GEF - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the Greif's Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank President, begin Vice and Communications, Corporate Matt conference. Investor may your you Eichmann, Relations

Matt Eichmann

Thank morning, Sharon. XXXX you, Good earnings quarter Greif's conference fiscal second call. everyone. Welcome to

significant and that we Greif's Chief with we call. issues results basis. Officer. slide and today to questions non-public Watson, consider to are answer On discussed. could available Larry make In plans, encourage regulation involving Financial will Actual because the items we beliefs ask one with Officer; those limit question end turn questions regarding the call, you Please X; on Hilsheimer, forward-looking to Greif's accordance at Pete statements as call the to an President you material, Larry to one future and and returning events. queue. Please differ expectations, Chief prohibited you individual are Pete a follow-up disclosure, reminder, related from to before discussing from and fair question Executive materially today's today's of are yourself during

reconciliation will and non-GAAP And the of I Pete to presentation. be certain presentation most on metrics the the contained over financial turn referencing appendix today's comparable measures X. slide in now, we is directly Additionally, GAAP to

Pete Watson

Good question-and-answer outlook discuss a will period. we Larry everyone. Hilsheimer, and expand our Thank summary you, will a quarter, results Matt. today's then after providing begin our CFO, our morning the prepared level I conduct our call by will and preview of and on remarks, financial

with Let the me takeaways. start key

in service make to We steady journey. improvements customer continue our

flexible and before improvement was improvement versus index segment. satisfaction customer significant continues solid year and products special prior recorded boosted our A both special Class per items and quarter. the by profit earnings share services items, quarter improve the to Operating in four trailing before Our score

mechanisms. The passed material significant our weather, contractual volumes, segment and part, by margin year-over-year interruptions, XXX Section impacted by focus Packaging are Rigid that being experience Industrial to also continues along on inflation, choppy tariffs Our raw in driven Segment operational via to due customer was management.

segments, abate. and a Flexible of to that Packaging working significant are actively much quarterly we Paper our performance. Our still recorded business both headwind remains Transportation across strong

business Finally, we share per please has flow the cash have range, before turn A our fiscal items to by flow segment, approved. to to I growth XXXX recent projects related most Class will free our that of increased by earnings now higher addition been oriented CapEx but performance review special cash slide several guidance due X. maintained profitability offset recently guidance Greif's

Industrial Rigid volumes is lower impacted in For and Packaging, in higher Europe, transportation to costs, by weather anticipated our in market challenges of continuing second interruptions, China. by headwinds, material tied U.S. trends and quarter customer operational continuation the mainly raw than

higher $XX lower lower second of primarily price Our strategic foreign to due increases, was year-over-year, the price quarter, stemming profit higher exchange sales were decisions a favorable RIPS quarter gross selling index tailwinds. year volumes. result prices, million prior versus from and

up and adjustments, steel quarter, cost our inflation, timing up while transportation cost per transportation versus the Continued unit of price $X XX% pass-through RIPS a year costs per prior material year. raw drum raw roughly material the and versus were steel million contractual headwind. prior were unit, XX%

factors andX% up million versus quarter drum by second America Our X% expense. The decreased lower to volumes impacting offset year-over-year, profit, SG&A primarily by $X bulk container year-over-year operating profit partially prior special before year respectively, quarter. same were the but due and gross items intermediate the steel North

in America in due end delivered an February U.S. in at to prior March. a the growth let operational fiber the grew versus the XX%, and intermediate the volumes mixed prior QX volume While prior volumes of versus more in paste me lower Coast, impacted and year story, bulk Gulf volume and quarter, disruptions, supply is versus thanks EMEA were while the few plastic customer Latin Volumes to drum chain In give XX% than and were steel EMEA, tomato year economy quarter. a better container X.X% for were examples. by the down Chile. really demand steel improving Brazilian drum volumes you year.

growth operations. conical agricultural lower impacted to the to our our improve markets. growth XX% were demand our Europe, Central our see versus we drum In Arabia We continue and the in Jubail, very volumes steel prior lower, steel were on restore advanced in volume year, ramp Europe, includes efforts specially Russia volumes we as demand, to we severe In Middle strong footprint the performance, Europe versus strong up XX% a due Middle drought to unit planning in were in East, And in which by Southern East, our German Saudi the that volumes while up prior negatively as optimize based Eastern our impacted margins, conditions year. profitability.

significant second year. continues the the Southeast a China lower quarter result X.X% competitive market pricing ongoing volume conditions, year-over-year. decisions, customer. experience of closure fell volumes prior But Demand versus to plant APAC remained in Finally, increased of and a while solid our steel as strategic Asia, volumes, a

encouraged recently new are with We wins. business

slide and secure China, operational unable turn to with currently quarter to are quarter almost footprint, in considering are Paper Please our thanks and business delivered second exceptional our we volume. examining if strategy Packaging improved our revenue second additional we and X; $XXX prices generated entire selling network. PPS to However, million, are demand rationalizing our sales across of higher margins. strong performance,

special before year. volume profit of OCC comes, spite unit X.X% versus of operating cost. This improvement boosted headwinds, strong transportation the million roughly quarter in growth increases, year, of price and prior items by prior containerboard favorable versus continued $X XX% grew by Second

corrugator, that integration us level. laminate to a a This with an specialty announced recently our to facility litho will expansion speed and be will with mill customers, we rod] of in region. network, committed enable high model, our sheet choice [ph] grow core Mid-Atlantic strategic feeder operation Finally, sheets. expand the the business That located and [offset the new improve include produces

