Business News

Greif, Inc. Reports Third Quarter 2008 Results

Thursday 28. August 2008 - Net sales increased 18 percent (12 percent excluding the impact of foreign currency translation) to a record $1,034.1 million in the third quarter of 2008 from $874.2 million in the third quarter of 2007.

Net income before special items, as defined below, increased 31 percent to $69.5 million ($1.18 per diluted Class A share) in the third quarter of 2008 compared to $53.2 million ($0.90 per diluted Class A share) in the third quarter of 2007. GAAP net income was $64.6 million ($1.10 per diluted Class A share) and $48.8 million ($0.82 per diluted Class A share) in the third quarter of 2008 and 2007, respectively.

Greif, Inc. (NYSE:GEF)(NYSE: GEF.B), a global leader in industrial packaging, today announced results for its third fiscal quarter, which ended July 31, 2008.

Michael J. Gasser, chairman and chief executive officer, said, “We continued to experience strong sales and earnings growth in the third quarter. These results also benefited from our business system and geographic diversity, which mitigated the impact of sharp increases in raw material and other input costs.”

Special Items and GAAP to Non-GAAP Reconciliation

Special items are as follows: (i) for the third quarter of 2008, restructuring charges of $6.6 million ($5.0 million net of tax) and timberland disposals, net of $0.2 million ($0.1 million net of tax); and (ii) for the third quarter of 2007, restructuring charges of $6.1 million ($4.5 million net of tax) and timberland disposals, net of $0.1 million ($0.1 million net of tax). A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release.

Consolidated Results

Net sales increased 18 percent (12 percent excluding the impact of foreign currency translation) to $1,034.1 million in the third quarter of 2008 compared to $874.2 million in the third quarter of 2007. The $159.9 million increase was due to Industrial Packaging ($147.1 million), Paper Packaging ($12.3 million) and Timber ($0.5 million). Strong organic sales growth for industrial packaging products and higher selling prices, in response to higher raw material costs, primarily drove the 12 percent constant-currency increase.

Operating profit before special items was $107.7 million for the third quarter of 2008 compared to $85.9 million for the third quarter of 2007. The $21.8 million increase was principally due to higher operating profit in Industrial Packaging ($25.1 million), partially offset by lower operating profit in Paper Packaging ($2.5 million) and Timber ($0.8 million). GAAP operating profit was $101.3 million and $79.9 million in the third quarter of 2008 and 2007, respectively.

Net income before special items increased 31 percent to $69.5 million for the third quarter of 2008 compared to $53.2 million for the third quarter of 2007. Diluted earnings per share before special items were $1.18 compared to $0.90 per Class A share and $1.79 compared to $1.37 per Class B share for the third quarter of 2008 and 2007, respectively. The Company had GAAP net income of $64.6 million, or $1.10 per diluted Class A share and $1.67 per diluted Class B share, in the third quarter of 2008 compared to GAAP net income of $48.8 million, or $0.82 per diluted Class A share and $1.26 per diluted Class B share, in the third quarter of 2007.

Business Group Results

Industrial Packaging net sales were up 21 percent to $852.4 million in the third quarter of 2008 from $705.3 million in the third quarter of 2007 — an increase of 14 percent excluding the impact of foreign currency translation. Higher sales volumes across all regions, with particular strength in the emerging markets, continued to drive the segment’s organic growth. Operating profit before special items increased to $92.9 million in the third quarter of 2008 from $67.8 million in the third quarter of 2007. This increase was primarily due to improvement in sales volumes and contributions from the Greif Business System, which were partially offset by generally higher input costs. GAAP operating profit was $88.1 million in the third quarter of 2008 compared to $63.1 million in the third quarter of 2007.

Paper Packaging net sales were $177.6 million in the third quarter of 2008 compared to $165.3 million in the third quarter of 2007. This was principally due to higher selling prices, including containerboard increases, implemented in the fourth quarter of 2007. Operating profit before special items decreased to $12.8 million in the third quarter of 2008 compared to $15.3 million in the third quarter of 2007. This decrease was primarily due to higher input costs, including energy ($3.1 million) and transportation ($2.5 million), partially offset by higher selling prices from the containerboard increase implemented in the fourth quarter of 2007. GAAP operating profit was $11.0 million and $13.9 million in the third quarter of 2008 and 2007, respectively.

Timber net sales were $4.1 million and $3.6 million in the third quarter of 2008 and 2007, respectively. Operating profit before special items was $2.0 million in the third quarter of 2008 compared to $2.8 million in the third quarter of 2007. Included in these amounts were profits from the sale of special use properties (surplus, higher and better use, and development properties) of $0.9 million in the third quarter of 2008 and $0.8 million in the third quarter of 2007. GAAP operating profit was $2.2 million and $2.9 million in the third quarter of 2008 and 2007, respectively.

Other Cash Flow Information

Capital expenditures were $37.7 million, excluding timberland purchases of $0.2 million, for the third quarter of 2008. Fiscal 2008 capital expenditures are expected to be approximately $135 million, excluding timberland purchases, which includes an increased capital commitment to support the Company’s growth strategy in emerging markets.

On Aug. 26, 2008, the Board of Directors declared quarterly cash dividends of $0.38 per share of Class A Common Stock and $0.57 per share of Class B Common Stock. These dividends, payable on Oct. 1, 2008 to stockholders of record at close of business on Sept. 17, 2008, are approximately 36 percent above the amount paid for the same period a year ago.

Company Outlook

The Company is raising its 2008 guidance to $4.45 to $4.55 per Class A share, which includes the $0.35 per Class A share impact of the first quarter net gain related to the divestiture of businesses. This increase is primarily driven by improved profitability for industrial packaging products than previously anticipated in the 2008 guidance and partial realization of a $55 per ton containerboard price increase in the fourth quarter of this year.