Good day and thank you for standing by. Welcome to the Greif second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-one-one again. 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: Thank you and good day everyone. Welcome to Greif’s fiscal second quarter 2024 earnings conference call. During the call today, our Chief Executive Officer, Ole Rosgaard will provide you with an update on our second quarter results driven by our build-to-last strategy, as well as current business trends. Our Chief Financial Officer, Larry Hilsheimer will provide an overview of our 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 non-public 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 reconciliations to the most directly comparable GAAP metrics that can be found in the appendix to today’s presentation. I’ll now turn the presentation over to Ole on Slide 3.

Thanks Bill. Hello everyone and thank you for joining us. We are excited to discuss another successful quarter for Greif underpinned by solid execution across the business through the Greif business system. Before we dive into our results, I would like to widen our lens and discuss key updates on our build-to-last strategy, specifically touching on each of our four missions for value creation. This will help contextualize our continued solid performance despite the persistence and [indiscernible] headwinds our business has recently faced, as well as why we believe Greif is positioned for near and long term outperformance. First, I will discuss our creating thriving communities and delivering legendary customer service pillars through the principles of the service profit chain. I will then touch on how we protect our future for our customers and our communities. Larry will discuss our quarter results and how we ensure financial strength through strategic capital allocation. As a reminder to all, our vision is to be the best performing customer service company in the world. We consider our primary customers to be our end product customers, our supply chain partners, our colleagues, and our financial stakeholders. Everything we do focuses on improving our service to these customers through dedication to the principles of the service profit chain, which I’ll now discuss on Slide 4. Our service profit chain has created a competitive advantage for Greif through investing in our people. This creates a flywheel for value creation as colleagues are engaged and dedicated to providing legendary customer service. Customers recognize the value Greif delivers from a differentiated product and service standpoint. This culminates in improved customer loyalty and increased share of wallet over time. Due to our steadfast conviction in the power of this value creation model, we monitor engagement of our colleagues and…

Thank you Ole, and thank you all for joining our call. Our second quarter results reflect improving but still weak demand and the extremely challenging price-cost dynamics in our paper business, resulting in $170 million of adjusted EBITDA, $59 million of free cash flow, and adjusted EPS of $0.82 per share. As Ole mentioned, we are leaning on the Greif business system to serve our customers with excellence, manage costs, and diligently monitor our business for signs of an inflection. The Greif business system champions for continuous improvement, accelerates plant modernization and automation, as well as creates value through gemba and Six Sigma programs. Using these tools, we continue to drive structural cost out and build productivity gains that not only help optimize our current business but also provides the foundation to accelerate integration and synergy capture as we grow through acquisitions. While managing the present, we are also growing for the future through the Ipackchem acquisition and through high value capital projects, such as our recently opened Dallas sheetfeeder. These investments are critical to our long term vision and strategy and will position us well for outperformance once markets return to a normalized state. We are reinstating the guidance range given our confidence in our view of the remainder of our fiscal year. We are pleased to raise the low end from our prior $610 million to $675 million and add a high end of $725 million. Before discussing guidance assumptions, let me provide a segment performance update, starting on Slide 9. For GIP, continuing weak but improving demand led to a year-over-year sales decline of $57 million and margin compression of 1.5% year-over-year. In addition, SG&A costs were up year-over-year, in line with our expectations communicated in our Q4 call. This was primarily a result of D&A step-up…

Thank you Larry. I appreciate each of you taking the time to listen to my opening remarks on our strategy and hope that I clearly communicated the value creation which is occurring through leveraging what we do best, customer service, to drive growth and transform our business. Our recent capital investments and internal initiatives are setting the stage for the next wave of accelerated growth at Greif. Our Greif business system and dedication to the service profit chain have combined to create a flywheel of success, which is driving growth and our disciplined capital allocation framework. We have an investor day upcoming this December and plan to discuss in greater detail the changes we are currently making through the Greif business system to transform our organization for breakout success. Operator, will you please open the lines for Q&A now?

Thank you. [Operator instructions] Our first question comes from the line of Ghansham Panjabi with Baird. Your line is now open.

Hi, good morning. This is Matt Krueger sitting in for Ghansham. How is everybody doing today?

Great Matt, thanks.

Good, thank you.

