Q1 2023 Greif Inc Earnings Call

Speaker 1: Good day and thank you for standing by. Welcome to the grade 1st quarter, 2023 earnings conference call. At this time all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session.

Speaker 1: To ask a question during this session, you will need a press star, one one on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star one one again. Please be advised for today's conference of being recorded. I would now like to hand the conference over to your speaker today, Matt Leahy. Please go ahead.

Speaker 2: Thanks, and good morning, everyone. Welcome to GRIG's first fiscal quarter, 2023, earnings conference call. This is Matt Leahy, GRIG's vice president of corporate development and investor relations. And I am joined by Oli Rosgard, GRIG's president and chief executive officer, and Larry Hill Shiner, GRIG's chief financial officer. We will take questions 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 non-public information with you on an individual basis. Please limit yourself to one question and one follow-up before returning to the queue.

Speaker 2: And thank you, good morning, everyone. Welcome to GRIF's first fiscal quarter, 2023, earnings conference call. This is Matt Leahy, GRIF's vice president of corporate development and investor relations. And I'm joined by Oli Rosgard, GRIF's president and chief executive officer, and Larry Hill Shriver, GRIF's chief financial officer. We will take questions 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 and public information with you on an individual basis. Please limit yourself to one question and one follow-up before returning to the queue. Please turn to slide two.

Speaker 2: As a reminder during today's call, we'll 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-gaft financial measures and reconciliation to the most directly comfortable gap metrics can be found in the appendix of today's presentation. And now I'll turn the presentation over to Oli on slide three. Thanks, Maths and good morning, everyone. During our first quarter, 2023, Brife took several important steps towards advancing our built-to-last strategy. We completed the acquisition of Li Container in mid-December and our rapidly integrating this new growth business into Brife. We proudly announced our new 2030 science-aligned sustainability targets. A roadmap for achieving our goals around climate, waste reduction and circularity. We divested one of our higher cost CRB mills and today announced that we will be reinvesting that capital into another growth platform with a significance, majority ownership, incinerium container, our IBCB conditioning joint venture. We are increasing our ownership from approximately 9% to 80%.

Speaker 2: with a path to full ownership in the next few years. I am proud of the progress made so far in 2023, and I look forward to building on this new foundation in the year to come. Now onto our first quarter results. Our global businesses clearly felt the impact of several headwinds in the first quarter. In our fourth quarter call, we cautious against a week of start to the 2023 year. Specifically highlighting the volume softness we were seeing, as well as the steel price, cost, headwinds in GIP and their impact to first quarter margins.

Speaker 2: Actually, volume trends in both businesses came in below our low original expectations. And that impact was a challenging first quarter result relative to fiscal 2022. Though it was the second best first quarter in Christ's 145 year history. Also knowing Q1 fiscal 2022 included full quarter EBITDA contribution from the FPS business which was subsequently sold. While the domain environments remains on certain.

Speaker 2: Our teams acted swiftly on cost-out actions, working to match production with demand, rationalizing and optimizing our footprint, and tightly managing working capital. We will continue to aggressively manage costs during this period of volume softness, and yet will remain agile enough to respond and support.

Speaker 2: our customers when demand improves. I'm proud of our team's ability to adapt to the changing demand environment and our commitment to taking actions to right-size our costs while still focusing on growth and discipline execution of our build-to-last strategy.

Speaker 2: Please turn to slide four. On Tuesday, we signed an acquisition agreement to increase our ownership stake in Centurion Container to 80%. Subject to cost of very close-in conditions and regulatory clearances. As I mentioned a few months ago, regarding our acquisition strategy, our most attractive targets are close to our core business of industrial packaging.

Speaker 2: At diversification benefits in product offerings or in markets and our margin are creative. We also want to grow with businesses that have a strong sustainability component. Centurion container meets all those criteria. And I'm even more excited about the future of our partnership than I was when Greif made its initial investments almost three years ago in April of 2020. The Centurion partnership helps.

Speaker 2: accelerate our growth in recent-based products with a sustainable offering of both new and reconditioned IVCs. Since inception in 2020, the joint venture has grown if it are finally eightfold through both organic and inorganic top-line growth and a scalable business model with strong margins and exceptional cash flow congression. I'm excited about the continued growth potential of this business and I look forward to formally welcoming the Centurion colleagues as part of RISE after we conclude the transaction. Let's now turn back to our quarterly results on slide five, please. As mentioned earlier, in our fiscal first quarter, our global industrial packaging business experienced dual headwinds in

Speaker 2: Decelerating demands and temporary margin compression from rack-and-stereal price deflation. Steel, plastic and IBC volumes were each down low double digits year over year on a global basis. The North American market was weakest largely due to lower demands within the chemical and coaching end markets. Our Latin region remained solid, essentially flat against the strong Q1 2022 on continuous strong demand from the ACM and food markets. Emea and ATAC volumes were weak through most of the quarter, but we saw some isolated sequential improvements in order patterns in February that give us some hope that demand may be on the path to recovery in Q2. In the face of these challenges, I commend our...

Speaker 2: global GIP team for their decisive actions taken in managing costs and maintaining our price discipline. Our expectation is that the combined impact of our team's actions along with normalization and steel prices should result in sequential margin improvements in GIP next quarter. Please turn to slide six. Paper packaging's first quarter sales declined by approximately 50 million in the quarter due to lower mill and converting volumes throughout the quarter despite a year of year pricing tailwinds.

