Greif Reports Third Quarter 2022 Results

Greif, Inc., a global leader in industrial packaging products and services, announced third quarter 2022 results.

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

• Net income of $141.8 million or $2.36 per diluted Class A share increased compared to net income of $113.0 million or $1.89 per diluted Class A share. Net income, excluding the impact of adjustments⁽¹⁾, of $141.7 million or $2.35 per diluted Class A share increased compared to net income, excluding the impact of adjustments, of $115.9 million or $1.93 per diluted Class A share.
• Adjusted EBITDA⁽²⁾ of $251.0 million, an increase of $13.2 million compared to Adjusted EBITDA of $237.8 million.
• Net cash provided by operating activities increased by $114.4 million to $209.3 million. Record adjusted free cash flow⁽³⁾ increased by $111.7 million to a source of $175.8 million.
• Total debt decreased by $208.9 million to $2,058.7 million. Net debt⁽⁴⁾ decreased by $236.6 million to $1,931.2 million. The Company’s leverage ratio⁽⁵⁾ decreased to 1.99x from 2.12x sequentially and from 2.80x in the prior year quarter.

Strategic Actions and Announcements

• Held Investor Day 2022 in New York City on June 23, 2022. A key area of discussion was the new Build to Last strategy, which included capital allocation priorities and long-term growth expectations under this strategy.
• Initiated $150.0 million share repurchase program.

CEO Commentary

“Our team delivered an outstanding third quarter financial result, remaining steadfast and execution-focused during a time of macroeconomic uncertainty,” said Ole Rosgaard, President and Chief Executive Officer. “This commitment has led to a rock-solid balance sheet, record free cash flow generation, and EBITDA growth. Our team has done an outstanding job transforming our business, as evidenced by volume growth compared to pre-pandemic 2019 volume levels, despite sequential declines from higher volumes last year. In addition to financial success, our teams have continued to deliver Legendary Customer Service, and made notable progress to further foster Thriving Communities at Greif and Protect Our Future through industry-leading sustainability practice.”

Build to Last Mission Progress

Building upon our Investor Day discussion, in addition to the quarterly releases which support our Build to Last mission of Ensuring Financial Strength, we will continue to update the investment community quarterly regarding key progress on our additional three Build to Last missions.

Customer satisfaction surveys are a key component of our mission to deliver Legendary Customer Service. Our long-term objective is a trailing twelve-month CSI⁽⁶⁾ score of 95.0 or greater. Our consolidated CSI score was 94.3 at the end of the third quarter 2022. CSI for the Global Industrial Packaging segment was 94.1. CSI for the Paper Packaging & Services segment was 95.1.

Towards our mission of Creating Thriving Communities, during the third quarter, we have complemented our continuing efforts by signing the Columbus Commitment, a pledge to close the wage gap and achieve gender pay equity at Greif.

Lastly, as we continue to make steps to Protect Our Future, during the third quarter, we advanced our progress toward setting 2030 ESG targets, which will be announced during our fourth quarter 2022.

Segment Results (all results compared to the third 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. The table below shows the percentage impact of each of these items on net sales for our primary products for the third quarter of 2022 as compared to the prior year quarter for the business segments with manufacturing operations.

Global Industrial Packaging

Net sales decreased by $1.1 million to $906.7 million primarily due to approximately $82.0 million of prior year net sales attributable to the Flexibles Products & Services business that was sold on April 1, 2022, negative foreign currency translation impacts of $69.7 million and lower volumes, offset by higher average selling prices.

Gross profit decreased by $21.7 million to $177.7 million. The decrease in gross profit was primarily due to the same factors that impacted net sales and higher raw material costs, partially offset by lower labor costs.

Operating profit decreased by $14.8 million to $107.2 million primarily due to the same factors that impacted gross profit, partially offset by lower SG&A expenses. Adjusted EBITDA decreased by $29.1 million to $117.1 million primarily due to the same factors that impacted operating profit.

Paper Packaging & Services

Net sales increased by $131.4 million to $710.2 million primarily due to higher published containerboard and boxboard prices, partially offset by lower volumes.

Gross profit increased by $49.3 million to $167.3 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 $49.2 million to $96.7 million primarily due to the same factors that impacted gross profit. Adjusted EBITDA increased by $41.9 million to $131.8 million primarily due to the same factors that impacted operating profit, partially offset by higher SG&A expenses.

Tax Summary

During the third quarter, we recorded an income tax rate of 21.6 percent and a tax rate excluding the impact of adjustments of 21.5 percent. Note that the application of FIN 18 frequently causes fluctuations in our quarterly effective tax rates. For fiscal 2022, we expect our tax rate to range between 27.0 and 31.0 percent and our tax rate excluding adjustments to range between 22.0 and 25.0 percent.

Dividend Summary

On August 30, 2022, 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 October 1, 2022, to stockholders of record at the close of business on September 16, 2022.

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, 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.
(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 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.
(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.
(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.