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Packaging Corporation of America (PKG) Q3 2022 Earnings Call Transcript

Packaging Corporation of America Earnings Call - Final Transcript

Packaging Corporation of America (NYSE:PKG) Q3 2022 Earnings Call dated Oct. 25, 2022.

Corporate Participants:

Mark W. Kowlzan — Chairman and Chief Executive Officer

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Robert P. Mundy — Executive Vice President and Chief Financial Officer

Analysts:

George Staphos — Bank of America Securities — Analyst

Mark Weintraub — Seaport Research Partners — Analyst

Adam Josephson — KeyBanc Capital Markets — Analyst

Philip Ng — Jefferies — Analyst

Anthony Pettinari — Citi — Analyst

Presentation:

Operator

Thank you for joining Packaging Corporation of America’s Third Quarter 2022 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session.

I will now turn the conference over to Mr. Kowlzan. Please proceed when you are ready.

Mark W. Kowlzan — Chairman and Chief Executive Officer

Thank you, Matt. Good morning, and thank you all for participating in Packaging Corporation of America’s Third Quarter 2022 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 our packaging business; and Bob Mundy, our Chief Financial Officer.

I’ll begin the call with an overview of our third 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 any questions.

Yesterday, we reported third quarter net income of $262 million or $2.80 per share. Excluding special items, third quarter 2022 net income was $266 million or $2.83 per share compared to the third quarter of 2021 net income of $257 million or $2.69 per share. The third quarter net sales were $2.1 billion in 2022 and $2.0 billion in 2021. Total company EBITDA for the third quarter, excluding the special items, was $477 million in 2022 and $464 million in 2021.

Third quarter net income included special items expenses of $0.03 per share, primarily for certain costs at the Jackson, Alabama mill for the paper to containerboard conversion-related activities. Details of all special items for the third quarter of 2022 and 2021 were included in the schedules that accompanied the earnings press release.

Excluding the special items, the $0.14 per share increase in third quarter 2022 earnings compared to the third quarter of 2021 was driven primarily by higher price and mix in our Packaging segment of $1.60 and Paper segment, $0.23; lower interest expense, $0.04; a lower share count resulting from share repurchases $0.04; and the lower tax rate, $0.02. These items were partially offset by operating costs, which were $0.70 per share higher, primarily due to inflation-related increases in the areas of energy, repairs, materials and supplies, chemicals, labor and benefits expenses as well as several other indirect and fixed cost areas. We also had inflation-related increases in our converting costs, which were $0.04 per share higher.

The negative impact of lower volume was $0.52 per share in our Packaging segment and $0.05 in our Paper segment. Freight and logistics expenses were $0.20 above last year and scheduled outage expenses were $0.10 higher. We also had higher depreciation expense of $0.07 and other expenses of $0.04. The results were $0.03 above the third quarter guidance of $2.80 per share, primarily due to the very sound implementation processes around our previously announced price increases in the Packaging and Paper segments as well as the continued benefits generated from our mills and plants through process efficiency optimization efforts and material usage initiatives.

Looking at our Packaging business, EBITDA, excluding special items in the third quarter 2022 of $467 million with sales of $1.9 billion resulted in a margin of 24.1% versus last year’s EBITDA of $467 million with sales of $1.8 billion and a 25.5% margin. Our teams did a tremendous job of implementing our previously announced price increases. However, demand in our Packaging segment was well below our expectations for the quarter. Tom will discuss this further in a moment.

The containerboard mills operated in an efficient and cost-effective manner as we balanced our supply with current domestic and export demand. As part of the effort, we began the scheduled maintenance outage in the first phase of the Number 3 machine conversion to containerboard at our Jackson, Alabama mill, a few weeks earlier than originally planned. Total economic related downtime for the third quarter was approximately 128,000 tons. The outage and conversion work at Jackson will be completed in the fourth quarter, and we will remain committed to ramping up our internal capacity according to our customers’ demand requirements.

