Greif, Inc. (GEF) reported third quarter results ended July 31,
2012, with adjusted earnings of 75 cents per share, down 40% from
$1.26 earned in the year-ago quarter. Weaker-than-expected volumes
and negative foreign currency translation in the Rigid Industrial
Packaging & Services and Flexible Products & Services
segments dragged down the results. However, earnings per
share comfortably surpassed the Zacks Consensus Estimate of 71
cents. Including special items, earnings per share in the quarter
stood at 70 cents compared with $1.14 in the year-ago quarter.
Operational Update
Sales dipped 2% year over year to $1,102.8 million, which
marginally missed the Zacks Consensus Estimate of $1,115 million.
Sales volumes, including acquisitions, increased 5% but were more
than offset by a negative 6% impact from foreign currency
translation. Selling prices remained flat year over year. Overall,
volumes on a same-structure basis declined 1% from the prior-year
quarter, mainly due to market conditions in the Rigid Industrial
Packaging & Services and Flexible Products & Services
segments, which partially offset stronger volumes in the Paper
Packaging segment.
Cost of sales fell 1% year over year to $900 million in the
reported quarter. Selling, general and administrative expenses
increased 6% year over year to $116 million. Adjusted operating
profit decreased 22% year over year to $91.6 million in the quarter
as weak results in Rigid Industrial Packaging & Services, Land
Management and Flexible Products & Services offset solid
performance of Paper Packaging. Adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization) was $131.3 million
compared with $147.1 million in the year-ago quarter.
Segmental Performance
Rigid Industrial Packaging & Services: Sales inched up 0.15%
year over year to $805 million in the reported quarter. On a
same-structure basis, sales volumes dipped 2% due to weak economic
and market conditions. Positive impact from acquisitions and
increase in prices were mitigated by a negative 7% impact from
foreign currency translation. Adjusted operating income declined
13% to $67 million from $77 million, due to lower volumes in global
markets and negative effect of foreign currency translation.
Flexible Products & Services: The segment reported sales of
$109.7 million, down 22% year over year. Results were affected by a
7% decrease in volumes due to weak market conditions in Europe,
supply chain issues resulting from network consolidation and market
conditions for multiwall bags in the U.S. Decline in prices by 4%
and a negative 9% impact from foreign currency translation further
exacerbated the decline. Operating income plunged 84% to $1.9
million, hurt by lower volumes, higher production costs and startup
costs mainly related to the fabric hub in Saudi Arabia.
Paper Packaging: Sales increased 6% year over year to $182.7
million in the quarter helped by an 8% increase in volumes, which
offset a 2% decline in process due to product mix. The segment
reported an operating profit of $21 million, up 25% from $16.8
million in the prior-year quarter. Benefits from higher volumes and
lower old corrugated container costs were partially offset by
slightly lower selling prices and expenses related to annual mill
maintenance shutdowns at both mills during third quarter 2012.
Land Management: Sales increased 33% year over year to $5.3
million in the quarter, driven by the timing of timber sales.
Operating income, however, declined 85% to $1.6 million.
Financial Position
Greif ended the quarter with cash and cash equivalents of $91.7
million, down from $104.9 million at the end of the second quarter.
Cash flow from operating activities during the quarter improved to
$151.7 million from $35 million in the year-ago quarter. Free cash
flow was $112.9 million compared with negative $11.2 million for
the third quarter of 2011. Long-term debt declined to $1,198.2
million in the quarter from $1,286 million at the end of the second
quarter.
Outlook
The company estimates EBITDA to be in the range of $445 million
- $465 million. Greif had earlier revised its fiscal 2012 guidance
citing weaker volumes and a slower-than-anticipated recovery in the
European market.
The Rigid Industrial Packaging & Services and Flexible
Products & Services segments are expected to bear the brunt of
lower volumes for the balance of the year. The negative effect of
foreign currency translation and the higher annual book tax rate
are also expected to impact fourth quarter 2012 results. On a
positive note, the Paper Packaging and Land Management segments are
expected to perform well. Contributions from contingency actions,
acquisition integration and ongoing Greif Business System
initiatives implemented during 2012 are to benefit fourth quarter
2012 results. EBITDA is anticipated to be $445 million to $465
million for fiscal 2012.
Delaware, Ohio-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
provides land management consulting services. Greif competes with
Longview Fibre Company, RockTenn CP, LLC and Temple-Inland Inc. The
stock retains a quantitative Zacks #5 Rank (short-term Strong Sell
rating) over the near term.
Greif, Inc.
