Destocking effects linger for packaging manufacturers

During the first quarter of 2023, several packaging manufacturers experienced declines in their production volumes due to the ongoing impact of destocking. Executives discussed inventory challenges during their earnings calls.

Below are additional statements made by companies regarding demand patterns during the first quarter and their forecasts for the rest of the year.

Paper and corrugated products

Pactiv Evergreen CFO Jon Baksht struck a note of optimism during a Tuesday earnings call. “The destocking that impacted our fourth quarter volumes was largely completed during the first quarter. So we expect that particular headwind to subside for the remainder of 2023,” he said.

At WestRock, CEO David Sewell said that “on the domestic side, I think we’re getting through most of the destocking that needs to occur.” Sewell added that customers are talking about the second half of the year with “just a little bit more optimism.”

International Paper CEO Mark Sutton also expressed more optimism about the latter half of 2023. “Although we believe most of the destocking through the retail channel has been resolved, destocking continues throughout the rest of the supply chain, especially with manufacturers and many of our customers,” Sutton said. “We believe this will run its course through the second quarter, resulting in an improved demand environment in the second half of the year.”

The first part of the second quarter has already shown promise, IP CFO Tim Nicholls suggested. “We also believe the majority of destocking will be completed in the first half of the year, and considering our performance in April, and looking at order backlogs, we expect sequentially higher volume in the second quarter.”

IP Chief Commercial Officer Tom Hamic added that a normalization of demand is expected when the U.S. economy recovers.

Thomas Hassfurther, Packaging Corporation of America’s executive vice president of corrugated products, echoed those ideas. “As we look to the second quarter, we expect the inventory destocking of both customer product and boxes to be near completion.” Regarding demand, Hassfurther said, “The good news is that there’s been a big turnaround starting in April. … Given the fact that we’re double digits ahead of where we [were] in March is a huge improvement. And it’s across all of the sectors.”