Greif Bros. Corporation (GEF)

GEF 
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Greif Brothers Inc. (GEF)

F4Q08 Earnings Call

December 11, 2008; 10:00 am ET

Executives

Michael Gasser - Chairman and Chief Executive Officer

Don Huml - Executive Vice President and Chief Financial Officer

Deborah Strohmaier - Vice President, Corporate Communications

Analysts

Christopher Chun - Deutsche Bank

Chris Manuel - KeyBanc Capital

Jim Lucas - Janney Montgomery Scott

Mark Wilde - Deutsche Bank

Jack Hain - Barrington Research

Bob Franklin - Prudential Financial

Bob Sketch - Lord Abbot

Mike Blassie - Point Advisors

Presentation

Operator

Good morning. My name is Christy and I will be your conference operator today. At this time I would like to welcome everyone to the Greif fourth quarter and fiscal year conference call. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

Ms. Strohmaier, you may begin.

Deborah Strohmaier

Thank you, Christy. Good morning. As a reminder you may follow this presentation on the web at www.greif.com in the Investor Center under Conference Calls. If you don’t already have the Earnings Release, it is also available on our website. We are on slide two.

The information provided during this mornings call contains forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are on slide two of this presentation in the company’s 2007 Form 10-K and in other company SEC filings as well as company earnings news releases.

As noted on slide three, this presentation uses certain non-GAAP financial measures, including those that exclude special items such as restructuring charges and timberland disposals. Management believes that non-GAAP measures provide a better indication of operational performance and a more stable platform on which to compare the historical performance to the company than the most nearly equivalent GAAP data.

All non-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation in Greif’s fourth quarter and fiscal 2008 earnings release.

I will now turn the call over to Chairman and CEO, Mike Gasser.

Michael Gasser

Thank you, Deb. Good morning everyone. I appreciate you joining our conference call today. If you’re following this presentation on the web, we are on slide four. We are pleased with our record results for the fourth quarter and fiscal year, which benefited from the Greif business system and our geographic and product diversity.

With the economic downturn that began in our fourth quarter, we methodically and aggressively accelerated execution of the Greif business system and initiated other temporary and permanent cost reduction initiatives. As a result of our controlled response, we will remain well positioned to deal with the global economic challenges and fast changing business environment. Now to slide five.

We expect the global economic slowdown to continue through 2009. As I just mentioned, we have implemented a number of cost reduction measures to protect our financial position throughout the year. We continue to closely manage our portfolio consistent with our strategy. We are fixing, selling or closing under performing operations and consolidating networks.

We have curtailed discretionary spending, frozen hiring and salaries, and reduced capital expenditures. We are also using and refined the tools of the comprehensive and integrated Greif business system to continuously improve in everything including operations, sourcing, administration, sales, working capital and talent management.

On slide six. Despite the current economic situation, we achieved working capital targets one year ahead of schedule. Our 2009 operating profit and SG&A targets remain aspirational based on a normalized environmental although the current economy is anything but.

Executive Vice President and Chief Financial Officer Don Huml will now provide you with an update of our financial results.

Don Huml

Thank you, Mike. Good morning everyone. Please go to slide seven. My remarks today will include a review of our full year results and comments about the specific actions we are taking to address the current economic and business environment.

We are pleased that net sales increased 14% to $3.8 billion or 10% excluding the impact of foreign currency translation. Strong organic sales growth for industrial packaging products and higher selling prices in response to higher raw material costs primarily drove the increase, which was equally split between the selling price and volume.

Operating profit before special items increased 33% to a record $413 million in 2008. The $102 million increase was principally due to higher operating profit across our business segments and included a previously reported one-time $30 million pre tax gain from the divestiture of business units in Australia and Zimbabwe.

Net income before special items increased 40% to $267 million in 2008. Diluted earnings per Class A share before special items were $4.54, $4.19 excluding the one-time item I noted a moment ago, compared to $3.22 per share in the prior year.

On slide eight. 2008 marks our fifth year of solid growth and leverage improvement in our earnings. The performance improvement trajectory provides tangible evidence of the power of the Greif business system.

Slide nine, shows industrial packaging net sales up 15% or 10%, excluding the impact of foreign currency translation to $3.1 billion in 2008. Higher sales volumes across all regions with particular strength in emerging markets continued to drive the segments organic growth.

Operating profit before special items rose to $315 million from $229 million last year. This increase was primarily due to improvement in sales volumes, higher selling prices and contributions from the Greif business system, which were partially offset by higher input costs.

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