Q4 2023 Greif Inc Earnings Call
Participants
Matt Leahy; VP, Corporate Development & IR; Greif Inc
Ole Rosgaard; President & CEO; Greif Inc
Larry Hilsheimer; EVP & CFO; Greif Inc
Ghansham Panjabi; Analyst; Baird Equity Research
Cashen Keeler; Analyst; Bank of American Merril Lynch
Roger Spitz; Analyst; Bank of America Merril Lynch
Gabe Hajde; Analyst; Wells Fargo
Presentation
Operator
Good day and welcome to the Greif fourth quarter 2023 earnings call. (Operator Instructions) As a reminder, this call may be recorded. I would like to turn the call over to Matt Leahy. You may begin.
Matt Leahy
Thanks, and good morning, everyone. And first, let me apologize for the technical difficulties on our side. We were dialed in and for some reason, we lost audio and troubleshooting for the last several minutes. We truly appreciate your patience.
Welcome to Chris' fourth quarter fiscal 2023 earnings conference call. This is Matt Leahy, Greif's Vice President of Corporate Development, and Investor Relations, and I'm joined by Ole Rosgaard, Greif's President and Chief Executive Officer, and Larry Hilsheimer, Greif's Chief Financial Officer. We will take questions at the end of today's call and in accordance with regulation fair disclosure.
Please ask questions regarding issues. You consider important because we're prohibited from discussing material nonpublic information with you on an individual basis.
Please turn to slide 2. As a reminder, during today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events, and actual results could differ materially from those discussed. Additionally, we'll be referencing certain non-GAAP financial measures and reconciliation to the most directly comparable GAAP metrics can be found in the appendix of today's presentation.
And now with that, I'd like to turn the presentation over to Oli on slide 3.
Ole Rosgaard
Thanks, Matt, and good morning, everyone. And let me also apologize for the technical difficulties we have this morning. Looking back on fiscal year 2023, the second fiscal year under our belt, Celeste strategy, I'm humbled and in all of the progress of our global drive team has made despite extraordinary macroeconomic headwinds.
This year challenge us to execute with continued precision and excellence in a complex operating environment. I'm proud to say that in the face of ongoing demand challenges, the hard work from our teams was solid in the second best year in drive's history on an adjusted EBITDA and adjusted free cash flow basis surpassed only by our exceptional performance in 2022 year over year, we improved both our EBITDA margins and our free cash flow conversion, even as primary product sales declined double digits across our businesses. A true testament to the commitment of our teams to operational excellence and our value over volume philosophy.
Fiscal 2023 was a banner year for investing in the long-term health of growth. We launched new organic growth projects in both PPS and GIP, completed four acquisitions and announced the fifth in iPAQ Kim for an aggregate capital commitments of over $1 billion on M&A, we maintained our focus on returning capital to shareholders by increasing dividends per share by 7.5% and completing our $150 million share buyback program earlier in the year. And we did all this while maintaining a leverage rate ratio within our target range of 2 to 2.5 times a growth.
We often talk about managing the presence while creating the future. We're doing both exceptionally as we close out fiscal 2023. I'm proud of what we have accomplished and where we are going, but make no mistake, managing the person can behalf especially when business is under pressure. And our business has been under pressure for some time. And we are continuing to face near-term headwinds, which Larry will cover with our low end guidance and modeling assumptions for fiscal 2024 for thoughts as proven 2023, we are built to handle Exxaro's impacts to our business by controlling what we can control.
Our execution will remain strong, and we will weather this storm and I have full confidence in our mission and our global growth team.
After Larry provides a review of the first the fourth quarter. I will share with you a broader update about our growth strategy for future value creation. On the build to last Larry, please turn to slide 4. Thanks, only.
In our fourth quarter, we generated nearly $200 million of adjusted EBITDA, $130 million of adjusted free cash flow and $1.56 of adjusted earnings per share. Despite the complex operating environment, our team's execution from the plant floor through corporate functions over the past year was truly extraordinary, and I would like to thank our colleagues for their hard work and commitment to delivering exceptional results in these difficult times.
