Q4 2022 Greif Inc Earnings Call
[music].
Oh thanks.
Good day, and thank you for standing by and welcome to the Great fourth quarter 2022 conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
Ask a question during the session you'll need to press star one on your telephone you will then hear an automated message advising your hands raised please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Matt Leahy, Vice President of Investor Relations and corporate development. Please go ahead Sir.
Thanks, and good morning, everyone welcome to <unk> fourth quarter fiscal 2022 earnings Conference call. This is Matt Lady Greg <unk>, Vice President of corporate development Investor Relations and I'm joined by <unk>, President and Chief Executive Officer, and Larry <unk>, Chief Financial Officer, We will take.
Question at the end of today's call.
In accordance with regulation fair disclosure. Please ask questions regarding issues you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. Please limit yourself to one question and one follow up before returning to the queue. Please.
Please turn to slide two.
As a reminder, during today's call we will make forward looking statements involving plans expectations and beliefs related to future events 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 I turn the presentation over to OLED on slide three thank you, Matt and good morning, everyone.
I'm extremely proud of the results all colleagues in 2020 to easily the most successful in financial terms bankruptcy history.
We believe these outstanding results are driven by the high engagement. Among our teams are focused on delivering legendary customer service and our consistent commitment to value over volume approach.
This year I've seen headwinds related to volatility in both raw materials and other input costs complex macroeconomic issues.
The war on Ukraine, and various regulatory responses to the ongoing COVID-19 pandemic.
Internally. It was also a year of change.
New executive leadership team creative our built to last strategy, which we presented at our Investor Day in June .
I believe that change opens doors for opportunity and.
Our results. This year are evidence of the global grief team's ability to capture those opportunities.
Therefore, before discussing our detailed fourth quarter results.
Like to express my heartfelt appreciation for the resilience dedication and consistency of performance from our home quite cheap.
We ended the year with a strong balance sheet record free cash generation and strong EBITDA and earnings performance when compared to what historically strong full year 'twenty one com.
We do anticipate some challenges heading into 2023 or our confidence our team can manage through any market environments and I'm excited for the year ahead.
Regarding our long term strategic objectives. The team's made excellent progress on all four missions of our built to last strategy.
During the past quarter, we formally launched our fifth and sixth colleague resource groups, furthering our diversity equity and inclusion objectives.
Creating thriving communities.
In the quarter Newsweek recognize this progress by announcing Brian ask number 58 on that 2020 to America's most locked workplaces application.
In regard to legendary customer service, we released our 12th promote net promoter score survey.
In a five point improvement from the prior year.
Lastly by the end of the calendar year, we plan to release, our 20th 30 sustainability targets, which are the science to help accelerate our progress to us protecting all future.
Our sustainability leadership was recognized in the quarter through a double a MSCI rating gold equal modest rating and ranking number 49 on investor's business Daily top 100, best ESG companies.
And then in addition to the record results our team achieved in 2022 I'm also excited to further discuss today, our planned acquisition of lean container and what that acquisition means for our strategy. Please.
Please turn to slide four.
As discussed at Investor Day, the acquisition products used in our GI business also grow in resin based products with Jerry cans being an important part of our strategic growth plan.
Our most attractive targets.
Close to our core business of industrial packaging.
And as diversification benefits and product offerings geographies and end market service.
Financially.
Our ideal M&A targets immediately market margin accretive.
<unk> margin expansion and return on capital goals outlined at Investor Day.
Lee container is an outstanding example of utilizing our disciplined M&A framework to drive growth and value for our company and shareholders.
It provides a strong foothold in the North America, small plastics and European business segments, one in which we have expertise elsewhere in the world, which further our expansion into less cyclical end markets and provides a platform for continued growth through both organic and inorganic.
Investments.
Lease exposure, so do your attractive agro chemical and speciality chemical end markets support above average growth and the sustainability element of their packaging assets or the attractiveness of our products and future partnership opportunities.
Our customers.
We see the lead team.
An excellent addition to our Gi business and anticipate closing the acquisition prior to year end.
I'm very excited to welcome our new colleagues to life.