Finally, although we are still experiencing historically high inflation within our operating and converting costs, our mills and plants continued to remain focused on delivering numerous cost reduction initiatives, efficiency improvements and integration and optimization enhancements and capital benefit — capital project benefits that helped to minimize the impact.

I’ll now turn it over to Tom, who’ll provide more details on the containerboard sales and corrugated business.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Thank you, Mark. As Mark mentioned, we continue to get excellent realization from the implementation of our previously announced price increases across all product lines. Domestic containerboard and corrugated products prices and mix together were $1.54 per share above the third quarter of 2021 and up $0.35 per share compared to the second quarter of 2022.

Export containerboard prices and mix were up $0.06 per share compared to the third quarter of 2021 and up $0.01 per share compared to the second quarter of 2022. The lower demand in our Packaging segment that Mark spoke of was driven by several items. The combined impact of which resulted in our volumes being much lower than we anticipated. Corrugated product shipments were down 6% in total and per workday compared to last year’s third quarter.

Outside sales volume of containerboard was 57,000 tons below last year’s third quarter and 61,000 tons below the second quarter of 2022. The ongoing inventory correction in the retail channels is larger than originally thought and significant inflation continues to negatively impact consumers’ purchases of both durable and non-durable goods. In addition, various events and issues in 2021 and this year, including the recent hurricane in Florida, continue to have a negative effect on the agriculture and protein markets. Demand is beginning to experience headwinds from the cooler housing markets as well. These things, combined with rising global interest rates, deterioration in US economic conditions, economic weakness in China and Europe along with China’

As we look from the third quarter and into the fourth quarter, we expect the majority of these conditions to continue. And in addition, there are four less shipping days in the fourth quarter compared to the third quarter.

Now I’ll turn it back to Mark.

Mark W. Kowlzan — Chairman and Chief Executive Officer

Thank you, Tom. Looking at the Paper segment, EBITDA, excluding special items in the third quarter was $33 million, with sales of $165 million or a 20% margin compared to the third quarter of 2021 EBITDA of $18 million and sales of $150 million or a 12% margin. Prices and mix were up 21% from last year’s third quarter and moved 6% higher from the second and into the third quarter of 2022 as we continue to implement our previously announced price increases.

Sales volume was about 9% below last year’s third quarter, primarily due to this year’s scheduled outage at our International Falls mill as well as last year’s third quarter that included paper sales from the Jackson mill’s Number 1 machine. The outstanding efforts around implementing our latest price increase, together with optimizing the cost structure, inventory and product mix, delivered excellent margins in the paper business.

Now I’ll turn it over to Bob.

Robert P. Mundy — Executive Vice President and Chief Financial Officer

Thanks, Mark. Cash provided by operations and free cash flows set all-time quarterly records at $431 million and $251 million, respectively. The primary payments of cash during the quarter included capital expenditures of $180 million, common stock dividends totaled $117 million, $77 million for federal and state income tax payments, pension and other post-employment benefit contributions of $51 million and net interest payments of $4 million. In addition, we repurchased 1.032 million shares during the quarter at an average price of $137.60 per share for a total of $142 million. We ended the quarter with $794 million of cash, including marketable securities, and our liquidity on September 30 was $1.1 billion.

Lastly, our planned annual maintenance outage expense for the fourth quarter is now expected to be about $0.38 per share or $0.11 per share higher, moving from the third quarter to the fourth quarter.

I’ll now turn it back over to Mark.

Mark W. Kowlzan — Chairman and Chief Executive Officer

Thank you, Bob. Looking ahead, as we move from the third and into the fourth quarter, as Tom mentioned, we see most of the issues in economic conditions and higher global interest rates that impacted third quarter packaging segment demand continuing. Our box plants will have four less shipping days compared to the third quarter, and we also expect a seasonally less rich mix in corrugated products as well as lower average export containerboard prices. We will run our containerboard system based on this demand outlook, along with completing the Jackson mill scheduled annual maintenance outage in the first phase of the containerboard conversion work on the Number 3 machine.

