Earnings Call: Q2 2021

Jul 27, 2021

Thank you for joining Packaging Corporation of America's Second Quarter 2021 Earnings Results Conference Call. Your host for today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question and answer session. I will now turn the call over to Mr. Kowlzan. Please proceed when you're ready. Thank you, Stephanie. Good morning, Thank you for participating in Packaging Corporation of America's Q2 2021 earnings release conference call. I'm Mark Kowlzan, Chairman and CEO of PCA, and with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging Business and Bob Mundy, our Chief Financial Officer. I'll begin the call with an overview of our 2nd quarter results and then turn the call over to Tom and Bob, who will provide further details. I'll then wrap things up and then we'd be glad to take questions. Yesterday, we reported 2nd quarter net income of $207,000,000 or $2.17 per share. Excluding special items, Q2 2021 net income was also $207,000,000 or $1.38 per share. 2nd quarter net sales were $1,900,000,000 in 20.21 and $1,500,000,000 in 2020. Total company EBITDA for the 2nd quarter, Excluding special items was $397,000,000 in 20.21 $299,000,000 in 2020. Reported earnings in the Q2 of 2021 included special items expense and income rounding to a negligible impact, While last year's Q2 net income included special items expenses of $0.79 per share for the 2nd quarters of 2021 2020 were included in the schedules that accompanied our earnings release conference press release. Excluding special items, the $0.79 per share increase in Q2 2021 earnings Compared to the Q2 of 2020 was driven primarily by higher prices and mix of $1.01 and volume $0.74 in our Packaging segment, higher volume in our Paper segment of $0.03 and lower non operating pension expense of $0.03 These items were partially offset by higher operating costs of $0.57 We also had inflation related increases in our converting costs, which were higher by $0.05 per share, while annual outage expenses were up $0.19 per share compared to last year. Freight and logistics expenses were higher by $0.19 per share, driven by historically high load to truck ratios, driver shortages, increases in fuel costs and a higher mix of spot pricing to keep pace with the box demand. Lastly, depreciation expense was higher by $0.01 per share and paper segment prices and mix were lower by $0.01 per share. Looking at our Packaging business, EBITDA excluding special items in the Q2 of 2021 of $409,000,000 with sales of $1,700,000,000 resulted in a margin of 24% versus last year's EBITDA of $313,000,000 A tight labor market, various freight and logistics challenges as well as the planned maintenance outages at 4 of our mills during the Q2. The mill executed the planned outages extremely well and with the help of the number 3 machine at our Jackson, Alabama mill, provided our plants the necessary containerboard to achieve an all time record for total box shipments. Although we were able to build some much needed inventory, Due to very high demand, we ended the 2nd quarter below our targeted levels and at a new low for weeks of inventory supply for this time of year and ahead of expected very busy 3rd and 4th quarters. In the second half of the year, we still anticipate a planned outage at our Jackson, Alabama mill later in the Q3 as well as a significant planned outage at our DeRidder mill in the 4th quarter. Implementation of the previously announced price increases continues to be executed extremely well by our sales organization, while our engineering and technology organization And the employees at all of our mills and corrugated products plants continue to successfully implement numerous initiatives and projects to reduce cost through efficiency, Productivity and Optimization Improvements. With inflation driven cost increases across most all areas of our company, coupled with truck, Rail and barge challenges for both incoming and outgoing products and materials at our facilities, these efforts are absolutely critical to our success. In addition, being a primarily virgin fiber based producer of containerboard, minimizes the impact of significant increases in recycled fiber costs over the last several quarters. I'll now turn it over to Tom, who will provide more details on containerboard sales and the corrugated business. Thank you, Mark. As Mark indicated, containerboard and corrugated products demand remains very strong across most of all of our end markets. Our plants achieved a new all time quarterly record for total box shipments as well as a second quarter record for shipments per day, both of which were up 9.6% compared to last year's 2nd quarter. Through the first half of twenty twenty one, our box shipment volume is up 9% on a per day basis versus the industry being up 6.8%. Driven by higher domestic demand, outside sales volume of containerboard was about 43,000 tons above the Q2 of 2020, But was down slightly versus the Q1 of this year due to lower export shipments, supplying the record requirements of our box plants from the implementation