Later in the presentation, only will expand commentary around our recent M&A, but for now, I will remind our investors that the cold pack and Reliance acquisitions both occurred during the fourth quarter. Therefore, Q4 results did not include the full contribution of these businesses which, along with Apex cam in early 2024, will provide a benefit to our performance in the coming year.
Let's turn to segment results starting on slide 5. The fourth quarter in GIP saw more of the same challenges we have now faced for five straight quarters and extremely weak industrial sector with demand at staggeringly low levels compared to Q4 of fiscal 22. Global volumes in steel drums were off 8%, large plastics up 14% and fiber drums down 19%.
Only IBCs and small plastic volumes increased year over year on a two year stack basis, nearly all substrates globally and GIP are tracking down mid-10s.
A reminder for investors related to this historic demand period in GIP., more than 85% of basic and specialty chemicals globally are consumed by the industrial sector. Global PMIs have been trending negatively since December of 2021 and tracking below 50 since September of 2022.
Existing home sales in the US are tracking at the lowest level since 2010. This is truly an unprecedented time with no comparable period, including the Great Recession where we saw steep drop in drawn drum volumes that quickly recovered.
While this is sobering data, we take pride in the results we have delivered. Those results have enabled us to continue to invest strategically in our Build to Last initiatives focused on the future while managing costs and operations. Effectively, we are excited about the results of our GIP segment, well that and what they will deliver when the industry industrial economy recovers.
Please turn to slide 6. Paper Packaging's fourth quarter sales declined $84 million year over year, primarily due to lower volumes and growing price cost pressures. We took approximately 62,000 tons of total downtime across our mill system in the fourth quarter compared to 35,000 in Q4 of last year.
Containerboard fared better than new RP with less economic downtime and better volumes in converting. But overall, the continued low volume environment, combined with rising OCC costs during the quarter led to both EBITDA dollars and margin compression compared to the prior year. Our PPS team continues to control the controllables wells and did an extraordinary job of managing working capital to close out the year.
Please turn to slide 7, where I'll discuss 2024 low end guidance assumptions. As I mentioned in his opening remarks and I've covered as well. We are sitting at a truly historic moment in time for great businesses with prolonged volume headwinds across GIP. end markets we serve and now a material price cost headwind in PPS with rising OCC and lower receipt published prices. It's a challenging time to give full year guidance because we do believe the demand environment will turn positively.
We just don't know when given those these multiple near term headwinds and low visibility to a sustained recovery, we made the decision to present a low end guidance to start fiscal 2024 of $585 million in EBITDA and $200 million in free cash flow.
This guidance methodology is simple. It presents a continuation of demand, price, and cost trends for both businesses through the duration of fiscal 24 at current levels. In addition, this guidance does not include our recently announced price increases in containerboard, which we don't include in guidance until recognized by receipt.
And it also excludes any impact from OPEC CAM, which we expect will close sometime in calendar Q1. Our hope is that our actual fiscal 24 results will end up significantly above this low end guidance. However, we've always stated that we do not guide based on how our downside view is driven by current price cost in PPS. and no volume inflections in 2024, we have seen some green shoots, but no identified compelling trends yet to give us conviction that a recovery is emerging.
Note that if volumes recovered 50% of the gap to 2022 volumes, our EBITDA would increase approximately $85 million and a 100% recovery would add approximately $170 million. Our business is designed to weather short-term cycles. We continue to delight our customers we are firing on all cylinders and controlling what we can control.
We're proud of our teams and we know that we will continue to execute through this difficult time and come out on the other side, a stronger, better business. The investments we are making under Build to Last are laying out the foundation for breakout performance in the years to come and I'd like to hand it back to Oli to cover more about our long-term strategy and growth plans only.
