Q1 2024 Greif Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Greif First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.
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[music].
Good day and thank you for standing by welcome to the Great first quarter 2024 earnings 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 the session you will need to press star one one on your telephone.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.
You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Matt Leahy. Please go ahead.
Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Matt Leahy. Please go ahead.
Matt Leahy: Thanks and good morning everyone. Welcome to Greif's fiscal first quarter 2024 earnings conference call. Matt Leahy, Greif's Vice President of Corporate Development and Investment Relations, and I am joined by Ole Rosgaard, Greif's President and Chief Executive Officer, and Larry Hilsheimer, Greif's Chief Financial Officer. We will take questions at the end of today's call. And in accordance with the Fair Disclosure Regulation, please ask questions regarding issues you consider important because we are prohibited from discussing material non-public information with you on an individual basis.
Good morning, everyone welcomed the physical.
Fiscal first quarter of 2024 earnings Conference call. This is Matt Lady Vice President of corporate development of Investor Relations and I am joined by <unk>, Gripes, President and Chief Executive Officer, and Larry He'll Shimer Gripes, Chief Financial Officer.
We will take questions at the end of today's call.
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.
Matt Leahy: 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, while actual results could differ materially from those discussed.
Please turn to slide too.
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 will 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.
Ole G. Rosgaard: Additionally, we will 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. Now, I'd like to turn the presentation over to Ole, on slide three. Thank you, Matt, and good morning all. Ahead of covering our first quarter results, I would like to briefly recap our strategy and philosophy of how we lead and serve customers. At Greif, we are a purpose-driven company. We create packaging solutions for life's essentials. Our 13,000 colleagues around the world serve as a critical supply chain partner for our customers who are delivering the raw materials, ingredients, foods, beverages, medicines, and products that make the world work. Our packaging helps our customers deliver the juice and ketchup on your table, the paint on your walls, the oil in the car, the furniture in your home, the soles on your shoes, your Amazon boxes, and the vitamins or meds that you take.
Now I'd like to turn the presentation over to <unk> on slide three thank you, Matt I am good morning all.
Covering our first quarter results I would like to briefly recap our strategy and philosophy of how we lead and sort of costumes at <unk>. We are a purpose driven company recreate packaging solutions for life's essentials.
13000 colleagues around the world serve as a critical supply chain partner for our customers, who are delivering the raw materials ingredients foods beverages medicines and products that make the world where.
Oh packaging helps our customers delivered a juice and ketchup on your table the paint on the walls. The oil in your car the furniture in your home the soldiers use Amazon boxes, and the vitamins are myths that you take we.
Ole G. Rosgaard: We help our customers do very important work. Our Build for Life strategy is designed to help us be better stewards of our customers' goods. And our vision is to be the best in the world at customer service. The way we do that is through our four strategic missions, how we work, and the principles that guide how we lead, support, and serve our colleagues and customers. We built a powerful culture and business systems at Greif that both serve as a flywheel to consistently improve our competitive positioning, attract and retain great talent, and create value as we grow the business. Please turn to slide four. We believe the future of global industrial packaging will be driven by a focus on sustainable packaging solutions, including recyclable resin-based products.
We help our customers to very important work.
I've been to last strategy is designed to help us be better stewards of our customers groups and ambition is to be the best in the world and customer service.
We do that is through our form strategic misuse, how we work and the principles that guide lead support and serve all colleagues and customers.
We built a powerful culture and business systems like Ryan that's both serve as a flywheel to consistently improve our competitive positioning attract and retain great talents and create value as we grow the business. Please.
Please turn to slide for.
We believe the future of global industrial packaging will be driven by a focus on sustainable packaging solutions, including recyclable redfin based products.
Ole G. Rosgaard: We have aligned our strategy with these broader industry trends, and through acquisition and organic investments, we are slowly transforming our portfolio. The five product groups shown on slide four are the same focus areas communicated at our investor day in 2022. And since then, we have made substantial progress on expanding in these verticals. We've executed three transactions in small plastics in the past year in Lee, Reliance, and IPAC, Kevin, to build global scale in that important and growing market. We intend to continue to build on our small plastics platform with high-quality, high-margin, speciality businesses. Our focus in IPC centers on building scale regionally at both the manufacturing and the reconditioning level to offer our customers a full lifecycle solution of sustainable products and further our circularity mission. Our acquisition of Centurion Container has significantly increased our mix of washed, re-bottled, and reconditioned IBCs, all with a growing margin.
