UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| (August 28, 2024) | |||||
Date of Report (Date of earliest event reported)
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (740 ) 549-6000
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
On August 28, 2024, Greif, Inc. (the "Company") issued a press release (the “Earnings Release”) announcing the financial results for its third quarter ended July 31, 2024. The full text of the Earnings Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The Earnings Release includes various non-GAAP financial measures, including measures such as net income excluding the impact of certain adjustments, earnings per diluted Class A share excluding the impact of certain adjustments, consolidated adjusted EBITDA, adjusted free cash flow and net debt. Management of the Company uses these non-GAAP financial measures to evaluate ongoing operations and believes that these non-GAAP financial measures are useful to investors. The exclusion of the impact of the identified adjustments enable management and investors to perform meaningful comparisons of current and historical performance of the Company. Management of the Company also believes that the exclusion of the impact of the identified adjustments provides a stable platform on which to compare the historical performance of the Company and that investors desire this information.
The non-GAAP financial measures included in the Earnings Release should be read together with our financial results. These non-GAAP financial measures should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on the non-GAAP financial measures included in the Earnings Release.
Section 7 – Regulation FD
Item 7.01. Regulation FD Disclosure.
i.Transcript of Conference Call
On August 29, 2024, management of the Company held a conference call with interested investors and financial analysts (the “Conference Call”) to discuss the Company’s financial results for its third quarter ended July 31, 2024. The file transcript of the Conference Call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits.
| Exhibit No. | Description | ||||
Press release issued by Greif Inc. on August 28, 2024 announcing the financial results for its third quarter ended July 31, 2024. | |||||
File transcript of conference call with interested investors and financial analysts held by management of Greif Inc. on August 29, 2024. | |||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GREIF, INC. | ||||||||
| Date: September 3, 2024 | By | /s/ Lawrence A. Hilsheimer | ||||||
Lawrence A. Hilsheimer, Executive Vice President and Chief Financial Officer | ||||||||
Exhibit 99.1
Greif Reports Fiscal Third Quarter 2024 Results
DELAWARE, Ohio (August 28, 2024) – Greif, Inc. (NYSE: GEF, GEF.B), a global leader in industrial packaging products and services, today announced fiscal third quarter 2024 results.
Fiscal Third Quarter 2024 Financial Highlights:
(all results compared to the third quarter of 2023 unless otherwise noted)
•Net income decreased 3.5% to $87.1 million or $1.50 per diluted Class A share compared to net income of $90.3 million or $1.55 per diluted Class A share. Net income, excluding the impact of adjustments(1), decreased 41.6% to $59.6 million or $1.03 per diluted Class A share compared to net income, excluding the impact of adjustments, of $102.1 million or $1.75 per diluted Class A share.
•Adjusted EBITDA(2) decreased 14.5% to $193.7 million compared to Adjusted EBITDA of $226.5 million.
•Net cash provided by operating activities decreased by $125.5 million to $76.8 million. Adjusted free cash flow(3) decreased by $132.8 million to a source of $34.3 million.
•Total debt of $2,909.5 million increased by $738.0 million. Net debt(4) increased by $701.5 million to $2,715.3 million. Our leverage ratio(5) increased to 3.66x from 3.44x sequentially, and increased from 2.17x in the prior year quarter.
Strategic Actions and Announcements
•We completed divestment of our US-based subsidiary Delta Petroleum Company (“Delta”) effective July 31, 2024. The cash proceeds were received on August 1, 2024. Our divestment of Delta enabled us to accelerate our debt paydown. The divestment exemplifies our commitment to focus on our core growth strategy of increasing our resin-based industrial products portfolio, allowing us to serve higher-growth and less cyclical end markets. Assuming the divestment of Delta net cash proceeds had been received in the third quarter and included in cash and cash equivalents as of July 31, 2024, our net debt and leverage ratio would have been $2,626.3 million and 3.59x, respectively, at July 31, 2024.
•Our integration of the Ipackchem Group SAS (“Ipackchem”) acquisition is on schedule to initial expectations, with run-rate synergy capture of at least $7.0 million reaffirmed for the next twelve months, ahead of the 18-month timeline in our previously announced business case.
•We announced our upcoming Investor Day on December 11, 2024. Further information, including formal invitations, will be sent in September. For any questions, please contact InvestorDay@greif.com.
•Our Board of Directors declared quarterly cash dividends reflecting an increase of 2 cents per share on our Class A Common Stock and 3 cents per share on our Class B Common Stock, respectively, from the prior quarter’s dividends on such shares, demonstrating our Board’s commitment to increasing direct shareholder return while also continuing to invest in our business.
CEO Commentary
“We are proud to present another solid quarter of performance for Greif,” stated Ole Rosgaard, President and CEO, “While global markets remain uncertain, our diligence in maintaining close contact with our customers has resulted in positive volume momentum in all regions. We are also making strides internally. We are nearing completion of the previously announced internal re-alignment of operating and commercial functions and plan to discuss the benefits of that transition in greater detail at our upcoming Investor Day on December 11”.
Build to Last Mission Progress
Our customer satisfaction index (CSI) is a key internal metric we utilize to measure our customer service experience, with a long-term goal of a CSI score greater than 95.0. Our consolidated CSI score was 92.8 at the end of the fiscal third quarter 2024. The CSI score for the Paper Packaging & Services business segment was 93.6 and for the Global Industrial Packaging segment was 91.8.
(1) Adjustments that are excluded from net income before adjustments and from earnings per diluted Class A share before adjustments are acquisition and integration related costs, restructuring charges, non-cash asset impairment charges, (gain) loss on disposal of properties, plants and equipment, net, (gain) loss on disposal of businesses, net, and fiscal year-end change costs.
(2) Adjusted EBITDA is defined as net income, plus interest expense, net, plus income tax (benefit) expense, plus depreciation, depletion and amortization expense, plus acquisition and integration related costs, plus restructuring charges, plus non-cash asset impairment charges, plus (gain) loss on disposal of properties, plants and equipment, net, plus (gain) loss on disposal of businesses, net, plus fiscal year-end change costs.
(3) Adjusted free cash flow is defined as net cash provided by operating activities, less cash paid for purchases of properties, plants and equipment, plus cash paid for acquisition and integration related costs, plus cash paid for integration related Enterprise Resource Planning (ERP) systems and equipment, plus cash paid for taxes related to Tama, Iowa mill divestment, plus cash paid for fiscal year-end change costs.
(4) Net debt is defined as total debt less cash and cash equivalents.
(5) Leverage ratio for the periods indicated is defined as adjusted net debt divided by trailing twelve month adjusted EBITDA, each as calculated under the terms of the Company’s Second Amended and Restated Credit Agreement dated as of March 1, 2022, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2022 (the “2022 Credit Agreement”). As calculated under the 2022 Credit Agreement, adjusted net debt was $2,608.5 million, $2,623.1 million, and $1,847.5 million as of July 31, 2024, April 30, 2024 and July 31, 2023, respectively, and trailing twelve month adjusted EBITDA was $712.2 million, $761.8 million and $851.8 million as of July 31, 2024, April 30, 2024 and July 31, 2023, respectively.
Note: A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. These non-GAAP financial measures are intended to supplement, and should be read together with, our financial results. They should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on these non-GAAP financial measures.
Fiscal Third Quarter 2024 Segment Results:
(all results compared to the third quarter of 2023 unless otherwise noted)
Net sales are impacted mainly by the volume of primary products(6) sold, selling prices and product mix, and the impact of changes in foreign currencies against the U.S. Dollar. The table below shows the percentage impact of each of these items on net sales for our primary products for the fiscal third quarter of 2024 as compared to the prior year quarter for the business segments with manufacturing operations. Net sales from completed acquisitions of Reliance Products Ltd. (“Reliance”) and Ipackchem’s primary products are not included in the table below, but will be included in their respective segments starting in the fiscal first quarter of 2025 for Reliance and fiscal third quarter of 2025 for Ipackchem.
| Net Sales Impact - Primary Products | Global Industrial Packaging | Paper Packaging & Services | |||||||||
| Currency Translation | (2.3) | % | (0.1) | % | |||||||
| Volume | 4.7 | % | 2.9 | % | |||||||
| Selling Prices and Product Mix | 3.4 | % | 0.2 | % | |||||||
| Total Impact of Primary Products | 5.8 | % | 3.0 | % | |||||||
Global Industrial Packaging
Net sales increased by $84.2 million to $846.0 million primarily due to higher average selling prices, higher volumes and contributions from recent acquisitions, partially offset by negative foreign currency translation impacts.
Gross profit increased by $8.8 million to $185.6 million. The increase in gross profit was primarily due to the same factors that impacted net sales, partially offset by higher raw material, transportation and manufacturing costs.
Operating profit increased by $29.8 million to $131.8 million primarily due to the same factors that impacted gross profit and a $46.1 million gain from the divestiture of Delta during the third quarter of 2024, partially offset by higher SG&A expenses related to higher compensation expenses, costs incurred for strategic investments and amortization expenses from recent acquisitions.
Adjusted EBITDA decreased by $4.2 million to $122.3 million primarily due to higher SG&A expenses related to higher compensation expenses and costs incurred for strategic investments, partially offset by the same factors that impacted gross profit.
Paper Packaging & Services
Net sales increased by $39.7 million to $603.6 million primarily due to higher average selling prices, higher volumes and contributions from recent acquisitions.
Gross profit decreased by $25.6 million to $102.5 million. The decrease in gross profit was primarily due to higher raw material, transportation and manufacturing costs, partially offset by the same factors that impacted net sales.
Operating profit decreased by $14.6 million to $37.5 million primarily due to the same factors that impacted gross profit and higher SG&A expenses related to higher incentive expenses and costs incurred for strategic investments, partially offset by lower restructuring charges and higher gains on disposal of properties, plants and equipment, net.
Adjusted EBITDA decreased by $28.7 million to $69.4 million primarily due to the same factors that impacted gross profit.
Tax Summary
During the third quarter, we recorded an income tax rate of 28.1 percent and a tax rate excluding the impact of adjustments of 22.7 percent. Note that the application of FIN 18 frequently causes fluctuations in our quarterly effective tax rates. For fiscal 2024, we expect our tax rate to range between 9.0 to 13.0 percent and our tax rate excluding adjustments to range between 8.0 to 12.0 percent.
Dividend Summary
On August 27, 2024, the Board of Directors declared quarterly cash dividends of $0.54 per share of Class A Common Stock and $0.81 per share of Class B Common Stock. Dividends are payable on October 1, 2024, to stockholders of record at the close of business on September 16, 2024.
