(GEF - Analyst Report
) reported first quarter 2013 (ended Jan 31, 2013) results, with adjusted earnings of 46 cents per share decreasing 10% from 51 cents earned in the year-ago quarter and falling short of the Zacks Consensus Estimate of 53 cents. Including special items, earnings per share in the quarter stood at 43 cents compared with 38 cents in the year-ago quarter.
Sales inched up 2% year over year to $1.009 million, beating the Zacks Consensus Estimate of $1.007 billion. Sales volumes increased 3% but were offset by a 1% setback from lower selling prices. Benefit from higher containerboard prices in paper packaging were mitigated by selling price decreases due to the pass-through of lower raw material costs in rigid industrial packaging and flexible products.
Cost of sales increased 1% year over year to $821 million in the reported quarter. Gross profit increased 6% to $187.3 million, helped by lower raw material costs and improved operating leverage and efficiencies.
Selling, general and administrative expenses increased 8% to $123 million. Adjusted operating profit edged up 1% year over year to $64.7 million in the quarter, due to improved results in the Paper Packaging, Rigid Industrial Packaging & Services and Land Management segments, partially offset by the decline in Flexible Products & Services segment. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $104.1 million compared with $106.5 million in the year-ago quarter.
Rigid Industrial Packaging & Services: Sales remained flat at $704 million as 4% higher volumes was offset by negative impact of 1% from foreign currency translation and 3% decline in selling prices. Volumes were particularly weak in Europe. Adjusted operating income decreased 16% to $33.8 million.
Flexible Products & Services: The segment reported sales of $111.4 million, down 3% year over year, hurt by a negative impact of 2% from lower selling prices and unfavorable foreign currency translation of 1%. Adjusted operating income plunged 84% to $0.7 million; hurt by lower volumes, higher production costs and startup costs mainly related to the fabric hub in Saudi Arabia.
Paper Packaging: Sales increased 10% year over year to $184.2 million in the quarter, helped by a 3% increase in volumes and a benefit of 75 from higher selling prices and change in product mix. The segment reported an adjusted operating profit of $27.7 million, up 37% from $20.2 million in the prior-year quarter. The increase was driven by higher volumes and gross profit margin improvement, mainly on the back of lower raw material costs.
Land Management: Sales increased 32% year over year to $8.6 million in the quarter, driven by increased timber sales and weather conditions favoring the ability to access the company's timberlands. Operating income increased 40% to $4.2 million due to increase in timber sales.
As of Jan 31, 2013, Greif had cash and cash equivalents of $91.6 million, flat compared with Oct 31, 2012. Cash flow from operating activities during the quarter was usage of $68.6 million compared with an inflow of $14 million in the prior quarter.
Long-term debt increased to $1.3 billion as of Jan 31, 2013 from $1,175.3 million as of Oct 31, 2012. Debt-to-capitalization ratio increased to 51% as of Jan 31, 2013 from 49% as of Oct 31, 2012.
The company affirmed its previous expectation of EBITDA in the range of $450 million - $500 million in fiscal 2013. Interest expense is expected to be lower compared with fiscal 2012, due to lower debt levels. Capital expenditures are expected to range between $140 million and $150 million. For fiscal 2013, volumes are expected to show improvement and margins will expand on the back of stable raw material costs.
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 provides land management consulting services. Greif currently retains a short-term Zacks Rank #3 (Hold).