We have a line that our strategy.
These broader industry trends and through acquisition and organic investments, we are slowly transforming our portfolio.
The side product group shown on slide four are the same focus areas communicated and I only missed a day in 2022 and since then we have made substantial progress on expanding in these verticals.
We've executed three transactions and small plastics in the past year elite reliance and I expect him to build global scale and that important and growing markets.
We intend to continue to build on our small plastics platform with high quality high margin speciality businesses.
Our focus and I do see <unk> on building scale recently at both the manufacturing and the reconditioning level to offer our customers a full lifecycle solution of sustainable products and further I also clarity mission.
Our acquisition of Centurion container has significantly increased I'll mix, a wasp re bottled and we condition diabetes.
And all with a growing March in this.
Ole G. Rosgaard: This business improves both the environment and our economics, a powerful combination. In our paper packaging business, our growth is focused on unique, high-margin converting businesses that improve our downstream integration, as well as our end market exposures into more stable food, beverage, and consumer markets. Our Coal Pack Acquisition, Dallas Sheet Feeder, and the Louisville Litho Laminator investments all meet this goal in paper.
This business improves both the environment and our economics a powerful combination.
And I'll pay the packaging business our growth is focused on unique high margin converting businesses that improve our downstream integration as well as our market exposures into more stable food beverage and consumer markets.
I'll Cold-pack acquisition data sheets data and the looming Bill Lithopone lemonade up investments all need this golden paper.
Ole G. Rosgaard: And while our closures business is predominantly internally focused, we see tremendous potential to grow beyond our current footprint, both organically and through acquisition. In summary, we see a long runway for growth in many of our businesses and intend to continue along this path of transforming our portfolio to meet the market needs and better serve our customers. Please turn to slide 5.
And while our closest business is predominantly internally focused we see tremendous potential to grow beyond our current footprint, both organically and through acquisition.
In summary, we see a long one ready for growth and many of our businesses and intend to continue along this path of transforming our portfolio to meet the market needs and better serve our customers.
Please turn to slide five.
Ole G. Rosgaard: Now into the first quarter. Volumes remained under pressure in most parts of the world through the quarter, consistent with our expectations and Foulier guidance. Starting east to west, which is how we normally see volume trends emerge, our APAC business saw some bright spots in the quarter as volumes in our China business improved slightly on both a sequential and year-on-year basis. China manufacturing PMI remained above 50 for all three months in the quarter, and lubricants, which are predominantly used by heavy manufacturing customers, were the primary improving end market in that region.
Now into the first corner.
Volumes remained on the pressure in most parts of the world through the quota consistent with our expectations and full year guidance.
Starting east to West, which is how we normally see volume trends emerge.
Oh, a pack business saw some bright spots in the corner and small rooms in our China business improved slightly on both a sequential and year on year basis.
China manufacturing PMI remained about 50 for all three months in the corner and loop. It comes with shop predominantly used by heavy manufacturing customers when a primary improving and market in that region.
Ole G. Rosgaard: In a mirror, we also saw improving lubricants, and end market demands reflected more of the low comparison versus an improving sequential trend, as Eurozone PMI remained well below 50 through January. The agricultural and conical markets are still working through some of the year-end 2023 de-stocking, and we expect those businesses to improve throughout the year. Our land-sand business primarily serves the agrochemical, juice, and beverage industries and is impacted by planting, yield, and consumer demand dynamics in those markets; volumes in that region remain weaker, and we do not at present see any material volume inflection. North America, still our largest and most diverse region with both red chips and paper packaging, remained our weakest market globally in the first quarter. U.S. manufacturing PMIs remain in contraction territory through January, the 14th consecutive month at or below 50.
In the meantime, we also saw improving lubricants and market the market demands reflective more of the low comparison versus and improving sequential trends and she also PMI remain well below 50 through January.
The agricultural and clinical markets are still working through some of the year is two.
2023, Destocking and we expect those businesses to improve throughout the year.
All that time business, primarily serves the agrochemical Jews and beverage industries and is impacted by planting yields and consumer.
Demand dynamics in those markets.
Volumes in that region remained weaker and we do not at present see any materials volume inflections.
North America still our largest and most diverse region with both Richards at table packaging remained our weakest market globally in the first quarter.
Manufacturing Pmi's remained in contraction territory through January 14th consecutive month at or below 50.
