Earnings Call Transcript
PACKAGING CORP OF AMERICA (PKG)
Earnings Call Transcript - PKG Q4 2025
Operator, Operator
Thank you for joining Packaging Corporation of America's Fourth Quarter and Full Year 2025 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 call over to Mr. Kowlzan. Please proceed when you are ready.
Mark Kowlzan, CEO
Thanks for the introduction, Jamie. Good morning, everyone, and thank you all for joining us today and participating in Packaging Corporation of America's Fourth Quarter 2025 Earnings Release Conference Call. Again, I'm Mark Kowlzan, Chairman and CEO of PCA. And with me on the call today is Tom Hassfurther, our President; and Kent Pflederer, our Chief Financial Officer. I'll begin the call with an overview of our fourth quarter results, and then I'll be turning the call over to Tom and Kent, who will be providing more details. After that, I'll wrap things up, and then we’ll be glad to take questions. Yesterday, we reported fourth quarter net income of $102 million or $1.13 per share. Excluding the special items, fourth quarter 2025 net income was $209 million or $2.32 per share compared to the fourth quarter of 2024's net income of $222 million or $2.47 per share. Fourth quarter net sales were $2.4 billion in 2025 and $2.1 billion in 2024. Total company EBITDA for the fourth quarter, excluding special items, was $486 million in 2025 and $439 million in 2024. Excluding special items, we also reported full year 2025 earnings of $888 million or $9.84 per share compared to 2024's earnings of $815 million or $9.04 per share. Net sales were $9 billion in 2025 and $8.4 billion in 2024. Excluding special items, total company EBITDA in 2025 was $1.86 billion and $1.64 billion in 2024. Fourth quarter net income included special items expense of $1.19 per share, primarily for the Wallula Mill restructuring charges as well as costs relating to the acquisition and integration of the Greif containerboard business and costs related to the closure of corrugated products facilities. Details of these special items for both the fourth quarter and full year of 2025 and 2024 were included in the schedules that accompanied the earnings press release. Excluding the special items, our earnings decreased by $0.15 per share compared to the fourth quarter of 2024. The decrease was driven primarily by lower production and sales volume in the legacy PCA business for $0.23; higher operating costs, $0.23; higher maintenance outage expense, $0.14; higher depreciation expense in the legacy PCA packaging business for $0.07; higher freight expense, $0.06; higher interest expense, excluding the Greif acquisition debt for $0.01; and lower production and sales volume in the Paper segment for $0.01. These items were partially offset by higher prices and mix in the Packaging segment for $0.50; lower fiber costs, $0.10; lower fixed and other expenses, $0.04; and higher prices and mix in the Paper segment, $0.01. The acquired Greif operations, including interest on the acquisition indebtedness, generated a loss of $0.05 during the fourth quarter, primarily as a result of extended outages at the Massillon Mill in October and December to perform reliability maintenance activities and manage our inventory at the acquired operations. Looking at our Packaging business, EBITDA, excluding special items in the fourth quarter 2025 of $476 million with sales of $2.2 billion resulted in a margin of 21.7% versus last year's EBITDA of $426 million, sales of $2 billion or a 21.5% margin. For the full year 2025, Packaging segment EBITDA, excluding special items, was $1.83 billion with sales of $8.3 billion or a 22.1% margin compared to the full year 2024 EBITDA of $1.6 billion with sales of $7.7 billion or a 20.8% margin. We ran to demand during the quarter and with the planned DeRidder maintenance outage and a full quarter of ownership of the acquired Greif operations, we produced 1,407,000 tons of containerboard. The legacy mills produced 1,235,000 tons of containerboard 20,000 tons less than the third quarter and 75,000 tons less than the fourth quarter of 2024. System-wide, our inventories were at the same level as at the end of the third quarter, and with the acquired Greif operations, 84,000 tons up from the beginning of the year. Operational performance during the quarter was again strong across the entire mill system and corrugated system, and we managed costs extremely well throughout the company. We made good progress on the integration and improvement of the acquired Greif assets with better reliability and performance at both mills and completion of key systems integration activities. We do not expect to take any additional outages at the mills until their annual maintenance outages later in the year, and we will operate the business at capacity. We're on track to complete the Wallula restructuring activities by mid-February, and we will begin to benefit from the improved cost structure beginning in March. I'd like to give an update on the gas turbine energy projects that we're currently working on in the engineering phase. The plan includes the installation of gas turbines at the Jackson, Alabama mill and the Riverville, Virginia mills over the next 30 months. These locations have relatively high purchased power costs and good reliable gas supply, as well as demand for the additional power that we can internally generate. We expect that these projects would involve roughly $250 million of total capital, some to be spent in 2026, but most of it coming in 2027 and 2028. The expected returns are in the mid- to high teens, and most importantly, it would make us energy electricity independent at these facilities and protect us from future rising electric rates. We're finalizing the scope and will seek Board approval during the first quarter. We're also working on plans for a third installation at one of our mills, and we'll provide more details at the appropriate time. We have a lot of good options, and we're considering all of these. I'm now going to turn it over to Tom, who will provide more details on containerboard sales and the corrugated business.
