Greif Reports Fiscal 2017 and Fourth Quarter Results

DELAWARE, Ohio–(BUSINESS WIRE)–Greif, Inc. (NYSE: GEF, GEF.B), a world leader in industrial packaging
products and services, today announced fiscal 2017 and fourth quarter
results.

Fiscal Year Highlights Include (all results compared to the
fiscal year 2016 unless otherwise noted):

• Net sales increased by $314.6 million to $3,638.2 million.
• Gross profit increased by $29.8 million to $714.7 million.
• Operating profit increased by $46.8 million to $272.4 million, and
  operating profit before special items1 increased by $26.7
  million to $335.0 million. Operating profit before special items was
  negatively impacted by $5.3 million associated with adverse weather
  events and $4.6 million of professional advisory fees related to
  planning and execution of tax strategies not contemplated in our
  original guidance, which resulted in significant tax risk mitigation
  and tax savings.
• Income tax expense increased by $0.7 million to $67.2 million, but our
  effective tax rate decreased from 47.1 percent to 33.5 percent despite
  the fiscal 2016 one time tax benefit achieved during Q3 2016.
• Net income of $118.6 million or $2.02 per diluted Class A share
  compared to net income of $74.9 million or $1.28 per diluted Class A
  share. Net income, excluding the impact of special items, of $173.1
  million or $2.95 per diluted Class A share compared to net income,
  excluding the impact of special items, of $143.5 million or $2.44 per
  diluted Class A share.
• Cash provided by operating activities increased by $4.0 million to
  $305.0 million. Free cash flow2 increased by $7.3 to $208.2
  million.

“We continued to make Greif a stronger and more profitable business in
2017, with solid earnings and cash generation,” said Pete Watson,
Greif’s President and Chief Executive Officer. “Fiscal Year 2017 Class A
earnings per share before special items rose by roughly 21 percent year
over year; we generated more than $200 million in Free Cash Flow and
returned nearly $100 million to shareholders. Our focus on customer
service excellence continues to strengthen and we are driving a
continuous improvement mindset to create stronger sustainable
performance. Our plans for Fiscal 2018 and beyond remain focused on our
teams being accountable to execute on our commitments and to deliver
superior value to our customers and shareholders.”

Fourth Quarter Highlights Include (all results compared to the
fourth quarter 2016 unless otherwise noted):

• Net sales increased by $100.5 million to $968.1 million.
• Gross profit decreased by $1.0 million to $182.4 million primarily
  related to adverse weather events.
• Operating profit increased by $6.8 million to $60.4 million and
  operating profit before special items increased by $1.9 million to
  $88.9 million.
• Income tax expense decreased by $23.1 million to $5.2 million.
• Net income of $33.3 million or $0.57 per diluted Class A share
  compared to net income of $8.5 million or $0.14 per diluted Class A
  share. Net income, excluding the impact of special items, of $57.8
  million or $0.98 per diluted Class A share compared to net income,
  excluding the impact of special items, of $38.5 million or $0.65 per
  diluted Class A share.
• Cash provided by operating activities increased by $56.9 million to
  $199.9 million. Free cash flow increased by $53.9 million to $168.2
  million.

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.

Notable Business Highlights

Our three strategic priorities are:

1. Invest in our people and teams to foster a strong culture of employee
engagement and accountability.

2. Deliver industry leading customer service excellence to achieve
superior customer satisfaction and loyalty.

3. Strive for and realize performance excellence, leading to enhanced
free cash flow and value creation.

Our goal is to be the best performing customer service company in
industrial packaging in the world. We measure and track our customer
performance through two metrics: the customer satisfaction index (CSI);
and Net Promoter Score (NPS). NPS measures how likely a customer is to
recommend Greif as a business partner.

Our consolidated CSI tracks a variety of internal metrics designed to
enhance the customer experience in dealing with Greif. Our CSI improved
by roughly 2% versus the prior year quarter, with the biggest
improvement recorded in the Flexible Products & Services (FPS) segment,
which generated a 17% improvement versus the prior year quarter. Our
expectation is that each business segment deliver CSI at a 95 score or
better. Our Paper Packaging & Services (PPS) segment has consistently
performed at that level for many years. Our Rigid Industrial Packaging
and Services (RIPS) and FPS segments are nearing that threshold.

We are finalizing the most recent NPS survey results, which will be
shared as part of our first quarter 2018 earnings release. The NPS
survey being finalized will be our fifth conducted since the beginning
of the Transformation initiative.