Ole G. Rosgaard: This continued low level of industrial activity has driven G.I.P. volumes down 19% in the quarter and 36% over two-year periods. This is a truly historic period for our G.I.P. business and makes the results from that team over the past year and a half even more impressive. We are excited by the prospects when volume trends inflect. Our PBS business saw a mix of volume trends, with ContainerBot clearly improving, and our BoxBot business still trending down slightly. Overall, it is clear we remain in a difficult point in the cycle, and our teams are doing an excellent job controlling what we can control and focusing on serving our customers. I'm proud of our work this quarter and our continued resilience and commitment as we navigate a tough environment. I'll now turn it over to Larry to walk through our detailed financial results.
This continued low level of industrial activity is driven G. I P volumes.
19% in the quarter and 36% over a two year period.
A truly historic period, followed G. I P business and makes the results from that team over the past year to have even more impressive.
We are excited by the prospects when volume trends in flex.
Oh P. B S business saw a mix of volume trends with contain a bot, clearly improving and aulbach spot business still trending downward slightly.
Overall it is clear we remain in a difficult point in the cycle and our teams are doing an excellent job controlling what we can control and focusing on serving our customers.
I'm proud of our work this quarter and our continued with citizens and commitments as we navigate tough environments.
And now I'm training over to Larry to walk through our detailed financial results better. Thanks.
Lawrence Allen Hilsheimer: Thank you, Ole. And good morning, everyone. Turning to slide six, Greif's first quarter results came in line with our expectations with 128 million of adjusted EBITDA and a use of free cash flow of $48 million. While our team's execution remained solid, the combined effect of extended slow demand and the significant negative price-cost dynamic in our paper business led to a decrease in year-over-year performance. We remain focused on execution, leaning on our value over volume price discipline and cost management with continued focus on cash and working capital. As Ole mentioned in his opening remarks, while we are managing through the short-term volume trends, we continue to focus on investments that will help us build a better business long-term. One of those investments is our recently launched pilot project with Ioncraft, a German-based startup that has developed a unique, chemically inert, and fully recyclable barrier technology for plastic containers.
Thank you and good morning, everyone turning disliked sex.
<unk> first quarter results came in line with our expectations with $128 million of adjusted EBITDA.
Or use a free cash flow of $48 million, while our team's execution remain solid the combined effect of extended slow demand and the significant negative price cost dynamic in our paper business led to a decrease in year over year performance.
We remain focused on execution leaning on our value over volume price discipline and cost management with continued focus on cash in working capital.
As always covered in his opening remarks, while we are managing through the short term volume trends. We continue to focus on investments that will help us build a better business longterm one of those investments as our recently launched a pilot project with Iron craft, a German based startup that has developed a unique chemically in there and.
Fully recyclable barrier technology for plastic containers. This partnership is representative of our commitment to innovation and packaging that meets the growing sustainability demands of the marketplace.
Lawrence Allen Hilsheimer: This partnership is representative of our commitment to innovation and packaging that meets the growing sustainability demands of the marketplace and will enable us to better serve our customers in many end markets, including agrochemicals and food and beverage. Combined with Lee Reliance and IPAC-CHEM, we think a successful outcome with Ioncraft will offer our customers a full suite of custom packaging and barrier options and provide multiple growth levers for Greif for years to come. Let's turn to the segment results, starting on slide seven. Our G.I.P.
[noise] able us to better serve our customers in many and markets, including agrochemical chemicals in food and beverage.
Combined with Lee reliance an AIPAC, we think a successful outcome with iron crap will offer our customers a full suite of custom packaging and barrier options and provide multiple growth levers for grape for years to come.
Let's turn to segment results starting on slide seven.
R. G. I P. P. As this has continued to trend consistent with the previous few quarters with a sustained low level of demand offset by strong execution on pricing costs.
Lawrence Allen Hilsheimer: Business has continued to trend consistent with the previous few quarters, with a sustained low level of demand offset by strong execution on price and cost. Volumes remain under pressure in most regions throughout the world, and order patterns remain tight as customers face limited visibility into demand improvements. APAC and EMEA volumes showed some signs of life on better petrochemical and lubricant demand as manufacturing activity improved in those regions, while North America remains weak. The GIP team posted solid results given this backdrop, with improving gross profit and flat EBITDA margins on lower sales year over year. Our team's combined Pricing Discipline and Cost Management, NGIP, in partnership with our Global Operations and Supply Chain teams, drove another quarter of solid margin performance in our seasonably slow first quarter. I want to thank our global G.I.P. colleagues for another quarter of excellent execution in a very tough environment. Please turn to slide 8.