(
GEF
) reported third quarter results ended July 31, 2012, with
adjusted earnings of 75 cents per share, down 40% from $1.26
earned in the year-ago quarter. Weaker-than-expected volumes and
negative foreign currency translation in the Rigid Industrial
Packaging & Services and Flexible Products & Services
segments dragged down the results. However, earnings per share
comfortably surpassed the Zacks Consensus Estimate of 71 cents.
Including special items, earnings per share in the quarter stood
at 70 cents compared with $1.14 in the year-ago quarter.
Operational Update
Sales dipped 2% year over year to $1,102.8 million, which
marginally missed the Zacks Consensus Estimate of $1,115 million.
Sales volumes, including acquisitions, increased 5% but were more
than offset by a negative 6% impact from foreign currency
translation. Selling prices remained flat year over year.
Overall, volumes on a same-structure basis declined 1% from the
prior-year quarter, mainly due to market conditions in the Rigid
Industrial Packaging & Services and Flexible Products &
Services segments, which partially offset stronger volumes in the
Paper Packaging segment.
Cost of sales fell 1% year over year to $900 million in the
reported quarter. Selling, general and administrative expenses
increased 6% year over year to $116 million. Adjusted operating
profit decreased 22% year over year to $91.6 million in the
quarter as weak results in Rigid Industrial Packaging &
Services, Land Management and Flexible Products & Services
offset solid performance of Paper Packaging. Adjusted EBITDA
(earnings before interest, taxes, depreciation and amortization)
was $131.3 million compared with $147.1 million in the year-ago
quarter.
Segmental Performance
Rigid Industrial Packaging & Services: Sales inched up
0.15% year over year to $805 million in the reported quarter. On
a same-structure basis, sales volumes dipped 2% due to weak
economic and market conditions. Positive impact from acquisitions
and increase in prices were mitigated by a negative 7% impact
from foreign currency translation. Adjusted operating income
declined 13% to $67 million from $77 million, due to lower
volumes in global markets and negative effect of foreign currency
translation.
Flexible Products & Services: The segment reported sales
of $109.7 million, down 22% year over year. Results were affected
by a 7% decrease in volumes due to weak market conditions in
Europe, supply chain issues resulting from network consolidation
and market conditions for multiwall bags in the U.S. Decline in
prices by 4% and a negative 9% impact from foreign currency
translation further exacerbated the decline. Operating income
plunged 84% to $1.9 million, hurt by lower volumes, higher
production costs and startup costs mainly related to the fabric
hub in Saudi Arabia.
Paper Packaging: Sales increased 6% year over year to $182.7
million in the quarter helped by an 8% increase in volumes, which
offset a 2% decline in process due to product mix. The segment
reported an operating profit of $21 million, up 25% from $16.8
million in the prior-year quarter. Benefits from higher volumes
and lower old corrugated container costs were partially offset by
slightly lower selling prices and expenses related to annual mill
maintenance shutdowns at both mills during third quarter
2012.
Land Management: Sales increased 33% year over year to $5.3
million in the quarter, driven by the timing of timber sales.
Operating income, however, declined 85% to $1.6 million.
Financial Position
Greif ended the quarter with cash and cash equivalents of
$91.7 million, down from $104.9 million at the end of the second
quarter. Cash flow from operating activities during the quarter
improved to $151.7 million from $35 million in the year-ago
quarter. Free cash flow was $112.9 million compared with negative
$11.2 million for the third quarter of 2011. Long-term debt
declined to $1,198.2 million in the quarter from $1,286 million
at the end of the second quarter.
Outlook
The company estimates EBITDA to be in the range of $445
million - $465 million. Greif had earlier revised its fiscal 2012
guidance citing weaker volumes and a slower-than-anticipated
recovery in the European market.
The Rigid Industrial Packaging & Services and Flexible
Products & Services segments are expected to bear the brunt
of lower volumes for the balance of the year. The negative effect
of foreign currency translation and the higher annual book tax
rate are also expected to impact fourth quarter 2012 results. On
a positive note, the Paper Packaging and Land Management segments
are expected to perform well. Contributions from contingency
actions, acquisition integration and ongoing Greif Business
System initiatives implemented during 2012 are to benefit fourth
quarter 2012 results. EBITDA is anticipated to be $445 million to
$465 million for fiscal 2012.
Delaware, Ohio-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
provides land management consulting services. Greif competes with
Longview Fibre Company
,
RockTenn CP, LLC
and
Temple-Inland Inc
. The stock retains a quantitative Zacks #5 Rank (short-term
Strong Sell rating) over the near term.
GREIF INC (GEF): Free Stock Analysis Report
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