In our Paper segment, we will continue to implement our previously announced $60 per ton price increase on all office, printing and converting grades that took effect on September 6. However, volume will be lower compared to the seasonally stronger third quarter. As Bob mentioned, scheduled annual outage expenses will be $0.11 per share higher than the third quarter. Lastly, we expect slightly higher operating costs, primarily labor and benefits expenses, along with anticipated colder weather resulting in higher energy costs. Considering all these items, we expect fourth quarter earnings of $2.22 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 constituted 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-K and subsequent quarterly reports on Form 10- Q filed with the SEC. The actual results could differ materially from those expressed in these forward-looking statements.

And with that, Matt, I’d like to open up the call for questions, please.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from George Staphos with Bank of America Securities. Please go ahead.

George Staphos — Bank of America Securities — Analyst

Hi. This is Sandy Liang on behalf of George Staphos. He had a small conflict. First, can you please discuss your early 4Q booking and billing trends? And to the extent that you can share, are customers continuing to destock in the supply chain? Thank you very much.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Sandy, this is Tom. So far, our bookings and billings are running about 5% below last year. The — you asked about stocking and some inventory issues. I will tell you that I think the good news is — well, first of all, we didn’t predict that it would last as long as it is in terms of this inventory issue.

There was obviously, coming out of the pandemic, retailers and other customers stocked up significantly to try to meet the record-breaking demand that they saw and wanted to maintain that. And of course, that demand is now weighing some. In addition, we find that they ordered excessive amount of boxes as well to meet that kind of demand. So we are going through this period right now of pretty severe inventory adjustment. That’s what we’re seeing primarily in these down volume numbers.

And that’s going to take a while to work through the system. We had thought that it was going to work through the system in about 30 or 60 days, but this looks like it’s going to be probably a couple of quarters to get through this completely.

George Staphos — Bank of America Securities — Analyst

Thank you.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Next question, please.

Operator

Our next question will come from Mark Weintraub with Seaport Research Partners. Please go ahead.

Mark Weintraub — Seaport Research Partners — Analyst

Thank you. Following up on the demand question. Could you ballpark — and I realized this is just judgment, but yours is certainly going to be as good or better than anybody else’s. How much that inventory destock might have contributed to the down 6%, realizing there are other factors you highlighted as well?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Mark, this is Tom again. It’s significant. There’s no question about it. And it’s the primary number. It’s quite interesting that just, as of yesterday, as a matter of fact, I mean, we had a fairly large customer at one of our plants, who sent an e-mail in and said, “I have finally run down my excessive inventory. I’m now ready to order again.”

So we probably lost in a lot of cases, one or two of the typical order cycles that some of these customers would go through as they went through this destocking of inventory.

Mark Weintraub — Seaport Research Partners — Analyst

And then you mentioned you thought, whereas originally 30 to 60 days, maybe it’s going to be a couple of quarters. So is that your best — is it right to interpret that as meaning — we had it in the third quarter, and you’re hopeful that will be done with it through the fourth quarter? Or might it go beyond there? And do you anticipate it’s going to be continuing at high level as what we saw in certainly the latter part of the third quarter?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Well, obviously, I can’t predict the future. But I can tell you that I believe that when you look at our fourth quarter, as I mentioned, there are a lot of other factors going into the fourth quarter, including this destocking. So if you look at those numbers and you think about those, you would see that the trend is probably we’ll begin to work our way out of this inventory issue. But we’ve got some other headwinds as well, as I mentioned, especially like the ag business in the South that was impacted by the hurricane.

And that — those crops are either going to be delayed or, in some cases, lost completely. So we — the only — I’ve never experienced this, to be honest with you, in my entire career. So this severity of this building the inventories, the lead times, the box plants got to and the — and kind of in some cases, almost a panic bio boxes because they couldn’t ship their products without it, obviously. So it’s just going to take a little while to work through this.

