Greif Inc. · NYSE:GEF
Greif — Q2 2020 Earnings Presentation
28 slides from Greif's earnings presentation, Jun 4, 2020
Slide 1: Second Quarter 2020 Earnings Conference Call
SECOND QUARTER 2020 EARNINGS CONFERENCE CALL JUNE 4, 2020
Slide 2: Safe harbor
Safe harbor FORWARD-LOOKING STATEMENTS • This presentation contains certain 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,” “
Slide 3: Supporting stakeholders during the COVID-19 pandemic
Supporting stakeholders during the COVID-19 pandemic Colleagues Customers Communities The health and safety of our global Responding to customer needs in Leveraging operational skills and colleagues is our #1 priority a dynamic and rapidly evolving existing relationships to support environment criti
Slide 4: Second Quarter Fiscal Year (FY) 2020 summary
Second Quarter Fiscal Year (FY) 2020 summary Financial performance Markets and operations Strategic priority highlights • Adj. EBITDA1: $181.3M, +12% • RIPS: • Engaged colleagues: YoY ‒ Solid volumes in most regions of ‒ Scored in the 89th percentile of all the world manufacturing companies • Adj. C
Slide 5: Rigid Industrial Packaging & Services (RIPS) review
Rigid Industrial Packaging & Services (RIPS) review $M Q2 2020 Q2 2019 Quarter Highlights: • Net sales down 2%, excluding F/X1, from prior year quarter Net sales $602.6 $631.6 ‒ Solid demand in N. America, West/Central Europe, offset by softness in Latin America Gross profit $129.3 $121.0 ‒ Lower av
Slide 6: RIPS end market review
RIPS end market review RIPS global end market segmentation1 Key quarterly commentary2 • Global large plastic drum volumes: +2.4% Petrol Prod, Lube Oils&Adds Other ‒ Solid demand for pharmaceuticals and personal care products and new blowmolder contributions, partially offset Specialty Chemicals by l
Slide 7: Flexible Products & Services (FPS) review
Flexible Products & Services (FPS) review $M Q2 2020 Q2 2019 Quarter Highlights: Net sales $67.4 $77.0 • Net sales down 9%, excluding F/X1, from prior year quarter ‒ Soft demand conditions and lower average sales price from raw Gross profit $13.9 $16.6 material price declines Adj. EBITDA $6.9 $7.7 •
Slide 8: Paper Packaging & Services (PPS) review
Paper Packaging & Services (PPS) review $M Q2 2020 Q2 2019 Quarter Highlights: • Net sales down 3%, excluding F/X1, from prior year quarter Net sales $481.6 $497.6 ‒ Softer containerboard conditions and lower YoY published containerboard and boxboard prices Gross profit $94.9 $108.3 ‒ 24K tons of co
Slide 9: PPS end market review
PPS end market review CorrChoice commentary3 Tube / core end markets2 Tube / core commentary3 • Integrated demand: Paper Mill • Cloth, Yarn, Carpet, Paper Mills Film demand: ‒ Negatively impacted by customers Other core internalizing volumes previously Construction ‒ Negatively impacted by non-essen
Slide 10: Q2'20 vs. Q2'19: financial comparison
Q2’20 vs. Q2’19: financial comparison Key financial metrics ($M and $/sh) Q2 2020 Q2 2019 Net Sales, Excluding the Impact of Currency Translation1 $1,180.6 $1,213.3 Gross Profit $240.7 $248.7 SG&A $121.1 $140.0 Adjusted EBITDA2 $181.3 $162.0 Interest expense $29.3 $33.9 Adjusted Net Income Attributa
Slide 11: Withdrawing Fiscal 2020 guidance
Withdrawing Fiscal 2020 guidance Fiscal 2020 key modeling assumptions ($M and %) FY 2020 Assumption DD&A expense $240 – $250 Interest expense $115 – $120 Non – GAAP tax rate 27 – 31% Working capital $(10) – $10 Adj. Capital expenditures $120 – $140 Adj. Class A EPS and Adj. Free Cash Flow guidance w
Slide 12: Taking proactive steps to mitigate uncertainty
Taking proactive steps to mitigate uncertainty 1 Variable cost COGS Breakdown1 reduction plans • Includes plant rationalization; furloughs; shift reductions developed RIPS PPS 2 SG&A reduction • Targeted reductions or hiring delays across back office functions levers identified 3 Capex and other • E
Slide 13: Balance sheet and liquidity profile
Balance sheet and liquidity profile Debt maturities as of 4/30/2020 ($M) $1,400 Key liquidity statistics • Covenant net debt to EBITDA requirement = $1,200 4.75x; GEF currently 3.6x (Q2’20) • ~77% of debt is fixed rate • ~$72M of cash & equivalents (Q2’20); $690M $1,000 undrawn on revolver • ~245K a
Slide 14: Capital allocation priorities
Capital allocation priorities 1 Reinvest in • Fund maintenance to sustain cash generation and advance organic growth opportunities that the business exceed required returns 2 • Current compliance leverage ratio = ~3.6x De-lever the balance sheet • Net debt decreased by $107M sequentially from Q1’20;
Slide 15: Why invest in Greif?
