Greif, Inc. (GEF) Earnings

Management highlights

### Overall Business Strategy & Structural Improvement - Management emphasized that Q3 2026 results reflect ongoing structural, not cyclical, improvements to the business, driven by disciplined execution rather than stronger market conditions. - The company hit its $90 million run rate post-optimization cost milestone early, reduced net leverage to 1.1x, delivered ~25% adjusted EBITDA growth year-over-year, and expanded adjusted EBITDA margins by more than 260 basis points. - Management remains committed to delivering $120 million in run rate analyzed cost optimization by the end of the next fiscal year, with the goal of expanding margins, returns on capital, and cash generation. ### Demand & Operational Performance - Despite ongoing negative demand impacts from the Middle East conflict, the company saw encouraging sequential demand improvement across all four business segments in Q3. - The company intentionally held higher-than-typical inventory balances in Q3 to ensure supply continuity amid Middle East conflict-driven volatility, with both inventory levels and costs expected to normalize in Q4. - The sales force commercial transformation (shifting from existing account maintenance to proactive new customer acquisition and solution-based selling) is progressing ahead of expectations, with early results showing strong new customer win momentum. ### Capital Allocation & Acquisitions - Strong cash generation supports multiple shareholder return initiatives: the company completed a $150 million share repurchase program earlier in the year, approved an additional $150 million repurchase authorization, and implemented a 10.7% increase to the recurring dividend. - The company maintains a strong balance sheet, with leverage expected to remain below 2.0x long-term, and below 1.5x in the near term. - The company recently closed the bolt-on acquisition of Amboplast, a leading small polymer container producer in Spain with limited prior Greif market presence; this acquisition provides a foothold for EMEA growth, expands the company's agrochemical market exposure, and meets disciplined M&A criteria (EBITDA margins above 18%, free cash flow conversion over 50%, exposure to attractive less cyclical end markets). - Management has a healthy pipeline of similar small bolt-on acquisitions, expects to complete multiple such deals annually, and has no plans for large transformative M&A activity.

Guidance

- Management revised full-year adjusted EBITDA guidance upward from a prior low-end assumption of $610 million to a new range of $615 to $635 million, representing 10% to 13% adjusted EBITDA growth year-over-year. This revision accounts for continued ~$20 million in Middle East conflict-related headwinds, offset by decisive operational actions across the business. - Full-year adjusted free cash flow conversion is maintained at ~50%, with full-year adjusted free cash flow guided to a new range of $305 to $325 million. The updated range reflects higher expected working capital and restructuring costs, partially offset by more favorable cash tax assumptions than the prior low-end guidance. Some residual impact of Q3 higher raw material price indices on inventory is expected to persist through year-end.

Segment performance

1. Polymer Solutions: Gross profit dollars and gross profit margin both increased year-over-year, driven by positive volume trends, favorable price-cost dynamics, and structural cost optimization. Volumes overall increased 1.5% year-over-year, led by strength in intermediate bulk containers (IBCs) and large polymer containers, while small polymer volumes declined against an unusually strong prior year comparison. No specific absolute revenue or contribution percentage was provided. 2. Metal Solutions: Gross profit dollars improved year-over-year, supported by ongoing cost optimization and effective variable cost management. Sequential volume improvement was seen quarter-over-quarter, though broader industrial markets remain soft amid geopolitical uncertainty. No specific absolute revenue or contribution percentage was provided. 3. Fiber Solutions: Net sales were lower year-over-year due to the prior year closure of the LA mill, but underlying converting volumes were solid. Gross margins were lower year-over-year primarily due to cost inflation, though the impact of an earlier implemented $60 per ton URB price increase has begun flowing into results, with a second $60 per ton price increase fully implemented for non-RISI customers. No specific absolute revenue or contribution percentage was provided. 4. Closures: Gross profit dollars and gross profit margin both increased year-over-year, driven by growth in volumes, favorable price mix, and cost optimization. Third-party demand increased mid-single digits, while total volumes increased high single digits as the segment continued to win new business. This segment continues to deliver profitability via technologically advanced products, new customer growth, and targeted strategic investment. No specific absolute revenue or contribution percentage was provided.

Risks & headwinds

- Ongoing geopolitical disruption from the Middle East conflict continues to negatively impact demand, create supply chain volatility, and drive sharp increases in raw material input costs. - Overall end market demand remains uneven across segments and regions, with broad industrial markets, chemical end markets, and housing-related end markets remaining soft at historically low levels. - RISI (a benchmarking organization) has not yet recognized the company's recently implemented fiber pricing increase, despite healthy underlying demand and higher input costs, creating near-term margin pressure for the Fiber Solutions segment.

Analyst Q&A

• Q: How has URB demand trended in July after Q3, and what is the outlook for RISI recognition of the fiber price increase? /

  A: Mill operating rates remain strong at 96%, indicating healthy underlying demand for fiber products. The company has not faced significant pushback from non-RISI contract customers on the price increase, so management expects RISI to eventually recognize the price increase, though no recognition is built into current guidance. The LA mill closed in the prior year primarily processed CRB, so current operations are running at high utilization. (312 characters)

• Q: What drove the strong polymer price-cost performance in Q3, and how will this dynamic look in Q4? /

  A: Sharp resin price increases driven by the Middle East crisis hit in Q3, and the sales team executed exceptionally well to pass through these increases to customers nearly in real time, staying ahead of inflation. Management does not expect another dramatic resin price increase in Q4, nor does it expect prices to decline, and the company is well positioned heading into the quarter. (319 characters)

• Q: What is the current demand picture across regions, and was sequential Q3 volume improvement consistent month-over-month? /

  A: Management is encouraged by recent demand improvements, but hesitates to call the improvement a lasting inflection, as gains are coming off a very low baseline. Target growth end markets including flavor, fragrance, and pharma are performing as expected, while fiber and steel-related chemicals and housing remain depressed. The company's strategy focuses on self-help (winning new customers, targeted investment, bolt-on acquisitions) rather than relying on market recovery. (388 characters)

• Q: What is the progress of the commercial organization transformation, and how does the M&A pipeline look today? /

  A: The shift to solution-focused selling and proactive new customer acquisition is progressing very well, though it remains early days; new tools like Drive Plus free up sales time to focus on new customers rather than existing account maintenance. The company has a healthy pipeline of small bolt-on acquisition targets matching its strategic criteria, expects to close multiple similar deals annually, and does not pursue large transformative M&A. (367 characters)