Thanks, Larry. If you could please turn to Slide 8. Bill asked about producing quality results on an annual basis, but it's also more than that. It's about leading through our values. Our purpose vision and missions all reflect our goal to better serve our colleagues and customers throughout the world. And I would like to briefly highlight a few achievements in 2023 on each of our missions and how they set us up for future success.
Customer Satisfaction Index has long been one of our most reliable measures of success in delivering legendary customer service, which directly aligns to our vision of being the best performing customer service company in the world.
Our aspirational target is 95%, and we are proud that in 2023, our average score was 94%. We also recently completed our 13th Net Promoter Score survey of nearly 5,000 customers receiving a result of 68, a new drive record and a leading score within the manufacturing industry. Consider the macroeconomic context of these results.
Our customers clearly know we are devoted to serving them with excellence, particularly when times are tough and we have been rewarded for it on the creating thriving communities. We completed our sixth annual gala survey this year with over 90% colleague participation. And the results again showed an improvement in engagement placing us firmly within the top quartile of all manufacturing companies serve it across the world.
We also show our industry leadership through our commitments to sustainability under protect our future. And this year, we published our 14th Annual Sustainability Report with our new 2030 targets around climate waste, circularity, supply chain and DENI. This mission is a foundational element of our long-term success, and I highly encourage our investors to visit the sustainability page of our website to read more about our initiatives.
Please turn to slide 9. Now that we have two years under the bill to last strategy, we wanted to provide a broader update on some ongoing internal strategic initiatives that we believe are the pillars of driving long-term value creation for all stakeholders. First, we shared with you the benefits throughout 2023 from centralizing our global operations, supply chain and IT functions. Under the one drive banner, we are building out these functions to serve a larger footprint of businesses in the future with the expectation of a growing scale advantage.
Second, in alignment with our one growth mentality, we are executing an organizational shift from geography-based operations to substrate based operations. This structure was piloted in 2023 in GIP. North America and resulted in plants and regional level operating efficiencies improved best practice sharing and better decision making around capital investments and growth. We will use this fiscal year to prepare and plan to update you with a more complete picture as we get closer to implementation targeted for the beginning of full year 2025.
Additionally, we plan to change our fiscal year end to September 30th, beginning in fiscal year 2026. This change had been requested by our investors and analysts for years, and we believe it will better align us to the standard industry calendar and increase our exposure to the investment community. Importantly, all these initiatives have been part of our Build to Last strategy from inception and our expectations as they will make us better at driving results, improving transparency and increase equity value creation enacting.
These changes takes time and effort, which will result in some short-term SG&A cost inflation in the coming fiscal year. But we firmly believe that these changes will lead to a better and more successful growth in the future. In addition to the internal work being done, I'm also excited about our recent growth through targeted M&A.
Please turn to slide 10. At our Investor Day in 2022, we outline drives acquisition priorities in three areas unique downstream, converting and paper sustainability, Alliance reconditioning services and pursuing a roll-up acquisition strategy in the resin based generic cans and small plastics markets.
These acquisition verticals share the same very attractive attributes they are aligned to growing end markets, holds strong circularity characteristics and enjoy an elevated margin profile with a growing addressable dairy can markets of $3.1 billion. We see a great opportunity to be the global leader in this high-performance packaging sector as we have the technical capability, product offering and scale to service customers in all our markets.
We accelerated our growth in this market over the past year with the acquisitions of LHi container Reliance products and look to bolster our position following the close of the IPACM. acquisition, which we anticipate by the end of our fiscal second quarter in summary, we will enter 2024 positions. It will become one of the largest, most technically sophisticated small plastic product offerings in the world.
Please turn to slide 11 and our objective, our acquisition path is to build greater balance in our portfolio. From an end market and substrate perspective, that transactions announced in fiscal 2023 give drive greater exposure to secular growth trends in agricultural and speciality chemicals as well as exposure to newer markets for us in pharmaceuticals and medical diagnostics.
