Greif Q2 Earnings Call Highlights

Key Points

• Greif’s fiscal Q2 showed operational improvement with adjusted EBITDA up 7.5% YoY, margins expanding 110 basis points (230 bps sequential), adjusted EPS up >60%, and adjusted free cash flow rising 107% (~$90 million), driven by pricing and cost actions.
• Management trimmed the low-end full-year adjusted EBITDA guide to $610 million citing Middle East-related facility disruptions and softer volumes (Q2 EBITDA hit under $5 million), but kept low-end adjusted free cash flow guidance at $315 million and expects to keep leverage below 2x.
• Productivity and balance-sheet strength were emphasized: Greif achieved $75 million of quarter savings toward a $80–90 million FY target and a $120 million total commitment by FY2027, finished the quarter at a 1.1x leverage ratio after a $150 million buyback, retains $300 million repurchase authorization, and refinanced debt to 2031 at a ~3.14% average rate.

Greif NYSE: GEF reported fiscal second-quarter 2026 results marked by margin expansion and stronger cash generation, while management reduced full-year adjusted EBITDA guidance to reflect operational disruption and softer demand tied to the conflict in the Middle East.

Productivity program and balance sheet highlighted

CEO Ole Rosgaard said the company continued to execute on productivity and cost optimization initiatives, calling them a “core driver” of margin improvement. Rosgaard reported Greif achieved $75 million of savings in the quarter, putting the company on track to meet its full-year savings target range of $80 million to $90 million. He reiterated that the broader program reflects a “total commitment of $120 million by fiscal year-end 2027,” representing defined actions management expects to complete.

Rosgaard also emphasized Greif’s balance sheet strength, noting the company ended the quarter with a leverage ratio of 1.1 times even after completing a $150 million share repurchase program. He described it as “the strongest balance sheet in our nearly 150-year history,” adding that it supports the company’s capital priorities of organic growth, dividend growth, and share repurchases while maintaining leverage below 2x.

Second-quarter performance: margin gains and cash flow improvement

CFO Larry Hilsheimer said sales were “approximately in line with prior year,” while adjusted EBITDA increased 7.5% year-over-year, which he attributed to cost actions offsetting weak volumes. Adjusted EBITDA margin expanded 110 basis points from the prior year and improved 230 basis points sequentially versus the fiscal first quarter, driven by value-based pricing and cost optimization benefits.

Hilsheimer said the combination of higher EBITDA, lower interest costs “due to our historically strong balance sheet,” and favorable year-over-year taxes drove an adjusted EPS increase of “over 60%” year-over-year.

On cash generation, Hilsheimer said adjusted free cash flow rose 107%, or about $90 million, compared with the fiscal second quarter of 2025. He noted the prior-year quarter also included about $30 million of cash flow from the containerboard business Greif has since divested; excluding that, he said free cash flow improved “over 200%.” Rosgaard separately stated free cash flow improved by $93 million compared with Q2 2025, despite the prior-year contribution from the divested business.

Middle East conflict: facility disruptions and inflation pressures

Management said the conflict in the Middle East had direct impacts on operations and costs during the quarter. Rosgaard said Greif experienced “intermittent periods of shutdowns in at least one of our facilities in the region,” and estimated the total adjusted EBITDA loss in Q2 at “less than $5 million.” He added that the company has already seen higher input costs due to supply-chain constraints and is taking pricing actions to stay ahead of inflation.

Rosgaard said the company’s first priority is safety for employees and partners in the affected region. He added that the situation remains dynamic and that Greif expects it “going to continue to evolve,” with the company monitoring price-cost dynamics and maintaining close communication with suppliers to ensure continuity of supply for customers.

Segment trends: mixed volumes, pricing and cost actions support profitability

Hilsheimer said profitability was “resilient across the portfolio,” and described quarter performance by segment:

• Polymer Solutions: Volumes improved, but gross profit was “slightly down” year-over-year due primarily to product and geographic sales mix.
• Metal Solutions: Gross profit dollars and margin improved year-over-year due to cost optimization and variable cost management.
• Fiber Solutions: Net sales declined year-over-year due to lower volumes and mill closures in 2025, but gross profit margin improved 50 basis points on pricing and cost management.
• Closures: Third-party volumes fell low single digits, while total volumes were flat year-over-year. Gross profit dollars and margin increased, reflecting “strong price mix and continued operational improvements.”