I looked back at the Great Recession, and it was kind of interesting there because in the Great Recession, it took a couple of quarters for the cycle to finally turn and the business to really turn up. Beginning, it still wasn’t equal to the previous year, it took a few more quarters.

But it — the first two quarters were the big jumps. So that’s the only thing I’ve really got it to compare to. And — so I think when you think about how many boxes somebody can store or how much product they can have and get rid of, I would think that through this Christmas season, you’ll see a lot of destocking take place.

Mark Weintraub — Seaport Research Partners — Analyst

I appreciate the color.

Operator

Our next question will come from Adam Josephson with KeyBanc Capital Markets. Please go ahead.

Adam Josephson — KeyBanc Capital Markets — Analyst

Thanks so much everyone. Hope you are well. Tom, just one more question about that. The — are you seeing it at the retail level at your customer — to your point, I just — I wouldn’t think that your customers could store — would have room to store as many boxes. So I’m just a little perplexed as to where exactly that destocking is taking place and how much longer it could last for?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Well, let me get specific on that, Adam. I mean what we’re talking about destocking is we’re talking about customers that built their own inventories of their own products to hopefully continue to meet a demand curve that was quite steep and quite good for them.

And all of a sudden, when that demand leveled out, they’re sitting on a lot of their own inventory. That, coupled with the lead times that got out in boxes, they had to store more boxes as a result of those lead times. And those lead times have now come back down to a more normal level. So just by coming back down to a normal level, you can miss a whole order cycle.

Adam Josephson — KeyBanc Capital Markets — Analyst

Got it. Alright. But even though they’ve come back to normal lead times, they’re still sitting on — it seems like much too much inventory for current demand level?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Yes, in some cases, yes. I just told you about a big — a large customer at one of our plants that is now ordering again. But they didn’t order. We — I’ll give you another example, a very large account of ours through midyear was up about a little over 3%. And suddenly the next month, it was down 50%.

Now this isn’t lost business. This isn’t anything other than just they’ve got — they have excessive inventory that they’re going to have to work off for a while. So we got to get through this cycle.

Adam Josephson — KeyBanc Capital Markets — Analyst

Yes. No, I appreciate that. Bob, just on the guidance, can you just walk me through the implied sequential change, the $0.60 decline. I believe you said maintenance is going to be $0.11 higher sequentially. So that leaves another, call it, $0.50.

Can you help me with how much is inflation? How much is lower containerboard export? How much is the Jackson conversion work, et cetera? And then within that, Bob, how much would you consider essentially onetime items, for instance, elevated maintenance relative to normal, et cetera? If you catch my drift.

Robert P. Mundy — Executive Vice President and Chief Financial Officer

Yes, Adam. I’ll say, as Mark mentioned in his comments, we expect to run our containerboard system similar to — with the same types of issues we had in the third. So when you consider that, I’d say about half of that sequential movement will end up in the volume side of — so — and then the balance of that, the items that are probably higher versus what we would normally see going from the third quarter to fourth quarter, really a couple of buckets, primarily energy for obvious reasons and labor and benefits, again, for some obvious reasons as that continues to just increase with the situation with the labor force.

I’d say one other item that might be a little bit different as well is on the freight side. We certainly are seeing some improvement in the freight world right now. But when you’re matching supply with demand, you’re not always able to optimize your routes and you may be shipping things more on one mode versus the other than normal or for longer distances. So that is a reason that, that — we expect that to be up a bit going from 3Q to 4Q.

Adam Josephson — KeyBanc Capital Markets — Analyst

Yes, I appreciate that. And Mark, just on the buyback, correct me if I’m wrong, but I think the average price of one 37 was comparable to what you did in 4Q of last year. Were you doing that as demand — like before or after demand did what it did. And I’m just wondering your thoughts about where the stock is now versus what you’ve been paying for buybacks in recent quarters in light of the recent demand weakness and otherwise.