be operational We basis. new items by FPS' second prices versus Please bags. in on slide products currency expand X; strong sales especially were performance, X.X% roughly a solid the neutral higher to $X selling and the performance facility the operating expect loop a growth sales four performance fiscal prior before unit Flexible with across of XX% network, year. bulk turn the and million XXXX. quarter of strong our sales team QX delivered Higher to helped up in special by operating Stronger driven

we credit exceptional The service. most its a team Net service at one Customer versus turnaround levels in Score. slide Day, High our consistent and Investor to in the operating year which of Satisfaction XX.X% our its year, its trajectory. Finally, projects the growth recent Score fundamentals helping XX% are acquisitions. I'd X; prior FPS team and and for expansion like includes in customer a the strategy, ago recorded accelerate path to improvement turn Promoter to Please outlined FPS Index performance capital

the underway. some efforts quickly advanced Over highlight that and have to I want plan, we we of the have last year,

initial before to which expect our country years. Plant operating $XX $XXX We special into we collective strategic million. investment recently slide in of their approximately presence strengthens for Russia, of New projects the a would generate highlighted items over next Kaluga over the be Rigid results And financial profit impact partnerships with customers. Packaging, those Steel per Drum in In year, commissioned in our blended our and further several our the million

in footprint, Chicago, with Netherlands. global and our IBC continue in recently expand and We Russia to the Houston, Spain, new being lines lines added commissioned new

We Packaging, bulk U.S., are complete expansion new time our the blow triple agricultural Israel. wall our adding packaging season. also Multicorr in small molders is Paper by and lines operational plastics plastics several In in expanding and offering in new for the

new our These required previously We network our to feeder are capital expansions, are strategic as risk have projects expanding returns needs, a oriented also higher in markets. demonstrated as capital facility framework, serving model margin appropriate I aligned by sheet and mentioned. all Mid-Atlantic, towards and customer with

presentation the Financial our over Larry Hilsheimer. to Now Chief to I'd Officer, like turn

Larry Hilsheimer

you, everyone. turn results. X Pete. second quarter to review financial Please Thank slide our Good morning to

year-over-year Second and containerboard pricing year-over-year strategic X.X% on quarter basis, to net neutral higher sales index changes, a price were increases. price decisions, currency due

expansion costs primarily and volumes, material consolidated roughly by Year-over-year rose Second points profit of raw higher margin X%. raw timing the Gross year inflation, transportation by headwinds. the quarter, lower profit generated material and sales, higher costs. gross was gross higher contractual adjustments profit versus quarter by due transportation to XX dramatically prior offset pass-through basis by partially declined

depreciation increased the forecasted roughly was ERP over amortization prior basis past related expenses versus SG&A were but system of higher, incentive points sales quarter quarter, as payments, years. percentage improved and the Second year SG&A higher the SG&A prior to related year. performance higher company primarily to implementation improved three due by to XX a versus our X% and

Second quarter before before rose year by offset per by versus the special SG&A, versus almost the in to the previously year Class due A operating mentioned. profit, XX% prior quarter. quarter, partially I million year-over-year profit special earnings higher prior higher reasons $X were operating Higher items resulted items, share, that

was adjustments to rate second non-GAAP for tax Our positions out added million period and was uncertain increased roughly tax our quarter XX.X%, second $X by impacted quarter tax expense. reserves that of

XX% non-GAAP our quarter. been for those to tax items, have two Excluding would rate the closer

tax rate expect between year. offset ratably continue second to results, We we full as be discrete later will expect tax non-GAAP XX% quarter range that the to year XX%, expenses benefits, impacted booked our our this and by

Jobs assess our and continue also to estimate We for Tax Act. the Cuts provisional

second earnings booked to our the quarter, This during that tax increase recorded we $X.X During the non-GAAP provisional was second benefit from quarter. for benefit excluded the was net a million first quarter. the

facility X. to packaging at from of capital million basis and Finally, such points of and higher to turn $XX review new Working continues increases to cash Lower projects, despite increasing in XX.X%. basis, days as than cash resulted days as IBC to capital conversion currently by capital Please flow percentage XX improved constructed. the inventories guidance. the million being $XX Multicorr a year-over-year quarter cost year slide on XX related lower XXXX XX.X growth and from for million $XX will for prior cycle maintenance Houston decreased steel, a our PPS. free second I in was or XX.X our while roughly the free improve, fiscal updated mill month bulk expansion Last, part our year-over-year, sales regular expenditures roughly quarter. working roughly now cash flow of trailing operating anticipation

aspects modifying our of fiscal XXXX are guidance. several We

between we fully our reflect increase. First, implemented Class special range per our price earnings to before $X.XX a share guidance $XX and A items containerboard to are per XXXX share increasing fiscal $X.XX ton

seeing out steel the are fiscal FPS, revised cost by created we offset headwinds and assumption transportation of by cost the and Our XXXX OCC increases. performance accelerated negative

Class per continually revised Our today the of of includes earnings in our increasing the on our trucker includes costs. A special country. also items, steel those estimate estimate share strike the operations of It Brazilian the our impact impact of before

our to strategy. capital $XXX between $XXX IBC of guidance $XXX has fiscal $XXX supporting million the guidance in expansions anticipated expansion our to XXXX. free a million in recently expenditure Higher profitable as Mid-Atlantic us results the growth expenditures, netted and and higher earnings increased for cash result plastic the by against and flow maintaining been and million capital including investments feeder global Our Pete, range of approved million, sheet described

discretionary benefit We would $XX of pension as based versus XX% return, tax catch to that make position and of are a had our to pension that have tax deduction be of in obtained making benefit elected XXXX cash We advantage would strong a in up contribution filing June. the to shortfall. that onetime future, We to later until been plant a roughly that on remains the our take contribution in the forecast. our million XX% extremely U.S. we open confident