Rosgaard also pointed to “notable volume bright spots,” including resilience in small containers due to a strong start to the agricultural season. He said Tubes and Cores demand remained soft but has been improving in the North American paper and film industries. He added that closure volumes were resilient, with total volumes flat year-over-year.

During Q&A, Rosgaard said that excluding Middle East disruption, volumes in Q2 were “very, very similar” to Q1, and that management is not seeing an inflection point in demand. He said the company continues to see growth in “small polymer,” particularly in agricultural chemical end markets, while volume declines tied to Middle East disruption have been “primarily in steel.”

Hilsheimer also discussed operating leverage if volumes recover, saying Greif has capacity across “virtually every factory” and that incremental volume could carry “over 50% margins” in some cases before step-changes such as adding shifts. Rosgaard added that cost actions have been structural, citing a 12% reduction in the professional workforce as an example.

Guidance revised on conflict-related disruption and softer volume assumptions

Hilsheimer said Greif revised its low-end adjusted EBITDA guidance to $610 million, while maintaining its low-end adjusted free cash flow guidance of $315 million. He said the company’s original guidance issued in early November 2025 did not contemplate the Middle East conflict. “If not for the already incurred and potential direct impacts of the conflict, we would not have changed our low-end guidance,” he said.

Hilsheimer said updated guidance incorporates both direct disruption already experienced and an assumption that the conflict contributes to further volume softness. He contrasted prior assumptions—metals and fiber volumes “flattened down low singles” and polymer and closure volumes “up low singles”—with revised expectations of metal, fiber, and closures down mid-singles and polymers flat.

On price and raw materials, Rosgaard said many global customer contracts include price adjustment mechanisms, and Greif has moved most of them to operate on a monthly basis tied to indexes, allowing prices to adjust as raw materials move. Hilsheimer added that Greif has expanded contractual “openers” for other cost increases over the past several years, which he said has helped execution as customers face similar inflation pressures.

Hilsheimer also corrected a detail from prepared remarks regarding recycled containerboard pricing. He said the impact from a $60 URB increase was expected to be an $11 million benefit, partially offset by about $2 million impact from higher OCC, resulting in a $9 million net lift (rather than the earlier stated $5 million net tailwind).

Despite the lower EBITDA outlook, Hilsheimer said Greif expects to maintain its free cash flow guidance, noting that while EBITDA could be “possibly $20 million lower,” the company is also assuming a $20 million lower working capital source due to higher raw material indexes and supply continuity actions, offset by lower cash taxes.

On capital allocation, Hilsheimer said priorities remain unchanged, with investment focused on high-return organic growth opportunities and leverage expected to remain below 2x. He said Greif retains $300 million of share repurchase authorization beyond the completed $150 million program and “intend[s] to be regular buyers” of the stock, with timing and execution to be coordinated with the board.

Hilsheimer also said the company refinanced its debt facilities, extending term loans to 2031 and resulting in a current weighted average interest rate of 3.14%. He cited access to the Farm Credit System as a lending advantage that lowers interest expense while the company remains committed to its leverage target.

In closing remarks, Rosgaard reiterated that demand remains soft and management is not seeing an inflection, but said the company’s strategy is unchanged: execute with discipline, generate cash, prioritize organic growth, and remain selective on capital allocation.

About Greif NYSE: GEF

Greif, Inc is a global leader in industrial packaging products and services, with a history dating back to its founding in 1877. Headquartered in Cleveland, Ohio, the company has evolved from a regional barrel and drum manufacturer into a diversified packaging provider serving a wide range of end markets. Greif's longstanding heritage in container solutions has positioned it as a trusted partner for customers seeking reliable, high-quality packaging options.

The company's core business revolves around the design, manufacture and sale of industrial packaging products, including steel, plastic and fiber drums; intermediate bulk containers (IBCs); safety closures; rigid, flexible and reconditioned packaging; containerboard and protective packaging.

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