Mark W. Kowlzan — Chairman and Chief Executive Officer

As we went through the third quarter, we saw an opportunity, based on where the stock price was at the time, that it was a good value for us to buy back. And we look at it as a conviction opportunity that we see the value there. We have the cash and took advantage of it. It is historically in line with what we did last year at the same time in the fourth quarter. And long term, I think, under the circumstances, we will continue to take advantage and be opportunistic in the same manner.

Adam Josephson — KeyBanc Capital Markets — Analyst

Just one last one on that, Mark. If you were to compare potential acquisitions to further buybacks, is there one at this juncture that’s looking more attractive to you than the other or not necessarily?

Mark W. Kowlzan — Chairman and Chief Executive Officer

Not necessarily. Again, I think, again, we see value in terms of the stock buyback during the third quarter. And so you would have to imagine where the stock is. Today, we have that same type of conviction. And so we’ll update you on the January earnings call on what we actually did.

But I think you have to understand, if we do hit the $2.22 number that we’re guiding to, we’re going to have an $11 earnings year. And so it’s going to be a record year for us once again. And so again, I’m going to use the term conviction. We strongly believe that there is a much higher value in the — embedded in the stock valuation.

Adam Josephson — KeyBanc Capital Markets — Analyst

Thank you. Next question please.

Operator

Our next question will come from Philip Ng with Jefferies. Please go ahead.

Philip Ng — Jefferies — Analyst

Hey, Mark, Tom, Bob, this is John, getting on for Phil. I appreciate the color. I want to start off with your own inventory levels. I mean it ticked up sequentially ahead of the J3 outage as you were planning. But obviously, the demand outlook has worsened quite a bit. Can you just give us some color on how you’re viewing your own internal inventory levels on the containerboard side? And is there any economic downtime baked into your guidance?

Mark W. Kowlzan — Chairman and Chief Executive Officer

When we went into the third quarter, we — historically, the third quarter is always a robust quarter. People are getting ready for holiday activity. And so you also come out of the second quarter, which is traditionally a bigger annual outage quarter when you’ve taken mills down and you run your inventory down to the lower side. So you always try to start building back up during that July, August period, which is what we did.

Obviously, the demand did not materialize. So we course-corrected and ran to demand. And so we will continue to do this. I think as far as inventory targets, we don’t have a specific target. As such we’re looking at what Tom is understanding of what the market is doing on his side of the business and what we would imagine we would need to supply that and we will continue to run our mills in that regard to meet the demand. We’ve got a lot of flexibility. We will be finishing up the Jackson work sometime in November. And then we will, again, using the term, run to our demand.

Philip Ng — Jefferies — Analyst

Understood. I guess, leading up this quarter, you had talked about being still pretty tight on the inventories. Obviously, there’s a course correction. I’m sure the it’s a little bit of a moving target in terms of the inventory levels. But I guess my takeaway is that you’re feeling comfortable with your inventory levels now, there isn’t some big destock that you feel like you have to do yourself with the pullback on the demand side?

Mark W. Kowlzan — Chairman and Chief Executive Officer

We’re in a good place. And again, we’re at a place now we can move the tons in inventories where we see we need to move them. So we’re in a healthy place.

Philip Ng — Jefferies — Analyst

Great. Okay. And then just shifting over to the paper side. My expectation, I thought from last quarter was that paper volumes would be about flat sequentially in the third quarter. Obviously, it came in much higher, seasonally stronger quarter. Was there anything that kind of stood out on the paper side for drivers that we should expect maybe going forward?

Mark W. Kowlzan — Chairman and Chief Executive Officer

No, I just — again, it was a good quarter for us. We’ve also rightsized the business. We’ve got International Falls running in a manner now in terms of its split between cut size and offset converting type grades. And so we’re in a good place there. We worked off the final inventory from the Jackson production that was produced last year. So — we see the market is in a balanced place right now, and we’re capable of supplying the nationwide demand we have.

