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Greif Inc. (GEF)
Q1 2009 Earnings Call
February 26, 2009 10:00 am ET
Deb Strohmaier - APR, Vice President, Communications
Mike Gasser - Chairman and CEO
Don Huml - Executive Vice President and CFO
Christopher Chun - Deutsche Bank Securities
Chris Manuel - KeyBanc Capital Markets
Bob Franklin - Prudential Financial
At this time I would like to welcome everyone to the Greif first quarter 2009 conference call. (Operator Instructions).
Thank you. Ms. Strohmaier, you may begin.
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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 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 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 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 first quarter 2009 earnings release.
I will now turn the call over to Chairman and CEO, Mike Gasser.
Thank you, Deb. Good morning everyone. Thank you for joining our conference call today. If you are following this presentation on the web, we are now on slide four. I will be blunt. This quarter was as challenging as we expected it to be. Seasonal factors have historical reduced demand for drums compounded the impact of the lengthened global downturn throughout the manufacturing sector.
We answered the challenges with accelerated, yet disciplined execution of comprehensive great business system initiatives. Further, our management team remains focused on sizing the activities of the organization to the demands of the market. The outstanding character by our hired team is evident as we all work to maintain our footings on this difficult trend.
Now to slide five. As I said last quarter, we expect the global economic slowdown to continue through 2009. That is not stopping us however, from making progress on our strategy. In the past few weeks, we have closed on two small tuck-in acquisitions, one in our, industrial packaging business in the southwestern United States and one in our load securement business in packaging accessories. These acquisitions are immediately accretive and all those together, they represent less than 2% of sales. These are the type of acquisitions that create value long-term.
A week ago, we announced the closing of our new senior secured credit facilities which were over subscribed. With enhanced financial flexibility and access to capital, we are well positioned to address the challenges in the global economy. With increasing opportunities available to us, and the ability to selectively pursue the right ones, we will emerge from this recession, a stronger company.
We will go to slide six, please. We are balancing our strong defense with an agile offense through this economic period. The Greif Business System is a catalyst that enables strong relative performance, increase value as we work through this cyclical trough. Our solid major team is proving to be up to the challenges thrown at us and our balance sheet remains strong. Our activities to date some of which I've mentioned a test to our determination to reearn the premium evaluation, we were achieving before the economic crisis.
Executive Vice President and Chief Financial Office, Don Huml, will now provide you with an update of our financial results.
Thank you, Mike. Good morning everyone. Please go to slide seven. The unprecedented global economic crisis impacted our performance year-over-year and sequentially. The comprehensive actions, we previously announced to mitigate these developments, are being aggressively implemented and are gaining traction. Consequently our financial results for the first quarter are consistent with guidance for the full year.
Net sales decreased 21% to $666 million or 15% on a constant currency basis, with a 20% decrease in sales volumes and a 5% increase in average selling prices. During this period we adjusted our cost structure to lower our activity levels across all product lines and regions.
Operating profit before special items was $46 million for the first quarter, compared to a $105 million last year or $75 million excluding a one-time gain of $30 million from the divestiture of business units.
Paper Packaging's operating profit improvement compared to the first quarter of 2008, was more than offset by lower results for Industrial Packaging. We expect operating profit to improve as savings from recently implemented initiatives are realized during the remainder of 2009.
Net income before special items was $22 million in the first quarter, compared to $69 million last year, which included the one-time after-tax gain of $21 million for divestiture of business units.
Slide eight, shows Industrial Packaging net sales decreased 21% or 13% excluding the impact of foreign currency translation to $530 million, notwithstanding general higher selling prices compared to the same period last year.