of our previously announced price increases across all product lines. Domestic containerboard and corrugated products prices and mix together were $0.92 per share above the Q2 of 2020 and up $0.51 per share compared to the and up $0.04 compared to the Q1 of 2021. Finally, I'd like to reemphasize some of what Mark was pointing out regarding the many things we do to help offset inflation and improve our margins beyond just price increases. And put us in position to serve our customers better than ever before. Our strategy of improving the technology and equipment in our plants And optimizing our footprint through the construction of new facilities as well as closing certain plants to consolidate business with other locations Is based upon our customers' needs and demands and improving our capabilities to grow with them. We're seeing this in our volume growth with new and existing customers, Operating efficiencies and savings and cost reductions in several conversion areas throughout our plants. I'll now turn it back to Mark. Thank you, Tom. Looking at the Paper segment, EBITDA excluding special items in the Q2 was $12,000,000 with sales of $142,000,000 or an 8% margin compared to Q2 2020 EBITDA of $5,000,000 and sales of $123,000,000 or a 4% margin. Although about 1% below 2nd quarter 2020 levels. Prices and mix moved higher for the 1st and into the Q2 of 2021 as we continue to implement our announced price increases. Volume was 17% above last year when pandemic issues caused us to take both machines at the Jackson, Alabama mill down for 2 months during the Q2, Well, this year, we ran the number one machine at Jackson on paper and the number 3 machine ran linerboard. Now that we have our finished goods inventory at a new optimal level. Sales volume in the second quarter is fairly reflective of what our production capability is as a 3 machine paper system. We'll continue to assess our outlook for paper demand and will run our paper system accordingly. I'll now turn it over to Bob. Thanks, Mark. Cash provided by operations for the 2nd expenditures of $131,000,000 common stock dividends of $95,000,000 cash taxes of $87,000,000 and net interest payments of $40,000,000 We ended the quarter with $972,000,000 of cash on hand 1,100,000,000 including marketable securities. Our liquidity at June 30th was just under $1,500,000,000 I'll turn it back to Mark. Thank you, Bob. As we move from the second to the third quarter in our Packaging segment, we expect continued strong demand for containerboard and corrugated products with one additional day for box shipments. Paper segment volume should be relatively flat, primarily due to the scheduled maintenance outage at the Jackson Mill. We will also continue to implement our previously announced price increases in both our Packaging and Paper segments. Our annual outage costs will be lower with 1 outage in the 3rd quarter versus 4 mill outages in the 2nd quarter. Inflation associated with most of the operating costs as well as freight and logistics expenses is expected to continue. Energy costs will also be impacted due to higher seasonal usage and wood costs in our southern mills will be higher due to wet weather, Low inventory and high demand. Considering these items, we expect Q3 earnings of $2.37 per share. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call today constitute forward looking statements. The statements were based on current estimates, expectations and projections of the company and involve inherent risks and uncertainties, Including the direction of the economy and those identified as risk factors in our annual report on Form 10 ks on file with the SEC. Actual results could differ materially from those expressed in the forward looking statements. And with that, Stephanie, I'd like to open for questions, please. Your first question comes from George Staphos with Bank of America Securities. Thanks, everyone. Good morning. Thanks for the details. I guess maybe to start Mark and Tom if you could talk a bit about Your early 3Q bookings and shipments. What are you seeing? And a related point, we heard from Going into the Q3, our bookings and billings are running about 7% ahead of last year. Keep in mind that our comps become much tougher. So, it's not as if volume has slowed down at all. It's remain incredibly robust coming right out of the Q4 of last year and all the way through this year. I think that's why we felt Pillai in the Q2, maybe bleeding over into the Q3. We're running lead times that are longer than we're used to and certainly longer than customers are used to, so the demand remains very high. Trying to get it out the door is an issue more related to transportation at this stage than it is Certainly about paper. We're able to take care of our own plants through our system. So that's not the issue for us. It's more transportation and I think that's Okay. Thanks, Tom. My second question, if you could talk to 3rd question really is, I think last quarter or going into 2021, you had You flagged wood costs, I think, particularly in the South. Can