Greif, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended October 31, 2022. This is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter financial summary. Unless noted otherwise, amounts are U.S. dollars.
Business context
Greif is a global packaging and services company operating in more than 35 countries. Its reportable segments are Global Industrial Packaging, Paper Packaging & Services, and Land Management. It also manages approximately 175,000 acres of timberland in the southeastern United States.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $6,349.5 million | $5,556.1 million |
| Gross profit / margin | $1,285.4 million / 20.2% | $1,093.0 million / 19.7% |
| Operating profit | $621.2 million | $585.2 million |
| Net income | $394.0 million | $413.2 million |
| Net income attributable to Greif | $376.7 million | $390.7 million |
| Diluted EPS, Class A / Class B | $6.30 / $9.53 | $6.54 / $9.84 |
| Adjusted EBITDA (non-GAAP) | $917.5 million | $764.2 million |
| Cash from operating activities | $657.5 million | $396.0 million |
| Capital expenditures | $176.3 million | $140.7 million |
| Cash and cash equivalents, year-end | $147.1 million | $124.6 million |
| Long-term debt, net of financing costs | $1,839.3 million | $2,054.8 million |
Sales rose 14.3%, principally from higher average selling prices, partly offset by lower volumes, currency translation, and the FPS divestiture. SG&A was $581.0 million, or 9.2% of sales, versus $565.9 million, or 10.2%, in FY2021. Net income declined despite higher operating profit, largely reflecting higher income tax expense and unusual charges. Cash from operations increased; investing activities used $28.2 million and financing activities used $531.0 million.
At year-end, Greif reported $758.1 million of available borrowing capacity under its $800 million revolving facility and stated that expected operating cash flows and borrowing sources should cover anticipated needs for at least 12 months. The company was in compliance with its credit agreement covenants. The filing reports $1,918.7 million of total debt before current portion and deferred financing costs.
Segment results and material changes
- Global Industrial Packaging: Sales increased to $3,652.4 million from $3,316.7 million. Operating profit fell to $313.7 million from $350.2 million, including a $62.4 million non-cash impairment related to the FPS divestiture. Adjusted EBITDA was $458.2 million versus $453.3 million; gross margin declined to 19.0% from 20.6% as higher raw material, utility, and transportation costs weighed on results.
- Paper Packaging & Services: Sales increased to $2,675.1 million from $2,218.4 million. Operating profit rose to $298.5 million from $131.0 million, and adjusted EBITDA rose to $450.5 million from $302.0 million, mainly reflecting higher selling prices. Gross margin improved to 21.8% from 18.1%, despite higher input, freight, labor, and utility costs.
- Land Management: Operating profit was $9.0 million versus $104.0 million in FY2021. The prior-year result included $95.7 million of gains from a timberland sale; adjusted EBITDA was broadly unchanged at $8.8 million versus $8.9 million.
The company completed the sale of its approximately 50% interest in the Flexible Products & Services business in April 2022, receiving $131.6 million in net cash proceeds, including cash from the deconsolidated venture. It also refinanced its debt in March 2022, redeemed $500 million of 6.50% senior notes, and recorded $25.4 million of debt extinguishment charges. In December 2022, after fiscal year-end, Greif acquired Lee Container for $300 million in cash, funded through its existing credit facility.
Outlook, commentary, and risks
- Management expected Global Industrial Packaging demand to weaken through the first fiscal quarter of 2023 and remain soft through the second quarter. It anticipated falling steel prices would compress margins into the second quarter, with demand and margins improving in the second half as higher-cost steel inventory worked through the system.
- For Paper Packaging & Services, management expected customer-demand weakness into early fiscal 2023, followed by sequential improvement, particularly in the second half. It expected old-corrugated-container prices to remain stable into the second quarter and then rise; resin, other direct materials, transportation, labor, and utility costs were expected to be relatively stable.
- Key risks include economic slowdown and weaker customer demand; inflation and volatility in steel, resin, recycled fiber, energy, and freight costs; lagging cost pass-through; labor availability and costs; foreign-exchange exposure; and geopolitical and supply-chain disruption, including the Russia-Ukraine conflict and continuing COVID-19 effects. Russian operations represented approximately 3% of sales, 6% of operating profit, and 2% of assets at year-end.
- Other matters to monitor include environmental and regulatory compliance, cybersecurity and IT-system transition risk, pension funding, potential asset impairment, and the proposed Milwaukee-area environmental consent decree involving Greif’s joint venture. The decree, filed for court approval in November 2022, includes approximately $1.6 million in penalties and required operational changes; it was not yet final at filing.
- Greif reported $71.0 million of non-cash asset impairment charges in FY2022, primarily the $62.4 million FPS-related charge. Income tax expense increased to $137.1 million from $69.6 million; the company cited the mix of earnings and book losses on disposals for which limited tax benefits were available. Goodwill was $1,464.5 million; annual testing found reporting-unit fair values exceeded carrying values by at least 29%, with no goodwill impairment recorded.
Most important facts for investors to verify
- Whether the expected fiscal 2023 recovery in demand and margins occurred, especially in Global Industrial Packaging and Paper Packaging & Services.
- How successfully Greif passed through or absorbed changing raw material, energy, freight, and labor costs, and whether segment margins recovered.
- The post-acquisition debt, cash flows, integration costs, and operating performance of Lee Container, including the completed purchase-price allocation.
- Debt refinancing and liquidity developments, particularly the 2023 maturities of receivables facilities and scheduled debt payments, interest-rate exposure, and covenant headroom.
- Any final court approval or subsequent developments concerning the CLCM environmental consent decree, and changes in environmental reserves or other contingencies.
- Whether unusual items, including divestiture-related charges, impairment, tax effects, and land-sale gains, materially affect comparisons with reported or adjusted results.