final remind I to that will on pension Following fully a us decrease U.S. are this expense the plan assumptions. in by increase reduce coming on expected roughly and the that premiums. This annual few Furthermore, million, essentially PBGC roughly key also will million contribution annual current our $X mitigate to will with annual save cash funded. years. PBGC guidance you, words pension our contribution, be I and impact our us. contribution $X.X discretionary funding will the our substantially, premiums close

the First, second Greif, for we to customer fiscal financial XXXX half, expect in due be consolidated our as to activities. is generally of case agricultural the first stronger the results half than

strongest, expect third has year, we of due fourth the in be to Although raw its before RIPS strongest usually pricing quarter items to profit operating the special material the our result quarter, this fiscal adjustments. timing

also our OCC for performance $XX profit October. line months three latest Second, operating RISI ton fourth items strongest fully June, containerboard in in a of $XX price in benefitting before the ton $XX PPS and from costs a September, ton ton forecast. fiscal realized This quarter, increases. with of assume special July-August $XXX will and deliver We in its a is a

are Packaging Finally, interest, please keep increased improvements venture. in the joint in in also segment the mind, non-controlling business as our that is Flexible reflected a

ratio maintain X.X. but not Turning to XX; opportunity due to additional debt-to-EBITDA. compelling seen X of beyond regular the we second I plan great exceeding Last, potential increased our returns to the at consider previous growth net opportunities, I We on shareholder the At the capital slide on million here. times our ratio, leverage low priorities of you year, contribution of on to we we occur it, and so to the capital will to priorities at our quarter, if dividends detail discretionary end that times pension are slide highlight spend leverage profitable leverage our end into emerge. a have $XX X.X CapEx temporarily to targeted intend this make. stood targeted won't calls, go growth ratio expected plan numerous

for years, to additional compelling increases our comments. now, as in turn will future opportunities. closing decrease, debt the call We and existence and the returns And absent our consider I levels growth of Pete, back his EBITDA

Pete Watson

closing, turn slide please our we XX. overall business. and encouraged are the by In to for Larry, performance you, Thank

have business. exposure the benefits portfolio, in is the stated that flexible Outperformance play scenario our its morning. please of business variety in we fiscal global seen end counter One We markets. helped Rigid this very segments Sharon, offset paper businesses, We commitments a our challenges confident, experienced in of to to helping for questions. others, for for thank both you will open our XXXX. with substrates this out strong the and some in remain challenges quarter, participating performances achieve for and line

Operator

[Operator Instructions].

Your with go first Panjabi ahead. question comes Ghansham Please Baird. from

Your line open. is

Ghansham Panjabi

Good morning. guys. Hey

Pete Watson

How Hi you? Ghansham. are

Ghansham Panjabi

disruptions Good weather guess, RIPS you called Hi North out morning. in with America, and in Pete. I February starting March.

American quarter did how the out on as basis, more give track RIPS did previous in month a well. during well? as monthly some You Can mentioned the that call sort May How on color the you that? us for on of shake volumes and of North it

Pete Watson

so, question. Yes for thanks the

steel. So steel and by with largest year-over-year really to quarter, disruptions was customers drum transportation. on was chain North with and one Coast, X.X% The steel their supply America, our Houston, exception, I is was in some Gulf is encouraged producing and unit, the really volumes, that major relative drum predominantly specifically some in down which

the X%, portfolio, look up of our America you X%, North Southeast, Midwest the include If at and growth. was rest the up Mexico was East X% we which at and

will Houston business, And I starting our bounce have to the talked after our across as in in similar -- back America business approximately If growth. growth occurred molder in portfolio, digit we that showed in is on X%, seeing as capacity are Alsip, hold. May, business point also much growth, mid-single our expansion blow larger taking our IBC also our Chicago, growth, out, IBC steel North just Gulf those at to whole Coast, Gulf about. the rates, in and you look good I May, disruptions Coast

Ghansham Panjabi

pieces, question, back between the super half the assuming as what obviously last volumes XXXX How when of a Okay, of OCC, you are help for guidance the in lot it lower for much your bridge And the containerboard that's some to well? outlook. gave RIPS my you us you increase, guidance raise? in helpful. Can changed, then, revised second price as various from and is relates the contribution has

Larry Hilsheimer

Hi Ghansham. Thanks for the question.

So ups run and change. through in me just the downs let guidance the

just the non-volume to million projects, related bit $XX transportation a related a slight we headwinds, amount. continually about OCC well to some our the volume, through side. increasing that the strike, have And related Brazilian About lag tariffs, $X that assumptions rates truck I that plant worth. related our have steel ability for relates million and improvement are previously. just to in on on as we we related About more just So EBITDA items. the about reduction then costs. also that ran year to performance new for to catch-up of delays that about $XX the already equipment, to and projected the that has in increase before million getting escalating had we from that's molders related underperformance increase, includes and and then, have million had significant based $X versus in we from $X incentive some $XX sort price assumptions us And an million June, costs containerboard impact to blow million the on full RIPS The And the that then, accruals reduction our which increases, things on stock was about little as delivery price. LTIP our year,

ends And an then, improving, volumes, those type that the items. additional with driving just of and PPS netted accrual. marginal improvement that's from flexible up gains, So other business

nets to So a increase. all generally of of net the million range in $XX that

So hopefully helpful. that's

Ghansham Panjabi

were that you Thanks question. much. so for ready like Looks

Operator

question Chris next with Fargo Manuel Your from comes Wells Securities.

open. is line Your

Gabe Hajde

on you envision a bit, some it be to can headwinds is This $X understand, assume get the the not But lower transportation reasonable reduction $X recover, that then million something might something that -- million fiscal some trying components, don't back guys sounds the investments, necessarily. on XXXX the volumes, to that and in some just are I of actually -- that million $XX you of Gabe if -- at I in of Chris. most make be like for looking sitting gentlemen. might can time. equipment guidance, Is that's you Larry, able coming you be guys of question, fiscal that which morning piggy I couple able for back making guess different when Good isn't pieces those capture of XXXX it to in -- those to would a little if on of but I look sense?