<unk> remain under pressure in most regions throughout the world and order patterns remained tight as customer space limited visibility too ma'am improvement.
APAC in EMEA volume showed some signs of life on better petrochemical and lubricant demand as manufacturing activity improved in those regions well North America remains weak.
G. I P team posted solid results given this backdrop with improving gross profit and flat EBITDA margins on lower sales year over year R.
Teams combined pricing discipline in cost management N G. I P. In partnership with our global operations in supply chain teams drove another quarter of solid margin performance in our season, everybody slow first quarter I.
I want to thank our global G. IP colleagues for another quarter of excellent execution in a very tough environment. Please turn to slide age.
R. P B S business executed well in the quarter with improving volume transient containerboard offset by weaker boxboard demand.
Lawrence Allen Hilsheimer: Our PPS business executed well in the quarter with improving volume trends in container board offset by weaker box board demand. Corrugated converting volumes were up 3%, and container board mill volumes were up above that level year over year as converting customers began to reorder paper and rebuild low inventory positions as they saw the demand outlook improve in late 23 and early 24. Our two and four volumes remain stable sequentially through the quarter but are still down four percent year over year. A reminder that the largest ad market for Tube and Core is the paper industry. So we expect that rising mill volumes in container board and elsewhere, if they continue, will lift volumes in our URB and tube and core business as well.
<unk> corrugated converting volumes were up 3% and container board mail volumes were up above that level year over year as converting customers began to reorder paper and rebuild low inventory positions as they saw the demand outlook improving and wait.
Three and early 2004.
Or tubing four volumes remained stable sequentially through the quarter, but are still down 4% year over year.
A reminder, that the largest and market for Cuban Corps as the paper industry. So we expect that rising mail volumes and containerboard and elsewhere. If they continue wellness volumes and are you are be improvement core business as well.
On the margin side or P. P. S business was challenged in Q1 with a price cost squeeze driven by delayed recognition of our announced price increases combined with rising OCC costs, which rose by $55 per ton or nearly 160% year over year gimmick for the quarter.
Lawrence Allen Hilsheimer: On the margin side, our PPS business was challenged in Q1 with a price-cost squeeze driven by delayed recognition of our announced price increases, combined with rising OCC costs, which rose by $55 per ton, or nearly 160% year-over-year for the quarter. The January published RISD index prices in both container board and box were not at all in sync with what we experienced in the market.
The January published risky index prices in both containerboard inbox per we're not at all in sync with what we experienced in the market. This.
This is largely due to what we see as a flawed methodology of industry price tracking by the publication.
Receive survey based approach of a small and shrinking third party independent market does not reflect what we see real time in our businesses or with our customers in a time of the increased use of data and analytics and the ability to track market information using automation or artificial intelligence tools, we struggle define relevance in a <unk>.
Survey based method with such a small non representative sample sizes.
Lawrence Allen Hilsheimer: This is largely due to what we see as a flawed methodology for industry price tracking by the publication. RISD's survey-based approach to a small and shrinking third-party independent market does not reflect what we see real-time in our businesses or with our customers. In a time of increased use of data and analytics and the ability to track market information using automation or artificial intelligence tools, we struggle to find relevance in a survey-based method with such a small, non-representative sample size. Nonetheless, the lack of paper price recognition coupled with significant cost inflation resulted in a 540 basis point margin squeeze in Q1, which we anticipate will largely recur in Q2 but then improve in the second half as RISC-E indices better reflect market prices.
Nonetheless, the lack of paper price recognition, coupled with significant cost inflation resulted in a 540 basis point margin squeeze in Q1, which we anticipate will largely ricker in queue too, but that improve in the second half is risky indices better reflect market pricing.
Please turn to slide nine for updated guidance and alpha.
Given the lack of any compelling demand info actually but accounting for the risky recognize price increase in other modest improvements we are raising our low end EBIT guidance by $25 million to $610 million and maintaining our adjusted free cash flow guidance of $200 million, which is reflective of increased capex and.
Working capital expectations for the full year.
Our full year 2024 assumptions remain consistent with our guidance from the fourth quarter, namely our expectation for a continuation of current demand trends no improvement and recently published index prices from the recent February publication and no contribution from <unk>, which is expected to close in our physical Q2.