Let's now return to our quarterly results on slide five.
Our global industrial packaging business experienced growing headwinds during our fiscal fourth quarter.
Volumes fell across our Gi pizza platform in most geographies as we saw sequentially declining demand through each month of the quarter.
Global steel drum and plastics were down mid single digits year over year.
EMEA saw a step down in demand due to impacts to our customers from energy inflation and challenges related to the warranty claim.
Similar to prior quarters, our APAC demand remained sporadic with our continued strict lockdown protocols in China impacting supply chain and industrial production.
And softness in most end markets, excluding auto motor, which has seen a modest recovery as a result of government incentives.
North America also experienced sequential demand weakness as domestic spending and manufacturing activity slowed.
Our Latam business remained strong in Q4 up mid single digits off a strong Q4, 'twenty one comparison due to robust demand in the citrus.
<unk> transportation markets.
In the fourth quarter, our <unk> business also faced headwinds from the rapid decline in steel costs.
North America steel prices declined almost 43% from June till November with a similar trend, although not quite as severe in EMEA and Latam.
As we have explained in the past rapid declines in steel negatively impacts our profitability the lag effects on price cost drives near term market margin compression as we work through higher cost steel inventory.
All of us over the past three plus months.
While selling at lower index adjusted prices.
This headwind is temporary but in the near term. We expect this margin pressure to continue in our steel business during the first half of fiscal 'twenty three.
Our price adjustment mechanisms continue to reassess.
The combination of these factors along with an anticipated currency impacts resulted in a year over year decrease in adjusted EBITDA for the fourth quarter of approximately 25 million or.
$17 million, excluding the 8 million contribution from our divested SBS business in Q4 'twenty one.
Despite the lower fourth quarter.
The IP team and Jim put up record adjusted EBITDA performance for the full fiscal 2022.
A very difficult 2021 compare and I am proud of the team and their contribution to <unk> results. This year.
Now please turn to slide six.
Paper packaging fourth quarter sales rose by approximately $44 million versus the prior year.
Due to continued favorable price cost dynamics, despite sequential month over month volume erosion for the quarter.
This demand.
This decrease demand resulted in a total of 26000 tons of economic downtime during the quarter.
Approximately 23000 not witnessed a crime.
Month of October .
Fourth quarter volumes in our core charge sheet feeder system was down high single digit per day compared to the very strong Q4 'twenty one.
This demand decline was in line with the overall box industry, which was down approximately 8% over the same period.
Fourth quarter coupon call volumes were down high single digits versus the prior year due to softness in film call Teva call and textile end markets. Despite its relative strength and some end markets such as construction and juice.
Despite declining demand and continued raw material cost inflation favorable price cost led to an approximately $33 million increase in adjusted EBITDA in our PPS business capping off a strong year of record operating performance for this business.
I'll now turn you over to our CFO , Larry <unk> Sharma on slide seven to discuss our Q4 financial review as well as outlook for fiscal 2023.
Thank you Ali good morning, everyone I want to start by reiterating <unk> opening comment of how proud we are of our team's performance in 2022.
This was a record year financially for greif across every measure and I attribute our success to the relentless dedication of every great great colleagues to serve our customers with excellence.
Clearly we've had some economic tailwind in the past few years, but as they rapidly disappeared in the second half of fiscal 2022, our teams did an outstanding job of managing through the challenges.
Now onto our results I'll start by addressing the obvious in early November we announced a reaffirmation of our Q3 guidance as part of our participation at the 2022 Baird Industrials conference.
Our final Q4, EPS result of $1 83 results on results and our full year non-GAAP EPS of $7 87 per share, which was <unk> <unk> below the low end of our reaffirmed range.
Affirmation was issued with the best information available as of the date released which was prior to Finalization of our year end close procedures.
While our above the line results came on the lower side of our expectations due to demand deterioration. It was that plus the combination of higher other expense from $4 million.
Negative currency impacts and higher than anticipated tax expense, resulting from an.
Unfavorable mix of jurisdictional income and tax return examination adjustments that drove our earnings per share below the low end of our range.