Speaker 2: First quarter volumes in our core choice sheet feeder system and Cuban core system were down low double digits per day compared to the very strong Q12 2022. Cuban core volumes suffered from particularly slow demand in the paper film, core and protective core in markets. In the quarter, grives took approximately 94,000 tons of economic downtime across our mill system with approximately 40,000 tons taken in container boards, 35,000 tons in URB and the rest in CRB.

Speaker 2: As in our GIP business, our PPS team is responding quickly to the changes and demand, taking actions on costs across the network with shifts in labor cost reductions, temporary furloughs, and advancing our footprint consolidation plans. In both businesses, teams remain laser focused on working capital management, and we expect to capitalize on incremental opportunities to improve margins and cash flow in the common chorus. I will now turn it over to our CFO , Mayor Gil Sharma on slide 7.

Speaker 2: to discuss our Q1 financial review as well as our 2022 guidance. Larry, thank you, Oli. Good morning, everyone. As Oli mentioned, our first quarter fiscal based several challenging headwinds, more than we anticipated when we provided guidance in December . I, too, want to demand our teams for acting swiftly to manage cost as we face a tougher demand environment. The first quarter of 2023 was Grif's second best start to the year ever, bested only by our record Q1-22, which included the $12 million EBITDA contribution attribute of both to SPS, which was sold in April of 2022. I am proud of our performance today given the strong economic headwinds.

Speaker 2: That sales were down 293.3 million in fiscal first quarter driven primarily by volume declines and the impact of 89.4 million of prior year net sales attributable to the SPS business, which we divested last April . Gross profit declined by 38.1 million primarily due to lower volumes and the impact of the previously mentioned steel price cost headwinds in our GIP business, which we expect will abate in the second half as price trends have stabilized.

Speaker 2: Adjusted EBITDA was 164.5 million in the quarter, down 32.3 million year over year, though only down to approximately 20 million when factoring in the prior year contribution of FPS, was consolidated even a margins of 12.9%, a 30 basis point improvement versus Q1-22.

Speaker 2: CAPEX came in line with our plan at 48 million for the quarter, a slight increase versus our first quarter of 2022. Our organic growth plans remain intact and teams are finding an easier to execute on our capital projects as the wait times on new machinery can to strengthen and more engineering staff becomes available.

Speaker 2: As Oli mentioned, we improved our free cash flow over prior year, which is especially notable given the pronounced volume weaknesses we've seen in the highlight and highlights the solid execution of our teams on reducing working capital and generating cash. We are still challenging our teams to drive further on working capital reduction initiatives, even if demand improves.

Speaker 2: We believe we can capture additional efficiencies throughout our supply chain. Now let's turn to sliding to discuss guidance. Setting guidance in 2023 has posed a particularly difficult challenge. In our Q4 call, we provided a guidance range of 820 to 906 million on EBITDA and 410 to 460 million in free cash flow.

Speaker 2: Admittedly, a wide range with a great deal of caution given the uncertainty and demand in the VACRO environment. We also tried to frame Q1 weaknesses for you based on the volume trends we were seeing through November and into December that we expected would level out and improve in January based on discussions with customers. However, that did not happen. Volumes in both businesses finished worse than our expectations through January and that weakness has continued into February and North America while stabilizing in our other regions. As we contemplated guidance for the remainder of the year.

Speaker 2: We determine we have insufficient data to expect an inflection point in the demand trends which we have experienced in the past two quarters beyond normal seasonal drivers in end markets, including agriculture and construction. As a result, we cannot establish a high end of guidance and consequently determine that we could choose to either provide no guidance or provide guidance assuming the trends we have been experiencing with adjustments or the seasonal drivers.

Speaker 2: We chose to provide low end only guidance based on that determination, including that some guidance is better than not. We also believe that if the demand's pattern continues, further deterioration and pricing in the paper industry could emerge. On an overall basis, we've reflected volume impact in the low end guidance of $42 million in our GIP business, and 62 million in our PPS business relative to the midpoint of our prior guidance range.

Speaker 2: Inclusive of one to two results. In addition, we have included a pricing impact in the paper business of $33 million. We will not be providing the breakdown by paper grade. While this approach may seem draconian, we compared to our prior guidance and especially our record results in 2022. I do want to reframe things with a broader look at history to highlight the improvements we've made in the business model and our earnings power. Looking back at our investor day last year, we presented a recession downside case of $600,700 million of EBITDA and $260,320 million of free cash flow.

Speaker 2: The volume trends we're seeing at present are significantly worse than those scenarios and our earnings and cash flow outlook is better. This low end guide is above our fiscal 2021 results, excluding FPS. And yet again, our volumes are currently trending materially worse than during that year. I work with you.

Speaker 2: We have simply raised the bar and performance at gripe by taking action to right size and across by maintaining our strict pricing discipline in the marketplace and by using our balance to continue to grow the business.

Speaker 2: I'll close by saying we are hopeful that current volume pressure is subside and we see that demand recovery in the second half of 2023 in line with our view in December . We have aggressive working capital goals in place as well as some exciting targets in our MNI A pipeline, including Centurion that it closed and depending on timing.

Speaker 2: could add an additional 20 to $40 million of EBITDA in 2023. And even if our low end guidance is realized due to negative economic environment, we find comfort in the strength of our balance sheet and cash flow generation to continue to provide growth capital to fund our business in the years ahead. With that closing thought on guidance, I'd like to share again our capital allocation strategy.

