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By the numbers: Fiscal Q2
Net sales: $1.37B
Up 4.7% year over year
Net sales for global industrial packaging: $804.8M
Up 7.6% year over year
Net sales for paper packaging and services: $560.8M
Up 1.1% year over year
Net income attributable to Greif: $44.4M
Down 60.1% year over year
- Corrugated trends: During the quarter that ended April 30, Greif saw corrugated volumes grow year over year. The month of May showed continued modest improvement in the paper business, and executives “anticipate continued improvements in containerboard driven by the opening of our Dallas sheet feeder,” CEO Ole Rosgaard said during a Thursday earnings call.
- Dallas adds capacity: Greif’s new, fully operational bulk corrugated manufacturing facility in Dallas is growing the company’s corrugated capacity for the South and Southwest United States, Rosgaard said. The facility has “highly automated machinery” and will “primarily make triple wall sheets and jumbo boxes and will have capabilities that include inline gluing and stitching” to service industrial and agricultural customers, according to the company.
- Another price increase: For the second time this year, Greif announced Tuesday it’s raising prices by $50 to $70 per short ton for all grades of uncoated recycled paper, effective July 8. The company said this accounts for increased demand for URB products and rising costs for raw materials, energy, labor and transportation. In January, it announced a $40 to $70 increase. That first round also addressed tubes, cores and protective packaging with a minimum 6% increase.
- Challenges with price recognition: Still, results in the quarter were hurt by ongoing delayed recognition of previously announced price increases, the company reported. During the call, CFO Larry Hilsheimer elaborated that in the paper and packaging services business, “continued delayed recognition of announced pricing increases, combined with the rising OCC cost, has led to a significant margin depression of over 10% despite flat sales.” Hilsheimer later added that Greif remains “burdened by this archaic survey system utilized by RISI.” Uncertainty around the degree of recognition is baked into Greif’s range of guidance. Greif is just the latest company to implement this second increase of the year after the first round only partially took hold.
- Looking ahead: Greif adjusted its guidance for the remainder of the fiscal year. After Q1, the company projected $610 million in annual adjusted earnings before interest, taxes, depreciation and amortization; now it’s raised that to between $675 million and $725 million. Adjusted free cash flow had been estimated at $200 million; now the company estimates $175 million to $225 million. Greif closed its acquisition of plastic container maker Ipackchem in March; however, Rosgaard said the updated guidance reflects lower-than-originally expected contribution from that ownership in the first six months. Greif will host an investor day in New York on Dec. 11.
