Good day and thank you for standing by. Welcome to the Greif Fourth Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Bill D'Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.
Good morning and thank you for joining Greif's Fiscal Fourth 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 and fiscal 2027 guidance. 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 non-public 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 good morning, everyone. Before we discuss the fourth quarter, I want to start with the bigger picture, how Greif has changed over the past two years, and what that means for our shareholders. Two years ago, we set out to build a simpler, stronger, more profitable Greif. We introduced our solutions-based operating model, brought our global commercial teams together, and committed to taking $100 million of structural cost out of the business. Today, those actions are delivering. We have achieved $105 million in annual run rate cost savings and expanded Adjusted EBITDA margins by approximately 160 basis points. We sharpened our portfolio through the containerboard and timberlands divestitures.
We reduced leverage from 3.5 times to 1.2 times at year-end, and we have returned capital to shareholders, raising the dividend by nearly 15% over two years and repurchasing approximately $225 million of shares in fiscal 2026. This is meaningful progress in a short time. Greif has greater earnings power, a stronger balance sheet, and more room to invest in growth. Our shareholders have participated in that progress, with total shareholder returns of more than 35% over the past two years. We are not finished. Our priorities are straightforward: win new customers, grow our share of business with existing customers, invest in high-return opportunities in Polymers and Closures, and keep taking structural costs out of the business. We will remain disciplined with capital, including targeted acquisitions and shareholder returns, while keeping leverage below two times. These results belong to our thousands of colleagues around the world.
They have driven this change while continuing to serve our customers. I want to thank them for their commitments and execution. Please turn to slide four. Now, look at what this means for our fiscal 2026. Adjusted EBITDA reached $625.7 million, up nearly 12% from last year, despite another year of weak industrial demand. Adjusted earnings per Class A share rose to $4.04, an improvement of 75% from a year ago. Our year-end leverage ratio was 1.2 times. We repurchased $225 million of shares during the year. These are clear signs of stronger earnings and financial flexibility. We also announced our exit from coated recycled board through the closure of our Sweetwater mill. While it may be a difficult decision for those affected, it is the right one for the long-term health of our Fiber business. It sharpens our portfolio and supports a more efficient network.
The key point is this: we are producing better results through actions we control. We are not depending on an industrial recovery to improve Greif. Please turn to slide 5. Cost improvements is one of the clearest examples of that approach. At the end of fiscal 2025, we had delivered $50 million of annual run rate savings. At the end of fiscal 2026, that number reached $105 million. We met our original $100 million commitment a year early. We are now raising the target to $150 million by the end of fiscal 2027. That is 50% above our original commitments, and another $45 million of annual run rate savings beyond what we have already delivered. The work is practical, improve operating efficiency, simplify our network, and reduce overhead. These savings are structural. They are designed to make Greif more competitive and support margin expansion through the cycle.
We have earned confidence by delivering. Now we need to deliver the next $45 million. Please turn to slide 6 for our fourth quarter results. Turning to demand, the industrial backdrop remains difficult. We have not seen convincing signs of a broad recovery. In the fourth quarter, primary product volumes in Polymer and Metal each declined about 2.3% from a year ago. Closures declined 3.5%. Fiber was the exception, with volumes up 1.3%. Within Polymer, intermediate bulk containers grew at a high single-digit rate, while smaller containers faced customer destocking, higher resin costs, and weaker agricultural demand. Metal continue to reflect soft industrial activity across regions. Fiber benefited from steady converting demands. Closures experienced lower volumes, but we remain confident in its long-term growth opportunities. We are being realistic about the markets. We do not control when demand recovers.
We do control how well we serve our customers, how quickly we win new business, how efficiently we run our operations, and where we invest. That is where our teams are focused. We are strengthening our commercial execution, pursuing growth in attractive end markets, and continuing to improve our cost base. With that, I will turn the call over to Larry to review the quarter, our financial performance, and our outlook.
