Greif Reports Third Quarter 2023 Results

Greif, Inc., a global leader in industrial packaging products and services, today announced third quarter 2023 results.

Third Quarter Financial Highlights include (all results compared to the third quarter of 2022 unless otherwise noted)

• Net income of $90.3 million or $1.55 per diluted Class A share decreased compared to net income of $141.8 million or $2.36 per diluted Class A share. Net income, excluding the impact of adjustments⁽¹⁾, of $102.1 million or $1.75 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $141.7 million or $2.35 per diluted Class A share.
• Gross profit decreased only $39.9 million compared to a net sales decrease of $291.8 million due to the continued cost management actions implemented.
• Adjusted EBITDA⁽²⁾ of $226.5 million decreased by $24.5 million compared to Adjusted EBITDA of $251.0 million.
• Net cash provided by operating activities decreased by $7.0 million to $202.3 million. Adjusted free cash flow⁽³⁾ decreased by $8.7 million to a source of $167.1 million.
• Total debt of $2,171.5 million increased by $112.8 million. Net debt⁽⁴⁾ increased by $82.6 million to $2,013.8 million. Our leverage ratio⁽⁵⁾ decreased to 2.17x from 2.25x sequentially, which is within our targeted leverage ratio range of 2.0x – 2.5x, and increased from 1.99x in the prior year quarter.

Strategic Actions and Announcements

• Acquisition of a 51% ownership interest in ColePak, LLC on August 23, 2023. ColePak is a manufacturer of bulk and specialty partitions made from both containerboard and uncoated recycled board serving a broad range of applications in food, beverage, and other markets. This business provides a unique and margin-accretive converting capability to Greif’s Paper Packaging & Services business segment and offers incremental integration benefits to our containerboard and uncoated recycled board mills.
• Announced increase of our quarterly dividend per share by $0.02 and $0.03 for Class A and Class B shares, respectively. This quarterly dividend increase is aligned with our broader capital allocation strategy and is a testament to the growth and continued strength of our free cash flow generation.

CEO Commentary

“Our team has once again demonstrated exceptional performance in delivering strong earnings, margin, and free cash flow performance despite continued volume challenges and ongoing uncertainty in end-markets worldwide,” commented Ole Rosgaard, President and Chief Executive Office of Greif. “Our Build to Last strategy is clearly delivering value as we execute on our cost-management playbook and gain new business, with mix and margin benefits, underpinned by a continuous improvement focus throughout the enterprise. Collectively, these efforts drove EBITDA performance above our expectations and resulted in an impressive free cash flow conversion of nearly 75% in the quarter, truly a commendable outcome considering an average volume decline of 13% across our global product portfolio. While the macroeconomic picture continues to be unclear, we remain focused on executing consistently and serving our customers with excellence and superior customer service. I sincerely thank the entire Greif team for their dedication and hard work through a challenging quarter.”

Build to Last Mission Progress

Customer satisfaction is a key component of our mission to deliver Legendary Customer Service. Our consolidated CSI⁽⁶⁾ score was 94.2 at the end of the third quarter 2023. Paper Packaging & Services CSI score was 93.6, and Global Industrial Packaging CSI score was 94.9. We thank our customers for their continued feedback which is critical to helping us achieve our vision to be the best performing customer service company in the world, and we are proud to continue to earn positive feedback from our customers throughout a difficult global operating environment.

In addition to delivering Legendary Customer Service, a key element of our Build to Last Strategy is Creating Thriving Communities for our colleagues. Building upon the successes to-date, this quarter we launched our first-ever Colleague Stock Purchase Plan to all colleagues in the United States. This plan enables our colleagues to acquire Greif stock at a discount to market prices and to enjoy the financial benefits of owning shares. We also believe further aligning colleague interests with the rest of our shareholders will drive incremental performance and accountability benefits, as well as accelerate idea generation to improve our operations. We are excited to launch this program and welcome a growing number of our colleagues to our investor community.