you talk a little bit about What you're seeing, what kind of headwind that might be for you in the Q3 and Q4? Obviously, the weather has been tough and that's usually what Yes, George, I'll take the wood cost. Obviously, we've had a very wet period of time throughout the entire Gulf Coastal region up through the southeastern states through the entire winter and Spring into the summer months now. And so coupled with the high demand for pulpwood And the logistics issues with the trucking side of the equation. It's basically put the It's more of a weather related phenomenon than anything else. Bob, why don't you go ahead and talk about the coverage cost? Yes. George, it's about $0.11 to 0.12 dollars Help going to 2Q to 3Q on outages, which is very similar to the our wood costs going the other direction in about Thank you very much guys. Good luck on the quarter. Okay. Next question please. Your next question comes from Mark Wilde with Bank of Montreal. Hi. Good morning, Mark. Good morning, Tom. Good morning. Mark, so my first question, I'd like to just kind of step back a little bit. And I know that this is a sensitive issue, but I wondered if you could just discuss kind of Yes. We've talked about this before and as you could imagine, that's a Board level matter, but we have got The depth and the breadth of the talent across the board that's been identified and we continue to develop. We're very confident in the talent pool we have and the Board feels the same way that again we've got Enormous opportunities with the talent across the entire company. Okay. The second question I had is if you could just walk us through the steps that you might be making as You downsized the footprint in the white paper business to a smaller capacity base. And whether this involves shifts in your customer base, I think Yes. As you can imagine, Without the Jackson number 3 machine, we've gone ahead and exited some business over the last 6 months. And now as you think about that as a 3 machine system, we're going to be supplying a smaller marketplace. So we've been able to rationalize that accordingly, but that has shifted us down to a Few bigger customers, but nevertheless the entire market for us has shifted down over the last 8 years since we've run the paper business. And so we're very confident that we'll continue to supply into that market and do it in a meaningful manner, as we go forward. Go ahead, Mark. Just a final on white paper. I just was curious, Mark, is it possible To think about high bulge as a containerboard mill at some point. I'm just trying to think about the puts and takes. Typically, upper Midwest, We've said this for the better part of the last decade that you can convert anything to do anything, but there's a capital cost and there are puts and takes with transportation, that's coming out of I Falls. We'll continue to run to that opportunity. We have The Jackson conversion coming on big next year that will continue to supply us with the necessary containerboard for the next few years. And I would say this, as long as the paper business offers us an opportunity with the International Falls Mill, the situation and look at our optionality with that asset. But trust me, it's you have to believe We've already done that and we have the opportunities in the files and know what we would do at any given time. So we're pretty confident that we've got a lot of flexibility. Next question please. Your next question comes from Mark Connelly with Stephens. Thank you. Two things. Just on white paper, will Jackson be all containerboard in the second half? I'm just sort of curious how these projects affect the ability to run white there? No, neither. Jackson will continue to run with the number 3 machine on containerboard and At the present time, our intent is to run number 1 machine on paper. Okay. So even during the project, great. And secondly, you talked in this call and previous about box plant debottlenecking projects. I'm just curious if with all the activity you've got going on right now and all the COVID, are you doing as many of those Projects today as normal or more than normal, less than normal? Yes. We're extremely pleased with the rate That we've been able to execute these projects. And I'll give you an example. I mean, we did slow down a little bit last year and During the 2020 period, we had become a little more targeted in what projects required the attention of The various technical organization just because of the travel restrictions and the concern for people's well-being. But this year that was ramped up to full activity and so we're continuing to execute well across the board. But I can give you an example. If you go back over the last three and a half years, we've executed approximately At 62 of these box plants, dollars 850,000,000 worth of capital project activity. FlexoFolder glue was converting equipment upgrades, major rebuilds, new corrugators, built to 2 new plants. And so We're doing this all in house, but the pace is ramped up in 2021 over some of 2020. So we're very pleased with what we're