Greif reports Q2 2019 sales increased

Greif Inc., Delaware, Ohio, an industrial packaging products and services company, has announced its second quarter 2019 results. Net sales increased by $245 million to about $1.21 billion, and gross profit increased by $53.4 million to $248.7 million. 

In the last quarter, Greif completed the acquisition of Caraustar Industries Inc. on Feb. 11 and included the results of Caraustar in the company’s financial results under the Paper Packaging & Services segment since that date. Greif reports that it has identified $15 million of new estimated run-rate synergies related to the Caraustar acquisition. The company now estimates that it will be able to achieve at least $60 million of run-rate synergies over 36 months from the deal close. 

“Greif produced solid financial results in fiscal second quarter 2019 despite the continuation of trade-related market softness in parts of our global Rigid Packaging segment and a more challenging demand environment in our Paper Packaging segment in the U.S.,” says Pete Watson, Greif’s president and chief executive officer.

Watson says second quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose by about 31 percent compared with the prior year quarter. 

“We completed the Caraustar acquisition during the quarter and are currently integrating these operations in a disciplined manner,” Watson adds. “I am pleased with the energy and pace of the integration, but I am most impressed with how well our teams have come together. Through their collective efforts, the combined team has uncovered a variety of operational enhancements and new synergies not previously identified during the due diligence process.

“We have revised our fiscal 2019 guidance slightly higher, despite expected continuation of market demand challenges for the remainder of our fiscal year,” Watson continues. “Looking beyond 2019, the long-term fundamentals for our business remain favorable as we integrate Caraustar into our business and advance ongoing value optimization activities in our global portfolio. Our team remains focused on delivering exceptional value for our shareholders and customers.”

In the Paper Packaging & Services segment, net sales increased by $283.7 million to $497.6 million. The increase in sales was primarily due to $293.3 million of contribution from the acquired Caraustar operations, partially offset by the impact of about 27,000 tons of economic downtime taken across the company’s containerboard operations during the quarter. 

Gross profit increased by $58.4 million to $108.3 million. Greif reports that the increase in gross profit was primarily due to $56.3 million of contribution from the acquired Caraustar operations, as well as more favorable price/cost mix.  Gross profit was impacted by a one-time $9.0 million acquisition inventory step-up charge that was approximately $2.0 million higher than initially contemplated in post-acquisition guidance.

Operating profit decreased by $2.8 million to $30.2 million, Greif reports in a news release. Adjusted EBITDA increased by $41.0 million to $82.1 million primarily due to $34.9 million of contribution from the acquired Caraustar operations.

Recycling Today connected with Watson for the June 2019 issue of the magazine to learn more about the Caraustar purchase and his new role as board chair of the American Forest & Paper Association (AF&PA).