Philip Ng — Jefferies — Analyst

Excellent. Thank you for the color, and I’ll turn it over.

Mark W. Kowlzan — Chairman and Chief Executive Officer

Next question please.

Operator

[Operator Instructions] Our next question will come from Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari — Citi — Analyst

Hi, good morning. We’ve seen a big step down in OCC over the last couple of months. And understanding you have more kind of a [Indecipherable] leverage system, I think you’ve made some investments in recent years to add flexibility there. I’m just wondering if you can remind us how much OCC you can consume? How much you can swing into potentially to take advantage of some of these low costs? Any thoughts there?

Mark W. Kowlzan — Chairman and Chief Executive Officer

I think the best way to look at it is on a percentage basis. So if you think about the total capacity of our mill system, we’d still be around that 20% — low 20% capability of fibering up our mills. And so it’s whether at a point in time with pricing, you’re running 15% recycle to the system or taking advantage of opportunities on price and availability and ramping it up into the lower 20% recycle. I think that’s how we look at it, and that’s the kind of capability we have.

Anthony Pettinari — Citi — Analyst

Alright. That’s very helpful. And then there are some competitor capacity projects that maybe will come online by the end of the year or early next year. I think some of those have explicitly targeted the independent box market.

You have a very high integration rate. I guess to the extent that you can, are you seeing any of that new capacity in the market or entering discussions? Or does your integration rate kind of insulate you from that? Just any thoughts about some of these new projects and impact on the market that you’re seeing it or not?

Mark W. Kowlzan — Chairman and Chief Executive Officer

I want to let Tom comment on that.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Anthony, number one is you summarized it correctly based on our integration level. That’s been a target of ours, a very high integration level. That’s where we come from. What — and we’ve said many, many times, what other people decide to do and the investments they decide to make, that’s strictly up to them.

And we’ve talked about what we see the independent market being — or the “open market” and what’s happened to acquisitions over the last decade or more. That market has changed quite dramatically in terms of size. So I would just say that it’s really — it’s — we’re a little bit ambivalent to what others decide to do.

Anthony Pettinari — Citi — Analyst

Okay. That’s helpful. I’ll turn it over.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Thank you. Next question?

Operator

Our next question is a follow-up from Adam Josephson with KeyBanc Capital Markets. Please go ahead.

Adam Josephson — KeyBanc Capital Markets — Analyst

Thanks so much everyone. Tom, just one more thought, which is in 3Q, shipments were down six and you’re talking about — excuse me, yes, in 4Q you’re talking about bookings and billings down about five. Can you just remind me how that compare to 2019 levels?

And what you think a reasonable expectation for demand is at this juncture relative to ’19 levels? There have been obviously so many distortions at the onset of the pandemic and thereafter. I’m just wondering how you’re thinking about that issue.

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Yes. Well, Adam, we’ll still be quite a bit above 2019 levels. So in spite of this, and I think that a big portion of this is, as I said, inventory restocking. So I haven’t changed — I really haven’t changed my viewpoint even from the last call we had in terms of that we will retain quite a bit of the gains that took place during the pandemic going forward. This isn’t a severe demand destruction or anything like that. Obviously, inflation is taking some toll. But this is more of a couple of quarter phenomenon, I think, regarding these excessive inventories.

Adam Josephson — KeyBanc Capital Markets — Analyst

And what gives you confidence in that, that you would hold some of the volume you gained post-2019? Just again, given that there was this extraordinary surge with all the government stimulus, you name it, and now we’re seeing the other side of that. So I guess, what would give you confidence that you would hold those post-2019 gains, if you will?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Well, a couple of things. No different from you having a discussion with me about my viewpoints, I have the same discussions with our customers about their business and about what they project going forward. And based on their forecast and what they see and what they expect to be doing in their business, the capital investments they’re making in their businesses, et cetera, I have a high degree of confidence.