seeing. And so we currently have a great deal of activity going on at numerous plants nationwide that will continue to provide the benefits that I spoke about and that Tom spoke about. So we're extremely pleased with the opportunities. Fantastic. Thank you, Mark. Next question please. Your next question comes from Mark Weintraub with Seaport Research. Thank you. First, it looks like you're getting really rapid and significant pass This is the type of environment where you're able to achieve that. And can you give us a read on how much more Mark, this is Tom. Let me just comment. We say very little about our price increase, but This isn't any different than the price increases we've had in the past. It's a very disciplined approach that we do. We roll them in over approximately in the 90 day period. We have local accounts that go in at a maybe a quicker rate than some of our contractual accounts. If you want to look at the 3 price increases kind of separately, the first price increase was effectively done and but you do have some bleed over depending on contracts and things like that timing. Those can be impacted. 2nd price increase the same way. It rolls out over a whole 90 day period. 3rd price increase hasn't been reflected yet in Pulp and Paper. So obviously, we have raised prices to our Independent customers and our liner board and medium customers domestically. Those are in place. But the lion's share of the price increase which goes through boxes, again, that will flow through over a 90 day period. So virtually none of that would be reflected at this stage in the Q3. Okay, that's helpful. And lastly, one other question, The impact from volume, you note, I believe it was $0.74 Which is $90,000,000 $100,000,000 if we think that pretax, which seems like a really big number relative to an extra 120,000 tons of board and boxes being shipped. Just trying to understand How we get to that number? Is there some sort of mix element included in here as well? Or And I realize this is kind of an esoteric question, but any help there would be appreciated. Yes, Mark. Yes. I mean, for starters, if you just look at the raw volume, I mean, the raw volume is up dramatically. And as we came out of COVID last year into that Q4, the question mark, and it was a big question mark for everybody, was will that level of volume be maintained Going into 2021 and then throughout 2021. So far, we've maintained very close to those kind of numbers. And I think it's just indicative of what the market is right now and the changes that have taken place from consumer habits. Also, I'll remind you that last year during COVID, of course, from a mix standpoint, Our display business had basically gone to nothing because of the shutdowns and No shopping in brick and mortar and things like that. So that end of the business had dried up quite a bit, and that's back now. And then also, we've had good cost controls in terms of getting this volume out. As we've indicated, a lot of these capital projects are paying off. So we can we're very comfortable with the number. Okay. Super quarter. Thank you. Okay. Next question please. Your next question comes from Adam Josephson with KeyBanc. Markov and Tom, good morning and congrats on a really good quarter as well. Thank you. Thanks. Tom, would you mind just elaborating on your demand expectations in the quarter just embedded in your guidance? You mentioned the comps get A lot more difficult than July. I know for the industry, the comps get particularly difficult in September. Can you just remind us roughly what your Yes. We had Adam, we had some really it really ramped up in the second half of the year as we've indicated. So Those numbers were high single, even to mid double digit increases by the time the Q4 rolled around. So to be at or above those numbers is a very, very large number and a robust number that we've essentially been able to maintain. And if I look out into the second half of the year, and that's why I say these comps become much tougher, When you're starting to compare to high single and low double digit numbers, Pretty hard to be significantly higher than that given everything that's going on right now and just the difficulty getting it out the door. But interestingly enough, I'll also point out, our customer base is telling us that They could ship a lot more. They have higher demand than what they're able to get out Because they're dealing with the same supply chain issues and transportation issues that we're dealing with. So, I'm bullish because there's some upside even to these numbers that we have so far. Yes. No, I appreciate that. And just relatedly, Tom, would you compare this period to anything else you can remember having worked at the company? And if so, what would that period be? Well, I think a couple of things is, number 1 is, I don't think we've ever gone through a time like this, Certainly in my career, where the government has pumped a lot of money into the economy and businesses have just taken off Coming out of a shutdown, I don't think anybody would have ever guessed that