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Investing.com - Cascades Inc (TSX:CAS)., North America’s sixth-largest containerboard producer, announced it will close its 200,000-ton corrugated medium facility in Niagara Falls, NY, no later than September 3, 2025. The closure comes as industry leaders like Packaging Corporation of America (PKG) maintain strong market positions, with PKG currently showing good financial health according to InvestingPro data.
The closure is part of the company’s optimization strategy for its packaging production platform and follows the shutdown of a second paper machine at the same Niagara Falls location in 2023. Cascades expects closure costs to reach approximately $5 million, while noting it had started up a larger 465,000-ton mill in Ashland (NYSE:ASH), Virginia in 2023.
This marks the fourth major capacity closure in North America this year, following shutdowns at International Paper’s Campti, Louisiana facility (840,000 tons), Southwire’s Forney, Texas plant (400,000 tons), and Georgia-Pacific’s Cedar Springs, Georgia mill (1 million tons).
Citi analysts view the closure as positive for International Paper, Southwire, and Packaging Corporation of America, echoing a similar assessment made by Truist Securities on Tuesday.
The combined North American closures represent approximately 2.4 million tons, or about 6% of regional capacity, with the only new production coming from ND Paper as its PM25 (240,000 tons) resumes operations at its Biron, Wisconsin mill later this month, potentially keeping industry operating rates in the low-to-mid 90% range through year-end.
In other recent news, Packaging Corp (NYSE:PKG). of America has announced a significant $1.8 billion acquisition of Greif (NYSE:GEF) Inc.’s containerboard business. The acquisition includes two mills and eight sheet feeder and corrugated plants, with the transaction expected to close by the end of the third quarter of 2025. Greif’s containerboard business generated $1.2 billion in revenue and $212 million in EBITDA, and Packaging Corp. anticipates $60 million in cost synergies within two years post-closing. Citi maintains a Neutral rating on the company, while Truist Securities increased its price target to $239.00, citing a favorable industry outlook. Jefferies, however, downgraded Packaging Corp. from Buy to Hold due to valuation concerns, adjusting its price target to $205.00. The acquisition is expected to be immediately accretive to earnings, enhancing Packaging Corp.’s growth strategy. The company plans to finance the acquisition with $1.5 billion in new debt and cash on hand, resulting in a pro forma leverage ratio of approximately 1.7 times. This strategic move underscores Packaging Corp.’s commitment to strengthening its position in the containerboard sector.
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