管理層發言
Good day, and thank you for standing by. Welcome to the Greif First Quarter 2026 Earnings Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Bill D’Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.
Good morning, and thank you for joining Greif's Fiscal First Quarter 2026 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results. Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. During today's call, we will make forward-looking statements involving plans, expectations, and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. I'll now turn the call over to Ole on Slide 3.
Thank you, Bill, and thank you all for joining us today. We entered 2026 from a position of strength despite a still muted industrial backdrop. Our Q1 performance demonstrates the progress we are making on two critical fronts: delivering solid financial results in the present while also making progress on our longer-term build-to-last strategy. During the quarter, volumes performed as anticipated, remaining in line with expectations due to continued softness in the industrial economy. Our EBITDA margin profile continues to improve meaningfully, up 260 basis points year-over-year, which is the result of decisive actions taken on our cost optimization. As a result, adjusted EBITDA increased 24% versus prior year, and our results came in as expected. Based on this performance, we are reaffirming our 2026 guidance. Following the portfolio rationalization we undertook in 2025, our leverage is now historically low, enabling significant capital flexibility to create shareholder value. In Q1, we completed $130 million of the $150 million share repurchase program we announced three months ago. Given our strong free cash flow projection for the year with a conversion ratio of 50%, we fully anticipate remaining well below a leverage of 2x. Our strong free cash flow generation and balance sheet strength allows us to fund value-creative organic growth, including growth CapEx in our existing operations and higher return in end markets. As we drive growth externally, we are also accelerating internal transformation. Our run-rate cost optimization is now at $65 million, which reflects primarily SG&A actions taken early in fiscal 2026, which will benefit EBITDA for the majority of the year as contemplated in our original guidance. As a reminder, our fiscal 2026 year-end run-rate commitment is $80 million to $90 million. We are confident in the progress we are making, and we believe we are demonstrating our ability to manage the present while continuing to shape the future. Please turn to Slide 4. Our end market performance reflects the reality of broader economic conditions remaining soft. In Customized Polymer Solutions, demand was essentially flat overall. IBC volumes were up low singles. Small containers down low singles, and large containers down mid-single digits due to continued industrial softness. This is consistent with our expectations heading into the year, and we expect small containers to sequentially improve into Q2 as Ag seasonality picks up. Durable Metal Solutions remained under pressure with softness across regions, especially with chemical customers. We continue to focus this business on cost discipline and cash generation. Sustainable Fiber Solutions saw volume declines in converting due to North America industrial softness, but the mills ran at solid operating rates throughout the quarter. Innovative Closure Solutions volumes declined high singles from both metal and polymer closure demand, driven by the industrial softness I just spoke on. Importantly, total sales, which reflects sales both direct to third parties and sold through our polymers and metals businesses were approximately flat due to strong price/mix, with volume down only mid-singles. This shows that our highest performing products remained the most resilient in the quarter. Overall, Q1 performance was consistent with our expectations and reflects our ability to improve margins through disciplined execution even in a muted industrial environment. With that context, I'll turn it over to Larry to walk through the financials on Slide 5.
Thank you, Ole, and hello, everyone. Adjusted EBITDA for the quarter increased by 24%, and margins improved by 260 basis points to 12.3%, which reflects better price and cost management along with the significant advantages of structural cost optimization. Although adjusted free cash flow in Q1 was lower compared to last year, this was mainly due to cash flow from divested businesses included in the prior year. When excluding that effect, the key cash generation and ongoing operations saw improvements year-over-year, aided by EBITDA growth, reduced interest expenses after deleveraging, and lesser maintenance capital following our containerboard sale. As we mentioned last quarter, Q1 is usually the weakest quarter for free cash flow, and we are fully confident in our low-end adjusted free cash flow guidance of $315 million and an expected conversion rate of about 50%. Our earnings strength is evident in our earnings per share results, which rose by 140% year-over-year, thanks to increased EBITDA and lower interest expenses, despite a higher tax expense compared to last year. In Customized Polymers, gross profit decreased even though volumes remained approximately flat, due primarily to product mix, despite gains from cost optimization. Durable Metals saw a slight increase in gross profit year-over-year, mainly due to structural cost optimization. Fiber sales were affected by the anticipated demand softness we discussed during our Q4 call. However, margins expanded year-over-year due to cost discipline and favorable pricing and OCC costs compared to last year. Innovative Closures sales are presented as total sales to accurately represent the margin profile, since gross profit reflects both direct external sales and those sold through metals or polymers businesses. Total sales were about flat year-over-year, but gross profit increased due to a strong mix and ongoing benefits from