Well this was a frustrating development related earnings I am pleased to report that in Q4, we posted solid gross profit and EBITDA growth, despite lower sales as well as stable SG&A on a percentage of sales basis and another quarter of record free cash flow.
I would like to specifically recognize our teams for their strong execution on working capital as volume slowed in the fourth quarter. We've often cited our potential to generate cash when demand turns and this was this was a quarter was a prime example of our agility and further evidence of.
The resilience of our business model.
We closed out 2022, having crushed the mid points of our original 2022 commitments made at our Investor day in June of 2019 by nearly $60 million on EBITDA and over $75 million on free cash flow.
One other element of the commitments, we made at our Investor day was that we would achieve gross profit margins over 20% SG&A below 10% operate operating profit above 10, we delivered on each at $27 nine 4% 11, three respectfully I'm extremely proud of our team.
Let's now turn to slide eight to further discuss 2023 outlook and guidance.
We've made the decision to begin presenting guidance on an adjusted EBITDA and adjusted free cash flow basis, and deemphasize earnings per share is the primary guidance metrics.
We feel that EBITDA and free cash flow or better representation of the ongoing results of our business, especially given our intention to continue to grow via acquisitions, earning.
Earnings per share is often transit tour and transitioning <unk> impacted by below line adjustments made to accommodate impact from acquisitions and divestitures as well as changes to our capital structure, resulting from transactions and changing leverage from other non operating adjustments and from a changing mix of jurisdictional income which impacts <unk>.
Currency around tax forecasting we firmly believe that EBITDA and free cash flow are better references patients the true economics of our business and guiding along these measures will provide better transparency and clarity both internal and external shareholders. We will continue to report adjusted earnings and earnings per share as before and while we are no longer.
Really guide to EPS, we will give directional information informative context to our below the line expectations as part of our quarterly earnings call.
With that context provided for fiscal 2023, we anticipate generating between 820 $906 million of adjusted EBITDA and between 410 and $460 million of adjusted free cash flow for the full year, which includes the impact of higher planned capex on slide eight we can.
Provide the key assumptions, which are included in your guide and our guidance range.
You will note that our range is slightly wider than usual, we anticipate finding our range during fiscal 'twenty. Three however, given the highly uncertain macroeconomic environment.
Determined there is too much variability and expectations to release a range tighter than what is provided we will be monitoring the dynamic changes in the market and we will update the investment community further as we progress through 2023 and will revise our guidance range as we werent. Please.
Please turn to slide nine.
In closing I want to remind investors of the strength of our balance sheet and our commitment to our capital allocation strategy outlined at Investor Day.
As we come off a record year in 2022 and enter a more uncertain path in 2023 are focused on disciplined capital allocation becomes even more important we currently that over 25 basis points below our target leverage ratio range of two to two five times net debt to EBITDA and with the acquisition of lean.
Container, we anticipate being back to the low end of our range by the end of 2023.
We remain committed to our plan to increase our dividend continue our share repurchases and invest in our business. Our M&A pipeline remains robust and Greg will continue to pursue our acquisition strategy to elevate the breadth and quality of the business just as our portfolio.
I am proud of the work we've done and the work we have ahead of US as we enter 2023 and advance on our build to last strategy with that I'll turn things back to <unk> on slide 10, Thanks Darren.
To sum up our thoughts fiscal 2022 was a record year for <unk> in many respects and we again would like to thank each and every one of our colleagues for being a part of making those results possible.
As we look into 2023, uncertainties das exists and while our guidance reflects expected results lower than in 2022.
Numbers due to the macroeconomic environment, we have discussed they will constitute.
Second highest EBITDA and free cash flow output and the 145 year history of price.
We have been through downturns like this.
The teams know how to win in this environment and we will be successful we are.
We're excited for the year ahead.
And so continue to produce results worthy of your investment in our company.
Thank you for your interest in price.
Please open the lines for questions. Thank.
Thank you as.
As a reminder to ask a question you will need to press star one on your telephone. Please wait for your David to be announced please standby, while we compile the Q&A roster.
Yeah.