Wonderful. I guess I just wanted to start off with a quick question on volumes. Can you provide some added detail on the volume cadence across both business segments during the quarter, and then just some early thoughts on how the third fiscal quarter has kicked off would be really helpful as well.

Sure, let me give you some comments. Let me sort of zoom out first and give you kind of a regional overview year-on-year, and then we can go into substrates and I’ll make some comments perhaps on the end markets. If you look at it regionally, the strongest market was EMEA, where we saw an 8% growth, and it’s also our largest GIP market. LatAm was flat, we were a little bit weaker in North America, minus-5%, and we were down 11% in APAC. The broad improvement we saw in EMEA was across our industrial end markets for the second straight quarter, mostly in bulk chemicals and lubes. In LatAm, we saw pockets of strength both in bulk chemical and paints and coatings, and as I mentioned, we had some softness in ag chem, like you’ve seen most other places, and again in North America, it was--you know we see continued slow bulk and commodity development and ag chem demand is down, but sequentially from Q1, we do see improvements. I made some comments earlier on APAC - Q2 volumes were negatively impacted by seasonality from the Chinese New Year and weaker demand from food and bev. If we look at substrates year-on-year, the strongest substrate was plastic, where we had invested, and IDC, and we’re up low teens year-on-year. Steel is flat but it’s actually improving, up to 10% sequentially, and we are down low singles in fiber but we are improving again sequentially - it’s up 10%. As I said, the end markets are really bulk chemicals, lubricants where we see strong development. If we look at also the economic indicators, the global PMI was above 50 for the last four months, including May, which is positive and which is reflected, and these positive signals that we’ve seen exiting makes us very positive for the future. We stay connected to our customers, our supply chain partners, and as demand hopefully keeps increasing, we will react quickly, like we have done in EMEA.

Great, that’s very helpful. Then just to follow up, I wanted to touch on price-cost a bit. Can you provide an updated view on the absolute price-cost expectation for the year? If you could provide some detail on how that performed this quarter and what you would expect from the upcoming two quarters, that would be helpful as well. It seems like we could be reaching kind of a peak price-cost pain point across your business, given the pricing initiatives you have in the market. I just want to check the validity of that statement.

Yes, that’s a great question. I think Larry would be good to answer that.

Yes, if you look--I mean, clearly as we looked at what price-cost we had relative to Q2 2023, major impact year-over-year, price-cost squeeze of about $49 million in paper and about $20 million--positive 17 out, actually, in GIP, so you had $12 million of volume benefit in GIP and $27 million of volume benefit in PPS, so trends on volume is good, price-cost squeeze very harmful to us. Then looking at going from our former guidance to current guidance, we show from that 610 low end that we gave, actually price-cost benefit in our GIP business of about $39 million and volume of $27 million. Within PPS at midpoint, $29 million--or I’m sorry, $16 million price-cost lift from prior where we were, and $15 million. If I’m going from prior year to where we are now, obvious squeeze numbers going from the $819 million of last year to $700 million this year within the PPS business - you know, major squeeze clearly on OCC of roughly $95 million, $100 million, URB at $5 million, pressure and containerboard about flat. Then in our GIP business, price-cost about a $59 million positive and volume about $30 million positive, so hopefully that’s what you were looking for, Matt.

Yes, that’s very helpful. That’s it for me. Thank you.

Thank you. Our next question comes from the line of George Staphos with Bank of America Securities. Your line is now open.

Hi everyone, good morning. Thanks for the details, and congratulations on the quarter. I wanted to go to Slide 11, where you have the waterfall. Larry and Ole, if we look at the volume pick-up in your guidance, recognizing there are no guarantees in life, things could move more positively, things could move more negatively, where are you right now in terms of that $22 million to $62 million would you say roughly in terms of the volume pick-up that in turn informed your improvement in your guidance?

Yes, I would say, George, where we’re at in the trend right now is right smack in the middle of that. What we did is build a range around it based on, as Ole mentioned in his comments, there’s still some nervousness in some of our customers, but there’s also some areas where we’re seeing there’s potential optimism, so we built a range around what we thought was possible for the rest of the year.

Okay. Larry, I probably missed this, Ole, I probably missed this, but if you could, either by end market or by substrate, maybe both, could you just give us kind of a quick where are you year-on-year early in fiscal 3Q in terms of trends you’re seeing at the moment on volume?