From an operational standpoint, the business delivered a solid quarter
despite weather related headwinds. Our third quarter earnings call was
several days after Hurricane Harvey made landfall and at that time, we
had estimated a $2.5 million adverse weather impact; in actuality, the
impact was $5.3 million. RIPS – our largest business segment by revenue
and operating profit – bore the brunt of these headwinds, but still
generated higher year-over-year sales. RIPS gross profit margin was
impacted by roughly $4 million related to Hurricane Harvey, rising raw
material prices and the timing of contractual pass through mechanisms
that will recover in the coming quarters. PPS – which consists of two
paper mills and one of the newest corrugator networks in the
containerboard industry – delivered strong volumes, higher specialty
sales and realized previous containerboard price increases, which all
helped to offset the impact of year-over-year old corrugated container
inflation. FPS – the world’s largest producer of industrial flexible
intermediate bulk containers – continues to demonstrate improvement, but
was impacted by a $2.7 million expense during the quarter related to
legacy claims.

Fourth quarter Class A earnings per share before special items was $0.98
per share versus $0.65 per share in the prior year quarter. Earnings
benefited from higher year over year sales, lower SG&A expense, lower
interest expense and a significantly reduced tax rate versus the prior
year quarter. For fiscal 2017, we delivered Class A earnings per share
before special items of $2.95 per share, which is at the high end our
guidance range. Fiscal 2017 earnings benefited from a significant
reduction in the company’s anticipated annual tax expense in the fourth
quarter as a result of a reduction in anticipated pretax income, the
realization of tax benefits from global tax initiatives in fiscal 2017,
and certain one-time tax benefits realized in the fourth quarter of
2017. Fiscal 2017 Free Cash Flow totaled $208.2 million which exceeded
our guidance. Fiscal 2018 guidance is included in this press release.

The end of Fiscal 2017 concludes our three year Transformation
initiative. That initiative helped to refocus Greif on the importance of
customer service excellence and re-oriented our business strategy
towards delivering value improvements over purely volume gains. We have
emerged from the Transformation with a stronger portfolio, one that is
optimized for future growth if opportunities arise that generate
appropriate returns. While the Transformation may have officially
concluded, optimization activities identified during the initiative will
continue into 2018. Furthermore, the financial discipline underlying our
Transformation will continue and full year benefits of fiscal 2017
initiatives will be realized in 2018.

Company Outlook

Highlights of fiscal 2018 guidance are set forth below.

Note: 2018 Class A Earnings per Share guidance 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, timberland or properties,
plants and equipment, net, non-cash asset impairment charges due to
unanticipated changes in the business, restructuring-related activities,
non-cash pension settlement charges or acquisition costs, and the income
tax effects of these items and other income tax-related events. No
reconciliation of the fiscal year 2018 Class A earnings per share
guidance, a non-GAAP financial measure which excludes gains and losses
on the disposal of businesses, timberland and properties, plants and
equipment, non-cash pension settlement charges, acquisition costs and
restructuring and impairment charges 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 the most directly comparable GAAP financial
measure without unreasonable efforts. A reconciliation of 2018 free cash
flow guidance to forecasted net cash provided by operating activities,
the most directly comparable GAAP financial measure, is included in this
release.

Segment Results (all results compared to the fourth quarter of
2017 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products3
sold, selling prices, product mix and the impact of changes in foreign
currencies against the U.S. Dollar. The tables below show the percentage
impact of each of these items on net sales for our primary products,
both including and excluding the impact of divestitures, for the fourth
quarter of 2017 as compared to the fourth quarter of 2016 for the
business segments with manufacturing operations:

(3) Primary products are manufactured steel, plastic and
fibre drums; intermediate bulk containers; linerboard, medium,
corrugated sheets and corrugated containers; and 1&2 loop and 4 loop
flexible intermediate bulk containers.

Rigid Industrial Packaging & Services

Net sales increased by $59.6 million to $662.5 million. Divestitures
negatively impacted net sales by $2.5 million and foreign currency
translation benefited net sales by $9.8 million. Net sales excluding
divestitures and foreign currency translation increased by $52.3 million
due primarily to a 11.1 percent increase in selling prices and product
mix on our primary products stemming from strategic pricing decisions
and increases in index prices.

Gross profit decreased by $12.0 million to $118.9 million due to raw
material price increases and a $4.4 million impact from adverse weather
events.

Operating profit decreased by $6.0 million to $24.5 million. Operating
profit before special items decreased by $7.9 million to $52.5 million,
due primarily to the same factors that impacted gross profit, offset by
a reduction in this segment's selling, general and administrative
expenses.

Paper Packaging & Services

Net sales increased by $34.0 million to $223.0 million. The increase was
due primarily to an increase in volumes in our mills and CorrChoice
sheet feeder network and increased sales of specialty products.

Gross profit increased by $10.0 million to $49.0 million primarily due
to the same factors that impacted net sales, partially offset by a $0.5
million impact from adverse weather events and higher year over year raw
material costs.

Operating profit increased by $9.0 million to $33.7 million primarily
due to the same factors that impacted gross profit.

Flexible Products & Services

Net sales increased by $7.1 million to $76.2 million due primarily to
strategic pricing decisions.

Gross profit increased by $0.3 million to $12.0 million due primarily to
the same factors that impacted net sales above, offset by increased
reserves for legacy claims.