during a COVID shutdown and extended COVID shutdown That people would turn to things like e commerce very quickly and as rapidly as they did. Those habits are now pretty well entrenched. And so what may have taken about 5 years to have occurred took place in a matter of a year, Those demands have certainly helped the corrugated box business. But again, interestingly enough, I mean, I can look across We've got 15,000, 16,000 customers and our top fifty accounts are up in excess of 15%. And when you look at the mix of those companies across the board, I mean, they're in every segment. Obviously, food and beverage is the largest one we have In the corrugated box business, but whether it's home improvement, apparel, like I said, food and beverage, whatever the case might be, They're up dramatically and most of our customers say they could even be higher. Yes. No, I really appreciate that, Tom. Mark, $1,000,000,000 of cash and equivalents at your disposal. Can you just talk about what your inclination is in terms of Repurchase, acquisitions. I know you've got the spending on the project, but you have ample room to do more. You've been Reluctant to buy back your stock in recent years and understandably so, but just can you update us on your thoughts Yes, the same thought process continues that we've always used. You can Use cash for dividends, acquisitions, buybacks as an example, organic opportunities with capital Spending currently happens to be a very, very big return opportunity for us that we've been taking advantage of for the last few years. We're always looking at opportunities in terms of acquisition opportunities. So that hasn't changed. But I think more than anything, we just remained very prudent in how we go about looking at that Use of cash and being mindful that every dollar is extremely valuable. And Again, quite frankly, currently, I would rather take $1 of cash and put it into a good capital project in a box Plant or Mill, because we get immediate return for it, low risk, high return opportunity. Same thing with dividends, dividend being a Board level matter, we continue to discuss that periodically and Understanding that dividend should be meaningful but sustainable. And then as time goes on, We'll just continue to look at the bigger opportunities, but I think again, one of our virtues that we've held closely is our patience And that we're extremely patient group. So that's long answer to your question. No, I appreciate it. And just one last Mark. On the labor situation, I know freight is problematic for everyone these days and there are many other costs that are problematic. Can you talk about labor specifically what you've experienced there and what you're anticipating along those lines? Well, again, it's pretty Understandable that the demand for labor is high across the board. We've been fortunate through the capital spending programs in the last few years that with a lot of new technology going into Box Plants as an example. We've provided enormous tools for the existing workforce to become much more productive. And so that has been a very big benefit to us. But again, we're struggling like Everybody else is trying to again look at the workforce, how do you retain and how do you attract People when the demand is so high for the current labor pool in this country. So I think we're in a good place. Our retention rates continue to be high. And so I'm feeling pretty good about it, but we're mindful. Tom, do you want to add to that? Yes. Listen, labor is an issue for us. It's an issue for customers as well. It's a getting people back into the workforce is going to be incredibly important. But I think it also goes back to your capital question, Adam, relative to we think long term about What we're going to be doing and how we run this business. And one of the things that we've been working on for quite some time now is how to Do more with less in terms of labor, just because we knew that it was going to be it's going to be an issue, for us over the long haul. So I think that that in itself has paid off some big dividends for us that Mark alluded to. Really appreciate it, Tom. Thank you. Thank you. Okay. Next question, please. Your next question is from Gabe Hajde with Wells Fargo Securities. Mark, Tom Boss, good morning. Good morning. Good morning. I had a question. I mean, not only did you rein guidance, but you also made mention of kind of just even second half strength on the packaging side. So I'm curious what you're seeing kind of the difference maybe than you were before, if there are end markets and I know the Again, I think it's just Inherently looking at the marketplace and understanding where demand has been now for the last year, Understanding what the paper side of the business has been doing and where demand has been going with paper, looking at the pricing side of the equation and understanding How pricing has been holding up for our corrugated products side of the business, volume pricing and then just The success of our own execution in our capital spending as we go forward, I think