KapStone Fourth Quarter Profit Soars

NET INCOME IS $25.4 MILLION

KapStone Paper and Packaging Corp. posted fourth quarter net income of $25.4 million, compared to $1.9 million in the same quarter last year. For the year ended Dec, 31, net income was $80.3 million, up $60.6 million versus prior year. Unit sales volume increased during the fourth quarter of 2009 compared to 2008 by over 15 percent. However, consolidated net sales decreased $16.5 million to $165.1 million compared to $181.6 million from the same quarter a year ago. Lower selling prices and less favorable product mix on a higher percentage of export linerboard sales reduced revenues by $39.6 million.

Operating income of $45.3 million for the 2009 fourth quarter increased by $33.6 million, or 289 percent, compared to the 2008 quarter due to $56.5 million of alternative fuel mixture tax credits, $12.3 million from higher sales volume, $7.3 million from lower costs on materials, energy and transportation and $2.0 million of lower bad debt expense, partially offset by $37.1 million of lower average selling prices and unfavorable mix, $6.0 million due to a change in the timing of the annual cold mill outage from the third quarter  in 2008 to the fourth quarter in 2009, $1.5 million from the ERP start up inefficiencies, and $1.8 million for the restoration of certain benefits for salaried employees that had been temporarily curtailed in the beginning of the year.  

"In the first half of the year, we took significant downtime due to the lack of orders,” Chaiman and CEO Roger Stone says. “We reached out to new customers, and demand in our markets gradually improved enabling us to achieve operating rates in the high 90 percent range for the last half of the year. The dynamics created from both increasing demand coupled with industry capacity reductions have positioned KapStone to be able to successfully achieve price recovery in our linerboard and kraft paper product lines. Late in the fourth quarter, we successfully implemented a $20 per ton price increase for kraft paper, followed by an additional $20 per ton increase in January. Export linerboard prices began gradually increasing in the fourth quarter and that trend is continuing.  A $50 per ton price increase for domestic linerboard was implemented in January.  On Feb. 25, the company announced a $60 per ton price increase effective April 1 on our kraft paper and domestic linerboard products.”

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