Business News

Greif, Inc. Reports Second Quarter 2008 Results

Saturday 07. June 2008 - -- Net sales increased 13 percent (7 percent excluding the impact of foreign currency translation) to $918.0 million in the second quarter of 2008 from $815.0 million in the second quarter of 2007.

— Net income before special items, as defined below, was $54.3 million
($0.92 per diluted Class A share) in the second quarter of 2008
compared to $39.2 million ($0.66 per diluted Class A share) in the
second quarter of 2007. GAAP net income was $48.7 million ($0.82 per
diluted Class A share) and $18.6 million ($0.32 per diluted Class A
share) in the second quarter of 2008 and 2007, respectively.

Greif, Inc. (NYSE:GEF)(NYSE:GEF.B), a global leader in industrial packaging, today announced results for its second fiscal quarter, which ended April 30, 2008.

Michael J. Gasser, chairman and chief executive officer, said, “We are pleased with the strong growth in net sales and profitability during the second quarter of 2008 compared to the same period last year, despite higher raw material, transportation and energy costs. We achieved solid organic sales growth, especially in Europe and the emerging markets for Industrial Packaging, and benefited from higher containerboard selling prices in Paper Packaging relative to the same quarter last year. Our results continue to demonstrate the value of geographic diversity and positive contributions from the Greif Business System.”

Special Items and GAAP to Non-GAAP Reconciliation

Special items are as follows: (i) for the second quarter of 2008, restructuring charges of $7.3 million ($5.7 million net of tax) and timberland disposals, net of $0.1 million ($0.1 million net of tax); and (ii) for the second quarter of 2007, restructuring charges of $4.0 million ($3.0 million net of tax), a debt extinguishment charge of $23.5 million ($17.3 million net of tax) and timberland disposals, net of negative $0.4 million (negative $0.3 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 13 percent (7 percent excluding the impact of foreign currency translation) to $918.0 million in the second quarter of 2008 compared to $815.0 million in the second quarter of 2007. The $103.0 million increase is due to Industrial Packaging ($90.0 million), Paper Packaging ($10.4 million) and Timber ($2.6 million). Higher sales volumes for industrial packaging products and higher containerboard selling prices primarily drove the 7 percent constant-currency increase.

Operating profit before special items was $88.7 million for the second quarter of 2008 compared to $68.3 million for the second quarter of 2007. The $20.4 million increase was principally due to higher operating profit in Industrial Packaging ($8.8 million), Paper Packaging ($4.6 million) and Timber ($7.0 million). GAAP operating profit was $81.5 million and $63.9 million in the second quarter of 2008 and 2007, respectively.

Net income before special items increased 39 percent to $54.3 million for the second quarter of 2008 compared to $39.2 million for the second quarter of 2007. Diluted earnings per share before special items were $0.92 compared to $0.66 per Class A share and $1.40 compared to $1.01 per Class B share for the second quarter of 2008 and 2007, respectively. The Company had GAAP net income of $48.7 million, or $0.82 per diluted Class A share and $1.25 per diluted Class B share, in the second quarter of 2008 compared to GAAP net income of $18.6 million, or $0.32 per diluted Class A share and $0.48 per diluted Class B share, in the second quarter of 2007.

Business Group Results

Industrial Packaging net sales were up 14 percent to $748.0 million in the second quarter of 2008 from $658.0 million in the second quarter of 2007 — an increase of 7 percent excluding the impact of foreign currency translation. Higher sales volumes in most regions, with particular strength in Europe and the emerging markets, continued to drive the segment’s organic growth. Operating profit before special items increased to $64.2 million in the second quarter of 2008 from $55.4 million in the second quarter of 2007. The increase was primarily due to improvement in net sales volumes and contributions from the execution of the Greif Business System, which were partially offset by the higher cost of raw materials (especially steel), energy and transportation. GAAP operating profit was $57.8 million in the second quarter of 2008 compared to $53.8 million in the second quarter of 2007.

Paper Packaging net sales were $163.4 million in the second quarter of 2008 compared to $153.0 million in the second quarter of 2007. This was principally due to higher containerboard selling prices implemented in the fourth quarter of 2007. Operating profit before special items increased to $14.1 million in the second quarter of 2008 compared to $9.5 million in the second quarter of 2007. The increase was primarily due to higher selling prices and contributions from the execution of the Greif Business System, which were partially offset by the higher cost of raw materials (especially old corrugated containers), energy and transportation. GAAP operating profit was $13.2 million and $7.1 million in the second quarter of 2008 and 2007, respectively.

Timber net sales were $6.6 million and $4.0 million in the second quarter of 2008 and 2007, respectively. Operating profit before special items was $10.4 million in the second quarter of 2008 compared to $3.4 million in the second 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 $9.5 million in the second quarter of 2008 and $2.0 million in the second quarter of 2007. GAAP operating profit was $10.4 million and $3.0 million in the second quarter of 2008 and 2007, respectively.

Other Cash Flow Information

Capital expenditures were $40.0 million, excluding timberland purchases of $0.8 million, for the second quarter of 2008 compared with capital expenditures of $39.9 million for the second quarter of 2007. There were no timberland purchases for the second quarter of 2007. Fiscal 2008 capital expenditures are expected to be approximately $125 million, excluding timberland purchases, which includes increased capital commitment to support the Company’s growth strategy in the emerging markets.

On June 2, 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 July 1, 2008 to stockholders of record at close of business on June 19, 2008, are approximately 36 percent above the amount paid for the same period a year ago.

Company Outlook

Business trends remain favorable in Industrial Packaging, particularly outside of North America; stable to improving in Paper Packaging; and Timber assets continue to be monetized as planned. These factors, coupled with benefits from the Greif Business System, are expected to contribute to a strong performance in the second half of 2008. The Company is raising its 2008 guidance to $4.25 to $4.45 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.