Greif Reports Second Quarter 2022 Results

Greif, Inc. (“Greif”), a global leader in industrial packaging products and services, today announced second quarter 2022 results.

Second Quarter Financial Highlights include (all results compared to the second quarter of 2021 unless otherwise noted):

• Net income of $125.1 million or $2.09 per diluted Class A share decreased compared to net income of $149.8 million or $2.51 per diluted Class A share. Second quarter 2021 net income included a one-time $95.7 million gain from sale of approximately 69,200 acres of timberlands in southwest Alabama. Net income, excluding the impact of adjustments⁽¹⁾, of $144.9 million or $2.41 per diluted Class A share increased compared to net income, excluding the impact of adjustments, of $67.3 million or $1.13 per diluted Class A share.
• Adjusted EBITDA⁽²⁾ of $251.0 million, an increase of $74.4 million compared to Adjusted EBITDA of $176.6 million.
• Net cash provided by operating activities decreased by $13.1 million to $139.2 million. Adjusted free cash flow⁽³⁾ decreased by $11.9 million to a source of $114.8 million.
• Total debt decreased by $213.5 million to $2,099.9 million. Net debt⁽⁴⁾ decreased by $211.8 million to $1,991.2 million. The Company’s leverage ratio⁽⁵⁾ decreased to 2.12x from 2.39x sequentially and from 3.20x in the prior year quarter.

Strategic Actions and Announcements

• Completed divestment of our 50% equity interest in the Flexible Products & Services joint venture and applied the net cash proceeds of $131.6 million received during the quarter towards repayment of debt.
• Redeemed our $500.0 million, 6.5% Senior notes due 2027 by amending and expanding borrowings under our credit agreement, which lowered our overall interest rate as of the end of the quarter by over 300 basis points.
• Published our 13th consecutive annual sustainability report, which highlighted significant milestones on climate, waste and circularity commitments.
• Reminder of Investor Day in New York City on June 23, 2022, which will feature discussions of the new Build to Last Strategy for Greif, capital deployment opportunities, sustainability progress and other key strategic programs for the future of the Company.

CEO Commentary

“Our second quarter results are a testament to our team’s continued execution and customer service focus in overcoming significant ongoing headwinds related to inflation, supply chain, and the pandemic to produce another quarter of record results,” said Ole Rosgaard, President and Chief Executive Officer of Greif. “This level of execution is exemplary of the Build to Last strategy in action, and is a fitting lead-in to our upcoming Investor Day on June 23 in New York City where we will be discussing that strategy and future growth for our Company in much greater detail. We hope to see you there.”

Customer Service, Sustainability and Colleague Engagement

The Company’s consolidated CSI⁽⁶⁾ score was 93.0 during the fiscal second quarter. 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 93.4, which was 1.5% lower than the prior year quarter. CSI for the Paper Packaging & Services segment was 92.6, which was 1.2% higher than the prior year quarter.

During the quarter, the Company completed its 13th annual sustainability report. The report is prepared using the Global Reporting Initiative’s (“GRI”) Core option and is in full accordance with the GRI Standards and the Sustainability Accounting Standards Board Application Guidance. The report also fulfills the United Nations’ Global Compact annual “Communication on Progress” requirement. The sustainability report is available for review at https://sustainability.greif.com. Report highlights include:

• Updates on critical milestones, such as Greif achieving >90% waste diverted from landfill at 149 facilities, including 50 facilities achieving our Zero Waste to Landfill target.
• Review of our 2021 Materiality Assessment, including identified material sustainability topics and progress made on each topic.
• Discussion of Greif Diversity, Equity & Inclusion efforts and important milestones achieved.
• Results from our 2021 Climate Change Workshop, including advancement opportunities identified and performance on those opportunities.
• Discussion of new key partnerships that will help further advance sustainability leadership at Greif to attain our 2030 Goals.

The Company has completed its 5^th annual Colleague Engagement Survey administered by Gallup. Based on feedback received in the most recent survey, the Company is again recognized within the top quartile of all manufacturing companies. Additionally, the Company expanded our overall engagement percentage to exceed the mean U.S. engagement score, highlighting the extraordinary commitment of our diverse, talented and engaged colleagues.

Segment Results (all results compared to the second quarter of 2021 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.

Global Industrial Packaging

Net sales increased by $173.7 million to $971.7 million. Net sales excluding foreign currency translation increased by $213.6 million primarily due to higher average selling prices and product mix, partially offset by lower volumes.

Gross profit increased by $15.2 million to $185.3 million. The increase in gross profit was primarily due to the same factors that impacted net sales, partially offset by higher raw material costs.

Operating profit increased by $31.6 million to $108.0 million. Adjusted EBITDA increased by $24.7 million to $130.9 million primarily due to the same factors that impacted gross profit.

Paper Packaging & Services

Net sales increased by $152.3 million to $689.3 million primarily due to higher volumes and higher published containerboard and boxboard prices.

Gross profit increased by $56.9 million to $150.8 million. The increase in gross profit was primarily due to the same factors that impacted net sales, partially offset by higher raw material, transportation, labor and utility costs.

Operating profit increased by $52.8 million to $80.1 million. Adjusted EBITDA increased by $49.1 million to $117.4 million primarily due to the same factors that impacted gross profit.

Tax Summary

During the second quarter, the Company recorded an income tax rate of 19.2 percent and a tax rate excluding the impact of adjustments of 20.2 percent. Note that the application of FIN 18 frequently causes fluctuations in our quarterly effective tax rates. For fiscal 2022, the Company expects its tax rate to range between 27.0 and 31.0 percent and its tax rate excluding adjustments to range between 22.0 and 25.0 percent.

Dividend Summary

On June 7, 2022, the Board of Directors declared quarterly cash dividends of $0.46 per share of Class A Common Stock and $0.69 per share of Class B Common Stock. Dividends are payable on July 1, 2022, to stockholders of record at the close of business on June 17, 2022.

For the full second 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, debt extinguishment charges, integration related costs, non-cash asset impairment charges, non-cash pension settlement charges, incremental COVID-19 costs, net, (gain) loss on disposal of properties, plants, equipment and businesses, net, and timberland gains, net.

(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 integration related costs, plus non-cash asset impairment charges, plus non-cash pension settlement charges, plus incremental COVID-19 costs, net, plus (gain) loss on disposal of properties, plants, equipment and businesses, net, plus timberland gains, 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 integration related costs, plus cash paid for incremental COVID-19 costs, net, plus cash paid for integration related Enterprise Resource Planning (“ERP”) systems, plus cash paid for debt issuance costs.

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

(5) Leverage ratio for the periods indicated is defined as net debt divided by trailing twelve month EBITDA, each as calculated under the terms of the Company’s Second Amended and Restated Credit Agreement dated as of March 1, 2022, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2022 (the “2022 Credit Agreement”).

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

(7) Primary products are manufactured steel, plastic and fibre drums; new and reconditioned intermediate bulk containers; linerboard, containerboard, corrugated sheets and corrugated containers; and boxboard and tube and core products.

About Greif

Greif is a global leader in industrial packaging products and services and is pursuing its vision: to be the best performing customer service company in the world. The Company produces steel, plastic and fibre drums, intermediate bulk containers, reconditioned containers, 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 35 countries to serve global as well as regional customers. Additional information is on the Company’s website at www.greif.com.

Contact:

Matt Leahy – Vice President, Corporate Development & Investor Relations – Matthew.Leahy@Greif.com – (740) 549-6158

Source: Greif, Inc.