Our first question comes from the line of Ghansham.
Panjab <unk> with R. W. Baird. Your line is now open.
Thank you and good morning, everyone and congrats on a really amazing year.
As we kind of think back to fiscal year 'twenty, two and as we can't give EBITDA was cleared the PPS segment would start to benefit from margin expansion was likely to be done.
Sort of moderation of G. I think just given the outsides fiscal year 'twenty one for that segment.
On that basis, how do you sort of think that segment dynamics will play out in fiscal year 'twenty three.
Just on what you see your card.
Yes, Thank you Jim.
This goes back to what we've talked about the fact that our two business units tenda.
Offset each other just because of the pricing lag and PPS.
And it did as you imagine play that way through 'twenty, two 'twenty three our first quarter and first half of the year in VIP is going to be extremely weak.
The demand deterioration in the market has been.
Pretty significant and that combined with the rapid decrease in the cost of steel.
It plays out through us as we've explained in the past and there is only commented in his comments.
That will squeeze our margin pretty significantly we expect that the things will well.
Our price adjustment mechanisms will catch up with that through the second quarter and the rest of the year and demand should pick up and youll see sort of the opposite flow through our PPS.
We believe will be very.
Very strong first second quarter and should continue reasonably well through the year.
We think things will pick up in the second half of the year.
Okay terrific and for my second question, Larry maybe you can just help us with the bridge on EBITDA 2000 today versus.
'twenty two.
Obviously, you have a very wide range for 2020, so maybe the midpoint differential what are the big moving pieces there.
Yes, we usually we would walk down the <unk>.
Mid point, but I would tell you given the macroeconomic uncertainty we've approached it in a different manner. This year, where we just really took each of the variables in that.
Multiple scenario plans and laid them across.
The chart and just use that to frame, our upside and downside and so for example.
We look at OCC, and we think that it'll be somewhere in the range of 35% to 90 throughout the year.
And probably trending upward through the year, yeah, everybody keeps talking about capacity additions as capacity comes on there will be some I'll say artificial bump in demand on FCC.
Because they can only produce so much market, it's got to have and demand for everybody at some point.
So we scaled out our OCC assumption, we've done scenario planning on pricing in the paper business across our grades.
Multiple different ones.
Yes.
That you have some increased decreased.
We don't actually have any with increases in pricing at any time in the year, but modeling out different alternatives and then just pace demand on on.
On the side of the VIP business. So I know that's not all that helpful. In terms of a midpoint analysis.
If I could give you a little bit I would say from an operations standpoint, we think the.
The high end of things as a potential decrease of $12 million from this year's overall EBITDA to a potential decrease of $98 million on EBITDA across all of the operational factors that does include uplift from Lee container. We also have.
Yes.
Remember, we had the divestiture of Fps, which was about $16 million of EBITDA.
That was included in fiscal 'twenty, two so thats gone.
And we also have some cats and dogs immaterial things that were in the process of dispatch.
I think they will take another $10 million to $12 million of EBITDA and generate some.
Proceeds from us for us.
As those things play out over that.
Next couple of quarters.
Okay perfect. Thank you and happy holidays to all of you.
Same to you grant thank you its IPO.
One moment for our next question please.
Our next question comes from Adam Josephson with Keybanc. Your line is now open.
Only Larry Matt Good morning, Thanks, very much for taking my questions hope you're well.
Larry just it sounds like in the PPS business Youre expecting to have a much better year than in the jet business and I know aided by OCC, having fallen quite considerably.
Gave us your range for OCC, obviously, youre not I presume youre not going to talk about your.
Containerboard and box more pricing assumptions relative to your OCC price assumption. So can you help us at all I mean, this is a spread business, obviously and it's hard to know how to think about that.
How conservative or or perhaps aggressive your guidance is without knowing what spread you're assuming between prices and costs next year, along with whatever you're assuming demand will be so is there any more clarity you could give us on what youre, assuming in PPS in terms of the spread between prices and costs and what you're assuming for demand.
Yes, not really Adam.
Like I said we.