we're in a pretty good place now. If one assumes that demand does what we think it's going to do, that in and of itself Builds a lot of confidence opportunity for us. All right. Thank you for that. And I guess, I know it may be difficult to discern, but is there any way you can parse out for us at Jackson Sort of the incremental contribution that you're getting, maybe in terms of production tons, for the dollar amount. And then is that being, I guess, reflected as a detriment to the paper business or are there any inefficiencies? As far as Jackson, if you without going into details, which we won't, but if you think about the productivity and we've talked about this, I believe on the April call, for the Q2 Jackson number 3 produced, I believe, 111,000 tons of linerboard, if I'm not mistaken. And we did explain that that is higher cost production than the rest of our system. And so even at a higher cost at the productivity and efficiencies that that machine is running at And it's extremely valuable in terms of its contribution to the bottom line and providing us the necessary tons. The cost will come down significantly next year as we go through the first phase of the conversion And then through the final phase, the following year, you'll see the cost position at Jackson Equal to or better than the rest of our containerboard system. But Jackson currently is a very significant contributor from the number 3 machine containerboard side. Okay. But I guess to be clear, those inefficiencies are booked and kind of reported through packaging, not the paper segment? Yes. Okay. Thank you. Thank you. Next question please. Your next question is from Phil Ng with Jefferies. Hey, guys. Congrats on another impressive quarter in a tough environment. I guess bigger picture, Mark and Tom, The industry is obviously set up for another strong year end box demand. I think many of us have been accustomed to seeing 1% growth in your comps to get a little tougher when we look at 2022. So do you expect the growth profile to kind of be elevated north of that 1% rate? Just any color how you think about the outlook going forward? Well, Phil, if I could predict that exactly, I'd be a much wealthier man, I can tell you that. Yes, you're right. We've been more in that 1%, 1.5% So, I think just the maintenance of that number has changed the dynamics of this industry dramatically. And I think going forward, I think you'll see some more normalization, but I would guess it will be Something a little north of where it traditionally has been, just given the demand we see out there in the marketplace and what we're hearing from our customers. I think one way I look at it, If you think about what happened in the 1980s and 1990s in the North America in general, we had a lot of offshoring of manufacturing If you went back over the last 60 years for many decades up into that 1980s, 1990s period, Box demand was strongly correlated to GDP. It wasn't a one to one correlation, but there was a high correlation. Through the 1980s into the 1990s that correlation separated and again In the GDP equation, service industry became a bigger factor in GDP. Manufacturing was less of a component. What we're seeing is more on shoring of manufacturing, more American businesses investing here in the United States and manufacturing, box demand tied to that factor, and I have to believe That as we go forward into the next few decades as an example that you will see on a trend line basis that box demand We'll have a new very strong correlation to GDP in general. And that's how I'm going to think about the future. Okay. I mean that's kind of how we're thinking about it too. So that's great to hear. Appreciating weather is having an impact on wood costs, How long do you think this impact is going to linger and any risk that you're going to have supply shortages that could impact your production in the back half this year? Well, there's a couple of factors involved. It's not if it was just the wet weather, I'd say, well, sooner than later, it's going to stop raining. We just had an unusually consistently wet winter and spring and then in the summer we had that one tropical system that came through in June, came up through the Southeast. But we've gone through wet periods before, but what's also a major factor is the availability of The trucking side of the equation in terms of log hauling to a mill You know, is dependent on trucks. And so those truck drivers have a choice. They can go and work over the road, hauling various or go into the woods and haul logs and so there's been extreme competition for truck drivers. So I would think though that if we get a dry period or a normal weather period in the South, You'll see a significant normalization of wood cost relatively quickly and then everything else dependent on the economy in terms of labor driver availability on that side of the equation. So it's a There's 2 major factors in that equation. Got it. But Mark, it doesn't sound like you're expecting any real shortages where You can't produce, I mean it's ongoing bottlenecks you've