Thomas Hassfurther, President
Thanks, Mark. Domestic containerboard and corrugated products prices and mix were $0.50 per share above the fourth quarter of 2024 and down $0.32 per share compared to the third quarter of 2025. This is mix related as our fourth quarter is seasonally less rich, incorporating more holiday-driven e-comm. Export containerboard prices were flat with last year's fourth quarter and down $0.01 from the third quarter of 2025. Export sales volume of containerboard was up 12,000 tons from the third quarter of 2025 and down 15,000 tons from the fourth quarter of 2024. In the legacy business, corrugated shipments per day and in total were down 1.7% versus last year's record fourth quarter when per day shipments were up more than 9% over 2023. That said, 2025 fourth quarter legacy box plant shipments were the second highest ever. For the year, our corrugated shipments were essentially flat with 2024. Our order book strengthened in November and December, and though we were ultimately disappointed with December shipment volume, we've seen this strength reflected in January shipments so far. While our corrugated volume and mix ended up below our fourth quarter forecast, the underlying volume trends were positive heading into 2026. To provide a little more color, December got off to a strong start, leading us to believe that we would grow our volume over last year. Later in the month, customers appeared to manage their already low inventories further down for year-end. The exception was e-commerce, which continued to remain strong well into the first week of January. In addition to the volume implications, this unfavorably impacted our December mix. The good news is that January is up significantly in terms of bookings and billings from a strong comp in 2025, where we were up 5% over 2024. January bookings in our legacy corrugated and sheet plants are up over 11% and billings are up 8% on a per day basis through last Thursday. We are seeing improvement across our customer base, which is a good sign for healthier underlying demand. Based on what we've seen so far, we are forecasting solid year-over-year growth for the first quarter and seasonal improvement in our mix. Our containerboard system is tightening up, and we will need to run at full capacity to support our demand. Including the acquisition, shipments were up 17% over last year for the fourth quarter and 6% for the year. The acquired plants had a very good quarter, outperforming our expectations and are also off to a strong start to the year. We made good progress on integration and are working toward operating as a single corrugated system as soon as we can with systems integration work ongoing. We still have work to do to optimize the inventory levels and paper grades carried by the acquired plants. We are working off the remaining containerboard purchase and trade commitments and ended the quarter at approximately the same inventory levels that we began, which is higher than what we had forecast. We had planned to bring the inventory levels down significantly while simplifying the grades carried at the plants and leveraging the larger integrated system. This will take place over the next two quarters, and better day-to-day visibility once our systems are in place will certainly help us. Last week, as you know, we notified our customers of a $70 per ton price increase on our linerboard and corrugated medium grades effective March 1. We will work as we normally do to implement the full price increase. I'll now turn it back to Mark.
Mark Kowlzan, CEO
Thanks, Tom. Looking at the Paper segment, EBITDA, excluding special items in the fourth quarter was $37 million with sales of $154 million or 24.2% margin compared to the fourth quarter 2024 EBITDA of $39 million and sales of $151 million or a 25.9% margin. Sales volume was 1% above the fourth quarter of 2024 and 4% below the third quarter of 2025. Prices and mix were up 1% from the fourth quarter of 2024 and down less than 1% from the third quarter of 2025. Performance exceeded our expectation on higher sales volume and strong underlying operating performance at the International Falls mill. For the full year, Paper segment EBITDA was $148 million with $615 million of sales for a 24.1% margin. 2024's EBITDA was $154 million on sales of $625 million for a 24.6% margin. I'll now turn it over to Kent.