Jerry can and small plastic product line is extraordinarily versatile and our teams are excited about the follow-on organic growth potential as we serve and grow with customers in these markets. Additionally, you will notice that nearly 75% of the acquisitions completed or announced in fiscal 2023 were resin based improving our overall sustainability profile as most of these products can be recycled and reused and require less energy and materials to manufacture.
Please turn to slide 12. A final note on acquisitions. In addition to the improved end market mix and sustainability benefits, we are also buying great businesses. These companies are the companies we are acquiring, and those in our M&A pipeline are materially margin accretive and have better free cash flow characteristics than our legacy DR business over time.
This path, along with the work our teams are doing to continuously improve our base business every day will drive our performance towards our long-term goals of 18% plus EBITDA margins and well over 50% free cash conversion. We will continue to utilize our strong balance sheet and remain disciplined on acquisitions going forward, while actively lowering our leverage through a combination of debt paydown and EBITDA growth. Our capital allocation strategy will remain balanced, ensuring the financial strength and growth of the business for years to come.
In closing on slide 14, let me remind you of the reasons I'm so excited for the long-term growth prospects of growth and why we remain well positioned to weather this historically soft demand and pricing environment. I have full confidence in our ability to control what we can control and excel through successful execution of our Build to Lead strategy.
We have proven over the past two years that we have the team and strategy to perform in complex operating environments. We manage the business tightly while also investing for the future. We have accelerated our growth through M&A and high-impact organic growth projects. And lastly, we are keeping a long-term lens regarding our operations and business strategy.
The cumulative impact of our efforts will result in a more robust, efficient growth-orientated and defensible business model, which we believe positions drive for success and strong earnings growth as the cycle normalizes. We thank you for your interest and drive. And operator, will you please open the line for questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from Ghansham Panjabi of Baird. Your line is open.
Ghansham Panjabi
Hey, guys, good morning.
Ole Rosgaard
I got more investment morning.
Ghansham Panjabi
Just making sure the value is working. I guess first off on the EBITDA bridge or Larry, you know, $890 million generated in fiscal year 23. Can you just give us more color in terms of the non-volume variances? I'm just trying to reconcile down to your 595, which would be a pretty significant step down relative to the.
Yes, almost $200 million generated in EBITDA in 4Q.
Larry Hilsheimer
Yes, sure. Thing kind of an obvious question, right, so I'm from walk through it.
We have a year-over-year impact because of the strengthening dollar against our that bucket of currencies of about $29 million. We also had throughout the year, a series of sort of one-off onetime items.
For example, we had insurance recovery of about $6 million related to a fire where the costs were actually in 22 we had another fire recoveries, same thing or we had some legal recoveries and had you already been retimed the issue because of the high cost business and governmental initiatives. And then a tax recovery down in Brazil, about $6 million.
That was an operating type attack. So all of those were big slowdown throughout the year. They were like big lumps, but they total roughly $29 million. So we don't anticipate those to reoccur. So between those two items have almost $60 million. And we then have the paper pricing and yield element in cost price squeeze in EPS It's roughly $140 million year-over-year of where we are right now. And it does not take into account the price increase we just announced, which will be implemented in January 1. And then the GIP. index timing on our forecast on the cost is about a $17 million drag year-over-year and then we have some investments and only mention that's flowing into the segment structure. We've got cost of that about 6 million that we believe would generate a lot of benefits for us from a concentrated focus on different segments going forward.
We also are investing, as we've talked a lot about our digitization efforts that in that we anticipate future a strong benefit that the GAAP rules require us to expense it. We view it more as an investment, but it that net of the benefits. So we believe we'll start to see some benefits this year is about $8 million that will turn into a turnaround at the more benefit generation in 25, 26 and going forward. And then there's about $5 million of other inflationary things that those kind of matters. So actually get run in the 95, 85.
Ghansham Panjabi
Okay. That's super helpful. And then the volume recovery, 100%, that's $100 million like the scale that you gave us. Is that relative to two years ago? Is that just to make sure I have that right.