Segment Results (all results compared to the third quarter of 2022 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 third quarter of 2023 as compared to the prior year quarter for the business segments with manufacturing operations. Net sales from Lee Container and Centurion Container’s primary products are not included in the table below, but will be included in the Global Industrial Packaging segment starting in the first quarter and second quarter of fiscal 2024 respectively.

Net Sales Impact – Primary Products	Global IndustrialPackaging		Paper Packaging &Services
Currency Translation	(2.3) %		(0.1) %
Volume	(12.6) %		(13.7) %
Selling Prices and Product Mix	(7.4) %		(5.9) %
Total Impact of Primary Products	(22.3) %		(19.7) %

Global Industrial Packaging

Net sales decreased by $144.9 million to $761.8 million primarily due to lower volumes and lower average selling prices.

Gross profit decreased by $0.9 million to $176.8 million. The decrease in gross profit was primarily due to the same factors that impacted net sales and higher depreciation and amortization expenses, partially offset by lower raw material, transportation and manufacturing costs.

Operating profit decreased by $5.2 million to $102.0 million primarily due to the same factors that impacted gross profit. Adjusted EBITDA increased by $9.4 million to $126.5 million primarily due to lower raw material, transportation and manufacturing costs excluding depreciation and amortization expenses, partially offset by the same factors that impacted net sales.

Paper Packaging & Services

Net sales decreased by $146.3 million to $563.9 million primarily due to lower volumes and lower average selling prices.

Gross profit decreased by $39.2 million to $128.1 million. The decrease in gross profit was primarily due to the same factors that impacted net sales, partially offset by lower raw material, transportation and manufacturing costs.

Operating profit decreased by $44.6 million to $52.1 million primarily due to the same factors that impacted gross profit. Adjusted EBITDA decreased by $33.7 million to $98.1 million primarily due to the same factors that impacted gross profit.

Tax Summary

During the third quarter, we recorded an income tax rate percent and a tax rate excluding the impact of adjustments of 24.5 percent. Note that the application of FIN 18 frequently causes fluctuations in our quarterly effective tax rates. For fiscal 2023, we expect our tax rate and our tax rate excluding adjustments to be towards the high-end of our 23.0 to 27.0 percent range.

Dividend Summary

On August 29, 2023, the Board of Directors declared quarterly cash dividends of $0.52 per share of Class A Common Stock and $0.78 per share of Class B Common Stock. Dividends are payable on October 1, 2023, to stockholders of record at the close of business on September 15, 2023.

Company Outlook

(in millions)	Fiscal 2023 Outlook Reported at Q3
Adjusted EBITDA	$790 – $820
Adjusted free cash flow	$400 – $430

For the full third 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, (gain) loss 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 (gain) loss 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 integration related Enterprise Resource Planning (ERP) systems and equipment, plus cash paid for taxes related to Tama, Iowa mill divestment.
(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.

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.

Note: Fiscal 2023 net income, the most directly comparable GAAP financial measure to Adjusted EBITDA, is not provided in this release due to the potential for one or more of the following, the timing and magnitude of which we are unable to reliably forecast: restructuring-related activities; acquisition and integration related costs; non-cash pension settlement charges; non-cash asset impairment charges due to unanticipated changes in the business; gains or losses on the disposal of businesses or properties, plants and equipment, net. No reconciliation of the 2023 guidance of Adjusted EBITDA, a non-GAAP financial measure which excludes restructuring charges, acquisition and integration costs, non-cash asset impairment charges, non-cash pension settlement charges, and (gain) loss on the disposal of properties, plants, equipment and businesses, net, is included in this release because, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, we are unable to quantify certain amounts that would be required to be included in net income, the most directly comparable GAAP financial measure, without unreasonable efforts. A reconciliation of the 2023 guidance of adjusted free cash flow to fiscal 2023 forecasted net cash provided by operating activities, the most directly comparable GAAP financial measure, is included in this release.

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, jerrycans and other small plastics, 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.