GREIF, INC Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Divestitures: Sold containerboard business and land management business; proceeds from land management sale ($462M) used to reduce debt, pro forma leverage under 1x.
• Cost Optimization: Achieved $50M run rate savings in fiscal '25, now expanded to $120M anticipated total commitments; moved adhesives and recycled fiber to Fiber segment results starting fiscal '26; renamed Integrated Solutions to Innovative Closure Solutions.
• Customer Service: Net Promoter Score of 72, up 3 points from prior year, reflecting strong customer trust.
• Business Progress: Polymers and closure business growing; cost optimization ahead of plan; free cash flow conversion 50% in fiscal '25 and expected 50% in fiscal '26; strong balance sheet with pro forma leverage below 1.0x.

Segment Performance

• Customized Polymer Solutions: Volumes flat YOY; small containers had positive volume momentum from agrochemicals, but mid-single digit declines in IBC and large polymer drums due to soft industrial markets in EMEA offset this.
• Durable Metals: Volumes declined 6.6% due to softness in industrial end markets.
• Sustainable Fiber: Volumes declined 7.7% due to URB economic downtime in September and soft fiber drum demand.
• Innovative Closure Solutions (formerly Integrated Solutions): Volumes improved driven by closures, with products generating +30% gross margin and winning new business through innovation and cross-selling on Greif+ digital platform.

Guidance

• Fiscal '26 Low-End Scenario: Flat to low single-digit volume declines in metals and fiber; low single-digit volume improvement in polymers and closures; SG&A and price/cost driving EBITDA; free cash flow $315M (50% conversion); CapEx ~$155M; plan to repurchase $150M of stock and seek new repurchase authorization with up to 2% per year of outstanding equity value repurchased.
• Capital Allocation: Strong balance sheet allows minimal cash needs for debt service; maintenance CapEx needs ~$25M lower after divestment of capital-intensive business.

Risks

• Cyclical Markets: Volatility in industrial end markets impacting volumes in Durable Metals and Sustainable Fiber.
• Macroeconomic Uncertainty: Soft demand in construction and manufacturing affecting customers' demand; impact of trade and tariff uncertainties.
• Demand Recovery: Uncertainty around timing and extent of demand recovery for chemicals and related end markets, influenced by factors like interest rates.

Question and Answer

Q: On polymers and target markets, specifically ag and flavors end markets, what's driving improvement?

A: Ole Rosgaard mentions focus on end segments growing faster than GDP, like agrochemicals served by small containers, with operational excellence and cost discipline aiding this.

Q: How should we think about the sequencing of EBITDA for fiscal '26?

A: Lawrence Hilsheimer states the first quarter will be the weakest, roughly 20% of the year, with the rest of the quarters 25%-30% each similar to prior year.

Q: On cost optimization and M&A, any additional cost opportunities or focus on M&A?

A: Ole Rosgaard mentions focus on tuck-in M&A to complement organic growth, with criteria including EBITDA margins in the 20s, 50% free cash flow conversion, and within Polymers and closures segments; Lawrence Hilsheimer notes stage-gate process for M&A with potential upside in cost optimization numbers.