our cost optimization efforts. We are reaffirming our low-end 2026 guidance of $630 million in adjusted EBITDA and $315 million in adjusted free cash flow. This guidance accounts for notable structural cost optimization, year-over-year price changes in fiber as reflected in RISI since our Q4 call, and overall flat volumes for the year. Our Q1 results closely aligned with our guidance expectations. Price and raw material costs were slightly better than planned, while volumes and manufacturing costs were slightly behind, and SG&A was in line. No individual category saw significant changes, and the overall impact was in line with our expectations, reinforcing our confidence in the guidance. Our capital allocation strategy continues to focus on pursuing organic growth that enhances margins and delivers high returns on invested capital. Our leverage remains historically low, and our maintenance CapEx needs have significantly decreased from last year, enabling us to pursue high-return organic growth investments. We plan to keep increasing our dividend over time and have nearly completed the $150 million share repurchase program announced last quarter. We still believe our stock represents one of the best value propositions for investment. Consequently, in December, our Board approved a new $300 million share repurchase authorization. We will carry out this authorization in a disciplined fashion, integrating repurchases into our balanced capital allocation strategy with the aim of repurchasing up to 2% of our outstanding shares annually. As Ole mentioned, we can achieve these targets while remaining well below our 2x leverage. Our strong balance sheet and robust free cash flow generation enable us to accelerate organic investments, funding growth CapEx within our existing operations and higher return end markets, even amid a sluggish macro environment.
Thanks, Larry. As we look ahead, we remain grounded in the realities of a still cautious demand environment, but we're not standing still. We're executing on cost, on capital and on strategy. The work we've done to transform Greif is not cyclical. It's structural, and it shows how we perform, how we invest and how we allocate capital. My sincere thanks to our colleagues all around the world for driving this transformation with me. We remain focused on managing the present while also building the next era of durable value creation for Greif. Thank you for your support. Operator, please open the lines for questions.
分析師問答
And our first question will be from Gabe Hajde of Wells Fargo Securities LLC.
I wanted to ask, I mean, you guys have been operating sort of in this muted environment now for three years and have done a really good job of kind of hitting the low-end guidance and even moving it up a little bit. I'm curious, Larry, you kind of talked about some costs coming in a little bit better and that gives you confidence in the full year. But the volume performance here in fiscal Q1 was maybe a little bit even below what we were expecting. So was there anything, I guess, as the quarter progressed from an inventory management standpoint from your customers that jumps out at you? And then just being a little bit more back-end weighted, I'm curious if you can talk about trends in the fiscal Q2 such that it kind of implies a pretty good ramp into the back half of the year, on the volume side.
Yes, thank you, Gabe. I want to mention that demand conditions remain subdued, especially in the fiber and steel sectors, reflecting ongoing pressure in both industrial and chemical markets. In some of our segments, there is some seasonality that we expect will improve in Q2. However, the overall environment has not changed significantly. Last week, I met with around eight customers globally, and the feedback was consistent: conditions are still subdued. That said, we are not becoming complacent. Our commercial teams are acting with purpose as we shift our approach to focus on new business rather than maintaining existing accounts. We are investing in organic growth and expanding capacity in areas where we anticipate strong demand. We are taking a very proactive stance in the market.
Gabe, one thing to supplement what Ole said is we have seen volume trajectory in our small plastics start Q2 in a very positive way.
Okay. And then I guess on the OCC front, any insights there? I know you guys obviously have the recycling operations. It seems like expectations are still for pretty flat here in the first, call it, half of '26. Anything that you'd point out for us there?
I just agree with that. That's our feeling as well, Gabe.
Okay. And CapEx, you've called out a couple of growth projects. It sounds like it's mostly small format plastics. Any particular geography or area that you want to call out for us?
In various regions, we are deploying additional capacity in Europe where we have strong business cases. In Africa, the mining sector in Southern Africa is experiencing significant growth due to the demand for precious metals. A lot of the products we manufacture in that region are used in mines, so when we add capacity in this area, we see immediate returns on our invested capital. We've also added capacity in India and last year in Singapore for specific customers, resulting in long-term contracts. I'm confident that this trend will continue as opportunities remain strong.
Our next question will be coming from George Staphos of Bank of America Securities.
On the topic of volume, I was hoping you might be able to give us a bit more color in terms of what you're seeing with metal, recognizing, as you said, maybe things were a little bit weaker, but not terribly out of line. Where are you seeing some strength, if at all, within the end markets within metal where things perhaps weaker? And I remember, Larry and Ole, you had been expecting some pickup to be helpful in housing if it were to occur relative to these in your business overall. Any thoughts on what you're seeing out of your markets that are exposed to housing at this juncture?