(6) Primary products are manufactured steel, plastic and fibre drums; new and reconditioned intermediate bulk containers; jerrycans and other small plastics; linerboard, containerboard, corrugated sheets and corrugated containers; and boxboard and tube and core products.
Company Outlook
| (in millions) | Fiscal 2024 Outlook Reported at Q3 | ||||
| Adjusted EBITDA | $675 - $725 | ||||
| Adjusted free cash flow | $175 - $225 | ||||
Note: Fiscal 2024 net income guidance, the most directly comparable GAAP financial measure to Adjusted EBITDA, is not provided in this release due to the potential for one or more of the following, the timing and magnitude of which we are unable to reliably forecast: gains or losses on the disposal of businesses or properties, plants and equipment, net; non-cash asset impairment charges due to unanticipated changes in the business; restructuring-related activities; acquisition and integration related costs; and ongoing initiatives under our Build to Last strategy. No reconciliation of the 2024 guidance of Adjusted EBITDA, a non-GAAP financial measure which excludes restructuring charges, acquisition and integration related costs, non-cash asset impairment charges, (gain) loss on the disposal of properties, plants, equipment and businesses, net, and fiscal year-end change costs, is included in this release because, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, we are unable to quantify certain amounts that would be required to be included in net income, the most directly comparable GAAP financial measure, without unreasonable efforts. A reconciliation of the 2024 guidance of adjusted free cash flow to fiscal 2024 forecasted net cash provided by operating activities, the most directly comparable GAAP financial measure, is included in this release.
Conference Call
The Company will host a conference call to discuss third quarter 2024 results on August 29, 2024, at 8:30 a.m. Eastern Time (ET). Participants may access the call using the following online registration link: https://register.vevent.com/register/BI812d0a53f5a14e0698ea1da197c5d580. Registrants will receive a confirmation email containing dial in details and a unique conference call code for entry. Phone lines will open at 8:00 a.m. ET on August 29, 2024. A digital replay of the conference call will be available two hours following the call on the Company’s web site at http://investor.greif.com.
Investor Relations contact information
Bill D’Onofrio, Vice President, Corporate Development & Investor Relations, 614-499-7233. Bill.Donofrio@greif.com
About Greif
Greif is a global leader in industrial packaging products and services and is pursuing its vision: to be the best performing customer service company in the world. The Company produces steel, plastic and fibre drums, intermediate bulk containers, reconditioned containers, jerrycans and other small plastics, containerboard, uncoated recycled paperboard, coated recycled paperboard, tubes and cores and a diverse mix of specialty products. The Company also manufactures packaging accessories and provides other services for a wide range of industries. In addition, Greif manages timber properties in the southeastern United States. The Company is strategically positioned in over 35 countries to serve global as well as regional customers. Additional information is on the Company’s website at www.greif.com.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “aspiration,” “objective,” “project,” “believe,” “continue,” “on track” or “target” or the negative thereof and similar expressions, among others, identify forward-looking statements. All forward-looking statements are based on assumptions, expectations and other information currently available to management. Although the Company believes that the expectations reflected in forward-looking statements have a reasonable basis, the Company can give no assurance that these expectations will prove to be correct. Such forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results to differ materially from those forecasted, projected or anticipated, whether expressed or implied.
Such risks and uncertainties that might cause a difference include, but are not limited to, the following: (i) historically, our business has been sensitive to changes in general economic or business conditions, (ii) our global operations subject us to political risks, instability and currency exchange that could adversely affect our results of operations, (iii) the current and future challenging global economy and disruption and volatility of the financial and credit markets may adversely affect our business, (iv) the continuing consolidation of our customer base and suppliers may intensify pricing pressure, (v) we operate in highly competitive industries, (vi) our business is sensitive to changes in industry demands and customer preferences, (vii) raw material, price fluctuations, global supply chain disruptions and increased inflation may adversely impact our results of operations, (viii) energy and transportation price fluctuations and shortages may adversely impact our manufacturing operations and costs, (ix) we may encounter difficulties or liabilities arising from acquisitions or divestitures, (x) we may incur additional rationalization costs and there is no guarantee that our efforts to reduce costs will be successful, (xi) several operations are conducted by joint ventures that we cannot operate solely for our benefit, (xii) certain of the agreements that govern our joint ventures provide our partners with put or call options, (xiii) our ability to attract, develop and retain talented and qualified employees, managers and executives is critical to our success, (xiv) our business may be adversely impacted by work stoppages and other labor relations matters, (xv) we may be subject to losses that might not be covered in whole or in part by existing insurance reserves or insurance coverage and general insurance premium and deductible increases, (xvi) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology and other business systems, (xvii) a cyber-attack or a security breach involving customer, employee, supplier or Company information and data privacy risks and costs of compliance with new regulations may have a material adverse effect on our business, financial condition, results of operations and cash flows, (xviii) we could be subject to changes to our tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities, (xix) we have a significant amount of goodwill and long-lived assets which, if impaired in the future, would adversely impact our results of operations, (xx) changing climate, global climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance, (xxi) we may be unable to achieve our greenhouse gas emission reduction targets by 2030, (xxii) legislation/regulation related to environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xxiii) product liability claims and other legal proceedings could adversely affect our operations and financial performance, and (xxiv) we may incur fines or penalties, damage to our reputation or other adverse consequences if our employees, agents or business partners violate, or are alleged to have violated, anti-bribery, competition or other laws.
The risks described above are not all-inclusive, and given these and other possible risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. For a detailed discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those forecasted, projected or anticipated, see “Risk Factors” in Part I, Item 1A of our most recently filed Form 10-K and our other filings with the Securities and Exchange Commission.
All forward-looking statements made in this news release are expressly qualified in their entirety by reference to such risk factors. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net sales | $ | 1,454.2 | $ | 1,330.3 | $ | 4,031.0 | $ | 3,910.2 | |||||||||||||||
| Cost of products sold | 1,163.8 | 1,023.3 | 3,248.9 | 3,039.8 | |||||||||||||||||||
| Gross profit | 290.4 | 307.0 | 782.1 | 870.4 | |||||||||||||||||||
| Selling, general and administrative expenses | 164.0 | 135.7 | 477.0 | 412.3 | |||||||||||||||||||
| Acquisition and integration related costs | 2.0 | 3.4 | 16.1 | 15.5 | |||||||||||||||||||
| Restructuring charges | 2.7 | 8.7 | 1.6 | 13.5 | |||||||||||||||||||
| Non-cash asset impairment charges | 0.2 | 1.6 | 1.9 | 3.4 | |||||||||||||||||||
| (Gain) loss on disposal of properties, plants and equipment, net | (3.4) | 1.7 | (6.4) | (3.3) | |||||||||||||||||||
| (Gain) loss on disposal of businesses, net | (46.1) | 0.3 | (46.1) | (64.1) | |||||||||||||||||||
| Operating profit | 171.0 | 155.6 | 338.0 | 493.1 | |||||||||||||||||||
| Interest expense, net | 41.3 | 25.3 | 95.7 | 71.5 | |||||||||||||||||||