Larry Hilsheimer

Yeah.

you are very and the back what Those come will Clearly, because delayed push line, I XXXX. line expect molders blow the question improvement, that on bottom back, Gabe. of a every you be of good primarily in delivery equipment. on the on -- it's month for and the and think losing we obviously, things, with

that yeah, pricing So will have issue, a to have initiatives. lot caught going on, that mitigate with customers activities be through the it. And transportation on Relative trying to the impact of up. working that we obviously, of we different

the So we able to piece there a that comes challenge be substantially, paper the in to it think teams but you lot price business of expect a business, mitigate a that already. our and market, big in in increases is particularly, have been obviously, of that

So are it. the working teams hard at

some will this at number you We have but the we I for think recover it. in you of expect a recover point about. probably primarily don't those guess, two, were all of I it, don't I I asked to guess, time.

Gabe Hajde

component year? in then this of And steel, the year then next that maybe some Yes. coming lag part of it and

Larry Hilsheimer

and should even the we steel are U.S., decreasing. be Outside that of Yeah. thoughts slightly at peak costs and our maybe off, sort are -- of leveling on they

that's Canadian start you standpoint, expected, to play just up, lot remainder their steel. if this what every million people the what to a most there buy companies action, to year. the price Canada, so, the contracts is -- might are adjustment at we people from logistics hit move as through U.S., tariff steel us, $X benefits not and of change of think we about more In price didn't, it domestic And will pushing roughly looked through a time continually of buying The was a we I do expect. our

price at to in though, some the that cost we play point at benefits will begin in the the So obviously, then the that year, get fully we to this of And and through we to adjustments. XXXX. mitigate, anticipate U.S. do more that capture expect time, will

Gabe Hajde

Okay. heightened competition? trigger That's of can it's this we provide Larry, to helpful can of understand of is some rationalization local little you color In China, Pete in competitive bit terms pursue for in some be that maybe -- there? Presumably, sorry. are dealing something is activity, that you you a outside I from what or incumbent players a guys with, terms look and there for, point to might guess, the

Pete Watson

Gabe. Yeah

very costs, that other behavior It or director, the and base from Mostly in is this change. our a strategy, drums, our But won in recently privately will hyper business regard tends of this steel footprint. our because soliciting high year, that's right competitive are is now. we is rationalize market. with supplier little of and very have will by So volume predominant fairly to we But on and the in companies, that just market, either our and country, China. we inflation When commercial of fragmented commercial independently owned, a behavior goes held way, perspective, end predictive it a in reduce steel increased contract. we our to the operational new new a that

year, likely report as will fourth X% be And it RIPS. have it end to sooner, no a in will Gabe, we only quarter also, the most of our our something than be revenue China So on maybe call, the represents in of that. reminder but later just will total

spotlight But in to losses an important for volume glaring the picture, So still as a kind impactful us. while on of big it's it has profitability. the not there, market overall

Gabe Hajde

visibility Understood. Pete. there, for the Thanks

Pete Watson

so everybody comment, And one understands. more just

to give portfolio. was steel the you in If China volumes out the higher But steel of world global rational perspective, across equation, certainly you impact our you on That the have would take can steel from been China to our just basis. which a year-over-year.

Operator

The with Adam KeyBanc. next from question Josephson comes

open. is line Your

Adam Josephson

Larry, and Pete morning. good

Pete Watson

Good morning Adam.

Adam Josephson

and have guidance Thanks question. for on a I taking one my questions. then other the couple got Larry,

thereafter go right, your you think $XX the prices you OCC what June, heard be then then to on assuming that heading in assuming OCC, up if one the $XX, $XXX it's going I guess, downward anything, On July, OCC are in price if October. you would so to to going and China I are why, in just and implemented. I are guidance, given

And would is year price spike be you So the months that expectation full assuming assuming why compared your OCC OCC to what July? in a in you prices ago? were $XXX three

Larry Hilsheimer

the Yeah. The for current year average to now $XX, and all that the floodgates, might if is assumption, at China we expect the to know what relative happen. full opened obviously, Adam, happen. I don't

You to an either. had have they it's go it exactly We decided you obviously just matched. published RISI's just pieces with independently that relatively We just with come with outside thought and forecast, team look independent go thing was what we to decided at. that's to you can that, close don't we that, and up and our what

Adam Josephson

on do to U.S. any cracking given But just imports? down expect have that prices Okay. is reason you China the to in July, really OCC spike

Larry Hilsheimer

-- particularly situation, don't. don't also And I all. the what's trade going at I in given I whole No on

I a So don't than the October. -- that, think be something at if even in I even they lot did, higher $XXX looking in we'd and

So put out there, how that -- I with anything generally, get say you agree we it. just is see but I did don't going we to to you somebody happening.

forecast. let's pick So RISI we the said, just

I you. rest hopeful like results it am I So year. our Obviously, would of it's just the lower the up. drive am

Adam Josephson

or interpret $XXX, will end that, range. EPS either mean of I higher the are your think extremely confident said or that to at you be that to is I you are Can then guidance not you And thinking just Pete right? that necessarily $XXX in it Right. revised relatedly,

