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Greif's Q4 Earnings Miss Estimates

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Greif, Inc. (GEF - Free Report) reported fourth-quarter fiscal 2013 (ended Oct 31, 2013) results with adjusted earnings of 76 cents per share, up 18.8% from 64 cents earned in the year-ago quarter. The reported figure, however, missed the Zacks Consensus Estimate of 80 cents.

Including special items, earnings per share in the quarter were 63 cents compared with 44 cents in the year-ago quarter.

Operational Updates

Revenues improved 5% year over year to $1,126 million from $1,075.6 million. The top line surpassed the Zacks Consensus Estimate of $1,125 million. The 4.7% year-over-year growth in net sales was primarily attributable to a 3.7% increase in selling prices along with 1.4% rise in volumes, partly offset by a negative 0.4% impact from foreign currency translation.

Cost of sales expanded to $900 million from $881 million in the prior-year quarter. Gross profit improved 16% year over year to $226 million.

Selling, general and administrative expenses declined 4% year over year to $116 million. Adjusted operating profit climbed 40% year over year to $109 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 32% to $145 million from $110 million in the year-ago quarter.

Segmental Performance

Rigid Industrial Packaging & Services: This segment reported sales of $782 million, up 2.4% from $764 million in the year-ago quarter. The growth was driven by a 1.8% increase in sales volume. Selling prices also rose 1.4% primarily due to pass-through of higher resin and containerboard costs to customers and changes in product mix. These were adversely affected by the weakened agriculture seasons in North America, Europe, the Middle East and North Africa. Adjusted operating income climbed 30% year over year to $49.6 million.

Flexible Products & Services: Sales from this segment remained flat year over year at $114 million. The 1% positive impact of foreign currency translation was partly offset by a 1.3% decrease in volumes. However, the segment reported an operating loss of $14.5 million wider than the loss of $2.8 million a year ago.

Paper Packaging: Sales increased 17% year over year to $222.4 million, helped by a 1.7% hike in volumes and a benefit of 15.6% from higher selling prices. The segment reported a record adjusted operating profit of $39.7 million, up 57.5% from $25.2 million in the year-ago period. The increase was driven by higher selling prices, improved volumes and moderately stable input costs.

Land Management: This segment’s sales rose 2.8% year over year to $7.3 million, due to increased timber sales volumes along with higher prices for timber products. Operating income improved about six fold to $20.2 million on higher timber sales.

Financial Position

As of Oct 31, 2013, Greif had cash and cash equivalents of $78.1 million, down from $91.5 million as of Oct 31, 2012. Cash flow from operating activities during the quarter was $131.6 million compared with $139.1 million in the prior-year quarter.

Long-term debt expanded to $1.2 billion as of Oct 31, 2013 from $1.1 billion as of Oct 31, 2012. Debt-to-capitalization ratio declined to 46.5% as of Oct 31, 2013 from 47.8% as of Oct 31, 2012. Capital expenditures were $54 million in the reported quarter versus $40 million the previous year.

Free cash flow was $69.3 million against $98.4 million a year ago. The decrease was due to lower cash provided by operating activities, higher capital expenditures and timberland purchases.

Fiscal 2013 Performance

Greif posted adjusted earnings of $2.75 per share for fiscal 2013 up 5.4% from the year-ago earnings of $2.61. Earnings missed the Zacks Consensus Estimate of $2.80.

Including special items, earnings per share for the year improved 20% year over year to $2.52 per share from $2.10 in the year-ago quarter.

Revenues for the full year rose 2% year over year to $4,353.4 million. However, it marginally fell short of the Zacks Consensus Estimate of $4,360 million.


For fiscal 2014, Greif expects EBITDA in the range of $490 million to $540 million. Excluding timberland gains of around $20 million or 20 cents per share, earnings will be in the band of approximately $2.60 to $3.15 a share. Greif expects modest sales volume improvement and slightly higher raw material costs. Capital expenditure is supposed to be about $153 million for 2014, slightly higher than 2013.

In fiscal 2014, the company will focus on safety in all its facilities and work-related activities. Reducing working capital and increasing cash flow remains key priorities for 2014. In addition, Greif is planning to implement additional restructuring activities for select geographies and assets.

The company will continue to benefit from efficiency improvements led by the Greif Business System. In the Paper Packaging segment, Greif expects to increase integration levels, capacity and product differentiation to serve customer base. Results for the segment is likely to be near the record 2013 performance. However, foreign exchange volatility and social and political unrest remain headwinds.

Delaware, Ohio-based Greif manufactures and sells industrial packaging products, bulk containers, and containerboard and corrugated products worldwide. The company provides services such as blending, filling, packaging and recycling of industrial containers for a wide range of industries. Greif also manages timber properties in North America and offers land management consulting services.

Greif currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Sealed Air Corp. (SEE - Free Report) , Packaging Corporation of America (PKG - Free Report) and UFP Technologies, Inc. (UFPT - Free Report) . All these hold a Zacks Rank #2 (Buy).

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