| Other (income) expense, net | 0.8 | 3.4 | 9.5 | 9.6 | |||||||||||||||||||
| Income before income tax (benefit) expense and equity earnings of unconsolidated affiliates, net | 128.9 | 126.9 | 232.8 | 412.0 | |||||||||||||||||||
| Income tax (benefit) expense | 36.2 | 31.1 | 15.0 | 107.9 | |||||||||||||||||||
| Equity earnings of unconsolidated affiliates, net of tax | (0.9) | (0.9) | (2.1) | (1.7) | |||||||||||||||||||
| Net income | 93.6 | 96.7 | 219.9 | 305.8 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | (6.5) | (6.4) | (21.2) | (14.4) | |||||||||||||||||||
| Net income attributable to Greif, Inc. | $ | 87.1 | $ | 90.3 | $ | 198.7 | $ | 291.4 | |||||||||||||||
| Basic earnings per share attributable to Greif, Inc. common shareholders: | |||||||||||||||||||||||
| Class A common stock | $ | 1.51 | $ | 1.57 | $ | 3.45 | $ | 5.03 | |||||||||||||||
| Class B common stock | $ | 2.26 | $ | 2.35 | $ | 5.16 | $ | 7.54 | |||||||||||||||
| Diluted earnings per share attributable to Greif, Inc. common shareholders: | |||||||||||||||||||||||
| Class A common stock | $ | 1.50 | $ | 1.55 | $ | 3.44 | $ | 4.99 | |||||||||||||||
| Class B common stock | $ | 2.26 | $ | 2.35 | $ | 5.16 | $ | 7.54 | |||||||||||||||
| Shares used to calculate basic earnings per share attributable to Greif, Inc. common shareholders: | |||||||||||||||||||||||
| Class A common stock | 25.8 | 25.5 | 25.7 | 25.6 | |||||||||||||||||||
| Class B common stock | 21.3 | 21.3 | 21.3 | 21.5 | |||||||||||||||||||
| Shares used to calculate diluted earnings per share attributable to Greif, Inc. common shareholders: | |||||||||||||||||||||||
| Class A common stock | 26.1 | 26.0 | 25.9 | 26.0 | |||||||||||||||||||
| Class B common stock | 21.3 | 21.3 | 21.3 | 21.5 | |||||||||||||||||||
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
| (in millions) | July 31, 2024 | October 31, 2023 | |||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 194.2 | $ | 180.9 | |||||||
| Trade accounts receivable | 785.7 | 659.4 | |||||||||
| Inventories | 420.7 | 338.6 | |||||||||
| Other current assets | 312.7 | 190.2 | |||||||||
| 1,713.3 | 1,369.1 | ||||||||||
| Long-term assets | |||||||||||
| Goodwill | 1,950.3 | 1,693.0 | |||||||||
| Intangible assets | 961.7 | 792.2 | |||||||||
| Operating lease right-of-use assets | 298.1 | 290.3 | |||||||||
| Other long-term assets | 256.0 | 253.6 | |||||||||
| 3,466.1 | 3,029.1 | ||||||||||
| Properties, plants and equipment | 1,655.5 | 1,562.6 | |||||||||
| $ | 6,834.9 | $ | 5,960.8 | ||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 533.6 | $ | 497.8 | |||||||
| Short-term borrowings | 20.3 | 5.4 | |||||||||
| Current portion of long-term debt | 95.8 | 88.3 | |||||||||
| Current portion of operating lease liabilities | 57.1 | 53.8 | |||||||||
| Other current liabilities | 303.4 | 294.0 | |||||||||
| 1,010.2 | 939.3 | ||||||||||
| Long-term liabilities | |||||||||||
| Long-term debt | 2,793.4 | 2,121.4 | |||||||||
| Operating lease liabilities | 242.2 | 240.2 | |||||||||
| Other long-term liabilities | 563.3 | 548.3 | |||||||||
| 3,598.9 | 2,909.9 | ||||||||||
| Redeemable noncontrolling interests | 126.2 | 125.3 | |||||||||
| Equity | |||||||||||
| Total Greif, Inc. equity | 2,056.9 | 1,947.9 | |||||||||
| Noncontrolling interests | 42.7 | 38.4 | |||||||||
| Total equity | 2,099.6 | 1,986.3 | |||||||||
| $ | 6,834.9 | $ | 5,960.8 | ||||||||
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||||
| Net income | $ | 93.6 | $ | 96.7 | $ | 219.9 | $ | 305.8 | |||||||||||||||
| Depreciation, depletion and amortization | 67.1 | 57.7 | 193.4 | 169.4 | |||||||||||||||||||
| Asset impairments | 0.2 | 1.6 | 1.9 | 3.4 | |||||||||||||||||||
| Deferred income tax expense (benefit) | (0.2) | (2.5) | (53.6) | (0.9) | |||||||||||||||||||
| Gain on disposal of businesses, net | (46.1) | 0.3 | (46.1) | (64.1) | |||||||||||||||||||
| Other non-cash adjustments to net income | 1.3 | 12.8 | 42.0 | 34.8 | |||||||||||||||||||
| Operating working capital changes | (48.0) | 56.1 | (102.3) | 93.8 | |||||||||||||||||||
| Increase (decrease) in cash from changes in other assets and liabilities | 8.9 | (20.4) | (86.4) | (96.2) | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 76.8 | 202.3 | 168.8 | 446.0 | |||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||||||
| Acquisitions of companies, net of cash acquired | — | — | (567.6) | (447.5) | |||||||||||||||||||
| Purchases of properties, plants and equipment | (44.8) | (45.3) | (141.4) | (136.4) | |||||||||||||||||||
| Proceeds from the sale of properties, plant and equipment and businesses, net of impacts from the purchase of acquisitions | 4.6 | 0.8 | 10.5 | 113.3 | |||||||||||||||||||
| Payments for deferred purchase price of acquisitions | (0.5) | — | (1.7) | (21.7) | |||||||||||||||||||
| Other | (0.5) | (1.2) | (3.6) | (4.4) | |||||||||||||||||||
| Net cash provided by (used in) investing activities | (41.2) | (45.7) | (703.8) | (496.7) | |||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||||||
| Proceeds (payments) on long-term debt, net | (9.1) | (118.1) | 661.2 | 243.1 | |||||||||||||||||||
| Dividends paid to Greif, Inc. shareholders | (30.1) | (28.8) | (89.8) | (86.7) | |||||||||||||||||||
| Payments for share repurchases | — | (4.3) | — | (63.9) | |||||||||||||||||||
| Tax withholding payments for stock-based awards | — | — | (10.6) | (13.7) | |||||||||||||||||||
| Other | (4.0) | (2.4) | (19.1) | (16.8) | |||||||||||||||||||
| Net cash provided by (used in) financing activities | (43.2) | (153.6) | 541.7 | 62.0 | |||||||||||||||||||
| Effects of exchange rates on cash | 5.8 | (3.8) | 6.6 | (0.7) | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (1.8) | (0.8) | 13.3 | 10.6 | |||||||||||||||||||
| Cash and cash equivalents, beginning of period | 196.0 | 158.5 | 180.9 | 147.1 | |||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 194.2 | $ | 157.7 | $ | 194.2 | $ | 157.7 | |||||||||||||||
GREIF, INC. AND SUBSIDIARY COMPANIES
FINANCIAL HIGHLIGHTS BY SEGMENT
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Global Industrial Packaging | $ | 846.0 | $ | 761.8 | $ | 2,337.4 | $ | 2,215.8 | |||||||||||||||
| Paper Packaging & Services | 603.6 | 563.9 | 1,679.0 | 1,678.9 | |||||||||||||||||||
| Land Management | 4.6 | 4.6 | 14.6 | 15.5 | |||||||||||||||||||
| Total net sales | $ | 1,454.2 | $ | 1,330.3 | $ | 4,031.0 | $ | 3,910.2 | |||||||||||||||
| Gross profit: | |||||||||||||||||||||||
| Global Industrial Packaging | $ | 185.6 | $ | 176.8 | $ | 502.4 | $ | 480.0 | |||||||||||||||
| Paper Packaging & Services | 102.5 | 128.1 | 272.9 | 383.7 | |||||||||||||||||||
| Land Management | 2.3 | 2.1 | 6.8 | 6.7 | |||||||||||||||||||
| Total gross profit | $ | 290.4 | $ | 307.0 | $ | 782.1 | $ | 870.4 | |||||||||||||||
| Operating profit: | |||||||||||||||||||||||
| Global Industrial Packaging | $ | 131.8 | $ | 102.0 | $ | 266.1 | $ | 259.2 | |||||||||||||||
| Paper Packaging & Services | 37.5 | 52.1 | 66.9 | 228.8 | |||||||||||||||||||
| Land Management | 1.7 | 1.5 | 5.0 | 5.1 | |||||||||||||||||||
| Total operating profit | $ | 171.0 | $ | 155.6 | $ | 338.0 | $ | 493.1 | |||||||||||||||
EBITDA(7): | |||||||||||||||||||||||
| Global Industrial Packaging | $ | 164.3 | $ | 123.8 | $ | 346.8 | $ | 319.5 | |||||||||||||||
| Paper Packaging & Services | 71.8 | 85.1 | 170.6 | 328.4 | |||||||||||||||||||
| Land Management | 2.1 | 1.9 | 6.6 | 6.7 | |||||||||||||||||||
| Total EBITDA | $ | 238.2 | $ | 210.8 | $ | 524.0 | $ | 654.6 | |||||||||||||||
Adjusted EBITDA(8): | |||||||||||||||||||||||
| Global Industrial Packaging | $ | 122.3 | $ | 126.5 | $ | 311.5 | $ | 319.5 | |||||||||||||||
| Paper Packaging & Services | 69.4 | 98.1 | 173.9 | 293.7 | |||||||||||||||||||
| Land Management | 2.0 | 1.9 | 6.2 | 6.4 | |||||||||||||||||||
| Total adjusted EBITDA | $ | 193.7 | $ | 226.5 | $ | 491.6 | $ | 619.6 | |||||||||||||||
(7) EBITDA is defined as net income, plus interest expense, net, plus income tax (benefit) expense, plus depreciation, depletion and amortization. However, because the Company does not calculate net income by segment, this table calculates EBITDA by segment with reference to operating profit by segment, which, as demonstrated in the table of Consolidated EBITDA, is another method to achieve the same result. See the reconciliations in the table of Segment EBITDA.
(8) Adjusted EBITDA is defined as net income, plus interest expense, net, plus income tax (benefit) expense, plus depreciation, depletion and amortization expense, plus acquisition and integration related costs, plus restructuring charges, plus non-cash asset impairment charges, plus (gain) loss on disposal of properties, plants and equipment, net, plus (gain) loss on disposal of businesses, net, plus fiscal year-end change costs.
