PACKAGING CORP OF AMERICA

Trade publications reported North American industry-wide corrugated products shipments were relatively flat in 2024, compared to 2023. Reported industry containerboard production increased 4.7% compared to 2023, and reported industry containerboard inventories at the end of 2024 were approximately 2.8 million tons, up 5.7% compared to 2023. Reported containerboard export shipments increased 15.4% compared to 2023. Index prices, in February 2024, increased $40 per ton for linerboard and $60 per ton for corrugating medium, followed by an additional increase in June 2024 of $40 per ton for linerboard and corrugating medium.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of traditional print media and communication papers. Trade publications reported North American uncoated freesheet paper shipments increased slightly 0.5% in 2024, compared to 2023. Average prices reported by a trade publication for cut size office papers were lower by $36 per ton, or (2.4%), in 2024 compared to 2023. For cut size office papers, index prices decreased $40 per ton in January, followed by increases of $20 per ton in April and May 2024. For offset printing papers, index prices decreased $20 per ton in January, followed by increases of $20 per ton in April and May 2024.

Outlook

For the first quarter of 2025, in our Packaging segment, we expect volume in our corrugated products plants to increase and set new first quarter records for total shipments and shipments-per-day. Containerboard production will be lower with two less operating days and scheduled maintenance outages at our Counce, TN and Valdosta, GA mills. Domestic prices are expected to be higher with an improved product mix together with our previously announced price increases. Export prices are assumed to be stable. In our Paper segment, we forecast slightly lower volume with two less mill operating days and prices and mix to be fairly flat. With the exception of recycled fiber prices, we expect inflation across most of our direct, indirect and fixed operating and converting costs along with a higher cost mix of mill operations. In addition, wood, energy, and chemical costs will also increase due to the unusually cold seasonal weather negatively affecting usages and yields for these items. Labor and benefits costs will be higher due to timing-related items that occur at the beginning of a new year for annual increases, the restart of payroll taxes, and share-based compensation expenses. First quarter rail rate increases at three of our mills will impact freight and logistics expenses and we expect higher depreciation expense. Lastly, scheduled outage expenses should be slightly lower and we assume a lower corporate tax rate. Considering these items, we expect first quarter earnings to be lower than the fourth quarter of 2024.