As a reminder, we present our guidance based only on a factual evidence available to us at the day report.
Lawrence Allen Hilsheimer: Please turn to slide 9 for our updated guidance and out... Given the lack of any compelling demand inflection, but accounting for the risky recognized price increase and other modest improvements, we are raising our low-end EBITDA guidance by $25 million to $610 million and maintaining our adjusted free cash flow guidance of $200 million, which is reflective of increased capex and working capital expectations for the full year. Our full-year 2024 assumptions remain consistent with our guidance from the fourth quarter, namely our expectation for a continuation of current demand trends, no improvement in risky published index prices from the recent February publication, and no contribution from IPAC-CHEM, which is expected to close in our fiscal Q2. As a reminder, we present our guidance based only on factual evidence available to us at the date we report.
We think it makes sense to stick with low and guidance at this time, and we will revisit and share our updated view, including possibly in introducing and brought her guidance range during our next quarter recall.
With that I'll turn things back to only for a brief closing.
Larry.
I will close by simply stating that we continue to demonstrate our ability to control what we can control and drive the business doing a down cycle.
The investments we are making on the built to last to grow and improve all aspects of our business will position as well so better serve our customers and achieve breakout performance when demand returns.
I'm proud of the dedication commitments and resilience from our global crisis teams and excited for what we are building together.
We will plan to discuss our business and future in greater detail at an upcoming Investor day on December 11th.
Details will be forthcoming, but please make a note in your column December 11th.
Lawrence Allen Hilsheimer: We think it makes sense to stick with low-end guidance at this time, and we'll revisit and share our updated view, including possibly introducing a broader guidance range during our next quarter call. With that, I'll turn things back to Ole for a brief closing. Thanks, Larry.
Before we start the Q&A secession I have an important update for our investors met.
<unk>, it's moving into a new position to oversee our Asia Pacific operations and build an <unk>, who has played a key role in developing financial planning and analysis and data.
Ole G. Rosgaard: I will close by simply stating that we continue to demonstrate our ability to control what we can control and drive the business during a down cycle. The investments we are making in the Build to Last program to grow and improve all aspects of our business will position us well to better serve our customers and achieve breakout performance when demand returns. I'm proud of the dedication, commitment, and resilience from our global Greif teams and excited about what we are building together. We will plan to discuss our business and future in greater detail at an upcoming investor day on December 11. Details will be forthcoming, but please make a note in your calendar on December 11th. Before we start the Q&A session, I have an important update for our investors. Matt Leahy is moving into a new position to oversee our Asia-Pacific operation, and Bill D'Onofrio, who has played a key role in developing financial planning and analysis and data analytics at Rife for nine years, will now take charge of our investor relations.
<unk> Ah drive for nine years will now take jobs of our Investor Relations.
This is part of their professional growth plans and I want to thank Matt for his leadership and solid head of corporate development and Investor Relations for the past several years and welcome to the new row with that I'd like to thank you one small for dialing in today and we will now open the lines for Q&A.
Certainly has a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please limit yourself to one question and one follow up please stand by while we compiled the Q&A roster.
One moment, our first question.
Which will come from <unk> <unk> Your line is open.
Hey, guys. Good morning, Congrats to you, but good luck in the future I guess first off you know maybe you can give us a sense as to how volumes during the first quarter compared to your initial plan and how things are looking so far in February you know there are some.
Recent indications on ASM et cetera, and global basis, it seem a little bit better just wondering if you were seeing any green shoots associated with it.
Ole G. Rosgaard: This is part of their professional growth plans, and I want to thank Matt for his leadership as our Head of Corporate Development and Investor Relations for the past several years and welcome Bill to the new role. With that, I'd like to thank you once more for dialing in today, and we will now open the lines for Q&A. Certainly. 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.
Yeah, So as I said.
It'll.
Throughout January volume S. S been depressed and we have seen some sequential improvements, but it's not really enough to signal an infection.
We spoke a little bit about the impact.
In Europe, where we have seen a little bit of <unk> songs on the spot by spot basis.
But I would say that when we speak to our customers. They seem much more positive positive that they have been for a long time, although we haven't seen that materialized into into volume yes.
Got it and then in terms of the EBITDA differential the $25 million between your previous low N versus now is that is that just purely containerboard pricing.