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
CONSOLIDATED ADJUSTED EBITDA
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net income | $ | 93.6 | $ | 96.7 | $ | 219.9 | $ | 305.8 | |||||||||||||||
| Plus: Interest expense, net | 41.3 | 25.3 | 95.7 | 71.5 | |||||||||||||||||||
| Plus: Income tax (benefit) expense | 36.2 | 31.1 | 15.0 | 107.9 | |||||||||||||||||||
| Plus: Depreciation, depletion and amortization expense | 67.1 | 57.7 | 193.4 | 169.4 | |||||||||||||||||||
| EBITDA | $ | 238.2 | $ | 210.8 | $ | 524.0 | $ | 654.6 | |||||||||||||||
| Net income | $ | 93.6 | $ | 96.7 | $ | 219.9 | $ | 305.8 | |||||||||||||||
| Plus: Interest expense, net | 41.3 | 25.3 | 95.7 | 71.5 | |||||||||||||||||||
| Plus: Other (income) expense, net | 0.8 | 3.4 | 9.5 | 9.6 | |||||||||||||||||||
| Plus: Income tax (benefit) expense | 36.2 | 31.1 | 15.0 | 107.9 | |||||||||||||||||||
| Plus: Equity earnings of unconsolidated affiliates, net of tax | (0.9) | (0.9) | (2.1) | (1.7) | |||||||||||||||||||
| Operating profit | $ | 171.0 | $ | 155.6 | $ | 338.0 | $ | 493.1 | |||||||||||||||
| Less: Other (income) expense, net | 0.8 | 3.4 | 9.5 | 9.6 | |||||||||||||||||||
| Less: Equity earnings of unconsolidated affiliates, net of tax | (0.9) | (0.9) | (2.1) | (1.7) | |||||||||||||||||||
| Plus: Depreciation, depletion and amortization expense | 67.1 | 57.7 | 193.4 | 169.4 | |||||||||||||||||||
| EBITDA | $ | 238.2 | $ | 210.8 | $ | 524.0 | $ | 654.6 | |||||||||||||||
| Plus: Acquisition and integration related costs | 2.0 | 3.4 | 16.1 | 15.5 | |||||||||||||||||||
| Plus: Restructuring charges | 2.7 | 8.7 | 1.6 | 13.5 | |||||||||||||||||||
| Plus: Non-cash asset impairment charges | 0.2 | 1.6 | 1.9 | 3.4 | |||||||||||||||||||
| Plus: (Gain) loss on disposal of properties, plants and equipment, net | (3.4) | 1.7 | (6.4) | (3.3) | |||||||||||||||||||
| Plus: (Gain) loss on disposal of businesses, net | (46.1) | 0.3 | (46.1) | (64.1) | |||||||||||||||||||
| Plus: Fiscal year-end change costs | 0.1 | — | 0.5 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 193.7 | $ | 226.5 | $ | 491.6 | $ | 619.6 | |||||||||||||||
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
SEGMENT ADJUSTED EBITDA(9)
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Global Industrial Packaging | |||||||||||||||||||||||
| Operating profit | 131.8 | 102.0 | 266.1 | 259.2 | |||||||||||||||||||
| Less: Other (income) expense, net | 1.2 | 4.0 | 10.7 | 10.9 | |||||||||||||||||||
| Less: Equity earnings of unconsolidated affiliates, net of tax | (0.9) | (0.9) | (2.1) | (1.7) | |||||||||||||||||||
| Plus: Depreciation and amortization expense | 32.8 | 24.9 | 89.3 | 69.5 | |||||||||||||||||||
| EBITDA | $ | 164.3 | $ | 123.8 | $ | 346.8 | $ | 319.5 | |||||||||||||||
| Plus: Acquisition and integration related costs | 2.0 | 1.3 | 16.1 | 8.8 | |||||||||||||||||||
| Plus: Restructuring charges | 1.9 | 1.3 | (5.8) | 4.2 | |||||||||||||||||||
| Plus: Non-cash asset impairment charges | 0.1 | — | 0.5 | 1.5 | |||||||||||||||||||
| Plus: (Gain) loss on disposal of properties, plants and equipment, net | — | 0.1 | (0.3) | (4.6) | |||||||||||||||||||
| Plus: (Gain) loss on disposal of businesses, net | (46.1) | — | (46.1) | (9.9) | |||||||||||||||||||
| Plus: Fiscal year-end change costs | 0.1 | — | 0.3 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 122.3 | $ | 126.5 | $ | 311.5 | $ | 319.5 | |||||||||||||||
| Paper Packaging & Services | |||||||||||||||||||||||
| Operating profit | 37.5 | 52.1 | 66.9 | 228.8 | |||||||||||||||||||
| Less: Other (income) expense, net | (0.4) | (0.6) | (1.2) | (1.3) | |||||||||||||||||||
| Plus: Depreciation and amortization expense | 33.9 | 32.4 | 102.5 | 98.3 | |||||||||||||||||||
| EBITDA | $ | 71.8 | $ | 85.1 | $ | 170.6 | $ | 328.4 | |||||||||||||||
| Plus: Acquisition and integration related costs | — | 2.1 | — | 6.7 | |||||||||||||||||||
| Plus: Restructuring charges | 0.8 | 7.4 | 7.4 | 9.3 | |||||||||||||||||||
| Plus: Non-cash asset impairment charges | 0.1 | 1.6 | 1.4 | 1.9 | |||||||||||||||||||
| Plus: (Gain) loss on disposal of properties, plants and equipment, net | (3.3) | 1.6 | (5.7) | 1.6 | |||||||||||||||||||
| Plus: (Gain) loss on disposal of businesses, net | — | 0.3 | — | (54.2) | |||||||||||||||||||
| Plus: Fiscal year-end change costs | — | — | 0.2 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 69.4 | $ | 98.1 | $ | 173.9 | $ | 293.7 | |||||||||||||||
| Land Management | |||||||||||||||||||||||
| Operating profit | 1.7 | 1.5 | 5.0 | 5.1 | |||||||||||||||||||
| Plus: Depreciation and depletion expense | 0.4 | 0.4 | 1.6 | 1.6 | |||||||||||||||||||
| EBITDA | $ | 2.1 | $ | 1.9 | $ | 6.6 | $ | 6.7 | |||||||||||||||
| Plus: (Gain) loss on disposal of properties, plants and equipment, net | (0.1) | — | (0.4) | (0.3) | |||||||||||||||||||
| Adjusted EBITDA | $ | 2.0 | $ | 1.9 | $ | 6.2 | $ | 6.4 | |||||||||||||||
| Consolidated EBITDA | $ | 238.2 | $ | 210.8 | $ | 524.0 | $ | 654.6 | |||||||||||||||
| Consolidated adjusted EBITDA | $ | 193.7 | $ | 226.5 | $ | 491.6 | $ | 619.6 | |||||||||||||||
(9) Adjusted EBITDA is defined as net income, plus interest expense, net, plus income tax (benefit) expense, plus depreciation, depletion and amortization expense, plus acquisition and integration related costs, plus restructuring charges, plus non-cash asset impairment charges, plus (gain) loss on disposal of properties, plants and equipment, net, plus (gain) loss on disposal of businesses, net, plus fiscal year-end change costs. However, because the Company does not calculate net income by segment, this table calculates adjusted EBITDA by segment with reference to operating profit by segment, which, as demonstrated in the table of consolidated adjusted EBITDA, is another method to achieve the same result.
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
ADJUSTED FREE CASH FLOW(10)
UNAUDITED
| Three months ended July 31, | Nine months ended July 31, | ||||||||||||||||||||||
| (in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 76.8 | $ | 202.3 | $ | 168.8 | $ | 446.0 | |||||||||||||||
| Cash paid for purchases of properties, plants and equipment | (44.8) | (45.3) | (141.4) | (136.4) | |||||||||||||||||||
| Free cash flow | $ | 32.0 | $ | 157.0 | $ | 27.4 | $ | 309.6 | |||||||||||||||
| Cash paid for acquisition and integration related costs | 2.0 | 3.4 | 16.1 | 15.5 | |||||||||||||||||||
Cash paid for integration related ERP systems and equipment(11) | 0.2 | 1.3 | 1.1 | 3.6 | |||||||||||||||||||
| Cash paid for taxes related to Tama, Iowa mill divestment | — | 5.4 | — | 16.3 | |||||||||||||||||||
| Cash paid for fiscal year-end change costs | 0.1 | — | 0.5 | $ | — | ||||||||||||||||||
| Adjusted free cash flow | $ | 34.3 | $ | 167.1 | $ | 45.1 | $ | 345.0 | |||||||||||||||
(10) Adjusted free cash flow is defined as net cash provided by operating activities, less cash paid for purchases of properties, plants and equipment, plus cash paid for acquisition and integration related costs, plus cash paid for integration related ERP systems and equipment, plus cash paid for taxes related to Tama, Iowa mill divestment, plus cash paid for fiscal year-end change costs.
(11) Cash paid for integration related ERP systems and equipment is defined as cash paid for ERP systems and equipment required to bring the acquired facilities to Greif’s standards.
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
NET INCOME, CLASS A EARNINGS PER SHARE AND TAX RATE BEFORE ADJUSTMENTS
UNAUDITED
| (in millions, except for per share amounts) | Income before Income Tax (Benefit) Expense and Equity Earnings of Unconsolidated Affiliates, net | Income Tax (Benefit) Expense | Equity Earnings | Non-Controlling Interest | Net Income (Loss) Attributable to Greif, Inc. | Diluted Class A Earnings Per Share | Tax Rate | ||||||||||||||||||||||||||||||||||
| Three months ended July 31, 2024 | $ | 128.9 | $ | 36.2 | $ | (0.9) | $ | 6.5 | $ | 87.1 | $ | 1.50 | 28.1 | % | |||||||||||||||||||||||||||
| Acquisition and integration related costs | 2.0 | 0.5 | — | — | 1.5 | 0.04 | |||||||||||||||||||||||||||||||||||
| Restructuring charges | 2.7 | 0.6 | — | — | 2.1 | 0.03 | |||||||||||||||||||||||||||||||||||
| Non-cash asset impairment charges | 0.2 | 0.1 | — | — | 0.1 | — | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of properties, plants and equipment, net | (3.4) | (0.9) | — | — | (2.5) | (0.04) | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of businesses, net | (46.1) | (17.3) | — | — | (28.8) | (0.50) | |||||||||||||||||||||||||||||||||||
| Fiscal year-end change costs | 0.1 | — | — | — | 0.1 | — | |||||||||||||||||||||||||||||||||||
| Excluding adjustments | $ | 84.4 | $ | 19.2 | $ | (0.9) | $ | 6.5 | $ | 59.6 | $ | 1.03 | 22.7 | % | |||||||||||||||||||||||||||
| Three months ended July 31, 2023 | $ | 126.9 | $ | 31.1 | $ | (0.9) | $ | 6.4 | $ | 90.3 | $ | 1.55 | 24.5 | % | |||||||||||||||||||||||||||
| Acquisition and integration related costs | 3.4 | 0.9 | — | — | 2.5 | 0.04 | |||||||||||||||||||||||||||||||||||
| Restructuring charges | 8.7 | 2.1 | — | — | 6.6 | 0.11 | |||||||||||||||||||||||||||||||||||
| Non-cash asset impairment charges | 1.6 | 0.4 | — | — | 1.2 | 0.02 | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of properties, plants and equipment, net | 1.7 | (0.2) | — | — | 1.9 | 0.03 | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of businesses, net | 0.3 | 0.7 | — | — | (0.4) | — | |||||||||||||||||||||||||||||||||||
| Excluding adjustments | $ | 142.6 | $ | 35.0 | $ | (0.9) | $ | 6.4 | $ | 102.1 | $ | 1.75 | 24.5 | % | |||||||||||||||||||||||||||
| Nine months ended July 31, 2024 | $ | 232.8 | $ | 15.0 | $ | (2.1) | $ | 21.2 | $ | 198.7 | $ | 3.44 | 6.4 | % | |||||||||||||||||||||||||||
| Acquisition and integration related costs | 16.1 | 4.0 | — | — | 12.1 | 0.21 | |||||||||||||||||||||||||||||||||||
| Restructuring charges | 1.6 | 0.3 | — | — | 1.3 | 0.02 | |||||||||||||||||||||||||||||||||||
| Non-cash asset impairment charges | 1.9 | 0.5 | — | — | 1.4 | 0.02 | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of properties, plants and equipment, net | (6.4) | (1.6) | — | — | (4.8) | (0.08) | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of businesses, net | (46.1) | (17.3) | — | — | (28.8) | (0.50) | |||||||||||||||||||||||||||||||||||
| Fiscal year-end change costs | 0.5 | 0.1 | — | — | 0.4 | 0.01 | |||||||||||||||||||||||||||||||||||
| Excluding adjustments | $ | 200.4 | $ | 1.0 | $ | (2.1) | $ | 21.2 | $ | 180.3 | $ | 3.12 | 0.5 | % | |||||||||||||||||||||||||||
| Nine months ended July 31, 2023 | $ | 412.0 | $ | 107.9 | $ | (1.7) | $ | 14.4 | $ | 291.4 | $ | 4.99 | 26.2 | % | |||||||||||||||||||||||||||
| Acquisition and integration related costs | 15.5 | 3.8 | — | — | 11.7 | 0.20 | |||||||||||||||||||||||||||||||||||
| Restructuring charges | 13.5 | 3.2 | — | 0.1 | 10.2 | 0.17 | |||||||||||||||||||||||||||||||||||
| Non-cash asset impairment charges | 3.4 | 0.8 | — | — | 2.6 | 0.04 | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of properties, plants and equipment, net | (3.3) | (0.6) | — | — | (2.7) | (0.05) | |||||||||||||||||||||||||||||||||||
| (Gain) loss on disposal of businesses, net | (64.1) | (18.7) | — | — | (45.4) | (0.77) | |||||||||||||||||||||||||||||||||||
| Excluding adjustments | $ | 377.0 | $ | 96.4 | $ | (1.7) | $ | 14.5 | $ | 267.8 | $ | 4.58 | 25.6 | % | |||||||||||||||||||||||||||
The impact of income tax (benefit) expense and non-controlling interest on each adjustment is calculated based on tax rates and ownership percentages specific to each applicable entity.