Thank you, Ole. Adjusted EBITDA declined approximately $5 million, or 3.1% year-over-year in Q4. However, the prior year quarter included $18.2 million of favorable incentive accrual reductions without regard to the sale of containerboard. Excluding this prior year item, adjusted EBITDA increased $13 million, or 8.7%, and margins expanded approximately 60 basis points year-over-year, reflecting disciplined price cost management and structural cost optimization. Adjusted EPS increased 50% year-over-year in Q4, driven by lower interest expense from our strengthened balance sheet, lower tax expense, and the impact of stock repurchases. Adjusted free cash flow declined $89 million year-over-year in Q4, primarily due to the inclusion of containerboard cash flows in Q4 2025, higher cash taxes, partially offset by better working capital on a year-over-year basis. This brings full year adjusted free cash flow to $279.3 million.
As we discussed in Q3, the Middle East conflict created significant disruption in raw material markets, particularly resin. At the time, we expected conditions would allow us to normalize inventory levels during the quarter. However, as supply disruptions intensified and raw material costs remained elevated, we made the decision to maintain higher inventory levels to ensure continuity of supply for our customers. These elevated inventory balances, combined with higher resin costs, increased our investment in working capital and negatively impacted free cash flow relative to our prior guidance. While this created a near-term cash flow headwind, the decision ensured continuity of supply for our customers. Importantly, this is a working capital timing impact rather than a structural change in our cash generation capabilities. Please turn to slide 8 for our segment results. In Polymer Solutions, sales increased due to favorable pricing, partially offset by lower volumes.
Gross profit percent declined due to product mix and the flow-through of higher resin costs. In Metal Solutions, gross profit dollars and percent improved year-over-year due to favorable price cost, partially offset by lower volumes. In Fiber Solutions, net sales benefited from higher volumes and the flow-through of our previously announced April $60 per ton price increase. While gross profit dollars and 11 million and 230 basis points respectively, both remain below the prior year due in part to the delayed recognition of our June-announced $60 per ton price increase. That increase was recognized by RISI in September, and we expect the full benefit to begin flowing through the P&L in the second quarter of fiscal 2027. In Closures, favorable price mix and variable cost management drove approximately 40% year-over-year gross profit dollar growth and a 490-basis point gross margin expansion.
This segment continues to benefit from technologically advanced products, new logo growth, and strategic investment. Please turn to slide nine for our capital allocation update. Our capital allocation framework remains unchanged as we enter fiscal 2027, with a continued focus on maintaining a strong balance sheet, returning capital to shareholders, and investing in high-return growth opportunities. Our top investment priority remains organic growth. Our fiscal 2027 CapEx guidance is $185 million, up from $160 million in fiscal 2026, reflecting increased investment in high-return growth opportunities, primarily in Polymers and Closures, serving our target end markets, as well as investments to drive operational efficiency gains in Fiber and Metals. Returning capital to shareholder remains an important priority. In fiscal 2026, we repurchased $225 million of our shares, representing approximately 6% of the shares outstanding.
While our long-term objective remains approximately 2% annually, we took advantage of attractive opportunities to repurchase shares during the year. We will continue allocating capital with discipline while maintaining our commitment to leverage below two times. Please turn to slide 10 for our fiscal 2027 guidance. Our fiscal 2027 low-end guidance reflects our consistent methodology of incorporating potential headwinds while recognizing tailwinds only when they are known and highly likely to occur. Our Adjusted EBITDA guidance of $645 million assumes $60 million of favorable price cost, including $33 million from improved URB pricing relative to OCC cost. The remaining benefit reflects favorable price cost in Polymer and Metal based on current raw material trends and continued pricing discipline. This is partially offset by $20 million of transportation and other non-raw material cost inflation.
