Mixed 2Q Earnings for Greif

Zacks

Greif, Inc. (GEF) reported second quarter 2013 (ended Apr 30, 2013) results with adjusted earnings of 70 cents per share, decreasing 13.5% from 81 cents earned in the year-ago quarter. The results, however, outperformed the Zacks Consensus Estimate by a penny.

Including special items, earnings per share in the quarter remain the same at 70 cents compared with 67 cents in the year-ago quarter.

Operational Updates

Revenues in the reported quarter declined to $1,088.9 million from $1,098.2 million in the year-ago quarter. The results fell short of the Zacks Consensus Estimate of $1, 114 mllion.

Sales volumes increased 0.5% but were offset by a 0.5% setback from lower selling prices and the negative impact of foreign currency translation. Benefit from higher containerboard prices were mitigated by decrease in selling prices of rigid industrial packaging products and polywoven products.        

Cost of sales decreased slightly to $886 million in the reported quarter compared with $892.7 million in the prior-year quarter. Gross profit decreased 1.4% year over year to $202.6 million in the second quarter.

Selling, general and administrative expenses increased 2.3% to $121.9 million. Adjusted operating profit has declined 6.3% year over year to $83.9 million in the reported quarter. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $122 million compared with $126.6 million in the year-ago quarter.

Segmental Performance

Rigid Industrial Packaging & Services: Sales decreased 3.7% year over year to $773.4 million in the quarter hurt by a negative impact of 0.3% from lower selling prices and unfavorable foreign currency translation. Adjusted operating income decreased 15% to $53 million.

Flexible Products & Services: The segment reported sales of $112.4 million, down 1.3% year over year, hurt by lower polywoven volumes in Asia and Australia and lower multiwall volumes in the United States, partly offset by higher polywoven volumes in Western Europe. Adjusted operating income plunged 68% to $1 million.

Paper Packaging: Sales increased 12% year over year to $194.5 million in the quarter, helped by a 3.5% increase in volumes and a benefit of 8.6% from higher selling prices. The segment reported an adjusted operating profit of $25.7 million, up 50% from $17.1 million in the prior-year quarter. The increase was driven by higher selling prices, higher volumes and lower raw material costs.

Land Management: Sales increased 9% year over year to $8.6 million in the quarter, driven by increased timber sales and weather conditions favoring the ability to access the company's timberlands. Operating income decreased 40% to $4.2 million due to fewer special use property disposals.

Financial Position

As of Apr 30, 2013, Greif had cash and cash equivalents of $85.6 million, down compared with $91.7 million as of Oct 31, 2012. Cash flow from operating activities during the quarter was $107.7 million compared with $165.4 million in the prior quarter.

Long-term debt increased to $1.3 billion as of Apr 30, 2013 from $1.1 billion as of Oct 31, 2012. Debt-to-capitalization ratio increased to 48.9% as of Apr 30, 2013 from 47.6% as of Oct 31, 2012.

Outlook

The company revised its previous expectation of EBITDA to the range of $450 million - $500 million to the new band of $475 million - $500 million in fiscal 2013. For the second half of 2013, Greif expects modest sales growth benefiting from the agricultural sector and stable raw material costs across the business portfolio. The company also anticipates continuation of favorable market conditions in its Paper Packaging business.

Delaware, Ohio-based Greif manufactures and sells industrial packaging products, bulk containers, and containerboard and corrugated products worldwide. The company provides services such as blending, filling, packaging and recycling of industrial containers for a wide range of industries. Greif also manages timber properties in North America and provides land management consulting services.

Greif currently retains a short-term Zacks Rank #3 (Hold).

Peer Performance

Ball Corporation (BLL) reported first-quarter 2013 adjusted earnings of 58 cents per share; an 8% decline from the year-ago adjusted earnings of 63 cents per share. The results also fell short of the Zacks Consensus Estimate of 64 cents.

Silgan Holdings Inc. (SLGN) posted adjusted earnings of 46 cents per share in the first-quarter of 2013; down 10% from 51 cents earned in the year-ago quarter, affected by higher resin costs and macroeconomic conditions in Europe. Earnings were within the company’s guided range of 40 to 50 cents per share but a penny short of the Zacks Consensus Estimate.

Crown Holdings Inc. (CCK) reported first quarter 2013 results, with adjusted earnings of 50 cents per share, up 8.7% from 46 cents earned in the year-ago quarter. However, earnings per share surpassed the Zacks Consensus Estimate of 48 cents.

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