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
NET DEBT
UNAUDITED
| (in millions) | July 31, 2024 | April 30, 2024 | July 31, 2023 | ||||||||||||||
| Total debt | $ | 2,909.5 | $ | 2,916.1 | $ | 2,171.5 | |||||||||||
| Cash and cash equivalents | (194.2) | (196.0) | (157.7) | ||||||||||||||
| Net debt | $ | 2,715.3 | $ | 2,720.1 | $ | 2,013.8 | |||||||||||
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
LEVERAGE RATIO
UNAUDITED
Trailing twelve month Credit Agreement EBITDA (in millions) | Trailing Twelve Months Ended 7/31/2024(15) | Trailing Twelve Months Ended 7/31/2024 | Trailing Twelve Months Ended 4/30/2024 | Trailing Twelve Months Ended 7/31/2023 | ||||||||||
| Net income | $ | 293.2 | $ | 293.2 | $ | 296.3 | $ | 408.4 | ||||||
| Plus: Interest expense, net | 120.5 | 120.5 | 104.5 | 88.4 | ||||||||||
| Plus: Income tax expense | 24.9 | 24.9 | 19.8 | 139.6 | ||||||||||
| Plus: Depreciation, depletion and amortization expense | 254.6 | 254.6 | 245.2 | 220.6 | ||||||||||
| EBITDA | $ | 693.2 | $ | 693.2 | $ | 665.8 | $ | 857.0 | ||||||
| Plus: Acquisition and integration related costs | 19.6 | 19.6 | 21.0 | 18.4 | ||||||||||
| Plus: Restructuring charges | 6.8 | 6.8 | 12.8 | 16.2 | ||||||||||
| Plus: Non-cash asset impairment charges | 18.8 | 18.8 | 20.2 | 11.3 | ||||||||||
| Plus: (Gain) loss on disposal of properties, plants and equipment, net | (5.6) | (5.6) | (0.5) | (3.3) | ||||||||||
| Plus: (Gain) loss on disposal of businesses, net | (46.0) | (46.0) | 0.4 | (61.3) | ||||||||||
| Plus: Non-cash pension settlement charges | 3.5 | 3.5 | 3.5 | — | ||||||||||
| Plus: Fiscal year-end change costs | 0.5 | 0.5 | 0.4 | — | ||||||||||
| Adjusted EBITDA | $ | 690.8 | $ | 690.8 | $ | 723.6 | $ | 838.3 | ||||||
Credit Agreement adjustments to EBITDA(12) | 10.7 | 21.4 | 38.2 | 13.5 | ||||||||||
| Credit Agreement EBITDA | $ | 701.5 | $ | 712.2 | $ | 761.8 | $ | 851.8 | ||||||
Adjusted net debt (in millions) | For the Period Ended 7/31/2024(15) | For the Period Ended 7/31/2024 | For the Period Ended 4/30/2024 | For the Period Ended 7/31/2023 | ||||||||||
| Total debt | $ | 2,909.5 | $ | 2,909.5 | $ | 2,916.1 | $ | 2,171.5 | ||||||
| Cash and cash equivalents | (283.2) | (194.2) | (196.0) | (157.7) | ||||||||||
| Net debt | $ | 2,626.3 | $ | 2,715.3 | $ | 2,720.1 | $ | 2,013.8 | ||||||
Credit Agreement adjustments to debt(13) | (106.8) | (106.8) | (97.0) | (166.3) | ||||||||||
| Adjusted net debt | $ | 2,519.5 | $ | 2,608.5 | $ | 2,623.1 | $ | 1,847.5 | ||||||
Leverage ratio(14) | 3.59x | 3.66x | 3.44x | 2.17x | ||||||||||
(12) Adjustments to EBITDA are specified by the 2022 Credit Agreement and include equity earnings of unconsolidated affiliates, net of tax, certain acquisition savings, deferred financing costs, capitalized interest, income and expense in connection with asset dispositions, and other items.
(13) Adjustments to net debt are specified by the 2022 Credit Agreement and include the European accounts receivable program, letters of credit, balances for swap contracts, and other items.
(14) Leverage ratio is defined as Credit Agreement adjusted net debt divided by Credit Agreement adjusted EBITDA.
(15) Assumes the divestment of Delta net cash proceeds had been received in the third quarter and included in cash and cash equivalents as of July 31, 2024.
GREIF, INC. AND SUBSIDIARY COMPANIES
PROJECTED 2024 GUIDANCE RECONCILIATION
ADJUSTED FREE CASH FLOW
UNAUDITED
Fiscal 2024 Guidance Range | ||||||||
| (in millions) | Scenario 1 | Scenario 2 | ||||||
| Net cash provided by operating activities | $ | 322.0 | $ | 388.0 | ||||
| Cash paid for purchases of properties, plants and equipment | (178.0) | (200.0) | ||||||
| Free cash flow | $ | 144.0 | $ | 188.0 | ||||
| Cash paid for acquisition and integration related costs | 26.8 | 30.8 | ||||||
| Cash paid for integration related ERP systems and equipment | 3.0 | 5.0 | ||||||
| Cash paid for fiscal year-end change costs | 1.2 | 1.2 | ||||||
| Adjusted free cash flow | $ | 175.0 | $ | 225.0 | ||||
Exhibit 99.2
Greif, Inc.
Fiscal Third Quarter 2024 Earnings Results Conference Call
Fiscal Third Quarter 2024 Earnings Results Conference Call
August 29, 2024
COMPANY PARTICIPANTS
Ole G. Rosgaard – Greif, Inc., President, Chief Executive Officer & Director
Lawrence A. Hilsheimer – Greif, Inc., Chief Financial Officer & Executive Vice President
Bill D'Onofrio – Greif, Inc., Vice President, Investor Relations & Corporate Development
OTHER PARTICIPANTS
Brian Joseph Butler – Stifel, Nicolaus & Company, Incorporated, Research Division
Gabrial Shane Hajde – Wells Fargo Securities, LLC, Research Division
George Leon Staphos - BofA Securities, Research Division
Ghansham Punjabi - Robert W. Baird & Company, Incorporated, Research Division
Matthew Burke Roberts – Raymond James & Associates, Inc., Research Division
Michael Andrew Roxland – Truist Securities, Inc., Research Division
MANAGEMENT DISCUSSION SECTION
Operator
Good day, and thank you for standing by. Welcome to the Greif, Inc. Third Quarter 2024 Earnings Conference Call.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill D'Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.
Bill D’Onofrio
Vice President of Investor Relations & Corporate Development
Thank you, and good day, everyone. Welcome to Greif's Fiscal Third Quarter 2024 Earnings Conference Call. During the call today, our Chief Executive Officer, Ole Rosgaard, will provide you an update on current business trends as well as the latest updates on our ongoing operating model change, which will be a focal point of our upcoming Investor Day on December 11th. Our Chief Financial Officer, Larry Hilsheimer, will provide an overview of our third quarter financial results and our fiscal full year guidance.
In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. Please turn to Slide 2.
During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we will be referencing certain non-GAAP financial measures and reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. I'll now turn the presentation over to Ole on Slide 3.
Ole G. Rosgaard
President, CEO & Director
Thank you, Bill. Hello, and thank you for joining us. Over the past quarter, I've had the privilege of visiting many of our more than 250 plants around the world. Each week, I made it a priority to spend time with our teams on the ground, often joining them in the early hours for the daily 6:00 a.m. safety meeting. These moments are truly energizing and remind me of the incredible commitment and dedication that our colleagues demonstrate every day.
I'm tremendously proud of how our people live our purpose and values, driving safety, quality, operational excellence and importantly, delivering legendary customer service. It's clear that these are more than just words. They are principles embodied in the work our teams do day in and day out across every location. I also want to extend a heartfelt thank you to our leaders and executive team for their outstanding leadership during this quarter. Working alongside such a committed and talented group of people is not just a source of pride for me but also a privilege.
As we review our results today, it's important to remember that the achievements we are sharing are the results of thousands of people pulling together, aligned by a shared purpose and values. I'm excited about where we're headed and the opportunities that lie ahead. At Greif, all the work we perform is focused on our purpose, creating packaging solutions for life's essentials. Whatever you are located today, listening to this, look around the room, the adhesive that holds your desk together, the chemicals used to manufacture your smartphone, the foam in your seat cushion, the soles in the shoes, the orange juice you
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have for breakfast, the vitamin supplements you took this morning and the lubricants in the car you drove to work. All of these are essential everyday products, and all of them at one time contained materials, which were stored and shipped in Greif packaging products.
We know that it was a Greif product because Greif maintains leading positions in nearly all industrial packaging capabilities globally and by no accidents. Those leading positions are the result of the deeply entrenched competitive advantages we have developed in our business, the most critical of which is our legendary customer service, as outlined in our vision statement. Greif is in the middle of a significant evolution. We are making excellent progress on our strategic missions by following our principles, and all of this is engineered to create a flywheel of financial success through the Greif Business System.
Towards the end of today's prepared remarks, I will provide you with some more information on the operating model change we announced last December and are nearing completion on. For now, let's shift gears to near-term performance in fiscal Q3. Please turn to Slide 4.
I'm pleased to report another solid quarter for Greif, where we continue to successfully manage through a variable and uncertain operating environment. All regions globally experienced net growth in the quarter despite choppiness on an individual end market basis. Although small on a year-on-year basis, we are encouraged that North America has now evidenced the East to West demand improvements we have talked about over the past quarters. There's still significant runway to reaching a normalized level of volumes, but recent trends have us cautiously optimistic as we have exited the trough of -- on volumes. This trend also applies to our LatAm region.