The other thing that gives me some confidence is regarding the consumer themselves. Consumer spending and the consumer relative to savings and other things like that has held up pretty well in spite of this big step-up in inflation. So I think some of these things, some of these phenomena we’re dealing with here in the short term are going to wane, and it’s going to be relatively positive going forward.

Adam Josephson — KeyBanc Capital Markets — Analyst

I appreciate it. And just one — I think you mentioned that the impact that COVID lockdowns are having — COVID lockdowns in China, excuse me, you’re having on domestic demand. Can you just talk about — just give your perspective as to the impact on the US economy from what’s happening in China?

Thomas A. Hassfurther — Executive Vice President, Corrugated Products

Well, interestingly enough, we set the all-time record for onshoring of manufacturing just in the last quarter in the US It’s not talked about very much, and it’s a little subtle, but it’s certainly very impactful for our business. And I think that will continue to be the case.

I can tell you the supply chains are still a big problem. It’s been — it continues to be a problem for our customers who rely on certain parts or chips or whatever the case might be coming from China and the continuous disruption of that supply. That’s beginning to really drive more onshoring, not only here in the United States, but in Mexico and other related countries that border the US, which will be much more beneficial going forward for our box business.

Adam Josephson — KeyBanc Capital Markets — Analyst

Thanks so much Tom.

Operator

[Operator Instructions] Our next question will come from Mark Weintraub with Seaport Research Partners. Please go ahead.

Mark Weintraub — Seaport Research Partners — Analyst

First, just a clarification. You had mentioned that outages, I think, were going to be about $0.11 higher than you had previously anticipated in the fourth quarter. Did I hear that right? What is that number kind of on a per share basis expected to be in the fourth quarter versus the third quarter?

Robert P. Mundy — Executive Vice President and Chief Financial Officer

In the fourth quarter — I followed your question, it’s $0.11. Mark, it’s $0.11 going from the third quarter to the fourth quarter.

Mark Weintraub — Seaport Research Partners — Analyst

Got it. So it was like $0.26 or so in the third quarter going to $0.37. Is that…

Robert P. Mundy — Executive Vice President and Chief Financial Officer

It was yes — it was like 20 — yes, $0.26, $0.27. Yes.

Mark Weintraub — Seaport Research Partners — Analyst

Alright. Very good. And then the other question I have is with the Jackson project. I mean one of the things it was also going to do was reduce your costs meaningfully. And hopefully, under a certain environment that would show up in 2023.

Is that dependent on demand getting back to strong levels? Or are there ways you can run your system that, that benefit is going to show up regardless, do you think? Or again, is it that it will show up, but we’ll have to wait until the demand is back to stronger levels?

Mark W. Kowlzan — Chairman and Chief Executive Officer

Yes. You just answered your own question. When you run the mill, the way it’s designed and the way we’re finishing up the work that we’re doing, it will be a low-cost operation for us. And so we’ve built that capability into it, and we’ll be able to take advantage of it. But as we stand by the position that we will run the entire system to demand. And that means rationalizing from a nationwide point of view where we need the tones to come from.

Mark Weintraub — Seaport Research Partners — Analyst

Alright. So basically — for full benefit, obviously, you need demand to get stronger? That’s the right conclusion?

Mark W. Kowlzan — Chairman and Chief Executive Officer

Yes.

Mark Weintraub — Seaport Research Partners — Analyst

Okay, thank you.

Operator

Mr. Kowlzan, I see there are no more questions. Do you have any closing comments?

Mark W. Kowlzan — Chairman and Chief Executive Officer

Yes. Thank you for joining us on the call today, and we look forward to talking with you in January for the full year, fourth quarter earnings event. Take care. Have a good holiday.

Operator

[Operator Closing Remarks]

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