Speaker 2: I am confident given our balance sheet strength and cash flow generation that Christ will be able to continue to grow our dividend and repurchase shares while simultaneously funding our critical maintenance catbacks and executing on our strategic growth plan. I am excited about this strategic opportunity capture thus far in 2023.

Speaker 2: and the growing list of attractive businesses in our Aminate pipeline. We will maintain our strict discipline around capital allocation and acquisitions and continue to pursue only the highest quality businesses that fit our strategy and culture and elevate the breadth and competitive positioning of the Greg Portfolio.

Speaker 2: With that, I'll turn things back to Oli on slide 10. Thanks, Larry. To build off Larry's comments, our final comments, built to last is about long term growth and a strategic vision to be the best customer service company in the world.

Speaker 2: That means executing with discipline regardless of where we are in the business cycle. But it also doesn't happen without thoughtful and continuous capital investments. Despite our slow start to 2023, we are confident in the global gripe team to execute well in shorter term as hell.

Speaker 2: and post strong financial results to continue fueling our growth and business objectives. We are excited for the year-end and will work to continue to produce results worthy of your investment in our company. We thank you for your interesting drive. Michelle, you can open the line to questions.

Speaker 1: Thank you, as a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please send by while we compile the Q&A raster. Our first question comes.

Speaker 3: in that process. And then as it relates to your comments on February , you know, clearly trying to starting to reopen some of the early data points in pretty positive as it relates to, you know, economic pickup, et cetera. Are you starting to see that in specific regions including Europe or is it just early at this point? Yeah, probably.

Speaker 2: bit too early, Ganshin. But what I can say is that we do see some improvement, especially in APEC and in North Western Europe . Latin, you know, remains fairly strong, but not the Americas, really, where we don't see any improvements. It's not getting worse, but it's not getting better either. kamam undeophey.

Speaker 3: in December and January , there's certainly no indication to us that anything is shifted Got it. And then just from my second question on Centurion, can you just give us a sense as to what's so unique about the asset that underlies the EBITDA margin profile of 23% and the The outset growth.

Speaker 2: since the joint venture was formed. It's essentially a service business. Where we collect used containers from our customers, and then either we condition them, or we put a new container into the steel cage. When we condition them, or when we use the old plastic,

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Speaker 1: Thank you. And again, if you would like to ask a question, please press star then one. One moment for our next question.

Speaker 1: Next question comes from the line of Gabe Hodge with Wells Fargo. Your line is open. Please go ahead.

Speaker 5: Yes, good morning. I wanted to, I think, Larry and your prepared very much, you talked about opportunities. I think it was specific to PPS to take out cost as well as improve working capital. You could expand on that a little bit. I'm curious what you're...

Speaker 2: I did talk about some super consolidation. I don't know if that's part of what you're talking about, but just hope it's there. Okay, it's only here. I can talk a little bit about that. We have been planning some groups of consolidation. Consolidations primarily on the converting sites and we're speeding them on.

Speaker 2: And then we have furloughs to the bills.

Speaker 2: We don't know what, you know, how long? What's, what we have heard of that most, we've heard of the most. And part of the other thing that comes with that revamping of our shift structure gave us, in this industry, there's been a lot of structural over time build into the way that they workers work. And we've been addressing that to take out some of that.

Speaker 5: Strap for overtime costs. Yeah, understood. OK. The other one is, or second question, I guess, on the low end of guide. Maybe just so we frame it up correctly, or make sure that we're hearing everything properly. You're sort of extrapolating out.

Speaker 5: you know, down, I guess low double digits in GIP and call it low teens in PPS and then kind of holding price consent somewhere we're at today and then he gave us the DOCC assumption so I guess A can confirm that and then B you know.

Speaker 5: Is there a scenario that you look at when you guys can figure your rebudget or recast that could come in lower than that? And maybe what could be the drivers there? Yeah, what we believe that...

Speaker 6: Well, first of all, let me get to some of your specific numbers just to clarify. You're right, maybe on the GIP side. On the PBS side, you're actually light. I mean, we've been, you know, our millivoyers, you know, low 20% down year over year. So now that's over some strong performance in particularly Q2 last year. So it be, you know, as...

Speaker 6: still pretty significant volume of roll forwards on that that are going to be painful. You know, could it be worse? I guess you can always have worse. We think what we've laid out, we don't have any indications to it, the things are going to get worse than where they are.

Speaker 6: We just don't have any indication it's going to get better. And so that's how we've landed where we are. But I did also want to restate something I said in my prepared remarks. We believe that if this volume trend in paper continues like this, it's inevitable that there would be some price pressure.

Speaker 6: And so we did build in relative to the midpoint of our prior guide about $33 million of impact of further price erosion from where we were in our assumptions in our guidance midpoint.

Speaker 6: build in relative to the midpoint of our prior guide about $33 million of impact of further price erosion from where we were in our assumptions in our guidance midpoint.

Speaker 5: And then the last one is, yep. This is Matt, I just want to clarify your question first. Were you asking the view on paper volumes for the full year or where they were trending currently? Well, I guess if you offer that up, that would be great. But it was more just to clarify to make sure I understood what's embedded in the 740 number, which it sounds like it sort of down consistent with what you reported in fiscal Q1. Yeah, I think.