APAC improvement, while expected, was also encouraging. As we mentioned, Q2 was negatively impacted by a short but significant destocking as the Chinese New Year, but is now on the path to recovery. EMEA, our largest GIP market, at approximately 45% of GIP sales, saw a third straight quarter of sequential improvements. This is particularly important as underlying macroeconomic data from calendar Q1 into calendar Q2 continued to be negative with PMI fluctuating around the 45 mark. In both Q2 and Q3, lubes, chemicals, paints and coatings end markets are a source of strength. This is equally notable as our volume performance in the quarter outpaced many of the leading companies serving those markets.
This outperformance demonstrates our legendary customer service paired with the Greif Business System in action. We are maintaining close relationships with our customers and then reacting with decisive action when change occurs. With that, I will turn things over to Larry on Slide 5 to walk through our third quarter results. Larry?
Lawrence Allen Hilsheimer
Executive VP & CFO
Thank you, Ole, and thank you all for joining our call. As Ole mentioned, we made progress on our operating model change in the quarter and are nearing completion. In the meantime, we continue to execute our strategy well and produce solid financial results under the circumstances. Ipackchem integration continues and synergy capture is in line with our business case expectations. We additionally made steps towards simplifying our portfolio through the divestiture of Delta Petroleum Company which provided additional debt pay down towards our long-term debt leverage ratio range of 2 to 2.5x.
Please note that while our current leverage is at 3.66, this does not include the impact of the Delta sale proceeds received on August 1. The pro forma adjusted leverage, including Delta proceeds would have been 3.59x. As for financial results, we finished the quarter at $194 million of adjusted EBITDA, $34 million of free cash flow and adjusted earnings per share of $1.03. This EBITDA performance was driven by the volume performance that Ole outlined in his remarks and was in line with our expectations. Our free cash flow performance was also aligned to our expectations for Q3 as we had modest working capital use as we ramped up the business with the nascent volume recovery. Please turn to Slide 6 to walk through GIP results.
In Q3, GIP saw demand improvement in all regions, totaling nearly 5% on a global year-over-year basis. While this is encouraging, I remind you that on a global basis, the current volume shortfalls to 2022 levels are significant. GIP EBITDA margins remained strong on a sequential basis, supported by our continued mix shift into higher-margin polymer-based products. On a year-over-year basis, EBITDA margins were down 200 basis points due to expected cost inflation, primarily related to acquisitions, investments in our ongoing operating model change and several onetime benefits in '23, which did not recur. Please turn to Slide 7 for PPS results.
Our paper business continued to experience the same conflicting dynamics as in Q2. Continued improvement in volume and demand for our product, coupled with partially unrealized paper price increases. We firmly believe these are warranted based on our significant input cost inflation as well as improving demand. As a result, PPS margins continued to lag prior year. The paper solutions team is continuing to manage controllable as well, including successful price increase implementation with our non-index based customers in URB. However, the outsized impact of the index-driven price cost dynamic, which we still view to not be in sync with real market trends, is a headwind we have and will continue to aggressively work to offset. Please turn to Slide 8 to discuss fiscal 2024 guidance.
When considering our guidance update, we ultimately determined that maintaining our guidance range consistent with our Q3 call is appropriate. Relative to our Q2 guidance, we are anticipating slightly more favorable price cost due to better paper pricing and value- based pricing in GIP. In Q3, although volumes were positive in all regions year-over-year, the pace of that
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improvement was less than anticipated in Q2 and will present a slight headwind relative to prior guidance. We benefited from a variety of small cost tailwinds in SG&A relative to our prior guidance. However, some of that was offset by other items such as a slight headwind from the lack of contribution from Delta in Q4.
What is important to remember when considering this Q4 guidance is the significance of certain tailwinds on the horizon. Our volumes while improving, are still down significantly on a 2-year stack. A return to 2022 volumes, which, in fact, were actually lower than '21 would be approximately $160 million of EBITDA. Adding the guidance midpoint of $700 million of EBITDA and the $160 million of volume-related increase, along with the incremental fiscal '25 impact of recently recognized paper price increases would return EBITDA to over $900 million. In the near term, we will continue to focus diligently on operational excellence and lean on our close customer relationships to ensure we maximize value capture when volume recovery begins in earnest. Please turn to Slide 9 to discuss capital allocation.
We remain committed to our disciplined approach to capital allocation, and this quarter continued to demonstrate that through our capital deployment actions. We have long stated that our two priority deployment objectives are funding safety and maintenance CapEx, which ensures continued cash generation and funding our continually increasing dividend. Earlier this week, we announced another increase in our quarterly dividend. After those modest uses of cash, our next priority is growing our business aligned to our strategy. Earnings growth remains our core focus. However, sometimes it is wise the first shrink in order to enable that growth. We demonstrated that willingness this quarter with our sale of Delta.
With that, I'll turn things back to Ole on Slide 10 to provide you with a preview of our upcoming Investor Day.
Ole G. Rosgaard
President, CEO & Director
Thank you, Larry. Greif has an Investor Day coming up on December 11th in Midtown New York. And one item I would like to review with you today or for you today, which will be important to our discussion in December is our ongoing operating model change. We are currently in the process of organizing our operations and commercial functions by material solution as opposed to geography.
While still ongoing we now have better clarity on the likely material solution verticals, which will encompass that organizational structure, polymers, metals, paper, integrated products and our land portfolio. Through organizing by material solutions, we plan to capture three distinct benefits, all of which we will discuss in detail at our upcoming Investor Day. First, it will enable us to accelerate market-aligned and value-driven growth through concentrating commercial and operations functions by subject matter expertise. That will enable us to better capitalize on our comprehensive suite of packaging solutions by optimizing pricing and account planning to drive higher margins.
Secondly, by realigning functions, we will maximize the effectiveness of all our enabling functions. It will better align business results to individual functions and drive accountability at all levels of the organization. The cost efficiencies driven by that approach will also enhance margins. Lastly, it will allow us to provide a deeper level of transparency to our investor community and help us to provide more predictable returns. It will streamline our capital allocation prioritization and execution, allowing us to deploy cash for growth faster. It will also enhance our speeds and ability to integrate acquisitions effectively and expand synergy capture on future deals.
Additionally, we are currently assessing whether this upcoming change will result in a change to externally reported segments. We have frequently heard feedback from our investor community that our current external segmentation is not sufficiently detailed on a product basis to clearly show the growth and margin profile of these leading businesses. That assessment is still ongoing, but we are confident that the end result will provide the transparency our investors are looking for. And starting at our Investor Day, we plan to shift our cadence of talking about the business, primarily by material solution and end markets with some regional color added. Please turn to Slide 11.
Part of the driving force behind our operating model change relates to shifting the mix of products in our portfolio, specifically our growth of polymers as a percentage of sales. We have been very clear in that focus that our growth priorities lie in resin or more accurately, polymer-based packaging solutions, and we have acted decisively on that focus over the past 24 months. In 2015, our business mix was approximately 10% in polymer-based packaging solutions. As of our previous Investor Day in 2022, that mix has shifted to 15%. And now in just 2 short years, that mix is now approximately 20%. We anticipate that shift to continue as we have significant runway for further growth in our polymer-based products.
This quarter, the sale of Delta further accelerated that portfolio shift. While Delta is a solid business and we received great value for it, it's not core to Greif's growth priorities and core competitive advantages as it served much more cyclical end markets. For those reasons, we have parted ways, and in doing so, added balance sheet flexibility by paying down debt with the proceeds. Please turn to Slide 12.
To our investors, we sincerely hope you make the time to come to visit us at our Investor Day on December 11th. And as a reminder, please reach out to investorday@greif.com, and I'll repeat that, investorday@greif.com, with any questions or to request a registration. I hope you have enjoyed our presentation today, and I would like to reaffirm to you that our vision to be the best performing customer service company in the world also extends to our financial customers. We are deeply committed
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to validating your investment in us through continued solid financial results and are proactively modernizing and evolving our business to warrant continued and increased investments.
1 hour at earnings is not sufficient time to probably communicate the myriad of ways we are creating value at Greif. And so I'm confident that after our half day together in December, you will depart with strong confirmation that Greif is primed for breakout success in both the near and long term through our proven execution on the Build to Last strategy. Thank you once more. And operator, will you please open the lines for Q&A.
QUESTION AND ANSWER SECTION
Operator
Our first question will be coming from Matt Roberts of Raymond James.
Matthew Burke Roberts
Raymond James & Associates, Inc., Research Division
Ole, I appreciate Slides 10 and 11 in the prelude to Investor Day here. So without stealing too much thunder from December, maybe can you help me understand the margin contribution or benefit you've received as a result of that mix shift and how incremental margins on the poly-based products compared to the total portfolio average? Or maybe is there a longer-term margin target you think is achievable, either in GIP or that polymer-based business within GIP?
Ole G. Rosgaard
President, CEO & Director
I certainly can. Maybe first, just to remind you of our M&A selection criteria. So when we review target companies, one of the criteria is to make sure that the EBITDA margin is accretive to our current margins. And that means that we are only looking at companies with a margin at or above 18%. And we're also looking at companies with a free cash flow in excess of 50%. And the segments that we're looking at are primarily polymer like resin-based segments in the premium end of the market. And you will typically find those companies having up to like mid-20 EBITDA margins.
Obviously, we have our current business. So even with the acquisitions we make now once they're accretive, it's not changing the margins for the whole enterprise. But in the long term, you will see a trend towards reaching the 18% margin.
Matthew Burke Roberts
Raymond James & Associates, Inc., Research Division
As a follow-up, Larry, you noted in the presentation, continued price cost headwinds albeit sequentially improving. And since last quarter, we've seen OCC come down slightly and 20 dollars go through on URB that you did mention. So maybe relative to your expectations you gave in the last quarter at current prices, where is the price/cost range tracking in your guide? And is there a certain price you need to see either in URB or containerboard to be at the midpoint there? Or would any changes here on out be more of a 2025 impact?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. Matt, thanks. In the quarter, we ended up benefiting from a little better than we anticipated on the price increases due to the volatile recognition typically through RISI, we had assumed only partial recognition of the outstanding price increases at that time. But then they actually recognized $40 in June for containerboard $20 in August for URB. So the net impact of those provided a little bit of a tailwind for our revised full year guidance.
And we also had better than expected value-based pricing benefits in GIP. Our teams just did a great job on focusing on value over volume. The combined benefits of those were slightly better than expected, and raw material costs were a little bit of an upside as well. In relation to the paper pricing guidance, we still believe there should be more to come. I don't anticipate anything in the remainder of our fiscal year, but certainly, we're optimistic that something should be recognized in '25, given the inflationary costs in the entire industry and improving demand trends, particularly in containerboard.