We also assume a $10 million tailwind from incremental Envaplast ownership and partial-year benefits from the Sweetwater closure, partially offset by a $5 million currency headwind. Our volume assumptions represent an $11 million headwind driven by low single-digit declines in Metal. We assume flat volumes in Polymer , Fiber, and Closures, with new customer wins offsetting continued industrial demand softness. Finally, SG&A represents an $11 million net headwind, as approximately $15 million of structural cost savings are more than offset by $30 million of inflation and strategic investments. Turning to free cash flow, our low-end guidance of $290 million begins with $645 million of Adjusted EBITDA and assumes $185 million of CapEx, $50 million of cash interest, $80 million of cash taxes, and $40 million largely related to restructuring and pension costs. We also assume flat working capital.
While we expect inventory levels to normalize during fiscal 2027, our low-end guidance assumes those benefits are offset by inflationary pressures on working capital. As in prior years, our low-end guidance reflects a conservative view of performance without assuming a broader recovery in industrial demand. Due to our usual Q1 seasonality and the delayed impact of our most recent fiber price increase, which will not fully benefit the P&L until January of 2027, our guidance assumes Q1 will be again our lowest EBITDA dollar and margin contributor of the year at approximately 20% of our total EBITDA guidance and flat EBITDA margins in Q1 of 2026. I'll now hand it back to Ole on slide 11.
Thanks, Larry. Before I close, I want to reinforce the financial progress we've made. As this slide illustrates, we're delivering meaningful improvements in profitability, shareholder returns, and balance sheet strength. These results reflect the actions we've taken to fundamentally strengthen Greif and provide a solid foundation for continued value creation. I'm proud of what our team has accomplished and confident in the direction we are taking Greif. Please turn to slide 12. The progress we've made over the past two years reinforces our confidence in Greif's long-term investment thesis. We have a strong foundation, clear priorities for organic growth and margin expansion, and the financial flexibility to invest in our future while returning capital to shareholders. Thank you for your continued trust and support. Operator, please open the line for questions.
Sure. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. Our first question will come from the line of Mike Roxland of Truist Securities. Your line is open.
Yeah. Thank you, Ole, Larry, Bill, and Dan for taking my questions. Larry, first question, just in terms of the $645 million of Adjusted EBITDA guidance for 2027, you mentioned $50 million of price cost benefit, includes $33 million from improved URB pricing versus OCC. Does that $33 million incorporate the $60 per ton September price increase that you mentioned goes into effect in your books in January?
Yes.
That fully bakes in the $60 for the-
Yes
As it flows throughout. Okay, got it. Perfect. Thank you. Second question, just back in late 2024, at your Investor Day, you guided to about $1 billion of Adjusted EBITDA by fiscal 2027. Ole highlighted the containerboard and timberland sales, and you have also rationalized other assets. Can you help us think about what a normalized EBITDA number would mean today given all those moves?
Yeah. Essentially, obviously with containerboard gone. I think the simplest thing to think about is if you just backed off the $220 million of containerboard plus the $5 million-$10 million of Soterra, and then added back in the M&A stuff we have done since then. I would say, Mike, roughly $750 million kind of thing would be sort of normalized just using that kind of rough math. That sort of reconciles, if you think about how we talk about, if we ever got back to normalized volumes, we would be above that number, but we have inflationary costs that have eaten the other way. That is how I would think through it.
Mike, just to add, we remain committed to the long-term earnings ambitions that we outlined at Investor Day that you are referring to. But we are also being clear that we are not managing the business to a headline number or a fixed timeline. Our focus is building a much stronger Greif.
Very clear. One last question, I will turn it over. How should we think about your portfolio and any further moves? Obviously, you recently announced the closure of Sweetwater by end of this calendar year, as you focus on your resources and businesses and assets where you have leading market positions. Just realizing that you are always evaluating your assets and performance from a portfolio perspective, what do you think is left to be done? Thanks, and good luck in the quarter.
We are very happy with the portfolio we have right now. We have leading positions in all our portfolio companies, and we also have long runways of growth opportunities, particularly in Polymer and in Closure. When you are number one or you are the leader of the world in a particular, like in Metal , it is difficult to grow. As we have outlined, that is where we are focused on really optimizing the business. But we are very, very happy with the portfolio we have now. It is sharp. It is leading edge.
