly, we will give up customers. When it comes to price, we'll walk from some customers if that's what it takes. We're not going to deal with certain matters in that regard. So that's a little bit of the volume impact, but very slightly.

I'm feeling really good with where we are. In spite of the world we're living in. If you think about the consternation on a daily basis around the world, our volume is very strong. Again, I've used this on the July call, Tom, when I talked about how tight the market is. I'll still use that word today. Containerboard availability is tight. You cannot go out on the market and buy tons. We're fortunate our mill system is running incredibly effectively and efficiently. We've talked about this back before, Phil, about our recapitalization over the last decade. We got ahead of the curve and we have the most efficient mill fleet and the most efficient converting fleet in the industry in North America. We just have to plug and play right now.

We started up our new box plant in Ohio, actually about a month ahead of schedule. The new plant in Ohio is up and running, and that's our biggest plant now to date. We're incredibly pleased with how that performance is looking. We're in a good place.