Larry Hilsheimer
That's just relative to 22. So yes, I guess it would be two years going forward, whether it will get back to actually the what we look at sort of the last normalized year, but no. And so they have everything else going on and you go back to 19 divided government even higher numbers, but that you had 174 rates relative to 22.
Ghansham Panjabi
Okay, got it. Perfect. Thank you. And then in terms of your comments on green shoots, more color there. And then just lastly on the CapEx guidance, is that reflective of the low end assumption? Or is that and if so, is that something that would be scaled up for the year?
Turns out to be better than?
Larry Hilsheimer
Yes, the green shoots. It's mostly that probably started to see in our in our containerboard business than certainly we've seen. I don't think we're ready to call it a trend yet or an inflection point. But certainly the last couple of months have been much better in our mill system is full at the moment. Backlogs are good.
So that's what we're talking about. We really haven't seen it any place else. And then I'm sorry, what was the second part of the CapEx side?
Probably CapEx, everything to OpEx guidance?
Yes, Gunjan, we've said, hey, look guys, even if we actually end up with a year that's at the low end, we're going to manage our CapEx spend to just yes, it's not have anything to do with our strength because obviously we could do more but more just to manage it for appropriately for investors.
So if we do see an inflection point, we would probably up our CapEx but it wouldn't be proportional on that same ratio. And obviously, there's a core amount of CapEx that we have to do every year to make sure we maintain critical maintenance and obviously, that's what impacts our cash generation ratio.
Ghansham Panjabi
Okay, terrific. Thank you, so much and happy holidays, to all of you that we've gone into.
Operator
And one moment for our next question our next question will come from cashing killer of Bank of America. Your line is open.
Cashen Keeler
Yes, hi, good morning. This is Josh on for George on your conflict this morning, business-related So just on containerboard, you know, I know you're not including it in guidance here, but I guess can you generally just speak to your rationale behind the price increases? And then and you also talked to some improvement just on containerboard. It's trending better relative to your base. So just on the demand front there, can you talk at all just how that maybe trended throughout the quarter? And what are you hearing from your customers on that front as well?
Ole Rosgaard
Yes. I mean, we are we are raising the prices because we like everybody else are face inflationary cost pressures. Obviously, OCC is up.
We deliver great services to our customers and demand's been up. So we are we've gone out with that and it will be effective January 1.
Larry Hilsheimer
Yes, that's essentially it.
Cashen Keeler
Okay. And then on just on trend, yes, we've done.
Ole Rosgaard
You've got that trends that are clear. It�s normal course in Q4.
Yes, yes.
So in the mills, we see it now, yes, mills a half a percent and in Chico's choice, 2.8%. And boxboard, we were down 6.9% and shouldn't call down 7.6%. Yes, so sequentially, a significant turnaround because we've been running negative.
Cashen Keeler
Okay, understood. I appreciate that color. And then I know you've done a number of acquisitions or announced a number this year. And only you talk to the M&A being part of the story kind of longer term here and on past calls, you've talked to stuff maybe in the kind of immediate term pipeline. So at this point, you know, is there anything that you could potentially execute on in the coming year? Or how can we kind of think about that.
Ole Rosgaard
I mean pick up we haven't closed on a pack of nets that will close here in the first calendar quarter. And we then deep dive back in how they operate in nine countries. And given the volume situation we have at the moment and our guidance, we're not sort of going out aggressively to buy box. We have the means to do something. And we remain opportunistic over the next six-months in terms of what's available. And we're not going to miss a good opportunity to do a good deal?
Yeah the thing I would I would also just share is even if we had hit this low end, if that's all that happens this year, we still are well within well within any of our debt covenants, and we'll be in great shape going forward. I mean, even if we got to just like recovering 50% of our volume this year, we would with IPAC. would still be right around three. I'm on a on a on a leverage ratio. And obviously, as we recover, we think there's significant upside in the pillow point on that. So we're out at 585.
