Greif Bros. Corporation (GEF)

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Greif Inc. (GEF)

F4Q09 Earnings Call

December 10, 2009 10:00 am ET


Mike Gasser - Chairman & Chief Executive Officer

Don Huml - Executive Vice President & Chief Financial Officer

Deb Strohmaier - APR, Vice President, Communications


Christopher Manuel - Keybanc Capital markets

James Lucas - Janney Montgomery Scott LLC

Christopher Chun - Deutsche Bank

Steven Chercover - D. A. Davidson & Companies

Scott Blumenthal - Emerald Advisers

Gregory DiMarzio - Century Capital



Greetings and welcome to the Greif Inc. fourth quarter and fiscal 2009 earnings conference call. (Operator Instructions).

It is now my pleasure to introduce your host, Deb Strohmaier of Greif, Inc., thank you, you may begin.

Deb Strohmaier

Thank you, Diego. Good morning. As a reminder, you may follow this presentation on the web at 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 morning’s 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 2 of this presentation, in the company’s 2008 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 excludes special items such as, restructuring charges and timberland disposals. Management believes the non-GAAP measures provide a better indication of operational performance and a more stable platform in which to compare the historical performance of 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 and in the fourth quarter and fiscal year 2009 earnings release.

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

Mike Gasser

Thank you, Deb. Good morning, everyone, and thank you for joining our conference call today. For those who are following this presentation on the web, we are on slide 4.

I am very happy to report that our fiscal 2009 has ended. I believe our solid defensive measures mitigated much of the unprecedented challenges while at the same time, our reinforced offense allowed us to take advantage of some unparalleled opportunities. At the beginning of 2009 and throughout, I have said that our goal was to end this year better than when we started it. Today, I can confidently say we did that, as difficult as 2009 was, Greif is a better and stronger company forward.

On defense, during fiscal 2009 we adapted to a difficult global market conditions and volatile raw material prices. Through the Greif business system initiatives and other contingency actions, we achieved over $150 million in cost saving, exceeding our target. From these actions, we expect to fully realize permanent benefits of at least a $120 million in fiscal 2010. To fortify our offense, we closed our new senior credit facilities and issued senior notes in 2009, improving our financial position meaningfully.

Our strong cash flow and balance sheet give us a financial flexibility to pursue profitable growth. Speaking of growth, we completed six tuck-in acquisitions and continued to pursue our robust pipeline of consolidation and product line extension opportunities in 2010. Looking at the fourth quarter, we were encouraged by our operating results, which were above the same period last year and significantly higher sequentially. Volumes continued to gradually improve and further cost savings were realized.

slide five outlined some of our key sustainability efforts. Each of these actions is intended to benefit the greater good, while also yielding the return on investment to our business. Two years ago, we challenged all Greif locations to reduce their energy usage by 10% by January 2010. We achieved this goal and will soon announce our new mid-term energy and carbon reduction goals to be realized by the end of 2015 and our aspirational long term goals set for the end of 2020.

We changed the name of our timber segment to land management which reflects the focus of this business now, where before we had been primarily concerned with responsible timber management and harvesting. We have involved to consciously take advantage of the full range of opportunities our forest lands present, including wild life stewardship recreation and development, taking advantage of our product line extension and rainwater management system in two cities, which we hope to eventually scale to other regions of the world. We are also partnering with various organizations to create complementary water purification processes for communities with the lack of access to safe water.

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 Six. Our net sales for the year decreased 26% due to lowered sales volumes, up 16%. Foreign currency translation of 6% and lower selling prices of 4%. The lower sales volumes resulted from a dramatic decline in the global economy, and lower selling prices were primarily due to the pass through of the lower raw material costs.

Importantly, following a sharp drop in sales volumes in the first quarter, we achieved sequential growth for the reminder of the year, and exited 2009 with positive volume comparisons.

Operating profit before special items was $313 million for 2009, compared to $413 million last year. The decrease was primarily due to lower net sales. The cost reductions achieved under client business system initiatives and specific contingency actions significantly offset these reductions. As these savings are annualized they will provide further contributions in 2010. Interest expense was $54 million for 2009, compared to $50 million in the prior year.

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