Kent Pflederer, CFO
Thanks, Mark. Cash generated from operations reached a record $443 million in the fourth quarter. After accounting for $319 million in capital expenditures, we had a free cash flow of $124 million. Other significant cash outflows for the quarter included $153 million for share repurchases, $112 million in dividend payments, $53 million in net interest payments, and $15 million in cash tax payments. We bought back 760,000 shares at an average price of $201.03 during the quarter, and we still have about $283 million of repurchase authority remaining. For the full year of 2025, cash from operations totaled $1.55 billion, capital spending amounted to $829 million, and free cash flow was $725 million. Our cash on hand at year-end, including marketable securities, was $668 million, giving us liquidity of approximately $1.25 billion. The effective tax rate for 2025 was finalized at 24.7%. For our projections for the upcoming year, we expect dividend payments to be around $450 million, total capital expenditures between $840 million and $870 million, and depreciation, depletion, and amortization to be about $700 million. Interest expense for 2026 is anticipated to be around $139 million, with net cash interest payments estimated at about $147 million. We project the 2026 effective tax rate to be 25%. We also have planned annual outages at all our mills in 2026, which will involve a higher number of outage days and tons compared to 2025. Considering lost volume, direct costs, and amortized repair costs, we expect the outages to impact earnings by approximately $1.39 per share. The anticipated impact per quarter for the year is $0.16 in the first quarter, $0.35 in the second, $0.24 in the third, and $0.63 in the fourth. I'll now turn it back over to Mark.
Mark Kowlzan, CEO
Thanks, Kent. Our employees put in a tremendous effort and delivered outstanding results for PCA during 2025 when business conditions were challenging at various times. We completed the acquisition of the Greif business and achieved significant progress on integration and improving the operations. We successfully started up our Glendale, Arizona plant and completed numerous capital and operational projects to improve our capabilities and efficiency in our corrugated business and continue to serve and profitably grow with our customers. Our Paper business continued to deliver outstanding results through its commitment to customer service and manufacturing excellence. As a company, we still have many key strategic capital opportunities in progress or ahead for the 2026 year and beyond. Our balance sheet remains high quality. We have flexibility to continue to take advantage of internal or external investment opportunities that generate shareholder value. We continue our time-tested and balanced approach towards capital allocation, investing in our business to profitably grow our earnings and cash flows and returning value to shareholders through dividends and buybacks. We accomplished a lot in 2025 and are positioned to accomplish even more this year. Looking ahead, as we move from the fourth and into the first quarter, as Tom mentioned, we see demand improving and expect year-over-year growth in corrugated volume in our legacy box plants and strong shipment volume from the acquired plants. First quarter volume is seasonally lower than the fourth quarter. And even with one more shipping day, overall volume is expected to be slightly lower than the fourth quarter. We'll now be running our mills full, but production will be lower than the fourth quarter with two fewer operating days, slightly more outage tons and Wallula running in its new reconfigured state. We expect slightly lower inventory levels at the quarter end. Price and mix will seasonally improve, and we expect to see some benefits from our containerboard price increase in March. Export containerboard sales will be slightly higher than the fourth quarter, and prices should be flat to slightly down. Paper volumes will be lower with two fewer operating days, and price/mix is expected to be slightly lower and will begin to improve in March with our recently announced uncoated freesheet price increase. With the exception of fiber prices, we expect price inflation across most of our direct, indirect and fixed operating and converting costs. In addition, wood, energy and chemical costs will also increase due to winter conditions that impact usages and yields for these items. Our cost structure will begin to benefit from the Wallula reconfiguration during the month of March. Labor and benefits costs will be higher due to the normal timing-related items that occur at the beginning of the new year for annual increases, the restart of payroll taxes and share-based compensation expenses. Freight will be slightly higher, and we expect slightly lower depreciation expense. Lastly, scheduled outage expenses will be lower, and we assume a lower corporate tax rate. Considering these items, we expect first quarter earnings of $2.20 per share, excluding special items. We are, in fact, assessing last weekend's winter storm across multiple regions, which caused some of our plants to be down earlier in the week and which could negatively impact shipments and operating and transportation costs for the quarter. 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 the annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open the call for the Q&A.
Operator, Operator
Our first question today comes from George Staphos from Bank of America Securities.
George Staphos, Analyst
I hope you're doing well. My first question is about operations in the mills. We have experienced outages and you've mentioned a sequential increase in variable costs for inputs. With fewer operating days, you're also planning to reduce inventory to some extent. Kent, could you provide more detail or an estimate on what the anticipated increase in cost per ton might be in the containerboard business? While we expected a sequential drop in the first quarter, we're trying to better understand what the cost per ton might look like from the fourth quarter to the first quarter.
Mark Kowlzan, CEO
I'm not sure we're going to run the system full. We've got the typical seasonal weather impacts taking place along with the recent storm. So there's some uncertainty there. But again, we're basically faced with the normal year-over-year inflationary concerns that we always see in January with labor, medical benefits, cost type matters. And then just the winter usage and yield matters with energy and wood. Again, I'd like to give you a number, but I don't have that off the top of my head.
