How Wallula Mill Shutdown and Cost Cuts At Packaging Corporation of America (PKG) Has Changed Its Investment Story

• Packaging Corporation of America has announced it will permanently shut down the No. 2 paper machine and kraft pulping facilities at its Wallula, Washington mill, cutting annual containerboard capacity there by 250,000 tons while investing in the remaining recycled-based operations and incurring an estimated US$205 million in restructuring charges spread across late 2025 and early 2026.
• At the same time, the company plans to lower Wallula’s production costs by about US$125 per ton from 2025 levels and maintain a US$1.25 quarterly dividend, signaling an effort to balance near-term restructuring with long-term efficiency and capital returns.
• We’ll now examine how the Wallula mill capacity cut and expected US$125 per ton cost reduction may reshape Packaging Corporation’s investment narrative.

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Packaging Corporation of America Investment Narrative Recap

To own Packaging Corporation of America, you need to believe it can convert a mature, cost-heavy containerboard business into a more efficient, higher quality cash generator. The Wallula shutdown and cost reset look meaningful for tackling margin pressure in the near term, but they also highlight the key risk right now: how well PCA can manage capacity, costs and demand swings without letting earnings become more volatile than investors are comfortable with.

The company’s decision to keep its US$1.25 quarterly dividend unchanged alongside the Wallula restructuring charges underlines how important ongoing cash returns are to the investment story. For many shareholders, the near term catalyst is whether PCA can hold that dividend while absorbing roughly US$205,000,000 of largely non cash charges and still deliver the expected benefits from its broader efficiency and capital investment program.

Yet investors should also be aware that cost savings at Wallula will not fully insulate PCA from...

Read the full narrative on Packaging Corporation of America (it's free!)

Packaging Corporation of America’s narrative projects $9.5 billion revenue and $1.1 billion earnings by 2028. This requires 3.2% yearly revenue growth and about a $201.6 million earnings increase from $898.4 million today.

Uncover how Packaging Corporation of America's forecasts yield a $224.70 fair value, a 11% upside to its current price.

Exploring Other Perspectives

Four fair value estimates from the Simply Wall St Community span roughly US$185 to US$398 per share, showing how far apart individual views can be. When you set those opinions against PCA’s ongoing exposure to fluctuating paper volumes and containerboard demand, it becomes even more important to compare several perspectives before deciding how this stock might fit in your portfolio.

Explore 4 other fair value estimates on Packaging Corporation of America - why the stock might be worth 9% less than the current price!

Build Your Own Packaging Corporation of America Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Packaging Corporation of America research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Packaging Corporation of America research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Packaging Corporation of America's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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