Greif Q1 earnings down from prior year

Greif, a packaging producer based in Delaware, Ohio, has announced its first-quarter 2021 financial results. According to its latest earnings report, the company achieved net income of $23.4 million in the first quarter, or 40 cents per diluted Class A share, which is down compared with net income of $32.3 million, or 55 cents per diluted Class A share, in the first quarter of 2020. Net income excluding the impact of adjustments was at $35.9 million, or 61 cents per diluted Class A share, which is down from $37.9 million, or 64 cents per diluted Class A share, in the first quarter of 2020. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by $8.9 million to $138.5 million compared with the first quarter of 2020.

In the first quarter, the company reports that its net cash provided by operating activities decreased by $8 million to a source of $11.5 million. According to Greif, adjusted free cash flow in the quarter increased by $1.8 million to $11.5 million. The company says its total debt decreased by $268.7 million to $2,539.4 million in the first quarter compared with the same time frame in 2020. Additionally, net debt decreased by $279.3 million to $2,438 million compared with the first quarter of 2020.

In the first quarter, Greif says it combined its Rigid Industrial Packaging & Services and Flexible Products & Services segments under a single global leadership team, now named Global Industrial Packaging, to enhance cross-selling and service offerings to customers within similar markets.

Segment results

Within the Global Industrial Packaging segment, net sales increased $27.6 million to $659.3 million in the first quarter of 2021 compared with the first quarter of 2020. Net sales in the segment excluding foreign currency translation increased by $18.9 million primarily due to higher volumes and higher average sale prices partly driven by contractual price adjustment mechanisms related to raw material price increases. The company reports that gross profit in this segment increased $10.2 million to $130.3 million in the first quarter of 2021 compared with the first quarter of 2020. According to Greif, the increase in gross profit was primarily because of the same facts that affected net sales, partially offset by higher transportation costs. In the first quarter, operating profit in the division increased by $9.2 million to $54 million compared with the same time frame in 2020, and adjusted EBITDA increased by $12.9 million to $79.5 million.

Within the company’s Paper Packaging & Services division, net sales increased by $7.2 million to $480.9 million in the first quarter of 2021 compared with the first quarter of 2020, primarily due to higher published containerboard prices and higher volumes. The company reports that net sales for the first quarter of 2020 had included $53 million of net sales attributable to Greif’s divested Consumer Packaging Group business that sold April 1, 2020. Within this division, gross profit decreased by $20.5 million to $79.6 million in the first quarter of 2021 compared with the first quarter of 2020. The company says the decrease in profit was primarily because of higher old corrugated container (OCC) costs and other raw material input costs as well as higher transportation costs.

During the company’s earnings presentation Feb. 25, Pete Watson, president and CEO of Greif, reported that EBITDA for this segment fell in the first quarter by $22 million compared with the same time frame in 2020 primarily due to “a significant $30 million OCC, transport and chemical cost headwind.” He added that the company announced a new set of price increases for containerboard and uncoated recycled boxboard grades in response to strong demand and expects to see that reflected in the company’s 2021 third-quarter earnings results.

The company says its operating profit in the Paper Packaging & Services segment decreased by $18.2 million to $14.3 million in the first quarter of 2021 compared with the first quarter of 2020, and adjusted EBITDA decreased by $21.8 million to $56.1 million in light of the same factors that impacted gross profit.

Overall, Watson says Greif delivered “solid first-quarter results” despite continued challenging circumstances arising from the pandemic.

He says, “Volumes grew across most of our packaging substrates as many of our key end markets improved and were particularly robust in our corrugated business. In response to strong demand for our products and cost inflation experienced in our key raw materials and transportation services, we are actively implementing price increases across our broad global product portfolio. Looking ahead, Greif is well-positioned to benefit as the world recovers from the pandemic. We remain laser-focused on managing those areas within our control to drive value creation.”

In the company’s earnings presentation Feb. 25, Watson added that Greif also is taking advantage of “favorable market dynamics to address the COVID-related shortfall on [Greif’s] deleveraging plans by entering into an agreement to divest 69,200 acres of timberlands in Alabama to Weyerhaeuser Co. for approximately $149 million. Proceeds to net sale will be applied to debt repayment.”