Greif Bros. Corp. reported net sales increased 6 percent to $386.4 million for the first quarter 2003 compared with the same period last year. The company also announced that its Industrial Packaging & Services achieved solid results for the quarter, with sales improving 9 percent compared with the prior year, reflecting realization of higher selling prices.
The company increased prices during the second half of fiscal 2002 in response to significant increases in raw material costs.
Sales for Paper, Packaging & Services were flat, quarter over quarter, reflecting weak market conditions in the U.S. paper industry. Timber sales declined $3.3 million for the first quarter 2003 versus a year ago, which was consistent with budgeted levels.
Without an accounting change, Greif posted a net loss of $600,000.
Gross profit margin was 17.4 percent of net sales for the first quarter of the year, compared with 18.6 percent the prior year. This decline was attributable to lower timber sales, which have a low cost basis, for the first quarter of this year and reduced margins for Paper, Packaging & Services, which experienced lower selling prices and higher recycled fiber and energy costs versus the same period last year.
Earnings before interest, income taxes, depreciation, depletion, amortization, equity in earnings of affiliates and minority interests was $32.2 million for the first quarter 2003 compared with $38.5 million for the same period last year, excluding timberland gains for both periods and $1.5 million in restructuring charges for the first quarter 2003. These charges were for costs related to the closing of four manufacturing facilities.
Michael Gasser, chairman and CEO, stated, "The operating environment remained difficult during the first quarter 2003. Industrial Packaging & Services achieved solid sales growth, while increased costs and pricing pressures were evident in our Paper, Packaging & Services business. Although we are encouraged by the reduced SG&A expenses, we are not satisfied with our overall performance."
Gasser continued, "Today, we announced a performance improvement plan to significantly enhance Greif's long-term financial and operating results. This plan is expected to realize $50 million in permanent cost savings.
As part of the company’s announced performance improvement plan, Greif plans to reduce the number of its 9,800 employees by 6 percent. To date, Industrial Packaging & Services has decided to close three operations in the U.S., one operation in Australia and an office in Canada. In Paper, Packaging & Services, one U.S. operation has been announced to close. In addition, corporate and administrative staff reductions have been made in the U.S.
Broken out by the company’s different business groups, Greif reported sales for its Industrial Packaging & Services group rose 9 percent to $303.1 million for the first quarter 2003 from $278.7 million the prior year.
Sales in Europe increased 21 percent, and sales in North America and other regions rose slightly. Increased pricing for this group's products, which was in response to higher raw material costs in steel and resin, contributed to the rise in net sales.
Paper, Packaging & Services saw net sales of $76.4 million, which were flat compared to the first quarter of last year. Sales benefited from slightly improved volumes for most of Paper, Packaging & Services' products; however, selling prices for linerboard and medium were about 4 percent less than the same period last year despite price increases implemented in the fourth quarter 2002. Sluggish market conditions prevailed throughout the first quarter 2003, especially in the company's corrugated converting operations.
Recycled fiber costs continued to decline during the first quarter 2003 but were still above the same period last year.