Speaker 7: So the comment is for the full year, it's not down as much as it was down in two weeks. Yeah, I want it because there's seeds. Because there's this thing. And the confiscate easier in the back half. So I just want to be clear there that that's more what we're referring to is the, you know, the volumes we saw down in Q1 are off a pretty strong comp. And then confiscate easier in the back half. So things kind of normalize throughout the year. So it's.

Speaker 6: not the same percentage decline in recorders. Yeah, my point was, you know, we saw pretty significant drag. And as we talked about our last call in 3Q beginning and then 4Q was bad. So you had overall volumes for fiscal 22, you remember down about almost 3%. So now if you then add the rest of this year, you know, even further down.

Speaker 5: I understood. Okay, and I guess the February trends, it sounds like it's not much has changed, but just confirm that. Yeah, that's correct. Okay, and the last one, it looks like there's, I don't know, 45 million left on the on the share repo authorization. Is it, I guess, tough question asked not exactly asking exact timing, but just. Okay.

Speaker 6: Maybe that would be on pause until we get a little more clarity on the macro. No, no, we're very comfortable with our balance position. We're moving forward on our stock free purchase.

Speaker 6: more clarity on the macro. No, work very comfortable with our balance position. We're moving forward on our stock free purchase. Okay.

Speaker 5: Thank you. Thank you in one moment for our next question. Our next question comes in the line of audit stress that was Diffle your line is open please go ahead. Thank you for taking the questions. So my first question is just about Centurion. So when do you actually expect that to close and sort of what is the annual even that profile? I know you gave 20 to 40 million but sort of the timeline we're pretty uncertain about.

Speaker 6: And the margins kind of are they expected to be in line with you know, Gregg's IBC business already. So, you know, we've got just the stat, the standard timeline to get close to regulatory process. We expected to close near term and just clarify that 20 to 40 million was not.

Speaker 6: Centurion alone, that 20 to 40 was Centurion and some other near-term opportunities in our MNI pipeline, if they materialize. So it's looking at all of that together. And as this Centurion, you know, the side in our deck does a good job of laying out what it is on an annual basis in the market profile of it.

Speaker 6: Centurion alone that 20 to 40 was Centurion and some other near-term opportunities in our MNI A pipeline if they materialize. So it's looking at all of that together. And as this Centurion, you know, the side in our deck does a good job of laying out what it is on annual basis in the market profile of it. Thank you. I'll take a look at that. And um...

the divestment of the CRB mill. So how much sort of volume sales even the free cash can we get sort of color on how much is actually being lost and that divestment? Yeah, so you know, that is a high cost, no for us. You know, the purchaser, it was more valuable to them than it was to us. You know, we had built in for this year, you know, a EBITDA realization for the four year that would make that a very, very attractive multiple that we sold that at given current volume trends that we've seen. I don't really want to go into exact numbers on the EBITDA on that mill, but it was a very nice multiple. It was in our prior guidance too, by the way. Yeah, that not being in the number. Okay, thank you. Thank you. And again, to ask a question at this time, please press star 11 on your telephone.

It's operating efficiency. We've improved things in supply chain. We have done some, we're doing these foot print consolidation activities that Oli mentioned and it's managing our shift structures. It's just a whole combination of things. But probably the biggest one is even...

stronger and better execution on our value over volume strategy and really good strength on pricing discipline among our team.

Great, that's helpful. Second question relates to, I think, the bridge from the midpoint of the prior EBITDA guide range to the 740. I think you said 42 million in GIP volume, 62 million in paper packaging volumes, and 33 million.

pricing impact, that would lead me, you know, a positive 10 million delta to get to the 740s. Is that just sort of cost containment actions or is that something else? Yeah, we've got a bit, yeah, you're right on the map. We've got about over 40 million of actions of improvement related to the items that we mentioned and then...

I mean given that it was a JV structure, did you actually have to bid against other parties or did you sort of have the right of first refusal? It was a, when we entered into the deal to acquire the initial piece, we had a buyout mechanism set for the net that provided the multiple on trailing EBITDA, which is based on...

Gotcha. Thank you. Best of luck.

Thank you in one moment for our next question. Our next question is a follow-up question from Gabe. Hady with Wolf Fargo. Your line of open please go ahead.

Thank you guys. Wanted to ask one on Centurion just because you did kind of give us a little detail here on site for. Um.

I guess just to calibrate properly, we make our own assumption in terms of when things might close, let's just say, I don't know, for modeling purposes may or something like that. I don't want to throw water on here, but is it safe to say that this business is likely kind of experiencing similar trends that you are? Yeah.

all seeing in your base business. So we made it need to adjust that. And then secondly, is part of the magic for how this thing has been able to kind of aid actually, but thus, in some of the April 2020, it has made your initial investment, been just the network overlap and sort of synergy with GRIFE.

Or is that what you expect sort of from a...

conventional, uh, refurbished business if that makes sense. So the meaning that the synergy number is sort of already baked in there. Um, on that 24 million or 23% of the down margin.

Well, on terms of the network, obviously, we are leveraging our footprints and our customer base in the business. So that has helped, and we will continue to do that.

I can't really comment on what we can't comment on their volume, but it's safe to assume that it's illicit and aligned with the rest of the macro.

terms of, you know, they, I can't really comment on, we can't comment on, on their volume, but it's safe to assume that it's ill, it's an align with, with the rest of the macro,

the observations that we see in the in the markets. Thank you. Thank you. The one thing I would add to that is that you know, with us now having you know 80% ownership and assuming this closes, which we assume it will, you know, we will then be supplying all of the bottles for their needs, which is not in the case to date. So there is some synergy pickup for it.

and have a nice day. This concludes today's conference call. Thank you for participating. You may now disconnect. The conference will begin shortly. To raise and lower your hand during Q&A, you can dial Star 11.