We get a bunch of different scenario plans you have to look at cross it and so what I gave the answer to Ghansham as deep as we're going to go into specifics on that what I would say is book our worst case scenarios.
<unk> takes everything bad that we can come up with for next year still delivers $820 million of EBITDA and <unk>.
I go back and it's interesting if I look across.
All of our analyst group a year ago.
A day.
Census, among everybody for EBITDA across the group was eight 7% from 23, so even our worst case is better than.
The whole group thought we could do for 'twenty three so we're pretty happy about where we think 'twenty three is going to be as always says, it's still going to be our second best year ever even if it's a worst case, we have so but there's just too many macro uncertainties right now to give you any more detail than that on the pricing side.
Got it.
And on the chip business can you are you at Liberty to talk about what your volume assumptions are what your steel price assumptions are in there relative to the 100 million dollar one time price cost benefit you had in steel in fiscal 'twenty, one what I assume you're assuming.
Pretty significant onetime hit, particularly in one H twenty-three any any details you could give us just along all those lines of the jet business would be helpful. Thank you very much.
Yes, so on so let me give you a broad for.
U S business.
<unk> index for 2022 average.
One 806, Okay started out the year at 2293 ended up the year at $12 54.
423 against that 186, we're showing an average for the year of one five.
<unk> six so.
So pretty dramatic increase in the index side of that.
For Europe , which is by far and away the largest yes, it's four times the size of the U S in terms of volumes, but.
We show a.
In 'twenty two it was one 155.
<unk> thousand $155, a ton and in Europe , It's 814.
As the average for our 23 assumptions.
And from a volume base.
<unk> basis, we are forecasting for the year.
The volumes.
On a global basis Adam.
About just shy of 3%.
Just shy of 1% and in plastics.
Fiber down 3% RBC is even down.
One and a half.
Sort of at the middle of our ranges that we did.
Those spaces now give you a further breakdown north North America were asked.
Just shy of 6% so dramatic decrease in North America, and EMEA about 3%.
Yeah, if I go volume wise now.
The mix of things, we've got all kinds of.
Different assumptions across.
Shutdowns and all that kind of thing but.
I won't talk about mills because there's.
All kinds of.
Different things on.
Downtime span for maintenance and that kind of thing.
In our sheet business, we're expecting that 3% same thing I'm, Kevin core down 3%.
Thank you and just on the one time hit that you are expecting from.
From falling steel relative to the $100 million one time benefit you had in fiscal 'twenty one.
Yes, we haven't calculated that number Adam so I don't have it for you okay. Okay. Thanks, so much Larry.
Yeah.
Thank you one moment.
As a reminder, ladies and gentlemen, Thats star one to ask a question.
Our next question comes from George Staphos with Bank of America. Your line is now open.
Thanks, a lot.
Larry Matt Ali Good morning.
Congratulations on the progress in 'twenty two.
Sure.
I guess my first question would be.
Within your guidance and thank you for going through the detail that you could provide.
Larry I thought I heard you say that you do have something for container built in.
If I heard that correctly can you.
Help us out a bit in terms of what we should be baking in.
Both in terms of.
EBITDA and how much it contributed to the interest expense uplift and then I have had a follow on.
Yes, Thanks, George So I would put somewhere between 25% and 30 its going to just depend on some of the we haven't worked through all of that.
Impacts of valuation adjustments might have on inventory opening Dec and those kind of things. So I would say 25 to 30.
It would be good range to put in on leave for this year and we expect that to expand nicely beyond that.
In future years on the interest expense.
You look back we ended up paying down about roughly $300 million of debt in 2022, when we are taking on about $300 million in 2023.
We've generally had a policy of.
<unk>.
Fixing 40% to 60% of our.
<unk>.
Debt.
We moved that up.
Beginning in March April this year, when we did some refinancing I asked our team to start to trend up to the top end of that 60, and then as we rolled out our strategy and knew we would be going in the acquisition space I asked our team to try to redeem to move it up even further and get ahead of our plans.
Roll it up to where we are approaching in the 80%.
Where we're at now after we do the.
Lee acquisition will be about 65% fixed and we believe that helps us manage our capital structure in a flexible manner and gives us more repayment.
