Greif Reports Third Quarter 2017 Results

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

Third Quarter Highlights (all results compared to the third
quarter 2016 unless otherwise noted):

• Net sales increased by $116.8 million to $961.8 million.
• Gross profit increased by $10.6 million to $187.1 million.
• Operating profit increased by $17.9 million to $89.5 million and
  operating profit before special items1 increased by $10.6
  million to $94.5 million, despite $2.0 million of professional fees
  related to tax planning expected to generate $3.0 million in recurring
  savings in fiscal 2017 and an incremental $12 million to $20 million
  annually, thereafter.
• Net income of $43.9 million or $0.74 per diluted Class A share
  compared to net income of $46.1 million or $0.78 per diluted Class A
  share. The third quarter of 2016 included a one time discrete tax
  benefit from tax restructuring activities that increased net income
  per diluted Class A share for the third quarter of 2016 by $0.17 per
  share.
• Net income, excluding the impact of special items, of $49.7 million or
  $0.85 per diluted Class A share compared to net income, excluding the
  impact of special items, of $53.6 million or $0.91 per diluted Class A
  share. The third quarter of 2016 included a one time discrete tax
  benefit from tax restructuring activities that increased net income,
  excluding the impact of special items, per diluted Class A share for
  the third quarter of 2016 by $0.17 per share.
• Interest expense decreased by $6.1 million to $13.7 million due
  primarily to the repayment of Senior Notes with borrowings under the
  Company's credit agreement and lower year-over-year debt balances.
• Cash provided by operating activities decreased by $10.7 million to
  $89.6 million primarily due to an increase in operating working
  capital.
• Free cash flow2 decreased by $9.5 million due to an
  increase in operating working capital, partially offset by a $1.2
  million decrease in cash paid for properties, plants, and equipment.
• Modified the guidance range for fiscal year 2017 Class A earnings per
  share before special items3 to $2.81 – $2.95 per share, due
  to ongoing competitive pressures in Asia Pacific, timing of raw
  material price adjustment mechanisms in customer contracts and our
  current assessment of a $2.5 million headwind impact related to
  Hurricane Harvey.
• Reaffirm guidance for fiscal year 2017 free cash flow of $180.0
  million to $200.0 million.

“Greif delivered solid operating and financial results during the fiscal
third quarter,” said Greif’s President and Chief Executive Officer, Pete
Watson. “Customer service levels continue to improve and our operating
profit before special items rose by more than 13 percent year over year.
We are on track to achieve our 2017 Transformation commitments and
remain confident that consistent execution of our strategy will result
in superior value creation for our customers and shareholders.”

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. Our consolidated customer
satisfaction index (CSI) improved by almost 5 percent versus the prior
year quarter, primarily related to improved performance in the Rigid
Industrial Packaging & Services (RIPS) and Flexible Products & Services
(FPS) segments. From an operational standpoint, the business delivered a
solid quarter. RIPS – our largest business segment by revenue and
operating profit – generated higher year-over-year sales and profits,
but gross profit margin was impacted by the timing of contractual pass
through mechanisms that will recover in the coming quarters. Paper
Packaging & Services (PPS) – which consists of two paper mills and one
of the newest corrugator networks in the containerboard industry –
delivered strong volumes, which helped to offset the significant impact
of year-over-year raw material inflation. PPS increased sales of
specialty products on a year-over-year basis and fully implemented
April’s announced containerboard price increase, which will help to
expand its profits and margin year-over-year in the fiscal fourth
quarter. FPS – the world’s largest producer of industrial flexible
intermediate bulk containers – continues to demonstrate improvement. FPS
delivered its 7th consecutive quarter of operating profit improvement
and recorded higher year-over-year sales.

We hosted our most recent Investor Day during the third quarter.
Materials from the event are available on our website at http://investor.greif.com.
Highlights from Greif’s Investor Day 2017 include:

• The disclosure of long term 2020 financial targets:
  • 2020 consolidated operating profit before special items range
    of $425 million – $465 million
  • 2020 free cash flow range of $230 million – $270 million
• The introduction of Greif’s “Path to Growth” plan, which highlights
  the process, strategy and acquisition priorities the Company has in
  place to grow profitability.

Segment Results (all results compared to the third quarter of
2016 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products4
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 third
quarter of 2017 as compared to the third quarter of 2016 for the
business segments with manufacturing operations:

Rigid Industrial Packaging & Services

Net sales increased by $77.6 million to $674.4 million. Divestitures
(all involving non-primary products) and foreign currency translation
negatively impacted net sales by $5.5 million and $2.1 million,
respectively. Net sales excluding divestitures and foreign currency
translation increased by $85.2 million due primarily to a 15.6 percent
increase in selling prices on our primary products stemming from
strategic pricing decisions and increases in index prices.

Gross profit increased by $5.2 million to $137.0 million. Gross profit
improved due to the same factors that impacted net sales along with the
tight control over manufacturing and transportation expenses. The third
quarter of 2016 gross profit included the recovery of insurance proceeds
of $5.2 million under a business interruption policy reflecting business
losses incurred during the first nine months of 2016 that was recorded
in cost of products sold of a deconsolidated non-core asset group.

Operating profit increased by $8.0 million to $64.7 million. Operating
profit before special items increased by $6.7 million to $70.2 million,
due primarily to the same factors that impacted gross profit, partially
offset by an increase in this segment's share of corporate allocated
costs.

Paper Packaging & Services

Net sales increased by $33.8 million to $206.3 million. The increase was
due primarily to an increase in volumes in our mills and corrugator
facilities and increased sales of specialty products.

Gross profit increased by $1.4 million to $33.7 million. The increase in
gross profit was due primarily to volume increases, partially offset by
significantly increased input costs.

Operating profit declined by $0.1 million to $19.0 million due to
significantly increased input costs and an increase in selling, general
and administrative expenses, partially offset by volume increases.

Flexible Products & Services

Net sales increased by $4.0 million to $73.9 million due to strategic
pricing decisions and product mix. Divestitures and foreign currency
translation negatively impacted net sales by $1.5 million and $1.4
million, respectively.

Gross profit increased by $3.5 million to $13.7 million due primarily
due to the same factors that impacted net sales above and a reduction in
transportation and manufacturing expenses.

Operating profit increased by $9.0 million to $3.1 million. Operating
profit before special items increased by $3.6 million to $2.6 million.
The improvement in operating profit before special items was due
primarily to the same factors that impacted gross profit.

Land Management

Net sales increased by $1.4 million to $7.2 million primarily due to an
increase in timber sales.

Operating profit increased by $1.0 million to $2.7 million due to the
same factor that impacted net sales.

Dividend Summary

On August 29, 2017, the Board of Directors declared quarterly cash
dividends of $0.42 per share of Class A Common Stock and $0.63 per share
of Class B Common Stock. Dividends are payable on October 1, 2017, to
stockholders of record at the close of business on September 18, 2017.

Conference Call

The Company will host a conference call to discuss the third quarter of
2017 results on August 31, 2017, at 8:30 a.m. Eastern Time (ET). To
participate, domestic callers should call 833-231-8265. The Greif ID is
67803852. 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 40
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, 2016. 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.S. generally accepted accounting principles (U.S. GAAP) and SEC
rules and regulations could materially impact our reported results,
(xxx) if the Company fails to maintain an effective system of internal
control, the Company may not be able to accurately report financial
results or prevent fraud, and (xxxi) the Company has a significant
amount of goodwill and long-lived assets which, if impaired in the
future, would adversely impact our results of operations. 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.

Contacts

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

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