Larry Hilsheimer

if that there But so I squeeze now we of -- I there just think -- because upside, topic the much OCC, that it. is to what what don't assumptions. tariffs are you down. I talked our have about, what said in mean, that going I steel we are to free our the to vision said I'd the world things in to think downside, clear have on, rest volatility built mean yeah, go confident in I there told really-really are our our U.S. that. right of of are. confident range said think in out they the to What's but like have steel we the continue instead the whatever expectations cash But expectations we tail I it's going down world, flow. in that, and I start I really hard costs in that are could is a be up flatten, I maybe happen I We we for range, But reasons, so flatten matching in going say, of

range. So that's why the

Adam Josephson

Got it.

out of company and for issue. what for it's it's Okay. And couple then Companies particular frequency, just just have been a And non-recurring RIPS flat, as obviously, problem. one be robust would recurring ongoing your had terms weather know based such guys, you over half, has as weather, But that been been the and a a of on increasing about China result the what problem. economy, read. issue, we but volume, last a calling for last pretty so being with have really year I on a you not you a this of volumes the quarters, Not a or flat in and an talked volume weather basically many see, companies. seem global has whole, it the to

perhaps do unreasonable mean, total Or you that the to soon, given trends I such accelerate have to reason China volume growth? is the volume an that issues, the company So weather expectation, would have your given etcetera? expect any problems, time any

Pete Watson

Yeah Adam, this is Pete.

Southern FPS, and we globally in So what ag portfolio, we -- have exposure, weather, obviously, that's years, had every to and try a really actual and transparent. are the gains have XX But In fair we in just do report to exceptional RIPS, the Europe two be past, on in and and business. are PPS, we and try is three strength we shortfalls our the countries, single statement. conical and business, do,

comparing performance We for its record that highs. now, are

how weather, that's inventories is manage It's to try how how We just can't we we the look reaction business. and and control There transparent. manage control markets our downs, to we part can we So and of customers. we ups our to but be at it. and our

our in your Rigid. that. then terms question versus view especially on the of that's view, And So global in on macroeconomic volumes

So part the percentage driven. business, digit largest it's our the single a -- growth GDP and that low steel business of business, is of

volumes the management. is to So market we large -- margin have improved in reason profitability, why of part and are we some shares that drive have and choppy is and we trying steel,

as and So trying trying that, we we to we behavior. that by out and an by to region, our do of are go our and are we Europe, we not example, have optimized looking the talked doing volume about margins operationally, to are grabs, footprint improve Central restore profitability

we you and investing the see and in that other But Rigid parts plastic double to single in packaging to which and that business, in because that, So important we of going has the reason macroeconomic our global conditions. we experiencing. digit why, high I digit That's it's growth, relate low uses. to vesting IBC business diversify that growth growth, say, that's are the is steel because will portfolio, low business thing single digit higher don't are are why strategically, business a

we some our we what because portfolio, that sell expect we we And five in of product higher businesses, growth so, are to. the see segments which would use years turn, end future or our in in to that so, diversified diversified trajectory

Adam Josephson

about about one out and have characterize synchronized expansion, How last mean, the markets. the longer no happening they curiosity? macro, Europe one people now just emerging Pete. just in a that global of you on are talking macro talking been I what's and global of because really would And

Pete Watson

mean. Yeah I

scale. a on think level high I

it's think positive. I

You certainly some potential have spots. hot some for

You not have government what have that impact may by have trade and may That impact situation tariff the could or migration the U.S. on on manufacturing globally. of capabilities.

also political in -- have You wouldn't Europe. of say noise parts some turmoil, I but

tell certain even, and regions. at are to and we some may which portfolio based steel, whole margin in think profitability but not very agree Volume I you optimize very our But management, grow, I would growth other is strong, that, accordance overall, goal be volumes. time, certain we and hotpots is is there think only growth again, would in about that profit not one we global there well So aim and in always and fairly RIPS, elements. is to I going performing through worry the And in our desire in think regions, our our some is to of in I think of improve those on regions, are to lower curve, I trepidation I based and behaving and regions. that in profit piece it's

all those balance most for we are so drive to trying components business. profit And the our to

Adam Josephson

Thanks Pete. so much

Pete Watson

Yes. Adam. Thank you,

Operator

Instructions]. [Operator

Mamtora Your next question Ketan with Capital BMO comes from Markets.

Your line is open.

Ketan Mamtora

Larry. Thanks Pete,

Pete Watson

Hi Ketan. How you are doing?

Ketan Mamtora

Good. Thanks.

You about your range. So first talk target of a little leverage your talked end being you about can bit pipeline? your M&A the question, just at low

kind seeing of sense terms you a you regions be out of and us most that give Just are valuations, areas would and what of opportunities, interested kind there, in of in?

Pete Watson

to it over first let and answer part me Larry. then Ketan, turn the

we and pipeline. acquisition continue strategic Day, outlined active on the will We have It's that that. to do priorities in we Investor an centered

growth progress that and we those keep We will over as Larry projects business, desired of I and updated of we move it the the appropriate the to turn be levels. on types financial returns return our debt you involved about and just forward, talk and will get some disciplined, to will to in

Larry Hilsheimer

at levels end be clearly, debt the ratios our not showing of Ketan, we be where up mean our And that we'd at best to and I the X quarter. increasing will increasing, point, times. fourth with our our end below EBITDA X.X we

opportunities. in shareholders. increasing our that very we that's spend capital opportunity continue challenging with those for us standpoint, financial any which our act things that find uses upon bring is we the But good But gone to for we projects, and will through encouraging stringent. feel our we share look we from us and have of that we previously, capital this be to don't opportunity again, process teams to we oriented to for And to capacity and opportunity us for looking capital, that been to if with what So it future year. don't high would then would identify about the our potential can flexibility we you led have, back arise, have growth to a growth projects very-very utilize

feel bottom we will we confident so very line projects And they approving, the deliver. that and that about have the been

those continue will we for to So well. look as

Ketan Mamtora

just RIPS of where Would and even through? higher helpful. recouping through, of were maybe the follow-on more of And the halfway with you specific do end a through, difficult you think little than be, in That's halfway very kind say second U.S. all at number, your halfway in my are you than the the it's a would question price those costs? costs less I if recognize to kind view, you but kind in quarter, pinpoint