And I.

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Good day and thank you for standing by. Welcome to the grade 1st quarter, 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need a press star, one on your telephone.

You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised to today's conference is being recorded. I would now like to hand the conference over to your speaker today. Matt Leigh, please go ahead. Thanks. Good morning, everyone. Welcome to GRIF's first fiscal quarter, 2023, earnings conference call. This is Matt Leigh. He drives vice president of corporate development and best relations. And I'm joined by Oli Rothgard, GRIF's president and chief executive officer and Larry Hill Shimer, GRIF's chief financial officer.

results to differ material from those discussed. Additionally, we'll be referencing certain non- GAAP financial measures and reconciliation to the most directly comparable gap metrics can be found in the appendix of today's presentation. And now I'll turn the presentation over to Oli on slide three. Thanks, Maths and good morning, everyone. During our first quarter, 2023, drive-to-excepts several important steps.

towards advancing our built-to-last strategy. We completed the acquisition of Lee Container in mid-December, and our rapidly integrating this new growth business into life. We proudly announced our new 2030 science-aligned sustainability targets, a roadmap for achieving our goals around climate, waste reduction, and circularity.

We've divested one of our higher cost CRB mills and today announced that we will be reinvesting that capital into another growth platform with a significant majority ownership in Centurion Container. Our IBCB conditioning joined venture.

We are increasing our ownership from approximately 9% to 80% with a path to full ownership in the next few years. I am proud of the progress made so far in 2023 and I look forward to building on this new foundation in the year to come. Now, onto our first quarter results.

Our global businesses clearly felt the impact of several Edmonds in the first quarter. In our fourth quarter call, we cautioned against a week of start to the 2023 year. Specifically highlighting the volume softness we were seeing as well as the steel price cost headwinds in GIP and their impacts.

to first quarter margins. Actually, volume trends in both businesses came in below our low original expectations, and the net impact was a challenging first quarter result relative to fiscal 2022. Though it was the second best first quarter in Christ 145 year history.

Also, knowing Q1 fiscal 2022, includes full quarter EBITDA contribution from the FPS business, which was subsequently solved.

While the demand environments remains uncertain, our teams acted swiftly on cost-out actions, working to match production with demand, rationalizing and optimizing our footprint, and tightly managing working capital. We will continue to aggressively manage costs.

during this period of volume softness. And yet, we'll remain agile enough to respond and support our customers when demand improves.

I'm proud of our team's ability to adapt to the changing demand environments and our commitment to taking actions to right size our costs while still focusing on growth and discipline execution of our build to the extra energy.

our team's ability to adapt to the changing demand environments and our commitment to taking actions to right size our costs while still focusing on growth and discipline execution of our build to last-primities. Please turn to slide 4.

On Tuesday, we signed an acquisition agreement to increase our ownership state in Centurion Container to 80%. Subject to cost of our closing conditions and regulatory clearances. As I mentioned a few months ago regarding our acquisition strategy, our most attractive targets are close to our core business of industrial packaging and diversification benefits in product offerings.

or end markets and are marching a creative. We also want to grow with businesses that have a strong sustainability components. Centurion Container meets all those criteria. And I'm even more excited about the future of our partnership than I was when Gryff made its initial investments almost three years ago in April of 2020. The Centurion Partnership helps.

accelerate our growth in recent-based products with a sustainable offering of both new and reconditioned IVCs. Since inception in 2020, the joint venture has grown epidax by nearly eightfold through both organic and inorganic top-line growth and a scalable business model with strong margins and exceptional cash flow conversion. The joint venture has grown epidax by nearly eightfold through both organic and inorganic top-line growth and a scalable business model with strong margins and exceptional cash flow conversion.

I'm excited about the continued growth potential of this business. And I look forward to formally welcoming the Centurion colleagues as part of RISE after we conclude the transaction. Let's now turn back to our quarterly results on slide 5, please. Thank you.

As mentioned earlier, in our fiscal first quarter, our global industrial packaging business experienced dual headwinds in decelerating demands and temporary margin compression from rapid steel price deflation.

Steel, plastic and IBC volumes were each down low double digits year over year on a global basis. The North American market was weakest largely due to lower demands within the chemical and coaching end markets. Our Latin region remained solid.

Essentially flats against the strong Q1 2022 on continuous strong demand from the act, and food markets. Emea and APEC volumes were reached through most of the quarter, but we saw some isolated sequential improvements in order patterns in February that give us some hope that demand may be on the path.

to recover it in Q2. In the face of these challenges, I commend our global GIP team for their decisive actions taken in managing costs and maintaining our price discipline. Our expectation is that the combined impact of our team's actions, along with normalization in steel prices.

should be solved in sequential margin improvements in GIP next quarter. Please turn to slide six. Paper packaging's first quarter sales declined by approximately 50 million in the quarter due to lower milk and converting volumes. Throughout the quarter, despite a year-year price in tailwinds.

First quarter volumes in our core choice sheet feeder system and human core system were down low double digits per day compared to the very strong Q1 2022. Cuban core volumes suffered from particularly slow demand in the paper film, core and protective core in markets. In the quarter, right to the approximately

94,000 tons of economic downtime across our mill system with approximately 40,000 tons taken in container boards, 35,000 tons in URB and the rest in CIP. As in our GIP business, our PPS team is responding quickly to the changes in demand, taking actions on costs across the network.

which shifts in labor cost reductions, temporary furloughs, and advancing our footprint consolidation plans. In both businesses, teams remain later focused on working capital management.

