) reported second-quarter fiscal 2014 (ended Apr 30, 2014) results
with adjusted earnings of 57 cents per share, down 17.4% from 69
cents per share in the year-ago quarter, due to disrupted
production in its flexible products manufacturing facility in
Turkey. Results also fell short of the Zacks Consensus Estimate of
68 cents per share.
Drop in earnings is in line with Greif's previous announcement that
second-quarter earnings would be adversely affected by production
disorder caused by protestors occupying the facility in Hadimkoy,
Turkey for 60 days. The company also revealed that inclement
weather will likely weigh on the Paper Packaging and Rigid
Industrial Packaging segments. Due to these reasons quarterly
earnings negatively impacted by approximately $20 million.
Including special items, earnings per share in the quarter were 61
cents compared with 69 cents in the year-ago quarter.
Revenues improved 1.1% year over year to $1,100.7 million from
$1,088.9 million. The top line missed the Zacks Consensus Estimate
of $1,131 million. The year-over-year growth in net sales was
primarily attributable to increase in selling prices, partially
offset by negative impact from foreign currency translation.
Cost of sales increased 1.2% year over year to $204 million. Gross
profit inched up 0.8% year over year to $204 million compared with
the year-ago quarter.
Selling, general and administrative expenses (SG&A) increased
11% year over year to $135.4 million. Adjusted operating profit
decreased 15.9% year over year to $70.6 million. Adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
declined 8% to $100.9 million from $112 million in the year-ago
Rigid Industrial Packaging & Services:
This segment reported sales of $784.3 million, up 1.4% from $773.4
million in the year-ago quarter. The growth was driven by 3%
increase in selling prices primarily as a result of pass-through of
higher resin costs, changes in product mix and volume improvement
in Europe. These were adversely affected by unfavorable foreign
currency translations. Adjusted operating income went down to $47.2
million from $53.2 million in the year-ago quarter.
Flexible Products & Services:
Sales from this segment went down 6.3% year over year to $105.3
million. The decrease in net sales was attributed to decrease in
selling price of 5.6% and in volume of 1.7% due to the disturbance
at the manufacturing facility in Turkey and product mix, partly
offset by the positive impact of 1% foreign currency translation.
The segment reported an operating loss of $10.3 million, compared
with the prior year profit of $0.8 million.
Sales increased 5.4% year over year to $205 million, aided by
higher selling prices as a result of the pass-through of
containerboard price increase and increasing sales of specialty
products, partially offset by the impact of adverse weather
conditions. The segment reported a record adjusted operating profit
of $26.5 million, up 3.1% from $25.7 million in the year-ago
period. The increase was driven by higher selling prices partially
offset by higher energy and input and logistic costs.
This segment's sales decreased 29.1% year over year to $6.1 million
driven by lower sales of timber. Operating income improved nearly
three fold to $11.2 million due to gain on the disposal of
Greif ended the quarter with cash and cash equivalents of $87.4
million of Apr 30, 2014, as against $78 million as of Oct 31, 2013.
Cash from operations during the quarter was $102.7 million versus
$107.8 million in the prior-year quarter.
Long-term debt was $1.3 billion as of Apr 30, 2014, up from $1.2
billion as of Oct 31, 2013. The debt-to-capitalization ratio
expanded 320 bps to 47.9% as of Jan 31, 2014, from 46.3% as of Oct
31, 2013. Capital expenditures were $27.5 million in the reported
quarter versus $27 million the prior-year comparable period.
For fiscal 2014, Greif trimmed Earnings before interest, taxes,
depreciation and amortization (EBITDA) guidance in the range of
$475 million to $505 million from the previous band of $490 million
to $540 million. Excluding timberland gains of around $20 million
or 20 cents per share, earnings per share was also lowered to the
new band of $2.48 to $2.80 from $2.60 to $3.15.
Greif anticipates a gradual global economic recovery during fiscal
2014, which should result in moderate sales and volume improvement,
along with slightly higher raw material costs. The company expects
that the Rigid Industrial Packaging segment will benefit from
moderate volume growth, especially in Europe.
In addition Flexible Products segment is repositioned for
sustainable growth and profitability during the second half of 2014
depending on the implementation of specific actions regarding the
disrupted production in the manufacturing facility in Turkey.
The company is expected to benefit from the sale of select non-core
assets. Greif's plans to accelerate restructuring actions will also
drive growth. However, foreign exchange volatility as well as
social and political unrest remains headwinds.
Delaware, OH-based Greif manufactures and sells industrial
packaging products, bulk containers, and containerboard and
corrugated products worldwide. The company provides services such
as blending, filling, packaging and recycling of industrial
containers for a wide range of industries. Greif also manages
timber properties in North America and offers land management
Greif currently carries a Zacks Rank #4 (Sell). Some better-ranked
stocks in the same sector include
Crown Holdings Inc.
Graphic Packaging Holding Co.
AO Smith Corp.
). While Crown Holdings has a Zacks Rank #1 (Strong Buy), Graphic
Packaging and AO Smith carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
GREIF INC (GEF): Free Stock Analysis Report
SMITH (AO) CORP (AOS): Free Stock Analysis
CROWN HLDGS INC (CCK): Free Stock Analysis
GRAPHIC PKG HLD (GPK): Free Stock Analysis
To read this article on Zacks.com click here.