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Greif Reports Fourth Quarter and Fiscal 2020 Results

General News

Greif, Inc. (“Greif” or the “Company”), a world leader in industrial packaging products and services, announced fourth quarter and fiscal 2020 results.

Fourth Quarter Highlights Include (all results compared to the fourth quarter 2019 unless otherwise noted):

– Net income of $44.4 million or $0.74 per diluted Class A share decreased compared to net income of $65.0 million or $1.09 per diluted Class A share. Net income, excluding the impact of adjustments(1), of $46.4 million or $0.78 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $73.4 million or $1.24 per diluted Class A share. Adjusted EBITDA(2) decreased by $32.3 million to $154.5 million.

– Net cash provided by operating activities increased by $5.0 million to $200.4 million. Adjusted free cash flow(3) increased by $23.7 million to $173.9 million.

– Awarded a Gold Rating in sustainability performance for the third consecutive year by EcoVadis.

Fiscal Year Highlights Include (all results compared to the fiscal year 2019 unless otherwise noted):

– Net income of $108.8 million or $1.83 per diluted Class A share decreased compared to net income of $171.0 million or $2.89 per diluted Class A share. Net income, excluding the impact of adjustments, of $190.9 million or $3.22 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $234.0 million or $3.96 per diluted Class A share. Adjusted EBITDA decreased by $16.3 million to $642.6 million.

– Net cash provided by operating activities increased by $65.2 million to $454.7 million. Adjusted free cash flow increased by $78.4 million to $346.2 million.

– Reduced net debt(4) by $293.5 million since October 31, 2019 and paid $104.3 million in dividends to stockholders.

Pete Watson, Greif’s President and Chief Executive Officer, commented:

“I am very proud of the commitment displayed by the Greif team to adapt and manage the challenges presented by the COVID-19 pandemic this past year,” said Pete Watson, Greif’s President and Chief Executive Officer. “Through our focus on customer service excellence and disciplined operational execution, the team delivered solid financial results, strong cash flow and significant debt reduction in a challenging operating environment. I am particularly pleased with our team’s results in reducing working capital, which created a strong source of cash in the fiscal fourth quarter that helped drive our fiscal 2020 adjusted free cash flow well higher than our previously announced forecast.

Looking ahead, while downstream industries are gradually ramping back up, there remains lingering uncertainty in the global economy. We are committed to managing those areas within our control to navigate successfully through these uncertainties. Greif is well positioned to benefit as the economy further recovers.”

Customer Service

The Company’s consolidated CSI(5) score was 92.9 during the fiscal fourth quarter 2020 and reached a record high of 93.0 on a trailing four quarter basis. Our long term objective is for each business segment to achieve a CSI score of 95.0 or greater.

CSI for the Rigid Industrial Packaging & Services segment was 93.7, which was approximately 4 percent higher compared to the prior year quarter. CSI for the Flexible Products & Services segment was 86.4, which was approximately 9 percent lower compared to the prior year quarter as a result of COVID-19 related delays to product shipments due to staffing constraints. CSI for the Paper Packaging & Services segment was 91.0, which was approximately flat to the prior year quarter.

Additionally, we completed our tenth NPS(6) survey and achieved our best ever score of 67.0. Our latest NPS result was approximately 10% better than our wave nine survey conducted in late 2019 and a 72% improvement from the initial wave one conducted in late 2015. We continue to leverage the increased customer interactions that accompany each survey into enhanced service offerings for our customers and better strategic insight into their business needs.

Liquidity and Balance Sheet

As of October 31, 2020, the Company had $538.1 million of available borrowing capacity(7) within its $800.0 million revolving credit facility. Subsequent to October 31, 2020, the Company entered into a delayed draw term loan with the intent to utilize the proceeds to pay down the Company’s Euro 200 million 7.375% senior notes at maturity in July of 2021. Based on the provisions of the applicable loan documents and a series of forward interest rate swaps entered into by the Company, if this term loan was drawn down today, the interest rate would initially be approximately 2.5% per annum. Other than the Euro 200 million senior notes, the Company has no other sizable debt maturities due until 2024.

For the year ended October 31, 2020, the Company’s adjusted free cash flow was $346.2 million compared to $267.8 million for the year ended October 31, 2019. The increase in adjusted free cash flow was primarily attributable to $56.1 million of cash provided by operating working capital as a result of management initiatives and tight market conditions, particularly in the Paper Packaging & Services segment.

Segment Results (all results compared to the fourth quarter of 2019 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products(8) sold, selling prices, product mix and the impact of changes in foreign currencies against the U.S. Dollar. The table below shows the percentage impact of each of these items on net sales for our primary products for the fourth quarter of 2020 as compared to the prior year quarter for the business segments with manufacturing operations.

Rigid Industrial Packaging & Services

Net sales decreased by $39.9 million to $579.1 million. Net sales excluding foreign currency translation decreased by $38.9 million due primarily to lower volumes and lower average sale prices driven by contractual price adjustment mechanisms related to raw material price decreases.

Gross profit decreased by $0.2 million to $113.8 million. The change in gross profit was primarily due to the same factors that impacted net sales, partially offset by lower priced raw materials.

Operating profit decreased by $0.9 million to $54.1 million. Adjusted EBITDA decreased by $4.2 million to $65.3 million primarily due to the same factors that impacted gross profit and higher segment SG&A expense, partially offset by the segment receiving a smaller portion of allocated corporate costs. The segment’s SG&A expense in the prior year quarter included a one-time Brazilian tax recovery of approximately $7.0 million, which was previously disclosed.

Paper Packaging & Services

Net sales decreased by $32.8 million to $502.3 million primarily due to approximately $58.0 million of prior year net sales attributable to the divested Consumer Packaging Group business, as well as lower published containerboard and boxboard prices, partially offset by higher volumes.

Gross profit decreased by $29.7 million to $98.8 million. The change in gross profit was primarily due to the same factors that impacted net sales and higher old corrugated container input costs, partially offset by lower manufacturing costs.

Operating profit decreased by $25.0 million to $30.7 million. Adjusted EBITDA decreased by $31.3 million to $77.4 million primarily due to the same factors that impacted gross profit and the segment receiving a greater portion of allocated corporate costs, partially offset by a reduction in the segment’s SG&A expense that was, in part, attributable to synergy realizations.

Flexible Products & Services

Net sales increased by $2.3 million to $73.2 million. Net sales excluding foreign currency translation increased by $0.4 million due primarily to due to higher average sale prices, partially offset by lower volumes.

Gross profit increased by $2.8 million to $17.0 million. The change in gross profit was primarily due to the same factors that impacted net sales and lower priced raw materials.

Operating profit increased by $1.7 million to $4.8 million. Adjusted EBITDA increased by $3.0 million to $8.8 million primarily due to the same factors that impacted gross profit.

Land Management

Net sales decreased by $0.4 million to $6.7 million.

Operating profit increased by $0.3 million to $2.2 million. Adjusted EBITDA increased by $0.2 million to $3.0 million.

Tax Summary

During the fourth quarter, the Company recorded an income tax rate of 27.9 percent and a tax rate excluding the impact of adjustments of 26.1 percent. As previously disclosed, the application of FIN 18 often causes fluctuations in our quarterly effective tax rates. For the full year, the Company recorded an income tax rate of 34.0 percent and a tax rate excluding the impact of adjustments of 27.0 percent.

Dividend Summary

On December 8, 2020, the Board of Directors declared quarterly cash dividends of $0.44 per share of Class A Common Stock and $0.65 per share of Class B Common Stock. Dividends are payable on January 1, 2021, to stockholders of record at the close of business on December 18, 2020.

Company Outlook

The Company is introducing a quarterly outlook given the continued market unpredictability caused by the COVID-19 pandemic. The Company will revert to annual guidance once the duration and economic impact of the pandemic is better understood.

For the full fourth quarter results, click here.

(1) Adjustments that are excluded from net income before adjustments and from earnings per diluted Class A share before adjustments are gain or loss on disposal of properties, plants, equipment and business, net, restructuring charges, acquisition-related costs, non-cash asset impairment charges, incremental COVID-19 costs, net, debt extinguishment charges, non-cash pension settlement income and tax net expense (benefit) resulting from the Tax Cuts and Jobs Act (“Tax Reform Act”).

(2) Adjusted EBITDA is defined as net income, plus interest expense, net, plus debt extinguishment charges, plus income tax expense, plus depreciation, depletion and amortization expense, plus restructuring charges, plus acquisition-related costs, plus non-cash asset impairment charges, plus incremental COVID-19 costs, net, plus non-cash pension settlement (income) charges, less (gain) loss on disposal of properties, plants, equipment and businesses, net.

(3) Adjusted free cash flow is defined as net cash provided by (used in) operating activities, less cash paid for purchases of properties, plants and equipment, plus cash paid for acquisition-related costs, plus cash paid for debt issuance costs, plus cash paid for incremental COVID-19 costs, net, plus cash paid for acquisition-related Enterprise Resource Planning (“ERP”) systems.

(4) Net debt is defined as total debt less cash and cash equivalents.

(5) Customer satisfaction index (“CSI”) tracks a variety of internal metrics designed to enhance the customer experience in dealing with Greif.

(6) Net Promoter Score (“NPS”) is derived from a survey conducted by a third party that measures how likely a customer is to recommend Greif as a business partner. NPS scores are calculated by subtracting the percentage of detractors a business has from the percentage of its promoters.

(7) Available borrowing capacity is determined by the lesser of the available capacity on the Company’s secured revolving credit facility or the amount which could be borrowed without causing the Company’s leverage ratio to exceed 4.5.

(8) Primary products are manufactured steel, plastic and fibre drums; new and reconditioned intermediate bulk containers; linerboard, containerboard, corrugated sheets and corrugated containers, boxboard and tube and core products; and 1&2 loop and 4 loop flexible intermediate bulk containers.

Note: A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. These non-GAAP financial measures are intended to supplement and should be read together with our financial results. They should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on these non-GAAP financial measures.

About Greif

Greif is a global leader in industrial packaging products and services and is pursuing its vision: in industrial packaging, be the best performing customer service company in the world. The Company produces steel, plastic and fibre drums, intermediate bulk containers, reconditioned containers, flexible products, containerboard, uncoated recycled paperboard, coated recycled paperboard, tubes and cores and a diverse mix of specialty products. The Company also manufactures packaging accessories and provides filling, packaging and other services for a wide range of industries. In addition, Greif manages timber properties in the southeastern United States. The Company is strategically positioned in over 40 countries to serve global as well as regional customers. Additional information is on the Company’s website at www.greif.com.

Contact:

Matt Eichmann – Investor Relations – matt.eichmann@greif.com – (740) 549-6067

Source: Greif, Inc.