Operating profit increased by $3.9 million to $0.3 million. Operating
profit before special items increased by $0.5 million to $0.6 million
primarily due to the same factors that impacted gross profit.

Land Management

Net sales decreased by $0.2 million to $6.4 million primarily due to a
decrease in timber sales and a $0.4 million impact from adverse weather
events.

Operating profit decreased by $0.1 million to $1.9 million. Operating
profit before special items increased by $0.4 million to $1.8 million
primarily due to the same factors that impacted net sales offset by a
reduction in transportation costs.

Dividend Summary

On December 5, 2017, the Board of Directors declared quarterly cash
dividends of $0.42 per share of Class A Common Stock and $0.62 per share
of Class B Common Stock. Dividends are payable on January 1, 2018, to
stockholders of record at the close of business on December 18, 2017.

(4)Operating working capital is defined as trade accounts
receivable plus inventories less accounts payable.

Conference Call

The Company will host a conference call to discuss the fourth quarter of
2017 results on December 7, 2017, at 8:30 a.m. Eastern Time (ET). To
participate, domestic callers should call (833) 231-8265. The Greif ID
is 9388796. The number for international callers is +1-(647) 689-4110.
Phone lines will open at 8:00 a.m. ET. The conference call will also be
available through a live webcast, including slides, which can be
accessed at http://investor.greif.com
by clicking on the Events and Presentations tab and searching under the
events calendar. A replay of the conference call will be available on
the Company’s website approximately two hours following the call.

About Greif

Greif is a global leader in industrial packaging products and services
and is pursuing its vision to become the world’s best performing
customer service company in industrial packaging. The Company produces
steel, plastic, fibre, flexible, corrugated, and reconditioned
containers, intermediate bulk containers, containerboard and packaging
accessories, and provides filling, packaging and industrial packaging
reconditioning services for a wide range of industries. Greif also
manages timber properties in the southeastern United States. The Company
is strategically positioned with production facilities in over 45
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. 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. The most significant of these risks and
uncertainties are described in Part I of the Company’s Annual Report on
Form 10-K for the fiscal year ended October 31, 2017. The Company
undertakes no obligation to update or revise any forward-looking
statements.

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.
Forward-looking statements are subject to risks and uncertainties that
could cause the Company’s actual results to differ materially from those
forecasted, projected or anticipated, whether expressed in or implied by
the statements. 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) we may not successfully implement
our business strategies, including achieving our transformation and
growth objectives, (iii) our operations subject us to currency exchange
and political risks that could adversely affect our results of
operations, (iv) the current and future challenging global economy and
disruption and volatility of the financial and credit markets may
adversely affect our business, (v) the continuing consolidation of our
customer base and suppliers may intensify pricing pressure, (vi) we
operate in highly competitive industries, (vii) our business is
sensitive to changes in industry demands, (viii) raw material and energy
price fluctuations and shortages may adversely impact our manufacturing
operations and costs, (ix) geopolitical conditions, including direct or
indirect acts of war or terrorism, could have a material adverse effect
on our operations and financial results, (x) we may encounter
difficulties arising from acquisitions, (xi) in connection with
acquisitions or divestitures, we may become subject to liabilities,
(xii) we may incur additional restructuring costs and there is no
guarantee that our efforts to reduce costs will be successful,
(xiii) tax legislation initiatives or challenges to our tax positions
may adversely impact our results or condition, (xiv) full realization of
our deferred tax assets may be affected by a number of factors,
(xv) several operations are conducted by joint ventures that we cannot
operate solely for our benefit, (xvi) certain of the agreements that
govern our joint ventures provide our partners with put or call options,
(xvii) our ability to attract, develop and retain talented and qualified
employees, managers and executives is critical to our success,
(xviii) our business may be adversely impacted by work stoppages and
other labor relations matters, (xix) we may not successfully identify
illegal immigrants in our workforce, (xx) our pension and postretirement
plans are underfunded and will require future cash contributions and our
required future cash contributions could be higher than we expect, each
of which could have a material adverse effect on our financial condition
and liquidity, (xxi) we may be subject to losses that might not be
covered in whole or in part by existing insurance reserves or insurance
coverage, (xxii) our business depends on the uninterrupted operations of
our facilities, systems and business functions, including our
information technology (IT) and other business systems, (xxiii) a
security breach of customer, employee, supplier or Company information
may have a material adverse effect on our business, financial condition
and results of operations, (xxiv) legislation/regulation related to
environmental and health and safety matters and corporate social
responsibility could negatively impact our operations and financial
performance, (xxv) product liability claims and other legal proceedings
could adversely affect our operations and financial performance,
(xxvi) 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, (xxvii) changing climate, climate change regulations and
greenhouse gas effects may adversely affect our operations and financial
performance, (xxviii) the frequency and volume of our timber and
timberland sales will impact our financial performance, (xxix) changes
in U.

Contacts

Investor Relations:
Greif, Inc.
Matt Eichmann, 740-549-6067
[email protected]

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