Volumes, on the other hand, while better, we're slightly below what we had expected. We talked in the last quarter that we had seen some lift in demand, and we're hopeful that, that would continue to improve. It was more mixed than we expected. And for that reason, there's sort of a little bit of downside relative to where our Q2 guidance was. And we also had some miscellaneous cost bucket improvements as we focused on improving things. But that's a little bit offset by the takeout of the fourth quarter EBITDA we would have had from Delta had we not sold it. When you put all that together, it just led us to where our guidance range didn't change on an allover basis.
As far as things before, beyond '24, we're not there yet. I mean things are changing so rapidly in the environment. We'll see what we get from the Fed in September, which I think could be a big impetus for us across our platform. So we'll be talking about guidance, obviously, at our next call. Also though, we've had the startup of our Dallas sheetfeeder but we have had no net bottom line benefit to that yet as we go through our start-up costs, but we're very excited about what that will be contributing for us in '25 as well.
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Operator
Our next question will be coming from Ghansham Panjabi of Baird.
Ghansham Panjabi
Robert W. Baird & Co. Incorporated, Research Division
I guess going back to Slide 6, where you're talking about the near-term outlook within GIP and customer sentiment and so on and so forth. Can you just give us a bit more color as it relates to your direct conversations with customers in the context of the environment that we have today? And then just in terms of your volumes that are starting to plateau at a sort of lower for longer, volume dynamic basically. Maybe touch on competitive activity. Are you seeing anything different than the usual competition that you've seen in the industry over time?
Ole G. Rosgaard
President, CEO & Director
Thanks, Ghansham. Yes, first of all, I mean, market competition has really not eased despite some positive volume trends. The number of tenders or RFQs remains very high. And we see market participants or some market participants are pricing at what we believe to be loss making levels to maintain their volume. We continue our strict adherence to our value-over-volume approach. And we simply focus on maintaining trusted relationships with our customers and the commitment of our teams to operational excellence and our value over volume philosophy. It's a large part of our continued margin strengths in GIP over the past quarters despite these competitive pressures.
In the past, we have seen customers return to us after chasing low competitive pricing, and our superior quality and our legendary customer service is really, in our view, unable to be matched. So over time, those customers come back and then we win in the long term.
In terms of sort of a bit more color, in our Q2, the strongest volume was coming from lubes, bulk chemicals and paint and coatings. But as you may have noticed, in those customers own earnings calls, they seem to be less bullish than before in these end markets. And the end markets we are investing in have likewise been mixed, food and bev have been solid, but agchem is still stagnating after the destock that occurred earlier in the year. You may have read an article, a recent article in The Wall Street Journal about the ag sector in North America, where this year, the farmers will have a bumper crop, but they're going to lose money. And the article goes into what that means to them in terms of investing in fertilizer and so on and even machinery.
But overall, I feel that our teams have done a really exceptional job of engaging with our customers and keeping close tabs on shifting demand patterns and it shows in our volume performance. And if you compare our volumes to some of the significant players in the end markets we serve, like lubes, bulk chemicals and so on, we have outperformed due to our quick reaction time, but that doesn’t mean we’re resting on our laurels. We're going to keep that focus up. And overall, demand signals are very mixed still. So we just remain deeply connected with our customers as a critical supply chain partner, and expect that will continue to drive better than industry volume performance.
Ghansham Panjabi
Robert W. Baird & Co. Incorporated, Research Division
Okay, thanks Ole, very comprehensive. And then on the reorganization by substrate versus geography, is this something that the customers themselves have been pushing for? Or is it just a natural evolution based on all the acquisitions you've done and the scale of the company at this point? And just separately, what percentage of your sales base in GIP goes to multinationals that want a cross-border supplier?
Ole G. Rosgaard
President, CEO & Director
Well, first of all, these are changes we are anticipating to make. Number one, yes, it's really to serve our customers better. So if you think of GIP and PPS, in GIP we have all types of materials that we're making, whether it's polymer-based, steel, fiber drums and so on. So in a way, our teams are kind of a jack-of-all-trades. And what we want to do in our drive to be even better is to really focus on one material solution. So blow-molding at jerrycans is obviously different from making a steel drum. So separating like jerrycans out in a separate SBU under a separate SBU management means that all they need to think about is to be the best in the world in making jerrycans, and that will help our customers with even better quality.
And so we're doing that for each of our material solutions. And then we've extracted the commercial organization out of all those. So our commercial organization becomes an enabling function, so to speak, under a Chief Commercial Officer. And that will drive up sales and cross-sales. As in the past, a salesperson would have visited a customer in the morning and another salesperson from Greif comes to sell another product in the afternoon. And by combining sales this way, we will just be much more effective in that, and it will also drive margins and we will be able to serve our customers better.
And then lastly, when we do an M&A, we will be even more effective in integrating these companies into our structure. So overall, the structure has been designed or is being designed for growth.
Operator
Our next question will be coming from Mike Roxland of Truist Securities.
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Michael Andrew Roxland
Truist Securities, Inc., Research Division
Just wanted to follow up quickly on your response to the last question. On the portfolio transformation, does that require any additional headcount given the sales force split?
Ole G. Rosgaard
President, CEO & Director
You mean in our evolution to modernize the organization?
Michael Andrew Roxland
Truist Securities, Inc., Research Division
Exactly, yes.
Ole G. Rosgaard
President, CEO & Director
It's not designed to reduce headcount. That has never been...
Lawrence Allen Hilsheimer
Executive VP & CFO
He asked if it increases it.
Ole G. Rosgaard
President, CEO & Director
No, there won’t be any increases. We won't increase it. We've had some questions whether or not we will be taking out headcount. And it's not designed to take out headcount, but we do believe we will be able to operate much more effectively. And as we are adding volume or growing our volume, we will be able to do that without adding further head count to the organization. So in effect, we will be operating much more effectively. But we certainly won't be adding.
Michael Andrew Roxland
Truist Securities, Inc., Research Division
Got you. Because I was just wondering, as your sales force, it sounds like your sales force is now going to become specialists in a targeted product. So -- I'm sorry, go ahead.
Ole G. Rosgaard
President, CEO & Director
Yes. The sales force will be more generalists, and they will turn more from farmers to hunters. And then we have created a very strong product management function that will be more of a support to sales or rather than our sales teams acting as product managers, we will have a dedicated central product management function by material solution serving the sales teams, but also our customers.
Michael Andrew Roxland
Truist Securities, Inc., Research Division
Got it. That's very clear. In terms of Global Industrial Packaging, what do you attribute your outperformance relative to the market to? Obviously, you showed sequential improvement despite PMIs remaining depressed. So I'm wondering if there's anything that you're doing differently like some type of restocking? Like how are you able to outperform despite the broader market still being somewhat challenged?
Ole G. Rosgaard
President, CEO & Director
Well, I mean, I give a lot of kudos to our teams, and that's one of them. But it's really our long-term focus on customer service that's driving that. Imagine you probably had the experience of dealing with a vendor or a store where you've got a really bad service, and you go home, you tell your family, I'm never going to go back there again and everybody -- and that word spreads. And conversely, you've probably also tried to shop somewhere or deal with a vendor that has provided you that exceptional level of customer service.
And then you tell people that as well, and then you prefer that over -- and you're even prepared to pay a bit more for that service. And the same thing goes with our customers. So we have for a very long time focused on providing legendary customer service. And we get better and better and better. And in that respect, I mean, we're chasing perfection knowing that we will never catch it, but in the process, we have become best-in-class. And that is really why we can deliver solid results in this current environment.
I was just going to add on top of that, providing top quality products, as you would expect.
Michael Andrew Roxland
Truist Securities, Inc., Research Division
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Got it. And just one final question before turning it over. Just in terms of PPS and non-index customers, how much of your business is non-indexed? And are you fully implementing the announced price increases with those non-index customers?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. So when we look at that, it's really about 35% of our customers in the URB space. And -- so just driving, yes, that -- we've had great success. I can't tell you it's 100% of that 35%, but it's pretty close.
Operator
And our next question will be coming from Gabe Hajde of Wells Fargo.
Gabrial Shane Hajde
Wells Fargo Securities, LLC, Research Division
Larry, you gave us an inch, so I'm going for the mile. If you can help us in the fiscal '25 on some of the known items that you kind of called out and I'm thinking about Delta Petroleum for sure. You said a little bit of a headwind in the fourth quarter. Is that maybe a $15 million to $20 million annualized EBITDA number that we should be thinking about for the assets sold? And then kind of gross price flowing through based on price increases that have already been reflected in the indices?
And then I guess, lastly, I think there were some higher compensation items called out in the press release. Is that kind of getting back to normal, which I guess is a good thing. But any other kind of onetime items in the next year that we should be thinking about?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. On Delta, no, that number is high. It was about -- our $90 million was about 8.5x after we deal with stranded cost and that kind of stuff. Well, you can do the math on that. So the fourth quarter actually was going to be a little higher than that. So it would be approaching $4 million in that quarter. But for full year, 8.5x on $90 million.
So relative to the pricing element, we obviously had the $20 increase on URB that ends up being about $1 million that will hit in the fourth quarter this year because it will flow through mostly in October only. And on that $20, on a full year basis for $10 on URB, you basically have about $650 million -- I'm sorry, what's that number? Yes, $650,000 a month on the URB. And the incremental price increase that we had on the containerboard -- sorry, I'm struggling through my notes here for a minute here. What's the number on containerboard?
Bill D’Onofrio
Vice President of Investor Relations & Corporate Development
It's $750 for $10.
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes, $750 per $10. So on those -- how much is it?
Bill D’Onofrio
Vice President of Investor Relations & Corporate Development
And that was recognized in June. So it will be fully beneficial to Q4.
Lawrence Allen Hilsheimer
Executive VP & CFO
Right. Yes. Gabe, does that address the question?
Gabrial Shane Hajde
Wells Fargo Securities, LLC, Research Division
It does. I mean the other thing I was thinking about was I don't think that I heard economic downtime mentioned in the prepared remarks or in the slides. Just curious kind of where you guys are running in the system today?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. We've been running full out in our containerboard business. We've had some economic downtime in our URB space, do you have that number?
Bill D’Onofrio
Vice President of Investor Relations & Corporate Development
It was nothing significant in any paper grade, but near optimal levels from a backlog perspective in containerboard.
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Lawrence Allen Hilsheimer
Executive VP & CFO
I know it's minor. So...