George Staphos, Analyst
No, that's okay, Mark. I guess maybe a related question. I know you're still assessing but what have you built into your guidance for the quarter related to the winter storms from an earnings standpoint or more sort of a factor standpoint from a volume versus cost qualitatively?
Mark Kowlzan, CEO
George, we're just starting. We've had plants down from the Texas region all the way across the Gulf region up through the Mid-Atlantic. Some of these areas are still down without power. We've got power outages continuing in Tennessee. The Dallas region has sought out and coming back, but things are coming back as we speak, literally on the call this morning. The mills ran through this. The two biggest mills that were impacted, the Counce, Tennessee mill and the Riverville, Virginia mill. Both mills did run through this quite well. We had exceptional support from all of the employees, and the mills ran through this. The problem was we couldn't ship any tons out during the period of time. So just in the last 24 hours, we started moving trucks and rail into Counce and Riverville. But nevertheless, we've had a huge number of the box plant system down for the few days. Tom, do you want to add a little color on that because it's a pretty significant...
Thomas Hassfurther, President
Yes, I think it's crucial to realize that it will be difficult for us to gauge the situation until we understand the impact on the orders that weren't shipped recently and whether our customers will resume their orders. Our customers have been affected as well, so we have faced similar situations before. In some instances, a prolonged process results in lost orders, while in others, we manage to recover quickly. We'll have to monitor the situation as this month progresses and likely through the winter, especially with another significant storm expected in the Mid-Atlantic and Southern regions this weekend. Overall, I believe we have handled the situation relatively well, despite having many box plants down. Additionally, transportation remains a significant challenge, whether by rail or truck, in getting the product out once our plants and mills are operational again.
Kent Pflederer, CFO
George, back to your first question, it's Kent. Ex freight and with a little bit of Wallula benefit in, but not all of it, we're about $15 million total on the cost line in the mills. And so running that through, that's maybe $10 a ton.
George Staphos, Analyst
Okay, I appreciate that, Kent. Last one, and I'll turn it over, just to be mindful. What gives you comfort that at Massillon, you're through the reliability issues? And for that matter, what gives you comfort? And what caused the inventory mismatch in the acquired facilities? Again, presuming it's going to be worked down, but what caused that?
Mark Kowlzan, CEO
Yes, I will discuss the operational matters, and then I will let Tom address the inventory. Since the acquisition date in September, we have spent six continuous weeks with around 200 PCA personnel helping at Massillon, along with contractors, essentially rebuilding the Massillon Mill from the ground up. This included replacing bearings, bushings, pumps, and motors, as well as conducting a gas turbine rebuild and overhauling all the mechanical infrastructure. During December, while the mill was down, we continued to work on finer details and operational improvements, including advancements in lubrication technology and enhanced bearing monitoring. Over the last 3.5 months, we have effectively rebuilt the Massillon Mill. It has transformed into a reliable facility. We have improved operational efficiency at both Massillon and Riverville, achieving approximately a 15% increase in overall efficiency based on our measurements. Both mills are now approaching PCA's standard efficiency levels. Tom, would you like to discuss the inventory?
Thomas Hassfurther, President
No. Go ahead, Kent.
Kent Pflederer, CFO
So George, I'll start with the Massillon piece to quantify it. We finished the year about 10,000 tons above our forecast. Some of that was due to purchase commitment tons and some was because our shipment volume was slightly lower than anticipated. Tom, I'll let you elaborate.
Thomas Hassfurther, President
Okay. So George, think of it this way. We recognized that we had a significant amount of work to accomplish and that we needed to improve our reliability in several areas. Fortunately, we had the financial flexibility to address these issues immediately in preparation for the demand we anticipated in 2026. Everyone performed exceptionally well, and we're in a good position as we enter 2026. However, there was another significant factor contributing to the inventory miss, which involved Greif having a considerable amount of containerboard purchase and trade commitments that we decided to absorb in the fourth quarter. We also lack extensive visibility into many of their daily operations compared to PCA. These were the primary reasons for the inventory miss. Importantly, we completed all that work ahead of time, positioning ourselves effectively for 2026.
Operator, Operator
And our next question comes from Michael Roxland from Truist Securities.
Michael Roxland, Analyst
I wanted to follow up on the last point about the purchase and trade commitments that Greif had in place. Can you provide more details about those commitments? Are you planning to maintain them, or do you intend to eliminate them once the contracts expire? Any information you can share regarding those commitments and your plans for them would be appreciated.
Thomas Hassfurther, President
Okay. Mike, I'm going to ignore the color part and just tell you that those commitments and purchases, we no longer are keeping or pursuing or anything like that. Those were agreements that Greif had. We would not typically have any of those in place, and we're discontinuing those. We met the commitments, and we're moving forward from there.