Larry Hilsheimer

Ketan, that per on cost price the we per in were we drum first per we relative to relative steel unit, unit. margin we relative I basis, while on were where basis, cost gave wanted a quarter, were showed to actually -- up, per Yeah -- our caught unit, the or sales the to not on ahead per some the be numbers unit,

that rapid and first the was up However example XX%, quarter U.S., for from between second occurred like, the, increase the prices XQ. to costs steel again quarter XQ went the in just our

$X.XX quarter-over-quarter, going Our of fact, and matter as costs catch up was a aren't price $X.XX. unit drum, for were us to per the sales scenario, the that up steel up and material in PAMs

further increase. So behind, actually the we continuing fell because rapid of

then level thing price we one there, just and say, I there, But for in, are So out yet. cost to adjustments to we The curve to there to are catch-up. for decrease; you watching that the has and the happen, I environment, to costs negative the expect for not your scenario because given us, our of decreases that's that's inventory have build PAMs, very be us. current one got but price would levels timing closely. in the start hard be us be XX% to that your that price rapid XX% it's continue -- for are that would kick if it'd a the a wouldn't a we good not going take me don't

Ketan Mamtora

very will the Good of I Got helpful. half year. it. the luck in the jump back in queue. That's back

Pete Watson

Thank you.

Operator

Your question of with comes Please Bank America Lynch. from ahead. next Staphos George go Merrill

open. Your line is

George Staphos

morning. my questions. for Good taking Thanks Hi everyone.

wanted thing we the and given outlook The returns the capital on about for where do, first years, to is talk next I have several been.

that where Adam's been reverse up are you growth, our certainly of tell and figures, investing return at the of question our you ago, if more why back termed first environment, the world with years even more than volume So to Yes, this for have that? well, actually in numbers, are of certainly have of XXXX, shows for your volume. on -- through done look obviously invested was it these based to investing you move a continue we reasonably and returns to choppier as Larry, capital has have I XXXX, been, can capital world it also of XXXX. going year, benefits on a half has percolating pick over what but inflation. a kind expect volume inflation you you and are me on and data going numerous Despite several you been could value will has now and earlier, higher, the also think where when and you times, fiscal In our

that things about I are the confident higher? what that a trend capital had to three And then two return make on you So follow-on. continuing or

Larry Hilsheimer

George, is, and our execution discipline system. against operational pieces answer I'd think my have two to I just One to that. business

operational to to in plants. room continue our metrics have in We improve our

improvement there even for our And that on our operating very we invested returns capital, capital though, low a so, that's growth on is room believe in business. base, do

have plants. true show they capital least going we through We going gone us immediately, to they we our is can't there, with at cost can before, capital, to in If show have to to that to or spreadsheet our the to of develop column you a also to which how have they get our they hold rationalize plan going that the are structure are us footprint. discipline that is, first existing are our return

We are watch idly and not sit that going deflate. to

And confident so, we that. feel in very

the stuff in and returns way of on one of And and molders them are, you I the go second that into what these one on to our each basis, that, happens. won't I plan delayed. see capital. excess are, getting is, The every approved, are of blow -- one of half always returns what capital into but have want them they we it the won't every Like, will cost of projects on a because go

that light that XXXX ones they year, this we to mitigation that really the get the million element said, million $XX approve. to until capital $XXX play green slightly $XX going So highlighted when and RIP. won't million $X up you or start are ones over operating -- so, returning to are the are of paper and million And ones end profit, and maturity. like to try it's just in to but approved page, that million, in things into $XX risk those factor But going you Pete on those page, on you the produce in a these

we can capital deploy. that confident to very feel we So continue returns the we deliver nice on

Pete Watson

one they and markets, higher businesses have and units our growth the are business where serve investing certain products at more you comment, in if regions been the have potential. look I George, And we that with successful

our trying segments targeted diversify a I So higher mentioned, economy. of to approach, it's and growth those the as toward portfolio

George Staphos

Okay. quick thoughts the then or My is -- diverse second business. five yes a return, And back China there. Appreciate question a would over RIPS follow-on, -- first, materially and materially and resolution second question improved the well in would your maybe whatever it looking as be, the again, there, last recognizing, just no? quarters

and/or am of the because been There the that the putting we less own you because are where business discussion, clearly You of actions, you, sense and predictable? just in can't all, your at but of trade including become are Do the that cycle. that I have around Not beyond all things control politely. control, our the world because has weather.

forecast of guys. to, next you you the years, the you happening? your forward has want that in that you it And Thank been what in and should couple ability grow, would think of maybe, going so be, what to isn't earlier quite cycle, recognizing, because

Pete Watson

quarters, to make That we And about first that will the obviously comment what be and make question any business intent. on past improve your decision happened. a so would good has George, China; it. five Yeah you

certain we trying areas pricing the we regions, how and that optimize decisions are where footprint is to which on we our control, and So in either grow.

think I global on visibility out control, macroeconomic issues, What don't weather, we that our market. or good well. forecast things have we impact that of portfolio a know changes can and political

accomplish trying we very to feel are So control and we confident types that fairly of depends on we those of what certain the external it we can amount in But I things. are forecast feel businesses. in and issues. what We just non-controllable decently, regions can

George Staphos

will turn over. it I you. Thank

Operator

Instructions]. [Operator

comes question with Company. Justin Bergner next and from Gabelli Your

Your line open. is

Justin Bergner

Good morning.