And we expect to capitalize on incremental opportunities to improve margins and cash flow in the common quarters. I will now turn it over to our CFO , Mayor Hill Sharma on slide 7 to discuss our Q1 financial review as well as our 2022 guidance. Thank you, Oli. Good morning, everyone. As Oli mentioned, our first...

to capitalize on incremental opportunities to improve margins and cash flow in the common quarters. I will now turn it over to our CFO , Mayor Hill Sharma on slide seven, to discuss our Q1 financial review, as well as our 2022 guidance. Larry, thank you, Oli. Good morning, everyone. As Oli mentioned, our first quarter fiscal, We've becomeer, we've all begun to discuss sides. Whereás probably believe standard,low

Based several challenging headwinds, more than we anticipated when we provided guidance in December . I too want to commend our teams for acting swiftly to manage costs as we face a tougher demand environment. First quarter of 2023 was grived second best start to the year ever. Bested only by our record to on 22, which included the $12 million EBITDA contribution attribute of both to SPS, which was sold in April of 2022. I am proud of our performance today given the strong economic headwinds. That sales were down 293.3 million in fiscal first quarter, driven primarily by volume declines and the impact of 89.4 million of prior year net sales, attributable to the SPS business.

challenging headwinds more than we anticipated when we provided guidance in December . I too want to amend our teams for acting swiftly to manage cost as we face a tougher demand environment. First quarter of 2023 was GRIF's second best start to the year ever. Bested only by our record Q122, which included the $12 million EBITDA contribution attributed a whole to SPS, which was sold in April of 2022. I am proud of our performance today given the strong economic headwinds. That sales were down 293.3 million in fiscal first quarter driven primarily by volume declines and the impact of 89.4 million of prior year net sales attributable to the SPS business, which we divested last April .

Gross profit declined by 38.1 million, primarily due to lower volumes and the impacts of the previously mentioned steel price cost headwinds in our GIP business, which we expect will abate in the second half as price trends have stabilized. Adjusted EBITDA was 164.5 million in the quarter, down 32.3 million year over year, though only down to approximately 20 million when factoring in the prior year contribution of FPS with consolidated EBITDA margins of 12.9%, a 30 basis point improvement versus Q122. CAPEX came in line with our plan at 48 million for the quarter, a slight increase versus our first quarter of 2022. Our organic growth plans remain intact and teams are finding an easier to execute on our capital projects at the wait times on new machinery, constrict, and more engineering staff becomes available.

As Oli mentioned, we improved our free cash flow over prior year, which is especially notable given the pronounced volume weaknesses we've seen in the highlight and highlights the solid execution of our teams on reducing working capital and generating cash. We are still challenging our teams to drive further on working capital reduction initiatives, even if demand improves.

We believe we can capture additional efficiencies throughout our supply chain. Now let's turn to sliding to discuss guidance. Setting guidance in 2023 has posed a particularly difficult challenge. In our Q4 call, we provided a guidance range of 820 to 906 million on EBITDA and 410 to 460 million in free cash flow. Admittedly, a wide range with a great deal of caution given the uncertainty and demand in the back row environment. We also tried to frame Q1 weaknesses.

for you based on the volume trends we were seeing through November and into December that we would expect it would level out and improve in January based on discussions with customers. However, that did not happen. Volumes in both businesses finished worse than our expectations through January and that weakness has continued into February in North America while stabilizing in our other regions. As we contemplated guidance for the remainder of the year, we determined we have insufficient data to expect an inflection point in the demand trends which we have experienced in the past two quarters beyond normal seasonal drivers in end markets including agriculture and construction.

As a result, we cannot establish a high end of guidance and consequently determine that we could choose to either provide no guidance or provide guidance assuming the trends we have been experiencing with adjustments for the seasonal drivers. We chose to provide low end only guidance based on that determination, including that some guidance is better than not. We also believe that if the demand's pattern continues further deterioration and pricing in the paper industry could emerge. On an overall basis, we've reflected volume impact in the low end guidance of $42 million in our GIP business.

and 62 million in our PPS business relative to the midpoint of our prior guidance range inclusive of one to results. In addition, we have included a pricing impact in the paper business of 33 million. We will not be providing the breakdown by paper grade. While this approach may seem draconian when compared to our prior guidance and especially our record results in 2022, I do want to reframe things with a broader look at history to highlight the improvements we've made in the business model in our earnings power. Looking back at our investor day last year, we presented a recession downside case of 600, 700 million of EBITDA and 260 to 320 million of free cashflow.

The volume trends we're seeing in present are significantly worse than those scenarios and our earnings and cash flow outlook is better. This low end guide is above our fiscal 2021 results excluding FPS. And yet again, our volumes are currently trending materially worse than during that year. We have simply raised the bar and performance at gripe by taking action to right size and cost by maintaining our strict pricing discipline in the marketplace and by using our balance to continue to grow the business.