Michael Roxland, Analyst
Perfect. Got it. And it sounds like demand has inflected and need to run full. But you have two less shipping days in 1Q. So this is a theoretical question, I mean if you had those two extra shipping days in 1Q, would things be looser and volumes be softer? Or has demand firmed up enough such that you would still be running full even with those two extra shipping days?
Mark Kowlzan, CEO
If we had the two extra days, we would still be operating at full capacity. Looking ahead to the full year of 2026, we anticipate running the entire mill system at maximum output, which is a great challenge to have. Tom, would you like to add anything?
Thomas Hassfurther, President
This is just about a 30-day period we are considering, rather than the long term. We would definitely be operating at full capacity if we had those two extra days.
Michael Roxland, Analyst
Got it. And then just from a demand perspective, you guys have called out in recent quarters, the housing environment, you've called out protein. Any inflection in those particular end markets that are contributing to this better demand?
Thomas Hassfurther, President
I believe, as I mentioned earlier, that the underlying demand is improving across all segments, which is very encouraging for us. As I have discussed over the past year and even earlier, areas like auto, building products, and durables were down and remained so through the fourth quarter. However, they have reduced their inventories significantly, and we are starting to see a recovery in that sector, which is a positive sign since these are still major segments for us. Additionally, we are performing well in other segments, which continue to thrive. I also think consumer sentiment is on the rise. The GDP grew by over 4% last quarter and is projected to increase by more than 5% this quarter. If you consider that box demand could at worst match half of the GDP, that represents substantial demand. Overall, the underlying demand is looking very positive at the moment.
Michael Roxland, Analyst
Got it. Just one quick follow-up on a housekeeping question. Are you including the $70 per ton in your first quarter guidance? Is that amount part of the $2.20 you're projecting for the first quarter?
Kent Pflederer, CFO
The answer is no. We have a little bit into March, but not the full benefit.
Michael Roxland, Analyst
So you are counting that in your 1Q guidance to some extent.
Thomas Hassfurther, President
We are only including a small amount in the forecast. These price increases, for us, occur over approximately a 90-day period. Additionally, some contracts extend to midyear. However, for the most part, we are incorporating this into our plans. It will be effective starting March 1, but we cannot fully account for the entire amount at this time.
Mark Kowlzan, CEO
Thanks, Mike. I appreciate it.
Operator, Operator
Our next question comes from Mark Adam Weintraub from Seaport Research Partners.
Mark Weintraub, Analyst
Just a few quick clarifications. One, just to be clear, the $70 you receive in containerboard in March will have a minimal impact in the first quarter because it takes a while to flow through into boxes. Is that correct?
Thomas Hassfurther, President
Correct. Correct, Mark. Yes.
Mark Weintraub, Analyst
And just second clarification, just to make sure I wasn't missing something. If there were two more shipping days, then you would have more demand on your mill system, not less in the short term?
Thomas Hassfurther, President
Correct.
Mark Kowlzan, CEO
Yes.
Mark Weintraub, Analyst
Okay. Going back to costs, last year you mentioned an impact of $0.50 to $0.60 when transitioning from the fourth quarter to the first quarter, and you expected to recover about half of that or possibly a bit more in the second quarter due to some seasonal factors. Can you provide similar metrics this time?
Kent Pflederer, CFO
Yes, we can, Mark. It's about $0.45 to $0.50 4Q to 1Q. We will get, excluding Wallula, a little under half of that back. But then Wallula, the cost improvements there start kicking in more so in the second quarter.
Mark Weintraub, Analyst
Okay. Can we compare how the containerboard box markets feel now compared to this time last year? Last year, you implemented price increases on January 1, and Pulp & Paper Week showed some partial increases. How does it feel this time compared to the last two years?
Thomas Hassfurther, President
I can only speak for PCA. Overall, it feels much improved compared to last year when there were many uncertainties, such as the transition to a new administration and concerns about potential tariffs. Most of those uncertainties have been addressed now. The most encouraging aspect is the increase in GDP and consumer sentiment, with GDP rising over 4% last quarter and projected to exceed 5% this quarter. These figures significantly impact the demand for corrugated boxes. Moreover, for the first time in over four years, wages are increasing faster than inflation, which will enhance consumer sentiment moving forward. While the effects may not be immediate, this is an important metric for our business throughout the year.
Mark Weintraub, Analyst
Great. I appreciate it.
Mark Kowlzan, CEO
Thank you.
Operator, Operator
Our next question comes from Gabe Hajde from Wells Fargo Securities.