Pete Watson

Justin. Hey

Justin Bergner

Rigid us your now? part Hey, of just Packaging breakdown That's substrates in different remind could the question. first across you the the

shrinking opposed in second your be The as in sort understand -- be Is question or to, you Europe, might the Europe? decision part position? of right Asia-Pacific, of over of of confidence gives of what Europe, the just a choosing competitive it to but more to value trying parts I volume? that the strategically to is, sort business, you sort in get

Pete Watson

Yeah.

U.S., the and to right of next and waiting of we higher energy is are cost of whole with do and in XX%. optimizing Western filling and RIPS do that and in the some and and and has plastics a the industry, we and which and and in based about smaller because a footprint optimize to behavior. are of advantage Europe, profit, value and change shifts over -- our and one we pricing, the regard that of So expect is Europe, to it's in years are reason that, IBC find chemical volume, share, the in in IBC the from in because we volume, usage, major profit, market you steel our to steel the pattern combination your have our Western profit over goal is are grow in in balance business values, is XX%, portfolio, those to pie U.S. the optimize of services it the our and U.S. volume operating a is see and is we question fiber And intent reference production just closures, we on one changing, your of why Justin, behavior, drum that our Central we got to Europe our efficiencies, In Europe plastics. our to that's that and few migration trying switch about will U.S., operational vehicle seeing

again, the size, on right focus our to the volume opportunities I wouldn't take what So we operational and advantage of and as the profit footprint that. much and on pools we as do markets, match how

Larry Hilsheimer

add wouldn't no opportunity there that go ton reason that a return that that continue capital cost said like is can plant and capital it least capital, facility, when in type spend our we that Justin, on to of to there, much very earlier, is what even from just a justify looking to of would in to And business? upgrade maintain higher to at financial want have a have certainly of if to the disciplined of return capital I I I place. we deploy And and mean, a at can are all lens weighted we these a got out the it return we decisions, coming of deploy

a drives gross we decision volume going X% to do? do things any doesn't to All maybe of chase X% sense you those what factor us. the of seem just Are into just continue margin, make to to that or

Justin Bergner

I growing on not -- you about are Thank concerned I is in from business, you the of you. maybe leverage it too and not the bit when sort of much multi-year mean, on a at bit of volume the as the so volume view, a point look calculus away volume, walking maybe the different. little am much operating chasing implications very helpful. That's multi-stage,

Larry Hilsheimer

have looked analysis. goes we Yeah, at into our that. That

Pete Watson

really RIPS moving digit, plastics to IBC. our IBC and just X.X% And grew reminder, last we as growth digit single Justin, low double that And growth quarter, forward. be and business high in our a expect platform is

we where is heavily and we basis. an is on weighted we on think when we over are steel, growth there Rigid see and which single portfolio So time, investing expect But had the growth ongoing markets participating potential diversify the I in better portfolio, again, time. our higher growth at low a digit opportunity, just to

Justin Bergner

explanation. you for thank that detailed Okay,

Pete Watson

you. Yes. Thank

Operator

Your next question with Dan Sidoti. comes from Jacome

open. is line Your

Dan Jacome

morning. Hi, good

Pete Watson

Hi Dan.

Dan Jacome

new about one was running. going and you was Just I that talked to excited notes walls just like be are excited sounds up over question; the other ag something market It there you last think looking the automotive to and Analyst that and I the from target. had see quick the was mentioned triple parts. year, you markets Are you'd any Day about?

any some wondering, that in other the across? come maybe color have it. you just And last So markets since comment, that's there, year,

Pete Watson

Dan, question. thanks the for

used on the progresses, key the the the market and our the Southeast the is industrial we the business where growing season the triple up up So and really all market. markets to market. automotive But that's way Coast, corrugated also food The East industrial of of are for Part market, or part business, wall ag But a is bulk big melons. the Midwest parts as packaging. it's watermelons market. that

to business. ag industrial get So drive on and seasonal balanced capacity, as is reliant is growth, our throughout less goal more higher over the which year, we more

Dan Jacome

And Terrific. but a a Okay. more not of comment actually. question,

RIPS, nicely in and then in of just are can kind years, containerboard, I as goes. on execute have ratios of return think able next couple mix your to shift you on if invested actually that the she improve capital steady you

we of kind will thought just see happens. But my what So there.

Larry Hilsheimer

We agree.

Dan Jacome

you. Okay, great. Thank

Pete Watson

Thank you, Dan.

Operator

Your Staphos of Merrill with next Lynch. comes question George Bank America from

open. line Your is

George Staphos

Hi guys.

look tax give Larry, had? bit tax taking second year-on-year. on into way kind operating on index, lot then, of I scores in totally implications there or for hand, we year-over-year, fiscal thanks a an terms what two performance CSI rate better, off the little basis? reserves When and the any quarter, for there and year, RIPS unrelated? but of it certainly questions, get On Are the incremental wanted means a follow-up. guidance? that was in guidance half any you Next the us at promoter rate, that one you the the done And the that, took, the of for then, the commentary in just half has effective any to given tax the and you can Is back it

Pete Watson

regard packaging of that's of tell George, it's the you I at when aligned and excess the customer customer Yeah you, to trajectory a part will our question, index in our will flexibles, satisfaction is the and underperforming satisfaction, surprise, tell business. is our big strategy. in are and and net of -- I There performance and score our market, you first those answer two you, score. it And the that look growing scores I look growth and to businesses in net about will when operations are insightful, no XX% RIPS, in and promoter very not promoter at that paper

very are XX% So to accurate, on think, I that with you, the performance. I a your and analysis level, is high will trust we working diligently improve

in people We have place. got good

get correlation, once to that we a see will levels, you across think the trajectory I volume portfolio. whole that see a and higher will business plans, good more have We you consistent