I'll close by saying we are hopeful that current volume pressure is subside and we see that the demand recovery in the second half of 2023 in line with our view in December . We have aggressive working capital goals in place as well as some exciting targets in our MNI A pipeline, including Centurion that if closed and depending on timing, could add an additional 20 to 40 million dollars of EBITDA in 2023. And even if our low-end guidance is realized due to negative and economic environment, we find comfort in the strength of our balance sheet and cash flow generation.

to continue to provide growth capital to fund our business in the years ahead. On guidance, I'd like to share our capital allocation strategy on slide 9. As mentioned in Oles opening remarks, even with the $300 million acquisition of Lee Container and a slower first quarter, we are still towards the low end of our target leverage ratio range.

We plan to continue to invest in our long-term strategic objectives and look to be opportunistic when attractive targets become available. I am confident given our balance sheet strength and cash flow generation that Christ will be able to continue to grow our dividend and repurchase shares while simultaneously funding our critical maintenance catbacks and executing on our strategic growth plan. I am excited about the strategic opportunities captured thus far in 2023 and the growing list of attractive businesses in our M&A pipeline. We will maintain our strict discipline around capital allocation and acquisitions and continue to pursue only the highest quality businesses.

that fit our strategy and culture and elevate the breadth and competitive positioning on the gripe portfolio. With that, I'll turn things back to Oli on slide 10. Thanks, Larry. To build off Larry's comments, our final comments, built to last, is about long-term growth and a strategic vision to be the best customer service company in the world. That means executing with discipline regardless of where we are in the business cycle. But it also doesn't happen without thoughtful and continuous capital investments. We find out slow start to 2023.

We are confident in the global growth team to execute well in Fulia 2023 and post strong financial results to continue fueling our growth and business objectives. We are excited for the year-end and will work to continue to produce results worthy of your investment in our company.

We thank you for your interesting drive. Michelle, you can open the line to questions. Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A raster. Our first question comes.

We open some of the early data points seem pretty positive as it relates to, you know, economic, pickup, etc. Are you starting to see that in specific reasons including Europe or is it just early at this point?

Yeah, probably fit too early, Ganshan, but what I can say is that we do see some improvements, especially in APEC and in North Western Europe . Last time remains what fairly strong, but not the meritorious, really where.

We don't see any improvements. It's not getting worse, but it's not getting better either. Gotcha, and then on the B-sucking, what do you think we are on that? Yeah, you know, it's been extremely difficult to get any clarity on that, gotcha? I mean, it is...

clear through discussions with our customer that there has been an impact to be stocking, but it's not clear whether we're through it yet. And given what we've seen in February , relatives of volume trends in December and January , there's certainly no indication to us that anything has shifted yet. And then just for my second question, Anson Sherry, can you just give us a sense as to what that so you make a boost?

or we put a new container into the steel cage, when we recondition them or when we use the old plastic to manufacture new products. So it's a circular product, very sustainable. And because it's a service business, it comes with solid margins as well.

And it plays into our strategy of high margin in the dark roads.

Thank you. And again, if you would like to ask a question, please press star then one. One moment for our next question.

Next question comes from a line of Gabe Hodge with Wells Fargo. Your line is open. Please go ahead.

Yes, good morning. I wanted to, I think, Larry and you're prepared very much. You talked about opportunities. I think it was specific to PPS to take out cost as well as improve working capital. You could expand on that a little bit. I'm curious what your

You did talk about some super consolidation, I don't know if that's part of what you're talking about, but just hope to start. Okay, it's only here. I can talk a little bit about that. We have been planning some groups of consolidation. Consolidations primarily on the converting sites and we're speeding them up and execute.

furloughs to the bills.

We don't know what, you know, how long, but we have heard of that. We have heard of those. And part of the other thing that comes with that revamping of our shift structure gave us. In this industry, there's been a lot of structural over time build into the way that they, workers work. And we've been addressing that to take out.

down, I guess low double digits in GIP and call it low teams in PPS and then kind of holding price consent somewhere we're at today and then you gave us the DOCC assumption so I guess A can confirm that. And then B, you know, is there a scenario that you look at when you guys kind of did your your re budget or recast that could come in lower than that? GravityB

and maybe what could be the drivers there. Yeah, what we believe that, but first of all, let me get to some of your specific numbers just to clarify you right, maybe on the GIT side. On the PBS side, you're actually light. I mean, we've been...

You know, our mill volume is low 20% down year over year. So now that's over some strong performance in particularly Q2 last year. So it still has pretty significant volume.

Roll forwards on that that are going to be painful. Could it be worse? I guess you can always have worse. We think what we've laid out, we don't have any indications to it, the things are going to get worse than where they are. We just don't have any indication it's going to get better.

And so that's where how we've landed, where we are. But I did also want to re-state something I said in my prepared remarks. We believe that if this volume trend in paper continues like this, it's inevitable that there would be some price pressure. And so we did build in relative to the midpoint of our prior guide about $33 million of impact of further price erosion from where we were.

in our assumptions in our guidance midpoint. Okay. And then the last one is, yep. Okay, this is Matt. I just want to clarify your questions first. Were you asking the view on paper volumes for the full year or where they were trending currently?

Well, I guess if you offer that up, that would be great, but it was more just to clarify to make sure I understood what's embedded in the 740 number, which it sounds like it's

down consistent with what you reported in fiscal Q1. Yeah, I think so the comment is for the full year, it's not down as much as it was down in two months. Yeah, because they're seeded, don't pick up. And the comps get easier in the back half. So I just want to be clear there that that's more.

uh, drag in as we talked about our last call in 3Q beginning and then 4Q was bad. So you had overall volumes for fiscal 22, you remember down about almost 3%. So now if you then add the rest this year, you know, even further down.