kind of experienced. Is that sort of Mark? Well, I mean speaking for PCA, we're okay day to day. We are looking at it carefully as you can imagine, but barring currently barring any unforeseen Hurricane, big tropical systems that come up through the Southern states right now, we're okay for the time being. I do watch the weather consistently because of that. But again, that's something we can't control. So you do the best you can. But currently, We're okay with where we are. We're just again, I'll point out the industry typically At this time of year, would be starting their winter wood build. And so mills across the southern region Would be starting to stockpile wood in their lay down yards, in their wet storage areas, satellite wet storage areas So you compound the problem right now that the inventories across the mill system in the south and southeast We're running basically day to day short inventories. We're also not able to start our winter wood build as an industry as you can imagine. So it's going to be important That we do get a dry period because we have to set ourselves up for the late fall and winter when you really get The weather systems coming through with the traditional lows that come out of the Gulf of Mexico and move up through. So that's a longer term concern. Got it. And just one quick one. It looks like and I think Mark tried to question earlier, but it looks like your drop through incremental margins on your volumes just really popped in 2Q. I know the previous two quarters maybe challenges with how strong demand is in these bottlenecks, maybe the drop through wasn't as good. Anything that stood out in the quarter and you think that is sustainable in the back half of the year, those great incremental margin you saw in the quarter? Well, again, if you think about the richness of the book of business in general that we have, the Operating efficiencies. We executed extremely well in the mills and the box plants. These capital projects and I called it out just in 2018, 2019, 2020 and then the half of twenty twenty one, we spent $852,000,000 on significant improvements In 2 thirds of our box plant fleet across the country and massive Capital opportunity for the employees to be significantly more productive and that's paid off in a big way for us. And so Again, if you again, it's pretty simple. Great book of business and operate extremely efficiently Equals high margins. That's super helpful. Thank you. Really appreciate it guys. Okay. Next question please. Your next question comes from Neel Kumar with Morgan Stanley. Thank you. For corrugated, Can you just talk about the cadence of the 9.6% volume growth through Q2 by month? And then can you also just touch Over last year. Again, I'll remind you that it's not as if volume went down. Volume continues to improve, but it's against a much tougher comp. Right. And then could you just maybe touch on end markets, how they performed relative to expectations? Well, our end markets have performed as expected. I mean, I just as I think I indicated earlier that Our top accounts are up in double digits and have plenty of opportunities to continue to grow. They're hindered a little bit by those same things we talked about, which Supply chain issues, freight issues, labor issues, those sorts of things. So I think that The trend remains very good. Okay. And then in Peaker, can you just discuss what you're seeing in terms of demand trends so far in July? I'm sorry, I couldn't quite hear you. Yes, I was just saying for paper, can you just talk about your demand trends so far in July and you have to take your back to school demand. Paper, as you could imagine, the trend line has moved up And it's for that very reason, school openings, business openings that are starting to people got to restock. But we've explained that because of the Jackson machine coming out of the system, We've reached a new equilibrium in our ability to go to market and serve the market. So we've intentionally brought that marketplace to a new point with PCA. So we're up, But we're up to a new level that we can manage to and supply into. So we're not representative of the industry at large Because of what we've done at Jackson. Great. Thank you. Okay. Next question please. Your next question comes from Kyle White with Deutsche Bank. Hey, Good morning. Thanks for taking the question. You already discussed wood fiber costs for 3Q quite a bit, but curious what your expectation is for recovered fiber costs and what's embedded in the guidance going forward. Understand it's not as impactful to you as that appears, but just any thoughts there would be helpful. Again, your guess is as good as mine. We're fortunate that again, we've you have to believe with the current trends, it's going up And there's nothing that indicates it's going to go down anytime soon. Some of the latest data that's come out indicates record Low nationwide inventory levels of recycled fiber availability, all time demand for all recycled fibers across the board. And so unless something happens to the marketplace in the