Larry Hilsheimer

And component. then tax George, on the

deep tax particular to had, and you revisits have adjustments, visit you true-ups You dive can are exams quarter. law into the all changes, a of a tax we up your as it impact and and when doing particularly and you end positions have making tax reserves,

talked when that do to you for carry operations forwards XX, about In the the the until loss As can't scenario have well, cannot we that benefit around. requires book of it have that have past that it you starts in with the year. the had standard this turned the Fin of year, end we same turn around,

factors things Where year. drive XX% expectation our the would one it some it now, have tax that -- right fluctuations you that other. know of that But year. are or of of and maxed that XX.X% occurs range center combined the that the expectation, we to XX% are But it those adjusted effective doing, for being basis, we quarter, from up could now, on in gave to So for the is way the there to that that, middle our rate quarter-to-quarter, about what anticipate range for that is right and in we for the the we things we shift that. calculate

Operator

question Davidson. from with next Yinger D.A. Your comes Kurt

line open. is Your

Kurt Yinger

Larry. Good morning Pete and

Pete Watson

Good morning Kurt.

Kurt Yinger

Two quick questions.

this couple had of in X% hopes, ago, you for year. a improvement quarters I First, profit RIPS outlined believe, gross

costs year, given have new is the Just and goal does price that and a trended, volumes sort where of there where for fit?

Larry Hilsheimer

opportunity. basis, steel, if Kurt, generally your on the for in That are always as a the cost raw as for. clearly looking XX% plus some other cost RIPS are the rapid the pushed what have of to Obviously, a us deliver goes that gross margin and on said, That's back well increase we of materials, and down, as always up, percentage margin basis. looking global a remains price dollar the same. goes we

an have that got also impact you inflating in occurring. So cost environment,

talking anticipate So terms. at this we the environment, did those not were we time in

to remain our business. margin gross to that drive to our in trying we So XX%, RIPS annual being committed

Kurt Yinger

Okay. going and to I that still goal? bit would the might third of trend it quarter, quarter, below in at into sort mean, higher you say into is fair the fourth be you that XXXX, a to be that,

Larry Hilsheimer

big the Kurt, with are to depending That obviously would and what which costs, the now, way that models on for right consistent is steel driver in showing happens be us. the our environment relative

of So exactly world, and if if the of quarter, that you flat, goes a even to I that basically earlier, to in as in communicated the out should starts yeah, down this stated. the latter U.S. where the slight play rest the trending then mitigate level it part

Kurt Yinger

Thank with any project? RIPS there volume of informal then, for expansion customers And Great. last the commitments you. are question,

Pete Watson

Yes.

Kurt Yinger

Okay. Great. Thank you.

Operator

Fargo Your comes Securities. next question with from Wells Manuel Chris

open. is Your line

Gabe Hajde

free quick. housekeeping. gentlemen, is end with and guidance. million working true, make prior to [indiscernible] on? for still remember capital Does inflation $XX in towards the cash will everything that a One million else and going $XX that's Larry, I try I them hold a use

Larry Hilsheimer

Yes.

Chris Manuel

put grow it that to cart with OP, customers $XX horse, the anchor, off that excess we'd not other customers anchor incorporate might before investments. to the $XX And that but of those already? had the question, Is piggyback that with guys last million beyond or like, logical you Okay. you of assume in you as some then does seems to million get

Larry Hilsheimer

past. want I is everything we what mean which always occur objective. to we that's at we actually and obviously the likely, we we the did still cases, to cases, our build know capital What to is given is what business in tried in Gabe, have most discipline, believe beginning, don't optimistic that try

we not will are then in but things pessimistic, are so beat get not And we optimistic, try place, obviously, we we to once it.

Gabe Hajde

you. Thank

Operator

comes question from with of America last Staphos Bank Lynch. Your George Merrill

Your line is open.

George Staphos

Hey guys, thanks.

Just for housekeeping. record more and the

clear, I fiscal the to be free your pension to million, is be in onetime that's want Just XQ, a $XX not the just of that. part funding, cash guidance, item clear on that flow

you missed then right And my know If Larry, in guidance I you you tax, your tax I right in to it, given for question materials, the will on be middle apologize. had said back so what of rate your you the now. year,

suggest haven't lower not for would that had than that you Thanks suggest, year, the were target and you but precision luck that'd yet, on fiscal any does that, the XX% and in great. kind back a of the good you done quarter. the in if of XQ, math that Given range had half be not that the year, in your

Larry Hilsheimer

Sure, clear, item. thanks in in onetime just million as $XX pension $XX to we have George. We The the be this item, unusual at pension million a already December. put look

to us that million that cash on obviously, back half the obviously of think yes, where reason; guidance. for you the we'd get range that, $XXX correct. of we million be, year. is your be the is end assumption be at have there, give it the to free a included on lower flow Clearly for the tax in $XXX we is midpoint range, in will we And is not which rate, know, to So but to a

George Staphos

Thank Okay. guys. you very much

Pete Watson

Thank you, George.

Operator

this the Eichmann. to Mr. will call over at And time, I turn

Matt Eichmann

week. Thanks call. second a the Sharon. and to quarter remainder a great appreciate lot That We your interest you in concludes conference Greif have hope today's

Operator

concludes conference call. This today's

You may now disconnect.

Greif (GEF) 7 Jun 182018 Q2 Earnings call transcript