Why invest in Greif? Compelling customer value Robust and diverse product Numerous avenues for Compelling dividend and proposition due to portfolio with exposure to a incremental low-risk growth opportunity for free cash demonstrated commitment variety of end markets and margin enhancement flow expa
Slide 16: Appendix
GREIF PACKAGING SUCCESS TOGETHER™ APPENDIX
Slide 17: Q2 Price, Volume and Foreign Currency Impact to Net Sales for Primary Products
Q2 Price, Volume and Foreign Currency Impact to Net Sales for Primary Products: TOTAL SALES VOLUME PRICE FX VARIANCE RIPS NA 1.0% -7.5% -0.5% -6.9% $2.2 ($16.0) ($1.1) ($14.9) RIPS LATAM -16.2% 12.0% -18.1% -22.3% ($6.0) $4.4 ($6.7) ($8.2) RIPS EMEA 4.3% -0.9% -4.2% -0.8% $11.0 ($2.3) ($10.9) ($2.2)
Slide 18: Key assumptions and sensitivity
Key assumptions and sensitivity FY 2020 Foreign Exchange Exposure Paper Packaging & Services Assumptions & Sensitivity 10% strengthening of the USD; Cumulative impact Key PPS stats Currency impact to EBITDA before hedging Containerboard production ~1M tons per year Euro $(9M) – $(11M) $(9M) – $(11M)
Slide 19: Becoming a world class customer service organization
Becoming a world class customer service organization Customer Satisfaction Index (CSI)1 Expectation RIPS PPS FPS 50 60 70 80 90 100 Q2'20 Q2'19 Note: CSI is an internal measure of a plant’s or business’ performance against selected parameters that customers experience, giving us an indication of our
Slide 20: Recognized for sustainability leadership
Recognized for sustainability leadership 2016 2018 2019 Join UN Global Achieved an Achieved an “A” Compact “A- Leadership” MSCI ESG rating 2017 CDP score Sustainability goals established 2015 2016 2017 2018 2019 2015 & 2016 2018 & 2019 2019 2019 Awarded Silver Awarded Gold Named to Newsweek’s Awarde
Slide 21: Non-GAAP financial measures
Non – GAAP financial measures Non-GAAP 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 fina
Slide 22: GAAP to Non-GAAP reconciliation: Segment and Consolidated Financials
GAAP to Non-GAAP reconciliation: Segment and Consolidated Financials June 3, 2020 – P.22
Slide 23: GAAP to Non-GAAP reconciliation: Net Sales Excluding Currency Translation
GAAP to Non-GAAP reconciliation: Reconciliation of Net Sales to Net Sales Excluding the Impact of Currency Translation June 3, 2020 – P.23
Slide 24: GAAP to Non-GAAP reconciliation: Net Income to Adjusted EBITDA
GAAP to Non-GAAP reconciliation: Reconciliation of Net Income to Adjusted EBITDA June 3, 2020 – P.24
Slide 25: GAAP to Non-GAAP reconciliation: Segment Operating Profit to Adjusted EBITDA
GAAP to Non-GAAP reconciliation: Reconciliation of Segment Operating Profit to Adjusted EBITDA June 3, 2020 – P.25
Slide 26: GAAP to Non-GAAP reconciliation: Net Income and Class A EPS
GAAP to Non-GAAP reconciliation: Net Income and Class A Earnings Per Share Excluding Adjustments June 3, 2020 – P.26
Slide 27: GAAP to Non-GAAP reconciliation: Adjusted Free Cash Flow
GAAP to Non-GAAP reconciliation: Adjusted Free Cash Flow June 3, 2020 – P.27
Slide 28: Credit Agreement Adj. EBITDA & Leverage Ratio
Credit Agreement Adj. EBITDA & Leverage Ratio Trailing Twelve Month Credit Agreement EBITDA TTM (in millions) 4/30/2020 Net income 189.2 Plus: Interest expense, net 126.9 Plus: Debt extinguishment charges 0.1 Plus: Income tax expense 77.1 Plus: Depreciation, depletion and amortization expense 241.8