Gabe Hajde, Analyst
I'm not trying to be confrontational, but I'm interested in the fact that GDP is expected to increase by 3% to 4% in 2025, while box demand has been relatively weak and disappointing. Your tone seems to reflect a significant change. Can you elaborate if this is related to PCA's actions, perhaps the new Glendale box plant and internal strategies? We heard from someone else earlier about more focus on acquisition than retention. Clearly, there has been a noticeable shift in demand. Additionally, we've been managing the fluctuations in orders and inventories at the end of the quarter and the beginning of the new one. Do you have any insights or analysis regarding whether this is occurring or if it indicates a more sustained shift in order patterns?
Thomas Hassfurther, President
I wish I could provide you with definitive answers. However, I can share that we continuously engage in conversations with our customers to understand their thoughts and actions, which is essential for us to adjust our business. Currently, there is a more positive sentiment among our customer base. The fluctuations we saw last year were atypical as everyone was trying to comprehend actual consumer demand and company CapEx spending, leading to a lot of uncertainty. For instance, some customers had products stuck at ports, waiting for tariff clarifications, which contributed to a rather unusual year. But much of that uncertainty has been resolved, improving our visibility and positivity regarding predictability going forward. That's about the best insight I can provide.
Gabe Hajde, Analyst
All right. On the Greif acquisition, some of the feedback that we've gotten is that it feels maybe a little bit of flow out of the gate. And I know you guys had a plan going in. But maybe, Mark, can you just talk about, let's say, an impromptu mill rebuild in 3.5 weeks. Was that part of the plan? And as you project forward and think about the acquired assets, you talked about running full for the rest of this year, but for planned maintenance outage, do you expect that to be kind of reaching that, I guess, EPS accretion level in the second quarter, first quarter, second half of this year? Just any thoughts on that?
Mark Kowlzan, CEO
Regarding the Massillon and Riverville mills, we've learned from our experience with Boise. We now have a different organizational structure compared to 13 years ago. We leveraged our in-house technology engineering group and decided to implement immediate corrective actions at the mills following the acquisition. We focused our efforts and applied our operational expertise effectively. Over a couple of months in the fall, especially through December at Massillon, we tackled all the issues that typically would take years to resolve. All routine maintenance tasks are now completed. We have also identified significant long-term cost-saving opportunities at Riverville, along with the gas turbine initiative. We will continue to apply our daily operational practices at both Massillon and Riverville. We expedited this execution and maximized the opportunity during the fall, given our capabilities and the need to manage our inventory effectively.
Gabe Hajde, Analyst
Got it. One last thing on...
Kent Pflederer, CFO
And Gabe, sorry, on the accretion piece, we are forecasting it to be slightly accretive in the first quarter and then improving as we get on and seasonality improves as well there. So...
Gabe Hajde, Analyst
One quick last one, hopefully on CapEx. Just, I guess, directionally, I think things are probably coming in maybe a little bit heavy in '26, and you talked about maybe only a smidge of the $250 million for the two gas turbines, the majority of that hitting in '27. Just directionally, would we expect things to be flattish next year on CapEx or down? I know we're just kicking off '26, but just any preliminary thoughts?
Mark Kowlzan, CEO
I believe we're currently in a range around $800 million. The gas turbines will likely keep the number on the higher end. We are completing the major box plant in Ohio and have a couple of other projects finishing this year in that area. For the larger capital projects, there’s the Jackson, Alabama winder installation and improvements, among a few other significant initiatives that will conclude this year. My aim is to reduce this number. There are several reasons for that; part of it is the need for the organization to take a moment to reflect on what has been accomplished in recent years and to optimize all of the capital. Without specifying a number, I would like to see it drop below the $800 million mark. We achieved this back in 2022 going into 2023, but then took advantage of opportunities that increased it back to the $600 million level. Last year, we hit $800 million due to larger projects and new box plants. Ultimately, it depends on the opportunities available, but we are focused on the discipline needed to spend wisely. So, while that's a longer answer to your question, the goal is to lower the amount, but we will also seize opportunities as they arise.
Gabe Hajde, Analyst
Good luck.
Mark Kowlzan, CEO
Thank you.
Operator, Operator
Our next question comes from Anojja Shah from UBS.
Anojja Shah, Analyst
I just wanted to ask more specifically what changed in January? It does seem like there was a pretty sudden upturn in demand. And I know you talked about less uncertainty versus last year, but consumer confidence numbers are still kind of depressing, and CPG earnings tone hasn't really changed. So do you think your customers are responding to maybe the promise of stimulus in the one big beautiful bill? And then after we get through tax refund season, we can see some choppiness again in demand? What are you hearing from your customers on that?
