Packaging Group Blames Weak Demand for Profit Dip

A sharp cut in production due to less demand for packaged goods in a soft economy coupled with higher input costs resulted in reduced fourth quarter earnings, claims Packaging Corporation of America (PCA).

The company has reported fourth quarter 2008 net income of $30 million, compared to $44 million for the same period in 2007.

PCA is the fifth largest producer of containerboard and corrugated packaging products in the U.S. with overall sales of nearly $2.4 billion in 2008. In 2007, 46 percent of the company's corrugated products were sold into the food, beverage and agricultural markets.

The manufacturer claimed that higher costs for energy, chemicals, and labor impacted negatively on earnings; however, it said that these items were partially offset by higher prices for containerboard and corrugated products.

Paul Stecko, chief executive of the company, said that “the past quarter was the most difficult quarter PCA has ever faced operationally, with box volume down almost 10 per cent and mill downtime and slow backs amounting to 90,000 tons.”

However, he said despite these conditions and the unusually high cost inflation during the first half of the year, PCA's full year 2008 earnings were the second best since it became a stand-alone company in 1999.

Looking ahead to the first quarter of 2009, the company said it expects to earn 20 cents a share, rather than the 21 cents a share predicted by analysts.

Source: FoodProductionDaily.com