Gabrial Shane Hajde
Wells Fargo Securities, LLC, Research Division
Okay. And one last one, just on the M&A front. Obviously, you guys have been active there. You called out kind of being 3.6x levered on a pro forma basis. Are there still opportunities out there given kind of where we are in the interest rate cycle? Or do you feel like you might get more competitive again if the Fed, in fact, does cut?
Ole G. Rosgaard
President, CEO & Director
No. We still have a lot of opportunities, Gabe. We have a very robust pipeline. We are engaged with a lot of companies and owners, which we continue to do that. We don't always decide the timing. So we have to continue that. And if an opportunity comes along, although the timing may not be ideal, we have, the capability to do it. But I will tell you that our focus right now is to pay down debt so that we get back to the 2 to 2.5x leverage ratio level.
Operator
Our next question will be coming from Brian Butler of Stifel.
Brian Joseph Butler
Stifel, Nicolaus & Company, Incorporated, Research Division
Just maybe on the first one. When you talk about that $160 million kind of in a more normalized volume environment, what has to happen for that? I mean, are we there at current kind of volumes right now, if those just kind of sustain through the back or through 2025? Or do we really need to see some step-up in the macro recovery to kind of get back to kind of the normalized 2022 levels?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. We need a step change. Just to give you a perspective on where we were and volumes versus Q3 '22. If you look back -- and let me just give you some sort of a number, just for example, or for total GIP, if I go to Q3 '22 to '21 was down 4.3%. The following year, it was down another 10.7%. We've only regained 4% of that, okay? So pretty significant drop-offs still from where we were. If I go to IBCs, they were -- because of acquisitions, stuff we were up 9.5% in Q3 '22 over '21, but we were down 13.7% '22. I can see it's because of our acquisitions come back pretty strong.
But if I go to paper, in our total mill volumes, '22 to '21 was down 2.6%. Next year is down 16.3% and we've only recovered to 7.9% up. So we still have a long way to go to get back to the volume levels that we were at. And so yes, it is more of a macro issue, Brian, than it is just some marginal change. So if I look at PPS as a whole, for us to get -- if we got back to normal volume levels, and this is not yet including the impact of the price changes that have been recognized. This is just sort of average value-add for the year, we pick up another $56 million of EBITDA in our PPS business.
And in our GIP business, it's a $90 million lift. And then you go into the acquisitions that we've made. And if you get back to normalized volumes for them, you end up picking up another $21 million. So it's a big macro piece against the entire environment.
Ole G. Rosgaard
President, CEO & Director
Brian, if I can just add a little bit of color to the $160 million as well. So as Larry alluded to, that's not one single factor as you have to consider that much of current volume dynamics is driven by like macroeconomic factors. So while we improved in Q3 that we can outpace the macro on volume, it is still the primary bottleneck to truly rebounding demand. And one major factor in that equation is the current interest rate situation.
In previous instances, interest rate cuts have been shown to drive production, specifically pent-up housing demand, both for new builds and existing housing sales. And that would be a major volume driver for us. As you know, when you move house or buy a new house, you do more than just buy the house, you paint the walls in your own house for it to sell better. You may buy new carpets, appliances and the hundreds of some other items for when that happens. And all of those things, they drive industrial production and demand for our products.
And then another component, as an example, would be ag. I just talked about it earlier, and we are experiencing short-term softness. Some of it is interest rate play in action too. And as that softened the base, again, you will see that end segment improve. So there's a lot of factors involved in returning to the $160 million.
Brian Joseph Butler
Stifel, Nicolaus & Company, Incorporated, Research Division
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Okay. That's helpful. And the second question, when you think of the operating model evolution that you're kind of in the process for. What's the time line on how long that takes to kind of implement? And is there a -- during that time, is there a short-term impact either on slower sales or higher costs as that gets pushed through?
Ole G. Rosgaard
President, CEO & Director
On sales, no. On costs that -- obviously, we're doing this in conjunction with changing our fiscal year, as you know. And there are some costs involved in that, but it's not material.
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. We had disclosed, Brian, but we were going to end up incurring about $6 million to $7 million related to just the cost of going through this change.
Brian Joseph Butler
Stifel, Nicolaus & Company, Incorporated, Research Division
And is that change kind of completed in fiscal '24 here? Or does that really roll into '25 as well?
Lawrence Allen Hilsheimer
Executive VP & CFO
We'll be rolling -- we're evolving into this, and we will roll out the details in December, but we will be operating in this model beginning November 1st.
Brian Joseph Butler
Stifel, Nicolaus & Company, Incorporated, Research Division
Okay. And then maybe one last one. On your shift towards more polymers versus kind of the other segments, how do you view kind of the market organic growth for the polymers in that kind of specialty piece that you're moving into versus the other segments? What does that organic growth look like?
Ole G. Rosgaard
President, CEO & Director
Well, first of all, just why are we doing this? Well, we are growing in polymer-based products because the margin profile is much, much higher and the cyclicality of those products is much, much lower. So we want to be a higher-margin company, that's a lot less cyclical. On the organic side, I mean, next week, I'm traveling to Malaysia to open a new IBC plant, which is polymer. We are adding lines all over the world all the time. We opened earlier this year, we opened another IBC plant in Turkey. So yes, right, we are also growing organically.
Operator
And our next question will be coming from George Staphos of Bank of America Securities.
George Leon Staphos
BofA Securities, Research Division
So we've touched on this a couple of different ways on the call regarding Europe. But Ole, as you think about it, is there a horizon where you won't be able to outperform Europe in spite of your model in spite of the legendary customer service, where do you think the next couple of quarters. For this reason, you should be able to outperform in Europe in spite of what's been sluggish conditions. If you could put some -- maybe some quantification on that somewhat sort of qualitative question.
Secondly, can you talk about what your exit trends were by big business into the fourth quarter. I'm particularly interested in what you're seeing in CorrChoice in terms of the marginal trends there. And I'll leave it there. I might have one follow-up.
Ole G. Rosgaard
President, CEO & Director
Thanks a lot, George. On Europe, first of all, the answer to the question is yes, I believe we can still outperform. And why do I believe that? Well, if we look back, and I have to go back to our philosophy of value over volume, we have said no to quite a lot of business in the past. And we can see now that after a certain period, that business is trickling back to us. So that's one reason for why we will continue to outperform.
Another one is we are really focused on growth in segments where we have not historically been very strong. And one is food and pharma. And we have teams really working hard on getting into those segments because the margins are higher, it's much more sticky, and it's much less cyclical as well. So with that, those combinations, I believe that we will continue to see solid performance come out of Europe. And we have added more capacity as well, by the way, organically. Sequentially on CorrChoice. CorrChoice was up...
George Leon Staphos
BofA Securities, Research Division
9
What are the businesses, but yes, lead with CorrChoice, sorry about that.
Ole G. Rosgaard
President, CEO & Director
I was just answering your second question. So sequentially, CorrChoice was also up nearly 10% as containerboard demand continued to improve, which was slightly better than we expected in our Q2 guidance. And I would remind you of our investments and our niche role in North America, containerboard as a champion of the independents which gives us earlier visibility to demand cycles and our competition, as we have a view of the full market, we are positioned well for this recovery.
Champion of the independent is a competitive advantage to us. So we're skilled at handling complexity. We can produce any flute, any size run and any linerboard combination with speed and profitability. So those are some of the reasons for why we see that sort of growth in containerboard.
George Leon Staphos
BofA Securities, Research Division
And Ole, just in general, and what were the other exit trends that you were seeing in the quarter?
Ole G. Rosgaard
President, CEO & Director
I can't really talk about quarter 4, but the exiting quarter 3 is still choppy. I would say it's very choppy. It's a little bit like walking in sand. You take 2 steps forward and then you slide half a step backwards. So we have months where we see, yes, it's all coming. And then the following months, we see a dive again and then the next month, it goes up again. But the overall trend is positive across the segment.
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes, the one thing, August is always tough because it's the vacation holiday month in Europe. And so it always gets choppy, and it also goes to a lot to harvest seasons in the south of Europe. But they're substantially the same as what we saw exiting in July.
George Leon Staphos
BofA Securities, Research Division
Last question following, I'll turn it over. Back to containerboard, CorrChoice and the business overall. To the extent that you have a view on your customers could offer one that you'd share on this conference call, volumes for the calendar second quarter in corrugated markets were okay, not great, flat, up a little bit, down a little bit depending on what adjustment you wanted to make, but all very easy comparisons.
What are your customers saying -- what are you seeing through your businesses in terms of why we're seeing that market trend, recognizing you're doing better? And what kind of holiday calendar fourth quarter season are we setting up for in the corrugated markets, given what you're seeing?
Lawrence Allen Hilsheimer
Executive VP & CFO
Yes. I mean, George, we're hearing the same thing that we've been expressing. I mean it's just mixed bag out there. I mean if you read like the Dow CEO's comments in their earnings call, it's like he's talking very positively if interest rates drop and home sales kick off, we feel the same way. I mean -- and we see others I think Henkel was very positive. You had other BASF not. And in the paper business, it's the same kind of mixed bag as what we're hearing from our people on the street. It's one week it’s hot. The next week is not. That's why we termed it as mixed.
Ole G. Rosgaard
President, CEO & Director
And I think the rate drop will obviously affect this because average person looks at their credit card debt and their payments, and it's linked to the interest rates. And if they go down, they get a little bit more money between their hands, they shop more on Amazon and it helps the industry. So we don't have a crystal ball, George.
Operator
Our next question is a follow-up from Gabe Hajde of Wells Fargo.
Gabrial Shane Hajde
Wells Fargo Securities, LLC, Research Division
Real quick. When we're talking about, I guess, the different end markets, can you remind us, roughly speaking, in your North American GIP business, how much is directionally tied to housing?
Ole G. Rosgaard
10
President, CEO & Director
It's difficult to give you a number on that. It really is because if you take chemical, bulk chemicals is one of our largest ones. Some goes into installation, some goes into the soles in your shoes and some goes into the fridge, you buy. It's just difficult to sort of point that out.
Lawrence Allen Hilsheimer
Executive VP & CFO
We don't have really good information on that at all, Gabe.
Operator
And I would now like to turn the conference back to Ole for closing remarks.
Ole G. Rosgaard
President, CEO & Director
Thank you. And first of all, a big thank you for all the questions and your continued interest in Greif. We really appreciate that. And we look forward to reporting our Q4 2024 earnings to you in early December, and subsequently also seeing you at our Investor Day on December 11th in Midtown New York. Have a wonderful day, everyone.
Operator
And this concludes today's conference call. Thank you for participating. You may now disconnect.
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