If we recovered paper and pricing margins to the average of the last five years, we've picked up $101 million. We recapture the volume. Where is that at $174 million. If we add iPAQ come in there, say roughly 60 for up to $920 million. If those things happen, we're already back down in our that ratio target.
Cashen Keeler
Got it. Understood. And then just one last one, and I'll turn it over. Just with the change in terms of your fiscal year, is it possible at all to quantify what the inflation might be or what costs you might incur related to that?
Ole Rosgaard
Yes, the fiscal year change thing is relatively minor. It's a couple of million dollars kind of thing for that element of it.
Cashen Keeler
Thanks.
Operator
(Operator Instructions) Our next question will come from Eddie thresher of Stifel. Your line is open.
Good morning. Thanks for taking my questions on if you could just talk about what you're watching as indications of change in the business fundamentals and what needs to happen to support a positive turn is coming and you'd feel more comfortable providing guidance range.
Ole Rosgaard
Well, what needs to happen is, I mean, obviously, there's a lot of factors involved, but if we see a interest rate reduction, we will probably see some improvements in the housing sector and the housing sector when people move houses drives a lot of the business we see from our paints and segments, but also on containerboards that will be a huge positive and probably the biggest, I would say and then you have all in all the issues on geopolitical in our context we have around the world that has an effect as well. Those will probably be the biggest.
Yes, I would just ask you to reflect on last year, we came out in the after our first quarter call with lowering guidance by the second quarter we gave a range.
Yes, so we're not. I mean when we see something we will we will react and get everybody the information that you'd rather see. But I also tell you a year ago on this call at this time, our paper customers were telling us they thought business was going to bounce back in January. Our chemical companies were saying a first or second quarter calendar last year. And by the time we got to that first quarter, everybody was like in, oh, my what's going on and it started extending further and further out.
So it will also reflect on the Great Recession. When we did see an inflection point, it was rapid demand kicked off aggressively. So hopefully, we start to see a recovery on that ties to some of the things that we just mentioned, and we are well positioned to respond.
Larry Hilsheimer
And there other tasks for that and then, Matt, so when you just look globally at industrial production, ISMPF, the PMIs were peaking in May of 2021 and trending down almost since then. They've actually been trending negatively globally since September of 2022 in a contractionary period for over 12 months. Our global industrial business is levered to some of those trends, if not directly. So I think if you look for a turn or a recovery in PMI or RISM, that that could also indicate we're probably seeing a demand recovery as well.
Thanks a lot and team and just about the cadence of price and volume by quarter, maybe within each segment like seems like within both they have the toughest comp in 1Q and sequentially improves and maybe this flat year over year sort of kind of what you built into your guidance.
Ole Rosgaard
Am I thinking about this correctly?
Yes, we didn't really look at the price cost. I don't I'm not ready to answer that on a quarter-by-quarter basis. I mean, we didn't think that it added adding go back and look at where we were on each. But we I guess just off the top things trended throughout the year. Obviously, with OCC going up on the paper business throughout the year and we got price cuts more on that.
We had forecast back half of the year. So if you did that, that would say that you'd be better at the end of the year than at the beginning. But then we've got our price increase announced that we are implementing on January 1. So that would obviously help in the in the first and more in the second quarter than the first.
And I did out of the first quarter tends to be the lowest in our business cycle as well.
And then one last one from these two deals that you've already closed on, what is the rollover contribution to sales EBITDA and free cash flow assumed in the guidance from that.
Larry Hilsheimer
And I can give you EBITDA is roughly $20 million in terms of the contribution to 2024. We know generally these businesses collectively are running at a 60% free cash flow conversion. We haven't guided to, but I'm not sure of the CapEx you've got next year, but that's directionally accurate in terms from an EBITDA perspective.
Thank you for taking my question.
Operator
(Operator Instructions) Our next question will come from Roger Spitz of Bank of America. Your line is open.
