GREIF, INC Q3 FY26 Results

Our third quarter results demonstrate that Greif continues to become a fundamentally stronger company. Over the past several years, we've been focused on strengthening the business in ways that are structural, not cyclical. The results this quarter are another indication that those efforts are translating into higher earnings power, stronger cash generation and a more resilient company. Despite ongoing geopolitical disruption and an uneven demand environment, we delivered approximately 25% adjusted EBITDA growth, expanded margins by more than 260 basis points, achieved our $90 million run rate cost optimization milestone early and reduced leverage to just 1.1x. Those results were not driven by stronger markets. They were driven by disciplined execution. Across Greif, we continue to simplify the organization, structurally lower our cost base, improve commercial execution, optimize our manufacturing network and invest behind attractive growth opportunities. Every one of those actions makes the business stronger regardless of where we are in the economic cycle. Our cash generation is equally important. We expect free cash flow conversion around 50% this year, giving us the ability to invest in the business, complete disciplined bolt-on acquisitions, increase our dividend, maintain one of the strongest balance sheets in our industry and execute on our commitment to stock repurchases with a new repurchase plan, as Larry will further discuss in a moment. Lastly, we remain committed to delivering $120 million of annualized cost optimization on a run rate basis by the end of next fiscal year, while continuing to improve margins, returns on capital and cash generation. As expected, the conflict in the Middle East continued to impact demand during the quarter. Even so,we saw encouraging sequential improvement across all 4 of our business segments. In Polymer Solutions, volumes increased 1.5%, led by continued strength in IBCs and large polymer containers. While small polymer volumes were below last year's unusually strong comparison, they remain one of the strongest performing product categories in our portfolio over the past 2 years. Metal Solutions also improved sequentially, although broader industrial markets remain soft and continue to reflect geopolitical uncertainty. Fiber Solutions likewise improved from the second quarter. Excluding last year's mill closure, underlying converting demand was close to flat, supported by improved performance in both partitions and tube and core. Closures delivered another excellent quarter. Third-party demand increased mid-single digits, while total volumes increased high single digits as we continued to win attractive new business. While the pace of recovery remains uneven, we're encouraged by the direction of travel across the portfolio. Equally important, we are continuing to win new customers, expand in attractive end markets and invest behind businesses where we see the best long-term opportunities. That gives us confidence that our growth is increasingly being driven by execution rather than simply waiting for markets to improve. This quarter reinforces that the actions we've taken over the past several years are making Greif a fundamentally stronger company. We continue to structurally reduce costs, improve commercial execution, strengthen our portfolio through disciplined acquisitions and invest where we see the best long-term opportunities. At the same time, we're converting more of our earnings into cash, allowing us to increase shareholder returns through dividend growth and share repurchases while continuing to invest in the business and maintain a strong balance sheet. The most important takeaway from this quarter isn't simply that our financial results improved, is that the underlying business continues to improve. We believe that Greif that emerges from this cycle will be fundamentally stronger than the Greif that entered it,with higher earnings power, stronger cash generation, improved margins and a portfolio that is better positioned for long-term growth. Before we open the call for questions, I'd like to thank the thousands of my colleagues around the world in the more than 35 countries in which we operate. Their commitment to serving customers safely, reliably and with excellence is what makes these results possible. Thank you.