Operator: Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. One moment for our first question, which will come from Ghansham Panjabi of Baird. Your line is open. Hey guys, good morning. Congratulations to you, Matt.
Yes, predominantly that ghansham, but we also the teams have done some good job. So we're lowering our estimate of SG&A for the rest of the year about $6 billion in our closures business is actually turned up all we mentioned a little bit about that in our comments. That's another five of West and then just some other I'd.
Ghansham Panjabi: Good luck in the future. I guess, first off, you know, maybe you can give us a sense as to how volumes during the first quarter compared to your initial plan and how things are looking so far in February. You know, there's some recent indications on ISM, et cetera, on a global basis that seem a little bit better. Just wondering if you're seeing any green shoots associated with that.
$3 million, so you got about $11 million a price cost.
Across both businesses.
And then May SG&A, six closures five and another three of miscellaneous currency and other stuff.
Okay got it thanks, so much cause I'll turn it over.
And one moment for our next question.
Ole G. Rosgaard: Yeah, so as I said, Ghansham, throughout January, you know, volume has been depressed, and we have seen some sequential improvements, but it's not really enough to signal an inflection. We spoke a little bit about AIPAC and Europe, where we have seen a little bit of green shoes, but it's on a spot by spot basis.
Yeah.
Our next question will be coming from Michael Hoffman is Stifel. Your line is open Michael.
Congratulations and early I always respect company's retreat.
Position as a strategic role so good luck to build who.
Thank you well.
Well.
On the Q&A side of it can we take a little bit in.
Pick.
And market customers that if if.
Ole G. Rosgaard: What I would say is that when we speak to our customers, they seem much more positive than they have been for a long time, although we haven't seen that materialize into one yet.
Individually, because they're two or three of them that if they make a change here.
Here in North America, this is going to shift the momentum.
No it's not 20 elements.
Two or three and markets, maybe it's only one or two who are we watching at this point to shift.
Lawrence Allen Hilsheimer: And then in terms of the EBITDA differential, you know, the 25 million between your previous low end versus now, is that just purely container board pricing? It's predominantly that, Ghansham, but we also, the teams have done some good jobs, so we're lowering our estimate of SG&A for the rest of the year by about $6 million, and our closures business has actually turned up. Ole mentioned a little bit about that in our comments. That's another $5 of lift, and then just some other items, $3 million.
Their demand outlook.
Yeah, I would I would really focus on the chemical customers or the chemical in segments are both in the biggest segment is the bulk of them commodity chemical.
And that has been significantly down and then the next one as speciality chemicals. Those are the two big ones and then the third one will be Luke.
Petrol loop in August.
Yeah. So the lube markets it seems to have corrected there and market oversupply all the finished goods. The destocking. So was there early green shoot Claire.
As I said, we've seen pockets sort of sporadic progress, but it's still not enough to to say that it's it's permanent we still see little bit of Destocking body space sporadic depending on what I'm sick when we're looking at.
Lawrence Allen Hilsheimer: So you got about $11 million in price costs across both businesses of lift, and then the SG&A is $6, closures $5, and another $3 of miscellaneous currency and other stuff. Okay, got it. Thanks so much, guys. I'll turn it over.
But I would say, it's too early to signal that's an inflection points.
And then on the paper side, there's a whole bunch of.
Operator: And one moment for our next question. Our next question will be coming from Michael Hoffman of Stiefel. Your line is open, Michael.
New capacity coming on line in North America, and Latin America, how is that factored into.
Virgin capacity, making paper, how does that factored into your outlook.
Michael Hoffman: Hey Matt, congratulations and Ole. I always respect companies who treat Matt's position as a strategic role, so good luck to Bill too. Thank you. You guys do well. On the Q&A side of things, can we dig a little bit deeper? If you pick, end market customers that if they individually, are there two or three of them that if they make a change? Here in North America, this is going to shift the momentum. You know, it's not 20 of them. It's, you know, it's two or three end markets. Maybe it's only one or two.
Yes, we have continued to see just.
Demand being weak, but like we said we did see some turn up in containerboard demand through the end of the first quarter and the new capacity. Yeah. This is the one microwave talked about often over the years that.
Every two years since I've been here you know Armageddon is coming next week in this this business and yet I think that.
The industry has managed to work its way through it.
And understand that focusing on.
Serving the customers and retaining them by providing excellent service helps combat that in terms of loss customers. So.
