Greif, Inc. (NYSE:GEF.B) Q2 2017 Earnings Conference Call - Final Transcript

Jun 08, 2017 • 08:30 am ET

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Greif, Inc. (NYSE:GEF.B) Q2 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. My name is Carol and I will be your conference operator today. At this time, I would like to welcome everyone to the Greif 2017 Second Quarter Earnings Call. [Operator Instructions] At this time, I would like to turn the call over to Matt Eichmann.

Executive
Matt Eichmann

Thanks Carol. Good morning everyone. My name is Matt Eichmann, and I am the Vice President of Investor Relations and Corporate Communications at Greif. Thank you for taking the time to join us today. Joining me are Pete Watson, Greif's President and Chief Executive Officer; and Larry Hilsheimer, Greif's Executive Vice President and Chief Financial Officer.

Following brief remarks, we will open the call for a question-and-answer session. In accordance with regulation of fair disclosure, I encourage you to ask any questions regarding issues that you consider material because are prohibited from discussing significant non-public items with you on an individual basis. Turning to Slide 2. 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, we will be referencing certain non-GAAP financial measures and a reconciliation to the most directly comparable GAAP metrics is contained in the appendix of today's presentation.

And now, I turn the presentation over to Pete on Slide 3.

Executive
Peter G. Watson

Thank you, Matt. Good morning everyone and welcome to our call. Our vision at Greif is an Industrial Packaging, be the best performing customer service company in the world. We are committed to building the best team aligned to value creation that delivers exceptional customer service with a relentless focus on disciplined operational execution. Our team with those focused areas will enable us to achieve our performance expectations.

Please turn to Slide 4. We delivered solid second quarter results across our portfolio, despite a year-over-year price cost margin squeeze in our paper business, driven primarily by dramatic OCC cost increases. Our performance is a reflection of sustained operational improvement in our businesses around the world.

Net sales for the second quarter were more than $887 million, a $47.8 million improvement versus the prior year and benefitted from strategic pricing decisions, higher index prices, and better operational execution. Our operating profit before special items grew to almost $85 million for a margin of 9.6%, a 20 basis point improvement year-over-year and close to our transformation run rate commitment.

We generated $0.67 in Class A earnings per share before special items versus $0.47 in the prior year quarter. We are narrowing our full year fiscal 2017 Class A earnings per share guidance range to $2.84 and $3.02 per Class A share. We are also narrowing our free cash flow guidance range to $180 million to $200 million as a result of recently approvied capital expenditures.

Although it was a stronger quarter, we still have much more room to improve. I'm disappointed in our performance in working capital management, and to be clear, our expectation is to generate cash from working capital. We are