[Indiscernible]. Let me just get--yes. Exit trends in May, they were generally positive, George. Steel and containerboard, they kept improving throughout Q2. Plastic and URB was a bit more mixed on a month-to-month basis during the quarter, but if we look at GIP and then EMEA, they remained sequentially strongest, as I mentioned, but also with North America and LatAm improving, containerboard continued to improve and will soon start benefiting from our Dallas sheetfeeder, which by the way is operational and it’s producing a sheet that’s being sold. In URB, we continue to see construction and film demand increasing in May despite the mixed demand in all end markets.

Okay. My last two and I’ll turn it over, just if you could, Ole, give us a bit more color or remind us what you said in terms of year-on-year in paper, it sounded like containerboard was alright, not gangbusters but up modestly year-on-year. Sequentially tube and core, URB was getting better but still down. If you could affirm that and discuss what you’re seeing early in May there. Then what kind of price-cost should we expect out of steel in GIP in particular the rest of the year? Do you have improving or sequentially decelerating benefits there? Thank you.

Yes, so on steel, that will generally keep improving, and I will maybe touch upon that a little bit later on what we’re doing internally, self-help. In tube and core, as I mentioned, film cores are positive and so is construction. Where we see--and which by the way is our biggest end segment, is paper cores, we haven’t really seen any major recovery there. Whilst we are doing well in paper cores, we’re also selling to other paper companies, and we haven’t seen a pick-up there yet but hopefully we will see that soon.

Thank you so much.

Thank you. Our next question comes from the line of Mike Roxland with Truist Securities. Your line is now open.

Thank you Ole, Larry and Bill for taking my questions. First question I just had on Slide 11, I think Larry, if I heard you correctly, you mentioned there the $19 million to $39 million of manufacturing headwinds, and that’s new. What’s driving that?

The predominant driver of that is volume, so with volume pick-up you get just more incremental transport costs, and then a little bit of additional manufacturing costs, just volume driven.

Got you, perfect. Thank you for that. Then Larry also, can you talk about the pent-up operating leverage in the business that could be released maybe once global volumes start to normalize? You certainly are in early stages, depending on region, in servicing the volume improvement. Once everything is, let’s say, firing on all cylinders, what’s this pent-up operating leverage that could potentially be released and positively impact the business?

Basically as this volume picks up, the predominant [indiscernible] demand occurring in addition to transport is just the raw material costs, but your value-add is going to be about 50%. But I’d say generally, just assume excess of 20% gross margin pick-up on incremental volume. If you look back, if we get a return to ’22 volume levels, we would end up being--you know, picking up about $160 million of EBITDA, and that doesn’t even factor in the incremental EBITDA from getting to full run rate on all of our acquisitions and getting back on price-cost where we need to be on paper. We see a path back with returning economic conditions to well over $900 million of EBITDA.

Let me also just touch on our internal initiatives on cost savings and the impact of our Greif business system. We’re operating at a high level and we’re always looking for what we call internally aggregation of marginal gains across our 250 locations. Our sourcing team, as an example, recently finalized a targeted review in North America, in the particular area, which reduced total spend for this area by an estimated 8%. They also did a recent review of certain global indirect material spend which resulted in an estimated run rate cost savings of 5%. We also recently conducted, as an example, two full scope steel plant operational excellence reviews, which were--these plants were previously underperforming to our expectations, and these reviews, they include a full value stream mapping and lean Six Sigma review, and by focusing on raw material usage and reducing scrap, each of these two plants have seen a sustained EBITDA margin increase of approximately 800 BPs relative to their prior performance. I visited a plant recently who has over the past few years made a significant improvement on their NPS and Gallup scores, and when you look at the profitability trend for that plant, it correlates extremely well with these things and their plant performance is now top tier. The aggregation of these types of marginal gains, they are a big part of our improved structural margin profile, so we are truly playing on the entire piano, as can you hear, spanning from operational and commercial excellence initiatives to supply chain and sourcing. I should also mention our automation effort, which is reflected in our earnings.

Got it, thank you Ole. Then one for [indiscernible], how many of your facilities could be subject to those types of reviews? How much further runway do you have in terms of improving plant level profitability like that?

Yes, to be honest with you, previously I’ve thought okay, there must be a limit somewhere, but I keep getting surprised. We had a gemba, we had a Six Sigma program and just to give you an idea of our Six Sigma program, we had nearly 700 participants across the globe. To date, we have 400 white belts, 170 yellow belts, 130 green belts, and we have 10 black belts, and they all have projects of a certain magnitude driving savings to the bottom line. We have deployed this in 250 plants. The things I see, and I mentioned some of them, the things I see that surprise me - hey, could we really find that sort of savings there? It’s just amazing, and you’re looking at years and years of runway on these initiatives. You could say, okay, you find $300,000 here and $700,000 there, but when you add it up--you know, that’s why we call it aggregation of marginal gains, it becomes big numbers over time.

Understood. Thanks very much for the color.

Thank you. Our next question comes from the line of Brian Butler with Stifel. Your line is now open.

Hi, good morning. Thank you very much for taking the questions. You talked about getting to the $900 million EBITDA. I was hoping we could maybe just talk about maybe high level, what are those components that get you there, and just walk through it - you know, the price-cost, volume, and if there’s anything else from the $700 million--

Yes, the single largest component of that is just getting back to volume levels of ’22. That alone is a $160 million driver at current margin rates. We look good a little bit on volume recovery sequentially, but you look on a two-year stack, volumes are still significantly off, and obviously that’s evidenced in the economic data with PMI statistics and everything else. Getting back to that kind of volume level drives a huge amount of earnings lift for us, and so as Ole mentioned, we undertake all these operational improvement areas to really change our structural cost drivers so that we can even tweak that more and cover other inflationary cost. The secondary element is clearly getting back to what we consider much needed, well deserved price-cost in our paper business, as evidenced by the price increases we recently announced - those things can drive a big pick-up as well, and then just getting full run rate on and performance level back on the acquisitions we’ve done, and then also this new Dallas sheetfeeder business in our containerboard business. You put all those elements together and it drives you easily over that $900 million figure.

Okay, and you mentioned that the recent URB price increases, how much of that is in the 40 to 70? Is that--you know, is the low end zero and the high end 100%, or some other mix?

We really expect that we should get full recognition of these price increases. They’re needed and deserved. The inflationary costs we’ve had in all of our production and paper trades is substantial, and we obviously need to earn appropriate returns on the capital. But yes, look - we’re also pragmatic and we still remain burdened by this archaic survey system utilized by Richey recently, which--look, once again, we’d love them to become very relevant and move to a data-driven automated system to correctly report the true market, but as a result, we hedged the upside. Our guidance would have no recognition and our upside, we’ve got a range there--you know, we put in a range to deal with the Richey system, and we also have timing issues related to any time they’re recognized. You know, you look at the $50 linerboard and $80 medium that we have effective June 1, that’s recognized this month. It would start to come through the P&L in late July, and the 50 and 70 in URB effective July 18, if that gets recognized timely, then we’d start benefiting in late August to September. There’s some play in that upside. If we got everything immediately when we rolled it out, then there’d be even more upside.

When you think about kind of the midpoint of what you’re assuming there, if that was to roll over, what’s the benefit into ’25 from a perspective of incremental EBITDA that you would be able to capture?

Yes, you know, if you look at our pricing in general, I’d just say a $10 change in--where am I at? Yes, a $10 impact on containerboard is $700,000 a month, so roughly $8 million annually, and URB is half a million a month, so $6 million annually. That should give you the numbers to back into whatever your assumptions would be.

Okay, and then one last one, maybe on the capital expenditures - that kind of increased a little bit on the updated guidance. Maybe break that out, is that all Ipackchem or are there other growth initiatives that you’re spending that $20 million on?

Very little Ipackchem at all. What it really is, is we had some inflationary costs on the Dallas sheetfeeder as a strategic growth project - that ran that up slightly over, but that’s--at full bulk, that’d generate about $2 million of EBITDA a month when fully operational, so money well spent in our estimation. Then frankly, we were producing more cash and some of our engineering group came to us and said, hey look, there’s some high need safety and maintenance projects that we really think we should pull forward, and we didn’t want to take the risk of not spending on that kind of thing. Since we had the cash capital available, we said, move it forward.

Okay. Nice quarter. Thank you for taking the questions.

Thank you. As a reminder, to ask a question at this time, please press star-one-one on your touchtone telephone. Our next question comes from the line of Gabe Hadje with Wells Fargo. Your line is now open.

Ole, Larry, Bill, good morning.

Hey Gabe.

Just a housekeeping question on the $8.4 million that you called out, Larry. Was that backed out as a one-timer or are you flowing that through? I know it’s non-cash.

No, we flow it through. It’s accounting. We have to mark to basically sales price any finished goods inventory we acquire, so had Ipackchem gone forward with it, it would have been profit, but for us it’s not. That’s a one-year thing.

Okay, and then I wanted to ask a question about, I guess, Southeast Asia or maybe China specifically. If memory serves, on the GIP side you guys have, I think, four remaining plants there; but when we look at, I don’t know, EV production and all these different things, it seems like film activity more than others is fairly robust. Again, I know you guys are being selective about customers and what you’re doing over there. Can you just talk about the appetite to grow over there, or maybe limiting factors that prevent you from deploying more capital in Southeast Asia in general? I know obviously it’s a returns oriented mindset, but just curious about that.

Yes, first of all, we have a very disciplined approach to the way we deploy cash, and as Larry mentioned earlier, when somebody comes with a request for safety capex, we never say no. Then we have our cash machine with our steel network and other assets, and we need to maintain them and we do that, and then we have dividends. Then after that, we then start looking at growth capex. When we--we have a periodic review of all the requests that come in and then we apply filters, such as ROI and payback and so on, but we also look at the geopolitical aspect of it. I would say China is not the country that’s the highest priority in terms of geopolitical aspects, so if there is a choice, we would likely do it elsewhere. We have invested in maintenance safety and some upgrades for the [indiscernible] in China, but I would [indiscernible] to say that we just built a new IBC plant in Malaysia, so it’s more the surrounding region we are investing in, in terms of APAC.

Yes, the same thing I would add, Gabe, is Ipackchem does have some operations in China. Whenever we assess any kind of project, we always have, as Ole mentioned, geopolitical as part of our risk factors. Now, what does that mean mechanically in our capital decisioning process? It means the hurdle rate for us investing in someplace like that is much higher, so if it can’t meet the hurdle rate, we ain’t getting it done. Then the other thing is part of our enterprise risk management program, as we look at those kind of things, and we did this in Ipackchem, you look at what happens if something goes wrong, what’s your next plan. We have plans to deal with anything that could evolve as best as we would be able to.

I appreciate that. One last one on--

Just one last comment on that. Bear in mind, we operate in 41 countries across the globe - we’ve done that for decades, so what happens on a geopolitical--on the geopolitical stage is really part of our disciplined operating system. We always focus on that, and since we are talking about APAC, we do have growth plans in that region, and as a result Matt Lahey has been promoted to lead that region. He’s actually already in place to do that.

Good luck Matt. I haven’t heard you guys talk about IBC deployment here recently. I appreciate obviously the manufacturing backdrop hasn’t supported that. I’m just curious if that’s part of the--is a little bit of a tickle up in capex, and/or on the flipside, maybe you guys have built out that infrastructure - I think I understand those lines pretty well, so let’s say your position to service your customers on the IBC side when demand does in fact inflect.

We have continued to expand on our IBC network, not through acquisition but primarily organic. We have deployed blow molders and new lines throughout last year and also this year, and I said in September, we will formally open our new IBC plant in Malaysia. Last year, we opened a new IBC plant in Turkey and we have put additional lines in, in many of the existing facilities, so this is an area where we have continued to grow. It’s also part of our M&A strategy because it’s resin-based, it’s high margin, so it’s a very attractive market for us to grow in. We do that at the request of our customers as well - you know, when they expand, they tend to come and ask if we could provide them the service on certain locations.

Yes, and Gabe, you’ll remember this but just to remind everybody, we increased our equity ownership of Centurion last year significantly, and we continue to explore opportunities with other IBC recyclers around the world. Most of them are relatively small but they fill out our footprint, and we continue to have dialogs around those in many geographies.

Thank you.

Thank you. I will now hand the microphone over to Ole Rosgaard for closing comments.

Thank you. Before we end the call, I just want to thank you all for the questions and your continued interest in Greif. We’re very proud of our global Greif team for utilizing the Greif business system to its fullest, as you’ve heard, and creating significant operating leverage during this temporary sluggish demand environment. We are equally excited to realize the outperformance we have positioned the business to capture through build-to-last, and we’ll continue to execute with excellence and provide you with the legendary customer service for which we are known. Thank you to all of our colleagues, our customers and stakeholders for your dedication, loyalty and commitment to Greif. Have a great day.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.