Ole G. Rosgaard: Who are we watching at this point to shift? their demand out. I would really focus on the chemical customers or the chemical end segments, both the biggest segment is the bulk and commodity chemical, and that has been significantly down, and then the next one is specialty chemicals. Those are the really two big ones, and then the third one would be lube. [inaudible] So the lube market seems to have corrected its end market oversupply of all the finished goods, the destocking, so were there early green shoot As I said, we've seen pockets, sort of sporadic pockets, but it's still not enough to say that, you know, it's permanent.
You know, it's like I said, we adjusted our guidance up for the price that was recognized by a receipt in January.
January but yeah.
Again, I'll repeat what I said it stuns me that we are still dealing with some survey based process to recognize price in this industry when everybody else in the world has moved on to data and analytics and fax because what we were seeing out on the street was no big pushback on the price.
Everybody knew cost driven.
Driven factors justified the price and yet it didn't get recognized so that's the biggest factor in our in our containerboard business right now.
Ole G. Rosgaard: We still see a little bit of destocking, but again, it's very sporadic, depending on, you know, what end segment we're looking at. But I would say it's too early to signal that there is an inflection point. Okay, and then on the paper side, there's a whole bunch of new capacity coming online in North America and Latin America. How is that factored into Virgin Capacity Making Paper? How's that factored into your outlook? Yeah, you know, we have continued to see demand being weak, but like we said, we did see some pick-up in container board demand through the end of the first quarter. And the new capacity, you know, this is the one, Michael, we've talked about often over the years that every year since I've been here, you know, Armageddon is coming next week in this business.
Okay, and then when you think about.
Where you would like to sort of a next incremental M&A to fill in the right place and the model what what's the sort of key place that you're watching that today.
Well, we could set the I'll focus on M&A is in the wrestling wrestling based products.
With high margins and pay for converting products with high margins.
And on paper do you find that in niche markets.
Okay, Alright, thank you very much.
Thank you that's a friendly reminder, if he would like to ask a question. Please press star one one from your telephone.
And one moment for our next question.
And our next question will come from Gabe Haiti, Hello, Spargo. Your line is open game.
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<unk> good morning back congrats.
<unk> Yep Mmm, you mentioned it briefly about some of the the recent acquisitions and and sometimes the pushback that we all here.
Is.
Sometimes companies do acquisition to mask, some weakness in the underlying business or something like that we we would contend hey look if you guys can deploy capital and M&A.
Ole G. Rosgaard: And yet, I think that the industry has managed to work its way through it and understands that, you know, focusing on serving the customers and retaining them by providing excellent service helps combat that in terms of loss of customers. So, you know, like I said, we adjusted our guidance up for the price that was recognized by RISD in January. But I'll repeat what I said. It stuns me that we are still dealing with some survey-based process to recognize price in this industry when everybody else in the world has moved on to data and analytics and facts. Because what we were seeing out in the street was no big pushback on the price.
Create a depressed demand maybe you can pick up a deal here and there I'm just curious.
If you could give us any specific.
As it relates to a couple of deals that you got the guys are now integrated you know.
In terms of key learnings number one and number two if.
These deals are kind of hitting underlying or or you know.
Economics that run dependant underpinning those those acquisitions.
Yeah, you know gave I I would say so far we're extremely pleased.
All of these a big factor for Us was.
Cultural fit.
And the Lee acquisition has been particularly incredible from that perspective, I mean, it it has gone extremely well.
And Ah.
They are dealing with the same kind of demand challenges that the entire industry is but.
Lawrence Allen Hilsheimer: Everybody knew, you know, cost-driven factors justified the price, and yet it didn't get recognized. So that's the biggest factor in our container board business right now. Okay, and then when you think about... Where would you like this sort of next incremental M&A to fill in the white space in the model? What's the sort of key place that you're watching today? Well, we, as we said, our focus on M&A is on resin, resin-based products with high margins, and paper converting products with high margins. And on paper, you find that in niche markets.
We sort of knew that going in I mean, it's a broader economic thing, but the results that they are delivering are in line with what we were expecting the integration has gone extremely well you have a <unk>.
Alliances are pretty small one plan kind of thing, it's going very well too.
They are adapting to our safety culture, and our focus on our people and that will end up being a success.
Successful, but it's tiny the iPad Ken transaction, you know, even though it hasn't closed yet or integration activities are well down the path and as soon as that close we expect that to hit the ground running that the cultural said it again seems extremely strong and then in the end we couldn't be more pleased with cole.