I'll start with a comment and then Larry will follow up with his insights on housing. For our metal segment, the largest area is chemicals, and one of their key sectors is housing. Currently, we haven't observed any increase in that area, and demand continues to be weak as I mentioned. Once housing shows improvement, we should see a corresponding uplift. The mining side, which I highlighted earlier, is crucial because mining requires significant supplies that are transported in metal containers, which are often left in mines. Unlike polymer products, which can't be stored in mines due to fire hazards, metal supplies are more manageable in that context as we are focusing on cash flow. Now, I'll turn it over to Larry for his thoughts on housing.
Yes, George, it's interesting. There have been a couple of headlines in the last couple of months of resale of existing homes picking up a bit. I think in like November better than 5%. It's nice to see the headline. It's interesting to get a little bit underneath it. I think we've shared before that existing home sales are at 1995 levels. What's more, I guess, I call it interesting. And I look at it as interesting because I think it truly is an upside because I do believe it will turn at some point. Existing home sales today are actually on a population-adjusted basis at the levels of 1982. 1982 had 16% mortgage rates, and we were in a recession. And so they are really decimated. And as we've said before, when people go to sell an existing home, they spend money to fix it up, do all this. The new person moves in, cares out what everybody else fixed up, buys new appliances, paints, buys new furniture. So it really is a big driver for the chemicals industry and us, but it is not there yet. I guess the positive, I think of it is, it's become a real issue for the current administration. You can see Trump talking about not allowing corporate investment in housing. You also see some discussion of portable mortgages, which is an interesting concept that's been in the U.K. for quite some time. So there's a lot of focus on it, but it really gets down to what's the resale prices and what's the interest rates.
Okay. I appreciate that. Larry, two last ones, I'll turn it over and I'll ask them together. One, can you remind us where you think the price cost on fiber will sort of anniversary right now, things are good? Is that a second half issue? Or should you be running relatively positively throughout the year? And then margins in polymers were a little bit weaker than we were expecting. I know gross margin wasn't down as much. EBITDA was down a bit more than we were expecting. What was driving that? And what are the implications going forward?
Yes, the answer to the fiber question is affirmative. The annualization will occur later in the second half of the year. Regarding polymers, the decrease is primarily due to a mix issue. We saw a decline in our small polymers and large plastic drums, which are our higher margin products, while there was a slight increase in volumes for the IBCs and medium categories. So, it was essentially just a mix issue and not related to costs or pricing.
But to elaborate on that, polymer gross profit margins were slightly lower year-over-year in Q1, primarily due to the mix and manufacturing costs, as Larry pointed out. Volumes were also lower in small plastics and large plastics, which are among our higher-margin polymer products. Overall, this reduced contribution from those products had a short-term impact on margins. Additionally, manufacturing costs across our network were higher. We are actively addressing manufacturing costs and expect that to improve as the year progresses.
It seems like the EBITDA margin delta was worse than the gross margin delta. Anyway, I'll turn it over. If you have any thoughts on that, we take them otherwise, good luck in the quarter.
Yes. George, just back to the issue that we've talked about and why we moved to gross profit. It gets to be the allocation issue of overhead cost is what the driver on the EBITDA difference is.
And our next question will be coming from Mike Roxland of Truist Securities.
I wanted to follow up on volumes. They declined by about 5% in the first quarter. The EBITDA guidance expects volumes to remain flat or possibly increase slightly for the year. What gives you confidence that volumes will improve? If volumes stay weak, meaning flat or a slight decline, how would that impact your EBITDA guidance for the year?
Yes. I'll address the EBITDA guidance for the year. I want to emphasize that we are very confident, which is why we provided low-end guidance. There are various factors that contribute to this. On the volume side, we anticipated lower numbers in some products for Q1, and it turned out to be a bit lower than expected. However, as I mentioned earlier, we're seeing an increase in small plastic volumes. Additionally, as Ole pointed out earlier, we remain very optimistic about our commercial team and the incentives we have implemented, as well as the positive results we are starting to see from those initiatives. Ole?
Yes. First, the bridge was never built on Q1 year-over-year performance. It reflects how we expect volumes to progress or normalize across the year. And as we have established, Q1 came in softer than last year, but nothing we saw changes our full year view. And importantly, as our commercial teams, they remain extremely active. I mentioned we have done a lot of organizational changes in the company. We have transformed or are transforming our global commercial organization from farmers to hunters. We are changing or have been changing the incentive program for that. We are targeting CapEx where we see organic growth opportunities, and we do that in a very disciplined way where we are targeting short-term gains. And basically, we've already seen customer wins and share of wallet gains with existing customers, which again supports our confidence in volume progressing as the year unfolds.
