Greif Reports First Quarter 2021 Results
Greif, Inc. (“Greif” or the “Company”), a global leader in industrial packaging products and services, today announced first quarter 2021 results.
First Quarter Financial Highlights include (all results compared to the first quarter of 2020 unless otherwise noted):
– Net income of $23.4 million or $0.40 per diluted Class A share decreased compared to net income of $32.3 million or $0.55 per diluted Class A share. Net income, excluding the impact of adjustments(1), of $35.9 million or $0.61 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $37.9 million or $0.64 per diluted Class A share. Adjusted EBITDA(2) decreased by $8.9 million to $138.5 million.
– Net cash provided by operating activities decreased by $8.0 million to a source of $11.5 million.
Adjusted free cash flow(3) increased by $1.8 million to a use of $11.5 million.
– Total debt decreased by $268.7 million to $2,539.4 million. Net debt(4) decreased by $279.3 million to $2,438.0 million.
Strategic Actions and Announcements
– The Company has made changes to the Rigid Industrial Packaging & Services (“RIPS”) and Flexible Products & Services (“FPS”) operational and financial management practices and procedures and combined the two segments under a single global leadership team. These changes were made to enhance cross-selling and service offerings to customers within similar markets and enhance Greif Business System effectiveness. As a result of these changes, during the first quarter of 2021, the RIPS segment and the FPS segment have been combined into a single reportable segment known as Global Industrial Packaging. Prior to close of business on February 24, 2021 the Company filed a Current Report on Form 8-K with the SEC to furnish certain historical GAAP and non-GAAP financial information in a revised presentation aligned with the Company’s new reportable segment structure described above.
– Awarded an A- Leadership ranking for the third consecutive year by CDP as part of their annual climate change assessment and named to CDP’s 2020 Supplier Engagement Leaderboard, placing Greif in the top 7% of suppliers assessed. Also recognized as one of America’s most responsible companies for the second consecutive year by Newsweek.
Pete Watson, Greif’s President and Chief Executive Officer, commented:
“Greif delivered solid first quarter results despite continued challenging circumstances due to the pandemic. Volumes grew across most of our packaging substrates as many of our key end markets improved and were particularly robust in our corrugated business. In response to strong demand for our products and cost inflation experienced in our key raw materials and transportation services, we are actively implementing price increases across our broad global product portfolio.
Looking ahead, Greif is well positioned to benefit as the world recovers from the pandemic. We remain laser focused on managing those areas within our control to drive value creation.”
The Company’s consolidated CSI(5) score was 92.1 during the fiscal first quarter 2021 and 92.6 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 Global Industrial Packaging segment was 94.7, which was roughly flat to the prior year quarter. CSI for the Paper Packaging & Services segment was 88.8, which was roughly 4% lower compared to the prior year quarter as a result of strong product demand that impacted customer delivery timing.
Liquidity and Balance Sheet
As of January 31, 2021, the Company had $420.9 million of available borrowing capacity(6) under its $800.0 million revolving credit facility. During the quarter 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 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.
Segment Results (all results compared to the first quarter of 2020 unless otherwise noted)
Net sales are impacted mainly by the volume of primary products(7) 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 first quarter of 2021 as compared to the prior year quarter for the business segments with manufacturing operations.
Global Industrial Packaging
Net sales increased by $27.6 million to $659.3 million. Net sales excluding foreign currency translation increased by $18.9 million primarily due to higher volumes and higher average sale prices partly driven by contractual price adjustment mechanisms related to raw material price increases.
Gross profit increased by $10.2 million to $130.3 million. The increase in gross profit was primarily due to the same factors that impacted net sales, partially offset by higher transportation expenses.
Operating profit increased by $9.2 million to $54.0 million. Adjusted EBITDA increased by $12.9 million to $79.5 million primarily due to the same factors that impacted gross profit.
Paper Packaging & Services
Net sales increased by $7.2 million to $480.9 million primarily due to higher published containerboard prices and higher volumes. Net sales for the first quarter 2020 included $53.0 million of net sales attributable to the divested Consumer Packaging Group business, which was sold on April 1, 2020.
Gross profit decreased by $20.5 million to $79.6 million. The decrease in gross profit was primarily due to higher old corrugated container and other raw material input costs and higher transportation expenses.
Operating profit decreased by $18.2 million to $14.3 million. Adjusted EBITDA decreased by $21.8 million to $56.1 million primarily due to the same factors that impacted gross profit.
Net sales decreased by $0.7 million to $6.3 million.
Operating profit decreased by $0.2 million to $1.7 million. Adjusted EBITDA remained flat at $2.9 million.
During the first quarter, the Company recorded an income tax rate of 16.8 percent. The Company’s tax rate excluding the impact of adjustments was 19.7 percent. The application of FIN 18 frequently causes fluctuations in our quarterly effective tax rates.
On February 23, 2021, the Board of Directors declared quarterly cash dividends of $0.44 per share of Class A Common Stock and $0.66 per share of Class B Common Stock. Dividends are payable on April 1, 2021, to stockholders of record at the close of business on March 19, 2021.
The Company is utilizing quarterly outlook given the continued market unpredictability caused by the COVID-19 pandemic.
For the full first 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 restructuring charges, acquisition and integration related costs, non-cash asset impairment charges, non-cash pension settlement charges (income), incremental COVID-19 costs, net and loss (gain) on disposal of properties, plants, equipment and businesses, net.
(2) Adjusted EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization expense, plus restructuring charges, plus acquisition and integration related costs, plus non-cash asset impairment charges, plus non-cash pension settlement charges (income), plus incremental COVID-19 costs, net, plus loss (gain) on disposal of properties, plants, equipment and businesses, net.
(3) Adjusted free cash flow is defined as net cash provided by operating activities, less cash paid for purchases of properties, plants and equipment, plus cash paid for acquisition and integration related costs, plus cash paid for incremental COVID-19 costs, net, plus cash paid for acquisition and integration 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) 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.
(7) Primary products are manufactured steel, plastic and fibre drums; new and reconditioned intermediate bulk containers; 1&2 loop and 4 loop flexible intermediate bulk containers; linerboard containerboard, corrugated sheets and corrugated containers, and boxboard and tube and core products.
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.
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.
Matt Eichmann – Investor Relations – email@example.com – (740) 549-6067
Source: Greif, Inc.