Lawrence Allen Hilsheimer: All right. Thank you very much. Thank you. As a friendly reminder, if you would like to ask a question, please press star 11 from your telephone. In one moment for our next question. And our next question will come from Gabe Hajde of Wells Fargo. Your line is open, Gabe.
<unk> I mean kopeck is just.
I mean, it's it's almost like they were part of great for the last 30 years. So.
Gabe Hajde: Foley, Larry, good morning, Matt, congrats. On slide four, you mentioned briefly some of the recent acquisitions, and sometimes the pushback that we all hear is, you know, sometimes companies do acquisitions to mask some weakness in the underlying business or something like that. You know, we would contend, hey, look, if you guys can deploy capital on M&A at a period of depressed demand, maybe you can pick up a deal here and there. I'm just curious if you could give us any specifics as it relates to a couple deals that you guys have now integrated, number one and number two, in terms of key learnings, number one and number two, if these deals are kind of Yeah, you know, Gabe, I would say so far we're extremely pleased. All of this, a big factor for us was cultural fit.
Yeah and these these.
Aren't masking anything there obviously, along the strategic plan that we delivered.
And and and all of these were seeing he actually volumes better nor legacy business. So we're really pleased I gave this to come.
You made about masking Ah the strategy, we have we developed three years ago, we announced it to the investment community two years ago, and what do you have seen a cyst. We had this to executing all the strategy, we presented to the investment community.
So it's very very intentional both of them.
I appreciate that only.
Another one on.
Organic investment and what you guys are doing internally if memory serves I think the the with a lemonade or in Louisville was was up and running and the theater was sort of underway are you guys commercializing at this point or it's gone.
Update us where you're at with what the Saint Peter.
Lawrence Allen Hilsheimer: And the LEA acquisition has been particularly incredible from that perspective. I mean, it has gone extremely well. You know, they're dealing with the same kind of demand challenges that the, you know, entire industry is dealing with, but we sort of knew that going in. I mean, it's a broader economic thing.
She feet are we in the final face it faces of getting pregnant.
<unk> solid outs fire payments and that sort of thing and.
And we will be operational by the end of May of this year.
We will serve the first customer on June 1st.
Yeah, no way of Nader's up and operating it actually.
Lawrence Allen Hilsheimer: But the results that they are delivering are in line with what we were expecting. The integration has gone extremely well. You know, Reliance is a pretty small one plant kind of thing.
It's going very very well.
Okay. Thank you.
I would now like to turn the conference back to Matt Leahy for closing remarks.
Thank you all again for joining have a great day.
Lawrence Allen Hilsheimer: It's going very well, too. You know, they're adapting to our safety culture and our focus on our people. And, you know, that'll end up being, you know, successful, but it's tiny.
This concludes today's conference call. Thank you for participating you may now disconnect.
Goodbye.
[music].
Lawrence Allen Hilsheimer: The IPAC-CHEM transaction, you know, even though it hasn't closed yet, our integration activities are well down the path. And as soon as that closes, we expect that to hit the ground running, that the cultural fit, again, seems extremely strong. And then, we couldn't be more pleased with COPAC. I mean, COPAC is fair.
Ole G. Rosgaard: I mean, it's almost like they have been part of Greif for the last 30 years. So, yeah, and they aren't masking anything. They're obviously in line with the strategic plan that we delivered. And in all of these, we're actually seeing volumes better than our legacy business. So, yeah, we're really pleased. I gave this to the comment you made about masking the strategy we have. We developed it three years ago, and we announced it to the investment community two years ago. And what you have seen is that we are just executing on the strategy we presented to the investment community. So it's very, very intentional what we have done.
Lawrence Allen Hilsheimer: Appreciate that, Ole. Another one on organic investment and what you guys are doing internally. If memory serves, I think the LithoLaminator in Louisville was up and running, and the sheet feeder was sort of underway. Are you guys commercializing that at this point, or is it gone? You know, just update us on where you're at with the sheet feeder. The Sheet Feeder, we're in the final phases of getting permits sorted out, fire permits, and that sort of thing. And we will be operational by the end of May of this year, and we'll serve the first customer on June 1st. Yeah, the laminator's up and operating, and actually, it's going very, very well.
Operator: Okay, thank you. I would now like to turn the conference back to Matt Leahy for closing remarks. Thank you all again for joining. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect.