Packaging Corporation of America (PKG) 16th Annual Wells Fargo Industrials & Materials Conference summary

Business performance and market conditions

• Corrugated shipments per day rose 24% year-over-year in April and May, with legacy business up 4.5% in April and 3.5% in May; bookings remained strong through June with no signs of slowdown.

• Freight and recycled fiber costs exceeded forecasts and are headwinds, with freight expected to be $10–12 million unfavorable to guidance for the quarter, but higher volumes and operational efficiencies helped offset these costs.

• Price increases are being implemented, with a $50/ton increase effective June 1, 2026, and further price realization expected in Q3.

• Inventory drawdown of 90,000 tons in March and April required rebuilding in May and June, prioritizing domestic demand over exports; Q2 export containerboard sales were reduced and box plant inventories built up.

• Continued year-over-year and seasonal demand growth is expected in the second half, with Q4 linerboard mill outages planned.

Operational updates and strategic initiatives

• The Greif acquisition is delivering strong volumes and record mill production, contributing positively to the bottom line and is expected to be accretive in Q2.

• Export sales were reduced to support box plant inventory, impacting Q2 but positioning for higher integrated sales in the back half of the year.

• The company is not managing strictly to Q2 guidance but is focused on serving customers amid tight market conditions.

• Maintenance expenses are expected to decrease slightly in Q3.

• Energy independence projects are underway, with three gas turbines acquired and being installed to make mills self-sufficient at a fraction of new equipment cost.

Financial performance and outlook

• Q1'26 EPS (excluding special items) was $2.40, up from $2.31 in Q1'25; net sales increased 10.6% to $2.4 billion.

• Q1'26 EBITDA (excluding special items) rose 15.3% to $486 million, with packaging margins improving to 22.0%.

• Packaging segment maintained an average EBITDA margin of 22.5% since 2018, with integration rates above 90% post-acquisition.

• Free cash flow remained strong, supporting both reinvestment and shareholder returns.

• Dividend growth continued, with a 5-year average payout ratio of 50% and yield of 3%.