Opportunities if we don't find other acquisitions. So bottom line of it is if you look at last year. Our interest expense was about 61 million so 3% of 2 billion of debt.
If you say, we're going to be at about that same level of debt.
Fluctuate through the year, but.
If you have 35% of that is floating with interest rates, you say, 35% of that 61 floating rates of about tripled. So you've got another $60 million to $65 million of interest expense.
Yes.
Yes.
Be related to that and puts us at an overall of 100 to 105.
Alright, Thats great I appreciate all that color very very helpful.
I guess my other question.
Just on exit rates on volume you mentioned that volumes were declining sequentially across G. IP could you talk to us and certainly they were down also and PPS can you tell us where.
Early in the new year volumes are trending.
It would be helpful. Obviously, because we have at least your volume forecast for the year relative to the other Q&A. Thanks, I'll turn it over.
I'll take that one so obviously, we saw we saw demand in voting sequentially throughout the quarter.
That softness has continued into November .
Is stabilizing as we see it.
We also believe there is some destocking going on.
In Q3 and into.
Into Q4.
Primarily on the paper size indirect and direct.
And obviously you have you have recently coming out on December 16th and then we'll see what happens after that.
Okay.
Larry you said indirect destocking. So you meant downstream and how that flows back to your business.
Yes.
Got it the biggest impact.
And also the most costly.
Yep got it I'll turn it over thank you.
Thank you one moment for our next question.
Our next question comes from <unk>.
Dresser with Stifel. Your line is now open.
Hi, good morning, Thanks for taking my call today.
My questions.
Just coming on for Michael Hoffman can make it. So my first question is with regarding FX and do you have anything built in for that within your guidance. Obviously it was a big headwind this year, but.
I think the rates are sort of.
So a little bit better now so how do you see that going forward.
Yes.
No.
We factor it in based on.
Fewer.
<unk> and currency every year in our budget process and when I end up when we ended up giving quarterly guidance, we do factor in some range of expectancies on currency.
And the.
So what <unk>.
Normally if if.
Yes, if everything doesn't go against you.
Yes sort of goes within the range and it ends up being a material item for us.
For this year two things happened one is we used to have.
Good natural hedge with our Sps business and when we sold that we lost some of that natural hedge and so we did more financial hedging, but we saw.
And overall impact for the year, roughly $9 million, which is more than what we would've had in the past.
Going forward next year based on what we see in the currency markets. We have on our revenue side about $160 million to $70 million headwind next year is what we estimate right now.
From from currency, but we do hedge.
Decent amount to the bottom line impact should be immaterial.
Okay, great. Thank you and as a follow up just regarding the free cash flow guidance.
Thank you have working capital can be a source of cash of around $70 million and I think you had pretty sizeable 90 million sourced two and <unk> 22.
How much more.
Working capital improvements can you drive.
In the near term basically is this all sort of captured within the next year or do you see incremental working capital benefits past 2023.
Yes, we actually believe that we have more.
Working capital opportunities.
<unk>.
We brought in a very seasoned and.
Knowledgeable supply chain leader last year.
And.
She has spent a good part of this year really diving into our.
Operations, and we have a guide path glide path that were going on actions to execute that we do believe provides us the opportunity to drive even better.
Improvement in our working capital I mean, our team did a phenomenal job in the fourth quarter as we said.
Executing on what we've said to people before when demand Decelerates, we are able to generate cash and they did an excellent job, but we do think there is upside we think will have a benefit somewhere $50 million to $90 million from working capital in the coming year.
Okay, great. Thanks, a lot for taking my questions.
Thank you one moment for our next question.
Our next question comes from Adam Joseph with Keybanc. Your line is open.
Larry Ali. Thanks, Thanks, very much for taking my follow up just to follow up on George's question about exit rates volume trends can you talk about <unk>.
Relative to the down call it 8% in the October quarter, what volume was down by month and then what you saw in November .
Okay great.
And then I can give you some.
So we will look at it on units per production day Adam.
So if I go with GIC.
August we were 212 months.