world, I don't see that changing. But again, I think for PCA, we've always considered ourselves We don't have a crystal ball. We don't know where the world's going. So we build ourselves around flexibility and we still remain the lowest dependent on OCC as an example compared to the rest of the industry. We can take advantage of it, But again, we are always mindful of maintaining our flexibility in fiber utilization. Got it. And then going back to Neil's question on some of the end markets, what are you seeing in agriculture? Do you have any exposure to or any impacts from some of the fires over in the Pacific. And then on e commerce, are you seeing any kind of signs of any slowdowns as markets reopen and people aren't as home as much? Kyle, this is Tom. Regarding ag, we have not had any impact on our ag end markets so far. The majority of the large fires out west are on the Oregon California border. So those Northern California Ag Markets, Those fires are quite a bit north of them. Regarding e comm, no, we have seen 0 slowdown in e comm. In fact, I think everybody in the business of any sort is trying to figure out how they can use that Ecom to better grow their business and consumer preference still remains very strong in the ecom area. Got it. Thank you. Good luck in the balance of the year. Thank you. Next question please. Star, then the number one on your telephone keypad, that is star one to ask a question. Your next question is from Clive Reichert with UBS. Hey, good morning everybody. Thanks for taking the question. Good morning. I just had one follow-up on containerboard production. With the mills coming off maintenance in Q3 and your outlook on demand. How much do you think containerboard production could grow sequentially in the quarter. And when do you think you'll be in a position to sort of have inventories more normalized in line with your target? Well, again, we're in a much better place than we were earlier in the Q2 because of all the outages we were dealing with. But as we mentioned on a weeks of supply basis in terms of weeks of supply inventory, We're at an extremely low level compared to what our needs are. And so even though we built some inventory, We're not where we need to be or should be. Our productivity out of our corrugated, I mean our containerboard mill system will be much better in the Q3. Production will be up. I'm not going to give you the number. If you can run the math on what you currently have for mills in the system, but we expect to build in terms of our productivity, but also we also expect Q3 to be a very high demand quarter for that containerboard through our Box Plant System. So, it's probably not the answer you wanted, but I'm not going to give you exact quantitative numbers. If you have latent capacity in the box plant I mean, could you run the box plant harder if you needed to? I wish. Bob and I talk about that all the time. We'd be in big trouble if we had not undertaken a few years back the capital program that we did and also The organizational changes that took place back in 2019 with the technology and engineering groups and how we manage the business day to day. But, yes, I wish we had a lot more productivity opportunities in the box plants, But we're building that in every day with the execution of more capital spending and projects that we're doing. So We're in a good place, but it's like we've always talked about it in our mills also and I see this in the box plants. Box planes and mills run really well when they're under pressure. And I will continue to believe that going forward. And anticipate what our customer requirements will be, because it's all about the customer and understanding what the needs are and being able to react and respond in any part of the country and within a region to meet that market demand. That's fair enough. And one quick follow-up. You did mention earlier in the prepared remarks that you're outgrowing the industry through the first half in packaging, which obviously is implying market share gain. Do you have a sense of where you're gaining share, That's a very complex question. And where do we gain share? I think We have a long tradition of having a much broader customer base than most of our major competitors. We have corrugated plants plus sheet plant network that we deal with. We have tried to align with Spread over 16,000 customers, all trying to win in their marketplaces. So I think those are And of course, I think our ability to be able to, as we've talked about over and over here relative to capital, Our ability to expand as our customers' needs and as they grow. So, those are the key elements to why we Thanks very much. Thank you. Next question please. Culzan. I see there are no more questions. Do you have any closing comments? Thank you, Stephanie. I would like to thank everybody for taking the time today to be with us on the call, and I look forward to talking with you in October for the Q3 earnings call. Stay well, stay safe. Have a nice day. Thank you. This concludes today's conference call. You may now disconnect.