Sales were approximately in line with prior year, while adjusted EBITDA improved by approximately 25%, driven primarily by better price/cost and structural cost optimization. These factors also led to adjusted EBITDA margins up over 260 basis points year-over-year and up 110 basis points sequentially from Q2 '26. In addition to the operational efficiency savings, we're delivering through our cost optimization using the Greif Business System framework, our team delivered margin and volume expansion in our target markets during a quarter with significant geopolitical disruption and complex supply chain challenges. Our EBITDA improvement as well as significantly lower interest costs due to our strong balance sheet and favorable year-over-year quarterly taxes resulted in adjusted EPS improvement of nearly 90% year-over-year. Adjusted free cash flow for the quarter was $58 million. In Q3, we strategically maintained higher inventory balances than typical to ensure continuity of supply for our customers throughout the volatility introduced from the Middle East conflict. That inventory was at a high dollar cost due to the increased raw material indices in Q3. We expect both inventory levels and costs to normalize in Q4 and to finish the year with a free cash flow conversion around 50%. As Ole mentioned in his opening remarks, our strategy clearly shows in these financial results. We are incredibly proud of our team for yet again proving the quality of our business model. Profitability remained resilient across the portfolio. In Polymer Solutions,gross profit dollars and percent were both up on positive volume, price/cost and structural cost optimization. In Metal Solutions, gross profit dollars improved year-over-year due to the continued cost optimization and variable cost management. In Fiber Solutions, net sales were lower year-over-year due to the L.A. mill closure Ole mentioned, but converting volumes were solid. Margins were lower year-over-year due primarily to the impact of cost inflation with the offsetting impact of April's $60 a ton URB price increase now beginning to flow into the P&L, which we expect will improve fiber margins heading into Q4. We announced an additional $60 per ton price increase in June and have fully implemented that price increase with our non-RISI customer base. Our commercial discussions remain constructive, and we continue working with customers to align pricing with the value we provide in the current cost environment. While RISI has not reflected that increase, we believe that conclusion is inconsistent with the underlying fundamentals we're seeing, including healthy customer demand and higher year-over-year cost environment. In Closures, volumes, price mix and cost optimization all led to gross profit dollar and percent increases year-over-year. This segment continues to drive profitability through technologically advanced products, new logo growth and strategic investment. We are updating our previous low-end adjusted EBITDA guidance assumption of $610million to a range of $615 million to $635 million. While we continue to expect approximately $20 million of Middle East-related impacts, we have acted decisively across the business to offset at least a portion of that headwind. The revised guidance range represents approximately 10% to 13% EBITDA growth year-over-year. We expect an adjusted free cash flow conversion of approximately 50% for the full year, which is reflected in the updated guidance range of $305 million to $325 million. The primary changes in assumptions from previous guidance are higher working capital and restructuring costs, partially offset by better cash taxes than our previous low-end assumption. While we expect both inventory levels and dollar cost of inventory to be lower sequentially, some of the impact of higher indices from Q3 will persist through year-end. We will continue to invest in our future through high return on invested capital organic growth opportunities while maintaining a strong balance sheet, while we fully intend for leverage to remain below 2.0 and expect that below 1.5x is more realistic for the near term. Our cash generation has allowed us to amplify shareholder returns. In addition to the $150 million share repurchase plan we completed earlier this year, we also announced a 10.7% increase to our recurring dividend, bringing our dividend yield to a compelling level. We will continue executing on share repurchases under our authorization. Given our confidence in the business, we continue to believe our stock is an attractive investment. In that regard, we asked our stock repurchase committee of the Board to approve an additional $150 million stock repurchase plan. We will manage the pace of repurchases with our balance of our long-term goal of approximately 2% of shares outstanding annually while also capitalizing on short-term opportunities in the event of event-driven or other dislocations. Lastly, as we have previously communicated, we are actively pursuing organic growth-enabling bolt-on acquisitions, which allow us to penetrate new markets with our advanced polymer technologies. Envaplast is a leading small polymer container producer in Spain, a market where Greif previously had limited small polymer presence. This acquisition provides a strong foothold to accelerate our organic growth strategy across EMEA while expanding our position in the agrochemical market, which represents the majority of Envaplast's business. The acquisition aligns well with our disciplined M&A criteria, including EBITDA margins well above 18%, free cash flow conversions exceeding 50% and exposure to attractive, less cyclical end markets. Sure, Matt. Our operating rates have continued strong. I mean, we're -- our mill operating rates are 96%. And so the demand in the marketplace is strong. Like I said in my comments, we don't think the underlying fundamentals support RISI not recognizing the price.And we certainly have not had strong resistance from our non-RISI contract-based customers. So we fully expect that, that should be recognized. We haven't built anything into our guidance, but we're seeing strong fundamentals matching up against the actions we took at closing our L.A. mill the prior year, which, by the way, was primarily CRB anyway. But no, things are operating at high levels for us. Yes. I mean, we have seen dramatic price increases in resin through Q3. And our teams have done an outstanding job of really executing and staying ahead of that inflationary price jump and virtually increasing prices day-to-day and working hand-in-hand with customers to face the reality of what the Middle East crisis is driving in that pricing element.