That's very helpful. So basically, what it comes down to is volumes were weaker in 1Q, but given some of the commercial activities that you're seeing, you think those wins should creep up or should occur sometime in the back half that will allow you to achieve your volume guide for the year. Is that fair?
That's fair.
Perfect. Got it. And just one quick follow-up. Following up on George's question about the price cost spread in fiber, I believed that would have been more apparent in fiscal 2Q. If that's true, what is the company doing to address that headwind as you encounter it?
Yes. I mean you saw the $40 a ton in URB was last May rolled in, in June and July, and the OCC was through the last part of the year. So it's that second half of our year with more of it coming in the last quarter just because of the way some of the contractual pass-throughs work. That's all it is, Michael.
Got it. Okay. And then one last question. Just you mentioned, I think, last quarter, deploying a very unique proprietary form of barrier technology. You said you guys are the only ones that have that. Wondering if you could provide any more color around the technology, what it does, the competitive advantage it gives you? And have you received any orders on that? We are using that technology?
Yes, it's called the SIOC technology. We have received orders. The first machine is fully operational in France. We have three more machines in production that will be deployed during this year, and that will be followed by further machines. So far, everything is going very well.
Yes. The financial impact for this year is not significant, Michael, but we are very, very optimistic about this technology and its impact, and we're ramping it up.
And our next question will be coming from Matt Roberts of Raymond James.
I'll start in fiber. I think you noted converting was down mid-single digits this quarter, which I believe is down from low single-digit decline seen last quarter. And on the operating rates, I believe you said last quarter was 90%, quarter before that 95% and now solid. So maybe where are operating rates trending now versus those prior two quarters? And does that support price that was previously taken? And in tubes and cores, you're understandably lapping some paperboard supply cuts that were in 2025. When do we lap those? When should we expect tube and cores and fiber more generally to return to growth?
Yes. So I mean, first of all, the URB mills, they took about, I think, about 14,000 tons of economic downtime in Q1, but that was all due to converting softness. And then converting saw similar MSD declines. And the largest driver is basically the paper industry, where we supply costs for SDS and CRB grades. We do expect fiber profitability to improve sequentially. There's a lot of activities in the pipeline.
That's helpful. And on the price cost, Larry, last quarter, you gave a bridge at the $30 million in price cost, I think $18 million of that was in the URB price and lower OCC. It sounds like there aren't any changes in expectations from OCC or URB price. But any other impacts or puts and takes from nonmaterials impacts, whether that be energy or freight?
No, there are a lot of things happening. We're doing a great job with our cost reductions. As you've likely seen, healthcare cost inflation is affecting all industries in the U.S., but we're managing to overcome those inflationary impacts while still delivering on our commitments. Regarding any differences from our Q4 guidance, there aren't any, other than the fact that we've reduced our professional headcount by 10%, totaling 220 positions. We are continuing to work on this, focusing on our overall objectives and addressing inflationary challenges.
That's very helpful, Larry. And if I can get one last one in. Just on the repurchases. I think you said $130 million of the $150 million was exhausted during the quarter. Is that remaining $20 million, is that still outstanding utilized quarter-to-date? Or was it replaced by the $300 million? And on that $300 million, I know you committed now to that 2% annual buyback. Should we expect any more in 2026? Or is that more 2027, given you've already about doubled that target so far in '26?
Yes. I'll handle the first part. We have completed $130 million, and there is still $20 million left. That will likely be finalized by summer. The current price of the B shares is beneficial for that. I'll let Larry address what happens next.
Yes, the $300 million is in addition to the $150 million, Matt. Our intention moving forward is to implement a buyback of about 2%. We believe our stock is a great investment, and we might discuss with our Board the possibility of exceeding that, but we are committed to maintaining the 2% level going forward, pending our Board's approval.
I would now like to turn the conference back to Ole Rosgaard for closing remarks.
Thank you very much, and thank you again for your interest and for your time and for your questions today. Greif has entered fiscal 2026 with strong momentum. Our 24% increase in EBITDA dollars, expanding EBITDA margins and meaningful cost reductions demonstrate our ability to drive returns in a muted demand environment. We have also reduced leverage to 1.2x while reducing or returning approximately $130 million to shareholders through disciplined share repurchases as discussed. This performance underscores the strength of our portfolio, the effectiveness of our operating model and our ability to convert execution into results. Our strategy is working, and we are positioned to continue delivering durable earnings and cash flow improvements. Have a great rest of your day. Thank you.
This concludes today's program. Thank you for participating.