Thomas Hassfurther, President
The recent increase in demand can be attributed to several factors. First, businesses have significantly reduced their inventories, which cannot be maintained at such low levels indefinitely. Additionally, there is growing optimism stemming from tax reform and various other initiatives. While consumer sentiment varies depending on the survey, and opinions can fluctuate between positive and negative, I believe that anytime consumers have more disposable income, we will naturally see an increase in demand, which will ultimately impact our box business. From our customers' perspective, we strive to partner with the best performers in their industries who generally maintain a positive outlook. The uncertainties that arose in 2025 due to the new administration have diminished, allowing for clearer visibility of improving demand that people can rely on more than before.
Anojja Shah, Analyst
Yes. Okay. That's good to hear. Let's hope you're right. And then for my second question, did I miss the cash tax expectation for 2026? And could you get a meaningful step down year-over-year this year because, I don't know, maybe immediate depreciation expensing provisions on Glendale or anything else?
Kent Pflederer, CFO
Anojja, we did not provide a cash tax forecast for the year. However, it will be higher than what we paid in 2025. The Greif acquisition and the ability to take some immediate depreciation on those assets were significant benefits. We are approaching more normal levels, but we will still gain some advantage from the bonus depreciation provisions.
Anojja Shah, Analyst
All right. Sounds good. I'll turn it over.
Mark Kowlzan, CEO
Thanks, Anojja.
Operator, Operator
Our next question comes from Anthony Pettinari from Citi.
Anthony Pettinari, Analyst
For the price increase for containerboard and boxes, should we expect the timing and implementation of the price hike for the Greif portion of the business to be quite similar to the legacy business? Or are there existing contracts or terms that might cause it to be a bit different or take longer?
Thomas Hassfurther, President
We would expect the acquisition plants to roll out the same as PCA.
Anthony Pettinari, Analyst
Good. Got it. And I mean, there were some pretty large mill closures in the industry last year. And obviously, you have Wallula. I understand that you don't sell into the open market as much as others. Can you just talk about sort of availability of board in the open market from a PCA perspective and just sort of what the market feels like given some pretty major supply actions that happened at the end of last year?
Thomas Hassfurther, President
Yes. All I can tell you is from a PCA perspective, we're going to have to run the mills full out. Things are going to be tight. We're not going to have additional board that we're going to be able to sell into the open market. And that's all I can comment on. You can draw other conclusions from your comments relative to the industry.
Anthony Pettinari, Analyst
Got it. Got it. Maybe just one last one. In terms of the CapEx for '26, $840 million to $870 million, I think you said the energy projects would be a small sliver of that. I'm just wondering if you can quantify that. And then if there are any other major projects maybe on the box plant level that we should think about for '26 that you'd point out?
Mark Kowlzan, CEO
We are currently finalizing the detailed engineering and preparing for approval. This year, if we are investing $250 million, we may allocate around $50 million for ordering equipment, steel, and other necessary items. The larger portion of this year's capital investment, exceeding $800 million, will primarily finance the completion of the new Ohio box plant, the significant project in Jackson known as the Jackson Winder project, and other expansions at Jackson, which collectively amount to over $100 million over two years. Additionally, we have several major projects in progress for the Counce #2 machine, with the first phase scheduled to start this March, focusing on upgrading the #2 paper machine. We're also wrapping up a project in Syracuse, New York, and completing a few other significant box plant upgrade projects. Furthermore, we continue with various routine projects on the converting side, introducing new converting equipment, corrugators, and upgrading converting lines. Overall, it's encouraging that we are committed to investing and expanding in alignment with our customers' needs.
Anthony Pettinari, Analyst
Okay. That's very helpful. I'll turn it over.
Mark Kowlzan, CEO
Thank you.
Operator, Operator
Our next question comes from Phil Ng from Jefferies.
Philip Ng, Analyst
A question for Tom. The pickup in orders in January, how much would you attribute that being from that destock that you saw reversing? Is that uptick pretty broad-based, isolated a few end markets? When I look at the spread between bookings and billings, it's quite large, larger than normal from what I can tell. I think that's a bullish indicator, but just give us a little more color on how we kind of interpret some of these things.
Thomas Hassfurther, President
It's challenging to pinpoint the extent of inventory restocking. While that's a factor, I don't believe it's the main reason. Our customers seem to be gearing up for increased demand, which we are consistently hearing about. Currently, as we near the end of the month, we have better visibility for February, and it looks very strong. This trend is continuing from January, which is encouraging for our forecasts. Overall, there is a more optimistic sentiment across the board. Additionally, some segments that struggled last year are starting to show signs of recovery, moving towards a more typical demand level we've seen in the past. With mortgage rates now below 6%, I believe housing will regain momentum, which will significantly benefit us in that area, particularly in new homebuilding and remodeling.
Philip Ng, Analyst
Got you. And then pretty encouraging, all that great stuff. And then I think your commentary is you expect to be running full out all of this year.
Thomas Hassfurther, President
Yes. Yes.
Philip Ng, Analyst
Is that a function of demand getting much better this year? I mean, certainly, the Wallula piece is part of it. But predicated on that, like what kind of box shipments should we assume for you to be running full out?
Thomas Hassfurther, President
We are definitely going to see an increase. One of our main focuses this year, despite the high capital intensity of this business, is the need to invest capital annually to achieve our goals. As Mark mentioned earlier, we aim to maximize the returns on our investments, and this year will be a significant opportunity for us to test that strategy. We are well-positioned for considerable growth in the business. However, we won't be preparing for unrealistic growth, as that's not typical in this industry. Instead, we anticipate normal growth plus a little extra. Overall, I believe we are in a good position, and if additional opportunities arise, we have the capacity to invest more capital.
Kent Pflederer, CFO
It was helpful color. You said you expect the Greif deal to be modestly accretive in 1Q. I think last quarter, you gave us a framework in terms of LTM EBITDA in that $240 million range and maybe $20 million of run rate synergies by 2Q. Appreciating things move around. Is that still a good way to think about it? Or perhaps some of that gets pushed out a little bit in terms of achieving those targets?
Mark Kowlzan, CEO
No, that's a very good way to think about it. That's where we still are. And I think we'll be in a better position to talk about some synergy opportunities in the next couple of calls going forward now that we're able to operate at full capacity.
Philip Ng, Analyst
Okay. Super. I appreciate it guys.
Mark Kowlzan, CEO
Thank you.
Operator, Operator
Our next question comes from Charlie Muir-Sands from BNP Paribas.
Charlie Muir-Sands, Analyst
Just a couple of follow-ups. You've obviously outlined a big list of all the projects that are the focus of CapEx at the moment. If we think ahead sort of 12 months from today, given that you're going to be running, you said, all out throughout this year, you anticipate, how much more capacity do you think you'll have in a 12 months' time from today versus now? And how are you thinking about any kind of constraints or things you might need to do in order to get ahead of that? And then I've got one follow-up question.
Mark Kowlzan, CEO
The short answer to that is I'll let you know then what we're planning to do going forward. Nothing's changed in terms of how PCA goes about our business to look at supplying containerboard into the converting side of the business. Tom just said it, we never get too far ahead of ourselves. Part of the impetus for the Greif acquisition is that we had two mills that we looked at that say we're producing in that 600,000 tons run rate a year. We looked at that. We know how to improve the operations. And we said we'll probably get over a couple of year period of time, depending on how much capital we want to spend, probably another 200,000 tons out of the two mill system. And so that provides the growth runway for the next couple of years for us. So that's how I'm looking at it. But it's going to be tight. We're going to have to run very well as we normally do, run very efficiently. But never forget, we're always looking out on the horizon of where the next containerboard capacity will come from in PCA. And we've got different levers to pull and different ways to get there, but that's one of the high-class problems that we face all the time. Tom, do you want to add that?
Thomas Hassfurther, President
No, there's nothing more to add except that we will grow with our customers. That's how we operate.
Charlie Muir-Sands, Analyst
And just the follow-up was you quoted your bookings and billings numbers so far. Can you just clarify, is that a fully legacy PCA number? Or is that line getting blurred now? Have you sort of moved customers from Greif operations into PCA or vice versa? Or is that an all-in number?
Thomas Hassfurther, President
I am providing you with the legacy PCA number. However, the visibility I have into our Greif business doesn't exactly match that, although it is quite similar.
Mark Kowlzan, CEO
Thank you. Are there any other questions, Jamie?
Operator, Operator
Mr. Kowlzan, at this time, there are no more questions. Do you have any closing comments?
Mark Kowlzan, CEO
Yes. Again, I want to thank everybody for joining us today. And also, I just want to put out a big thanks to the folks at the Riverville Mill and Counce Mill in particular, a number of the employees and managers spent three or four days living at the mill during the storm and protecting the assets and running the mill and safeguarding things. So from up here in Lake Forest to the facilities, thank you. And then all the box plants that are down and people that have been without power, again, it's been a struggle, but things are coming back. So we appreciate everybody's effort and the dedication that we have from our PCA employees and look forward to talking with everybody on the next call in April. Thank you. Have a good day.
Operator, Operator
Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.