DERIDDER, Louisiana (News release) -- Packaging Corporation of America PKG had ramped down its DeRidder containerboard mill operations before the arrival of Hurricane Laura. On Aug 27, the storm made landfall approximately 100 miles south of the company's containerboard mill in Louisiana. Notably, the storm did not make any significant property damages to the mill.
The mill's two paper machines and other ancillary equipment operations were suspended as electric supply was out of service for approximately 11 days. On Sep 7, power supply was restored and the mill resumed full operations. The mill's production was down for approximately 12 days, with a total impact of 40,000 tons. The company is currently evaluating the impact the storm might have on the previously-announced scheduled outage planned in the fourth quarter. During the second-quarter earnings call, the company had stated that it expects scheduled outage costs at its mills to impact bottom-line performance in the current year.
Packaging Corporation did not provide any financial guidance for the third quarter given the uncertainty regarding the duration and impact of the coronavirus pandemic, and the timing of global recovery. The company might have to shut down or suspend operations as per government mandates, or if there are any cases reported in its facilities. Its supply chain might also be affected. In these cases, Packaging Corporation's performance would be affected.
Packaging Corporation discontinued the production of uncoated free sheet and coated one-side grades at the Wallula, WA mill, and converted the No. 3 machine into a virgin kraft linerboard machine with an annual capacity of 400,000 tons. The conversion resulted in production of lighter-weight high-performance linerboard grades, which will assist the company in optimizing the entire containerboard system platform, and reduce its logistics and freight costs. This move will help improve its profitability and margins in the paper segment.
However, paper consumption in schools, offices and businesses has been impacted due to the pandemic, straining paper demand. To balance the supply of Boise Paper products with demand, Packaging Corporation has, thus, announced plans to temporarily idle both paper machines and the sheet-converting operation at its Jackson Mill in Jackson, AL for the months of May and June. This move will reduce paper production by approximately 70,000 tons. Also, the paper segment continues to bear the brunt of bleak uncoated freesheet market.