Roger Spitz
Thank you and good morning. First one was on IBC's fiscal Q4 volume increase on a percentage basis, would you have first steel plastic fiber and IBCs, the full fiscal year 2024 volume change percentage basis?
Ole Rosgaard
Hi, Roger. I can give you that the first line in Q4 was a contraction of 4.3% on IBCs.
Roger Spitz
Okay. I set up okay, my fault and you don't have the full year and that's what you're saying for all for.
Ole Rosgaard
The full year is a contraction of 9.5%
Roger Spitz
On wider small plastic packaging businesses, higher margins than your legacy large packaging. It's a small package, plastic packaging, more fragmented and large, but in large packaging really only has maybe our three producers with maybe 80% global market share.
Larry Hilsheimer
So on a less fragmented business, yes, number one, it is a less consolidated business across the globe. There's a lot of players. It's also a more sophisticated product to produce than you could on small plastic and Derek, and you could kind of split it up in three buckets you have a commodity markets, then you have the middle in a little bit commodity, little bit premium. And then you have the premium market, which is really where we operate where you have things like barrier technologies, you have special designs and that sort of thing.
And one thing to supplement always answer because only was answering on IBCs on a same store basis without the impact of Centurion acquisitions. So on Cinterion with Centurion in our volumes on IBCs, you were up 2% and for 24, we would expect them to be up 12 year over year.
Roger Spitz
Thank you very much for your time.
Ole Rosgaard
Thank you.
Operator
(Operator Instructions)
Our next question comes from Gabe Hodge of Wells Fargo. Your line is open.
Gabe Hajde
Good morning, guys.
Ole Rosgaard
Again, I'm sure you've been called worse from a preference on the contract.
Gabe Hajde
I wanted to ask something a little bit that's been in the publications here recently about imported uncoated recycled board and just historically speaking, not being really a paper grade. That's been important, I think, for a variety of reasons, one of which is and there are probably other paper grades that are higher price points that that can be justified to be imported. I'm just curious if you all have seen this in the past or if in fact you can confirm that it's something that you've seen in the marketplace now, I'll stop there.
Ole Rosgaard
Yes, Gabriel, it's something that there's always been some. It is really minor in the overall market. We've seen a little bit more, but it's not substantial. Okay.
Gabe Hajde
And I guess to revisit the bridge question on, I apologize in advance, but you Larry laid out, I think a lot of the negative factors on to get to the 585, but we aren't necessarily giving yourselves credit for any of the positives that would be included even taking into account sort of what you're assuming on the guidance and or what you're experiencing today, at least on the containerboard side. What I mean by that is it sounds like the system is full at this point, which would imply no economic downtime in the containerboard mill system.
So Matt, throughout plus 20 for acquisitions on I don't know if I have the exact number, correct. I want to say there was about 120,000 tons of economic downtime in your Seaboard system. Assuming some of that comes back on, those will all be additive sort of just based on what your assumptions are today?
Is that the right way to think about it?
Ole Rosgaard
Partially, I mean, we are we have built in some relatively minor growth in from containerboard in the year, but it's a Asia and like $60 million now we also are closing down our Santa Clara mill. So that will take a little bit out. But yes, you're right, we're being relatively conservative in that low end guidance. I mean, it's low end because it's low ends.
Gabe Hajde
Okay. Our Santa Clara, remind me, is CRB and that I declare we actually have been. Okay, not at the main airports in Europe for the foreseeable?
No, it's containerboard.
Ole Rosgaard
Yes, the tonnage on that, what we have that, just let me check.
Larry Hilsheimer
We'll get that data yet.
Okay. All right. That will that will be it.
Ole Rosgaard
Thank you.
Operator
And I'm showing no further questions. I would now like to hand the call back to Matt Lucey for closing remarks.
Matt Leahy
I will thank you, everyone again for your patience today and our challenges at the beginning of the call. We hope you all have a wonderful holiday.
Operator
This concludes today's conference. Thank you for participating. You may now disconnect.