Demand September was 201000 total was actually 200 floor.
And then November was about.
194.
Okay.
So still it's still the biggest one across the platform.
But the others are similar trend lines.
And then in PPS.
If I could.
Sure.
I was just wondering.
Just trying to get a sense of what the exit rate was in other words, if if if.
If.
November was down.
Are you seeing youre seeing trend lines.
Down for sure on across all of our businesses and so.
But much less so in the.
The PPS operation I mean.
Yes, we did see some.
Deterioration.
In November .
We're in that business, so put it in downtime perspective, Adam Yeah, we had 30000.
Tons of downtime in November about half of that containerboard.
Yeah.
<unk>.
And you had taken how much downtime previously Larry just.
As a reminder, Victor 26000, Q3 and Q3, so on November 4th.
In Q4.
Yes.
Our last fiscal year. So, yes November was a big downtime month.
Got it okay and that was kind of and what you are saying is that trends in now are similar to what they were in November .
Okay.
Yes, we don't.
It's not.
Don't see it as significant in the coming months.
Got it okay.
On Lee container you mentioned that it's a platform deal it's going to make the business less cyclical can you just talk about how much of that business is industrial versus consumer is it an entirely different customer base for you just give us a little more detail as to where these jerry cans and small.
Plastic containers are sold again is there any customer overlap et cetera.
Hi, Adam.
This is a considerable amount of similar customers or customer overlap, but primarily the business.
Within the agrochemical markets.
We're the.
The generic answer you produce in that market that pretty sophisticated.
So it is not a commodity markets. That's the biggest elements than you have on.
On the consumer side, a very small elements of.
Gerrick asked that goes into things like.
And the pits.
Saying that that sort of thing.
And then you have a growing pharma market as well, which we do like and Thats also part of our strategy to expand into those markets. So I guess, a growing markets you will see food food shortage as we go forward in the coming years.
Like that's.
<unk> pharma is a growing market for us as well and then we like that as well. So all in all of you will see this.
This should help us being even less cyclical relative share.
AG business and Lee is significantly higher than in our.
In our current business Scott I appreciate it.
Sure Adam about 15% of that business, you could call pure industrial which serves like the lubricants and oil Petro Chem fuel additives, Motorola market, but outside of that.
It leans more to those segments.
Larry I only highlighted.
Thank you, Matt and Larry just one last one if you don't mind it back to Jeff. So the segment's EBITDA had been running around $300 million for a number of years and then in fiscal 'twenty. One it went up to call it $450 million and it was similar this past year and obviously in 'twenty. One you had that one time steel bent.
<unk> last year, you didn't have that but nonetheless, you are at a whole profitability at that same.
Level.
Can you give us any sense of what you think quote normalized EBITDA for that segment is I assume do you think it's higher than.
What it used to be pre pandemic of around $300 million per year, but I also assume you don't think it's $450 million either given the one time benefits during the pandemic. So any thoughts you could give there I would appreciate it.
Yes.
I mean.
During the pandemic our EBIT it was in fiscal 'twenty was $3 27.
The growth really happened through 'twenty, one, which gathers so ongoing thought pandemic for sure but.
It's way closer to $4 50 than it is the 350 I would tell you that I mean, we think it's clearly north of 400 on a going basis.
We have a significant hit build into our guidance this year because of the combination of the dramatic decrease in steel cost and <unk>.
Volume deterioration that I would tell you is in our fiscal 19 Investor day stood up on the stage and told everybody I thought we were in an industrial recession.
Feels like that right now.
You are talking to our customers across all of our spectrums everybody's volumes are off and.
So I know, there's a lot of economists, saying they see a recession.
Latter half of next year.
That might be when the consumers start running out of the money that was handed out to them by the government, but yeah right now youre seeing were seeing it in the industrial space, but the good news for US is like I said, we've modeled all of that out we're still going to have a great year.
Terrific. Thanks, a lot Larry best of luck.
Thank you.
Im showing no further questions at this time I'd like to hand, the conference back over to Matt <unk> for any closing comments.
And thank you everyone for joining today and have a half hour.
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Thanks.