PKG Q3 2025: Greif Acquisition Boosts Sales, Weighs on Net Income

Packaging Corporation of America (PKG), a major player in North America's containerboard and paper markets, recently filed its third-quarter 2025 financial report. The big story is the company's massive $1.8 billion acquisition of Greif's containerboard business, a move that is already reshaping its financial landscape. Let's dive into the numbers from the latest 10-Q filing to see how the company is performing during this pivotal period.

Acquisition Drives Sales, but Integration Costs Weigh on Profit

At first glance, the top line looks strong. PKG's net sales for the quarter climbed 6% to $2.31 billion, up from $2.18 billion in the same period last year. However, the bottom line tells a different story. Net income fell to $227 million ($2.51 per share), a decrease from last year's $238 million ($2.64 per share).

So, what's causing this divergence? The Greif acquisition, which closed on September 2, 2025, is the primary factor. The newly acquired mills and plants are contributing to higher sales volume. But acquisitions of this scale come with significant upfront costs. In its first month, the Greif business incurred expenses related to integration, depreciation, and interest from the new debt taken on to finance the deal.

The company identified these as "special items." Excluding these one-time costs, PKG's adjusted earnings per share actually rose to $2.73, compared to $2.65 a year ago. This suggests the core business remains healthy, but the short-term financial picture is clouded by the integration process.

The following flow diagram provides a clear visual breakdown of PKG's revenue sources and how they flow through various costs to arrive at the final net income for the third quarter.

A Closer Look at the Business Segments

PKG operates through two main divisions: Packaging and Paper.

• Packaging: This segment, which includes products like linerboard and corrugated boxes used for shipping everything from food to manufactured goods, is the company's engine. Sales in this division grew nearly 6% to $2.13 billion. Interestingly, while the Greif acquisition boosted overall shipment volumes, the company noted that shipments from its legacy business were down slightly, pointing to what it calls "cautious ordering patterns from customers." This could be an early indicator of broader economic softness.

• Paper: This segment produces uncoated free sheet (UFS) papers, like office and printing paper. Sales were flat at $161 million, but operating income declined. This division continues to navigate the long-term trend of declining demand for print media as the world becomes more digital.

Balance Sheet and Future Outlook

To fund the Greif acquisition, PKG took on significant debt. Its long-term debt has increased by roughly $1.5 billion since the end of 2024, now standing at nearly $4.0 billion. Managing this increased leverage will be a key focus for the company moving forward.

Looking ahead to the final quarter of 2025, PKG anticipates lower earnings. The company cited fewer shipping days, planned maintenance outages at its mills, and a seasonally less profitable product mix as headwinds. However, management expects the operational performance of the newly acquired Greif assets to improve as they become more integrated into PKG's system.

In conclusion, Packaging Corporation of America is in the midst of a major strategic transformation. The Greif acquisition significantly expands its footprint in the packaging industry but also introduces short-term profitability pressures and higher debt. The key challenge ahead will be to smoothly integrate these new assets and realize cost synergies, all while navigating a potentially softening market for its core products.