Greif Reports First Quarter 2023 Results

Greif, Inc. (“Greif”), a global leader in industrial packaging products and services, today announced first quarter 2023 results.

First Quarter Financial Highlights include (all results compared to the first quarter of 2022 unless otherwise noted):

• Net income of $89.9 million or $1.54 per diluted Class A share increased compared to net income of $10.3 million or $0.18 per diluted Class A share. Net income, excluding the impact of adjustments⁽¹⁾, of $61.9 million or $1.06 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $75.6 million or $1.28 per diluted Class A share.
    
• Adjusted EBITDA⁽²⁾ of $164.5 million decreased by $32.3 million compared to Adjusted EBITDA of $196.8 million.
    
• Net cash provided by operating activities increased by $10.5 million to $32.9 million. Adjusted free cash flow⁽³⁾ increased by $11.2 million to a use of $7.6 million.
    
• Total debt decreased by $67.5 million to $2,229.3 million. Net debt⁽⁴⁾ decreased by $108.8 million to $2,068.3 million. Our leverage ratio⁽⁵⁾ increased to 2.11x from 1.73x sequentially, which is within our targeted leverage ratio range of 2.0x – 2.5x, but decreased from 2.39x in the prior year quarter.

Strategic Actions and Announcements

• Completed previously announced acquisition of Lee Container Corporation. Our Greif team, including our newly welcomed colleagues, is progressing ahead of schedule on planned integration, and we reaffirm our expectation to fully realize expected synergies of at least $6.0 million.
    
• Announced a definitive agreement to increase Greif’s current 9% ownership interest in Centurion Container LLC, a leader in the North American IBC reconditioning industry, to an 80% stake in an all-cash transaction for $145.0 million, subject to customary purchase price adjustments for cash and debt, as well as customary closing conditions, including regulatory clearances. Greif has been a joint venture partner of Centurion since 2020 and is expanding our ownership as part of our ongoing commitment to grow in high margin, highly sustainable resin-based products.

CEO Commentary

“I am very proud of our team’s execution in first quarter 2023 despite multiple headwinds: destocking, lower customer demand and continued inflationary pressures,” said Ole Rosgaard, Chief Executive Officer of Greif. “The pace and severity of these headwinds progressed rapidly during the quarter and pressured results in both business segments. Despite these challenges, our teams around the world demonstrated resiliency in rapidly adapting to these changing conditions while continuing to deliver on our Build to Last strategy and making meaningful progress towards our long-term strategic missions.”

Build to Last Mission Progress

Customer satisfaction surveys are a key component of our mission to deliver Legendary Customer Service. Our consolidated CSI⁽⁶⁾ score was 95.0 at the end of the first quarter 2023, which is Greif’s aspirational target. We look forward to building upon this achievement and continuing our focus on delivering exceptional service to our customers.

During the quarter, Greif recognized 122 of our global facilities for an accident-free year in 2022, with over 10 million safe hours worked. The safety of our people is our number one priority and the foundation of Creating Thriving Communities. We are very proud of our global Greif team for a record year of safety excellence.

Additionally, during the quarter we published our 2030 Sustainability Targets, highlighting our commitment to advancing a circular economy, reducing greenhouse gas emissions, and championing diversity, equity & inclusion initiatives. Protecting Our Future is critical to the future success of Greif. More information on our 2030 targets is available at our sustainability homepage at https://www.greif.com/sustainability/ and will be a part of our 14th annual sustainability report, publicly available in April 2023.

(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.
(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.

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.

Segment Results (all results compared to the first 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 first quarter of 2023 as compared to the prior year quarter for the business segments with manufacturing operations. Net sales from Lee 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 of fiscal 2024.

Net Sales Impact – Primary Products	Global IndustrialPackaging		Paper Packaging &Services
Currency Translation	(3.2) %		(0.1) %
Volume	(13.8) %		(17.0) %
Selling Prices and Product Mix	(3.7) %		10.6 %
Total Impact of Primary Products	(20.7) %		(6.5) %

Global Industrial Packaging

Net sales decreased by $243.3 million to $705.8 million primarily due to approximately $89.4 million of prior year net sales attributable to the Flexible Products & Services business, negative foreign currency translation impacts, and lower volumes and selling prices.

Gross profit decreased by $51.8 million to $125.3 million. The decrease in gross profit was primarily due to the same factors that impacted net sales, partially offset by lower raw material, transportation, labor, utility and maintenance costs.

Operating profit increased by $14.9 million to $45.9 million primarily due to the $62.4 million non-cash impairment charge during the first quarter of 2022 for the Flexible Products & Services business divestiture, partially offset by the same factors that impacted gross profit. Adjusted EBITDA decreased by $42.4 million to $71.8 million primarily due to the same factors that impacted gross profit, partially offset by lower SG&A expenses.

Paper Packaging & Services

Net sales decreased by $49.8 million to $560.2 million primarily due to lower volumes, partially offset by higher published containerboard and boxboard prices.

Gross profit increased by $13.4 million to $124.2 million. The increase in gross profit was primarily due to higher published containerboard and boxboard prices and lower raw material, transportation, and labor costs, partially offset by lower volumes and higher manufacturing costs.

Operating profit increased by $70.8 million to $109.1 million primarily due to the same factors that impacted gross profit and the $54.6 million gain from the divestiture of the Tama, Iowa mill in the Paper Packaging & Services segment during the first quarter of 2023. Adjusted EBITDA increased by $10.2 million to $90.7 million primarily due to the same factors that impacted gross profit.

Tax Summary

During the first quarter, we recorded an income tax rate of 28.9 percent and a tax rate excluding the impact of adjustments of 24.9 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 February 28, 2023, the Board of Directors declared quarterly cash dividends of $0.50 per share of Class A Common Stock and $0.75 per share of Class B Common Stock. Dividends are payable on April 1, 2023, to stockholders of record at the close of business on March 17, 2023.

(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.

Company Outlook

Given the significant deterioration of product demand in the past two quarters and the degree of uncertainty in the forward looking macro-economic environment, we are unable to determine the trajectory of product demand for the remainder of our fiscal year.  As a result, we are providing only a low-end guidance estimate that is based on the continuation of demand trends reflected in the recent two quarters and February, modified by normal lifts related to agricultural, construction, and other seasonal end markets. In addition, we have factored in the impact of potential negative price trends in our paper business that could result from extended negative demand trends. Lastly, the low-end guidance estimate does not factor in any contribution from the recently announced potential Centurion transaction or other near-term actionable opportunities in our M&A pipeline, which, if closed and depending on timing, could add an additional $20 million to $40 million of Adjusted EBITDA to fiscal 2023.   

(in millions, except per share amounts)	Fiscal 2023 Low-End Guidance Estimate Reported at Q1
Adjusted EBITDA	$740
Adjusted free cash flow	$370

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 low-end guidance estimate 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 low-end guidance estimate 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.

For the full first quarter results, click here.

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.