Our next question will come from the line of Ghansham Panjabi of Baird. Your line is open.
Hey, guys. Good morning. This is Josh Vesely on for Ghansham. Thanks for taking my questions. Maybe if I could just start off with a broader volume question. Just looking at your guidance, obviously flat to low single or down low single digits depending on the category. I'm just curious what you guys think the market is going to do this year or what your customers are saying about volumes, just in context of what you guys have been talking about in terms of gaining share via your commercial actions.
Hi, Josh. Ole here. Overall, I mean, demand was consistent with our expectations, first of all. As we outlined, we don't have a crystal ball to give a comment on the whole year. We had assumed basically flat demand like we have experienced here now. But I would say in terms of our organic growth engine, in the year, we won more than 4,000 new logos, and we're seeing business from them starting to come through. So, as we said, we're helping ourselves, and I'm confident that we will grow the business. Just to give you an example of this new logo growth, we have a customer that we have dealt with for many years, but this is relating to the data center markets.
Through the good work of our commercial organization, we won a very large chunk of this customer's business, and this is a global chemical producer serving the water treatment markets. Through the focus that we now have, we actually won a significant new contract, and this customer is now up 200% compared to the same period last year. Another example is another global customer in the high-end perfume markets. We've served this customer for many years with a part of our portfolio, but again, through the intensive work of our new commercial organization, we managed to secure this customer's other business. In fact, their chief procurement officer named us an official strategic partner. The result of all that is that our volume with this customer is up 40% compared to the same period last year.
Josh, the thing I would supplement what Ole said is I would just remind, this is low-end guidance.
Right
We are taking the most sort of pessimistic view. We are seeing the trend lines continue where the industrial economy just continues to suffer. If you are not tied into that data center business, everything else is off. It is a little even worse in Europe with what is going on there. We are really excited about the commercial efforts, and obviously, our expectation is we exceed this low-end guidance.
Great. Thanks for that. Then maybe just for my second question, just curious if you could provide some more specifics on the destocking that you saw in the small plastic volumes. Just more color there on maybe the timing of that and whether or not that is contained in this fourth quarter or if you expect that to kind of linger into 2027. Thanks.
Yeah. It is really, it is twofold. The increase in cost in resin caused customers to destock, hoping that resin will come down again, and that is a big element of that. The other one is the agricultural season, which was very weak so far due to weather events and diesel costs for that matter.
Is that supposed to continue into 1Q, or is it going to linger in, or is it kind of contained into 4Q?
It is isolated to Q4.
Okay. Awesome. Thank you, guys.
Our next question will be coming from the line of Matt Roberts of Raymond James. Your line is open.
Hi, Ole, Larry, Bill, Dan. Good morning. First question on Fiber. The volumes seem to be a bright area and recently took some actions on Sweetwater. We are assuming flat Fiber volumes in 2027. Are there any offsets within that from the exited tons from Sweetwater? If so, how much? How do you think about the margin in that business? You spelled out the price-cost benefit in 2027, but any other considerations from exiting lower-margin businesses or potential productivity gains from that Sweetwater announcement?
I mean, on Sweetwater, so the effect there is 120,000 tons that has been removed, and 60% of that was CRB. The remaining was URB. We have moved that URB to the profitable part of that to other mills. I cannot give you a percentage how much that is, but certainly it is a business we like, and we are still seeing very solid demand in that business. In fact, that is the business that has grown this year.
Yeah, the other part, Matt, it is just you asked about other elements of the margin in that business. That one is particularly impacted by the diesel cost and transportation cost increases because you are shipping raw material into the plant and out of the plant at higher levels than maybe in some of our other businesses.
