The higher revenue resulted from a 15.6% gain from higher prices for its linerboard and corrugating medium, and corrugated boxes, and also a 1.7% increase in volume, according to the company.
The firm also reported "relatively stable input costs."
The unit's sales increased 17.3% and gross profit increased 36.7% to $53.3 million for the company's fiscal fourth quarter, when compared with the year-ago quarter.
Greif's paper packaging unit's 21.3% profit margin was based on EBITDA to sales, a company official said.
While Greif is the sixth largest containerboard producer in North America with 708,000 tons/yr of capacity, the No. 1 and No. 4 ranked companies, International Paper and Packaging Corp of America, respectively, have been generating 20%+ margins as well.
One-fifth share of total sales.Greif's packaging paper unit generated 20% of the firm's total sales in the quarter, which were $1.12 billion, up 4.7%. The company's total operating profit was $95.0 million vs $64.1 million for fourth quarter 2012. The $30.9 million increase included a $14.5 million increase in paper packaging profit, the company said.
In a call with analysts on Dec. 12, Greif CEO David Fischer gave guidance that the paper/packaging unit's performance in the coming 12 months would be near where it was in the last fiscal year.
He cited concerns about one million tons of new containerboard capacity in North America and a potential impact on old corrugated container (OCC) pricing.
"Part of the challenge is that the one million tons of new capacity" is in the Northeast predominantly [where two machines started up in April and July this year]. And that's in our basket of OCC and fiber," Fischer said, based on a Seeking Alpha transcript of the firm's earnings call.
"We're uncertain as to the impact that would have as that new capacity comes on relative to the growth of the overall market and how that's absorbed," he said. "It's hard to say what OCC is going to do next year ... and the impact of these new competitors coming in."
Fischer added: "While market demand may be more challenging in fiscal 2014, our current sales activities remain very strong. We have additional opportunities identified to increase our integration levels based upon our business strategy."
Riverville to reach 555,000 tons.Fischer said that work was underway on installing a shoe press and doing other work to the firm's semichemical medium machine at the Riverville Mill in Amherst, VA. The shoe press is being installed on the 300,000 tons/yr PM 1. The project work will increase capacity at the 500,000 tons/yr mill by 55,000 tons and 11% to 555,000 tons/yr, according to Fischer.
The $45 million project is to be completed by the summer of 2015 -- and is to reduce the mill's energy cost by 10%, resulting in a $3/ton production cost reduction, Fischer said.
"Despite our small scale vs industry leaders, these activities, coupled with our product and service differentiation achieved by CorrChoice [the firm's corrugated box business], place Greif in a unique and strong competitive position to serve our independent customers," Fischer said.
Green Bay Packagingacquired 8,973 acres of timberland in central Arkansas fromWeyerhaeuserfor $13.5 million or about $1,504/acre, according to a local press report. The company in 2011 acquired 8,835 acres in the same area from Weyerhaeuser for $14.2 million or $1,607/acre. The timberlands support Green Bay Packaging's linerboard and corrugating medium mill in Morrilton, AR,Arkansas Business reported. The two-machine, integrated 450,000 tons/yr Morrilton mill produces mostly linerboard with 60% of furnish from unbleached kraft pulp, according to RISI Mill Intelligence. Also, Green Bay Packaging has been looking to sell 19,000 acres of timberland in Oklahoma, according to RISI'sTimberland Markets Report.
A fire was put out on Dec. 11 in the dryer section on a machine atRand-WhitneyContainerboard mill in Montville, CT, Day Publishing in Connecticut reported this week. The fire occurred while the mill was on a maintenance shut, contacts said. Two employees who helped put out the fire received hospital treatment.