I understand. Okay, and I guess the February trends, it sounds like it's not much has changed, but just I confirm that. Yeah, that's correct. Okay, and the last one, it looks like there's, call it, I don't know, 45 million left on the on the share repo authorization. Is it?

I guess tough question to ask not exactly, asking exact timing, but just maybe that would be on pause until we get a little more clarity on the macro.

No, no, no, work very comfortable with our balance position. We're moving forward on our stock free purchase. Okay.

work very comfortable with our balance position. We're moving forward on our stock free purchase. Okay. Thank you.

Thank you in one moment for our next question. Our next question comes in the line of Audit Shrestha with Steeple. Your line is open, please go ahead.

All right, thank you for taking my questions. So my first question is just about Centurion. So when do you actually expect that to close and sort of what is the annual payment up for I know you gave 20 to 40 million but sort of the timeline we're pretty uncertain about. And the margins kind of are they expected to be in line with you know, Greiss, IBC business already.

So, you know, we've got just the standard timeline to get close to regulatory process. We expected to close near term and just clarify that 20 to 40 million was not centurion alone. That 20 to 40 was centurion and some other.

near-term opportunities in our MNI pipeline, if they materialize. So it's looking at all of that together. And as this insurion, you know, the slide in our deck does a good job of laying out what it is on annual basis in the margin profile of it.

I'll take a look at that. And the divestment of the CRB mill, so how much volume sales, ebbed up, recounted, and we get sort of color on how much is actually being lost. And that divestment. Yeah. So, you know, that is a high cost, no for us. The purchaser, it was...

that we've seen. I don't really want to go into exact numbers on the EBIT on that mill, but it was a very nice multiple. It was in our prior guidance too, by the way. Yeah, that not being in the number. Okay, thank you.

Thank you and again to ask a question at this time. Please press star 11 on your telephone. Our next question comes from the line of Justin Berkner with Gabelli. Your line is open. Please go ahead. Good morning, all. Good morning.

Thank you and again to ask a question at this time. Please press star 11 on your telephone. Our next question comes from the line of Justin Berkner with Gabelli, your line is open. Please go ahead. Good morning, all. Good morning, Lawrence. Larry, sorry. Thank you just a minute.

First question is in regards to the 600 to 700 million of downside EBITDAW, the investor day and the 740 being sort of a new low end guide tracking above that. Can you sort of help handicap, I mean the investor day wasn't that long ago, can you help handicap, you know what is allowing the business to perform.

better than that 600 to 700 million scenario, despite you experiencing, you know, recessionary volume conditions, at least for your business this year. Yeah, you know, it's just in its whole combination of things that we've mentioned, but it's operating efficiency. We've improved things in supply chain.

We have done some, we're doing these football footprint consolidation activities that only mentioned and it's managing our shift structures. It's just a whole combination of things, but probably the biggest one is even stronger and better execution on our value over volume strategy and really

good strength on pricing discipline among our team. Great, that's helpful. Second question relates to, I think, the bridge from the midpoint of the prior EBITDA guide range to the 740. I think you said 42 million in GIP volume, 62 million in paper packaging volumes of 33 million.

pricing impact, that would lead me, you know, a positive 10 million delta to get to the 740s. Is that just sort of cost containment actions or is that something else? Yeah, we've got to, but yeah, you're right on the map. We've got about over 40 million of actions, of improvement related to the items that we mentioned. And then, you've got 26 million going the other way of items that are mixed, you know, product mix, margin, stuff like that and just...

some inflationary cost elements that offset that. God it, thanks for filling that picture. And then lastly, the Centaurian transaction, I mean given that it was a JV structure, did you actually have to bid against other parties or did you sort of have the right of first refusal? It was a, when we entered into the deal to acquire the initial piece, we had a...

Thank you, Mr. Brasson.

Okay, gotcha. Thank you. Let's look.

Thank you in one moment for our next question. Our next question is a follow-up question from Gabe. Hady with Wells Fargo. Your line of open please go ahead.

Thank you guys. I wanted to ask one on Centurion just because you did kind of give us a little detail here on slide four. I guess just to calibrate properly, we make our own assumption in terms of when things might close, let's just say, I don't know, from my own purposes may or something like that. Is it, I don't want to throw?

water on here, but is it safe to say that this business is likely kind of experiencing similar trends that you are all seeing in your based business? So we made it need to adjust that. Then secondly, is part of the magic for how this thing has been able to kind of aid actually, but thought since, like, April 2020, because it made your initial investment?

at 24 million or 23% of the down margin. On terms of the net worth, obviously, we are leveraging our footprints and our customer base in the business. So that has helped, and we will continue to do that. Terms of, you know, they.

I can't really comment on it. We can't comment on their volume, but it's safe to assume that it's illicit and align with the rest of the macro macro.

on their volume, but it's safe to assume that it's in line with the rest of the macro.

the observations that we've seen in the markets. Thank you, Lee. The one thing I would add to that is with us now having 80% ownership, assuming this closes, which we assume it will, we will then be supplying.

all of the bottles for their needs, which is not in the case to date, so there is some synergy pickup for us there. And we'll be able to provide a full service to all our customers directly rather than then receiving that service separately.

Got it. Thank you. I would now like to turn the conference back to Matt Leigh for any closing remarks.

Very good. Thank you everyone for joining today and have a nice day. This concludes today's conference call. Thank you for participating. You may now disconnect.