Right. That makes sense. Then maybe relatedly on the cost side, but $15 million in SG&A in the 2027 bridge. I might have missed this on the call, but was that net of the incremental $30 million in savings, or how much inflation is absorbed from the prior cost outs? Given the announcements, basically, is it fair to say that that incremental $30 million is largely in Fiber Solutions, or how would you split that?
It's pretty much spread across the businesses. We've got incremental cost saves that are hitting SG&A, about $15 million. The remaining increases will be in our cost of operations. That's offset by $30 million of SG&A cost increases, labor inflation. Medical is just going crazy. Those are the inflationary costs that we are working hard to overcome with the cost-out actions.
All right. Thank you all for taking the questions.
Our next question will be coming from the line of George Staphos of Bank of America. Your line is open, George.
Hi, good morning. Thanks for the details. I wanted to cover a bit the waterfall chart, Larry and Ole, on slide 10. We're familiar, obviously, with your approach now to basically giving us the most pessimistic view that you can have in terms of your guidance. Of those waterfall bars, if you will, based on what you know in terms of initiatives you have underway, dialogues you have with customers, with employees within the supply chain, which of those bars would have the most potential upside? Would there be a way to dimensionalize that at this juncture, recognizing that you really want to give us more of the low-end guidance? Second question, in terms of the capital spending this year, the 185, you might have mentioned it, and if you did, I missed it. What is embedded in that number for organic growth, high-return projects?
Yeah, as to your first question, George, on those walks, the one with the most upside is volume. To the extent our commercial activities drive success, that one's got the most upside in it. Most of the others, the transportation, if somebody could tell us when the Russia, Ukraine, and Middle East conflicts end, we might see some upside there, but I don't think anybody's got high bets on that. That's the biggest one, clearly the volume. On the CapEx, we basically we've got our safety investments, we've got our maintenance CapEx. Those are fairly consistent. What's the number on that?
On maintenance, it's around $85 million a year.
Yeah.
We'll spend another $5 million-$10 million on safety.
Safety. The balance of that is toward high organic growth projects, George. Most of those aren't going to deliver any results in this year because we're spending the money now for future. But we're very excited about the number of projects the teams are bringing to us and our ability to execute because of our balance sheet.
Thanks for that, Larry. That makes sense. I do not want to overdo the point, but I just want to come back to the volume trend in Polymer. Were you surprised with the performance relative to what your expectation was going into the quarter? On the destocking, look, recognizing it is behind you from what your remarks pointed to, normally, would not you see destocking when raw material prices are going down as opposed to going up? It sounded like your customers destocked because resin prices were going up. Maybe it is two sides of the same quarter but just wanted to probe that.
On expectations, it is very difficult to have expectations to the weather and what is going on in the Middle East in terms of diesel costs and all that. What happened here, George, is it is a seasonal business, and customers are building up stock in sort of in advance of the season, because once the season starts, you simply cannot do it to order. What they did, because resin costs were increasing, they delayed the stocking exercise, getting ready for the season, because there was some speculation that the resin costs will go down, and then the PAMs will kick in, and then they would get it cheaper instead of sitting with high stocks at a high cost. It is kind of the reverse of what you alluded to.
Yeah. No, look, I get it. It all depends on the context, but over time, people stock up when costs are heading higher because they are worried about a further price hike. We got it. Was it related to any particular customer or not?
No, generally, it was general to all our ag customers.
Yeah. George, this is one of the things as we've gotten more into the jerrycan business, you can store a lot more of those. You don't store a bunch of big steel drum or plastic drums, but small jerrycans, you can speculate, buy them. Then the weather impacted it as well. When they didn't need it, that also contributed to the destock.
All right. Thank you very much. I'll turn it over.
I would now like to turn the call back to Ole Rosgaard for closing remarks.
Thank you. Thank you for your questions today and your continued interest in Greif. We remain focused on disciplined execution and building a fundamentally stronger company, and we have confidence in our ability to continue that progress in fiscal 2027. Thank you for your time.
This concludes today's program. Thank you for participating. You may now disconnect.