Greif, Inc.’s (GEF) fourth-quarter fiscal 2014 (ended Oct 31, 2014) adjusted earnings (excluding charges) of 85 cents per share improved 11.8% from 76 cents per share in the year-ago quarter. Earnings were positively impacted by gains on the sale of businesses and a decrease in SG&A expenses, offset by asset impairment charges in the Flexible Products & Services segment and restructuring costs. Earnings beat the Zacks Consensus Estimate of 77 cents.
On a reported basis, earnings per share in the quarter were 15 cents compared with 65 cents in the year-ago quarter.
Operational Updates
Revenues declined 4.2% year over year to $1,048.1 million from $1,094.2 million in the year-ago quarter. The top line missed the Zacks Consensus Estimate of $1,149 million and management’s guidance of $1,082 million. The year-over-year decline in net sales was primarily due to a decrease in selling prices, negative impact from foreign currency translation and a reduction in volumes.
Cost of sales decreased 2.6% year over year to roughly $845 million. Gross profit also reduced by 10.3% year over year to around $203 million.
Selling, general and administrative expenses (SG&A) decreased 2% year over year to $113.6 million. Adjusted operating profit increased 3.6% year over year to $113.7 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 2.4% to $149.2 million from $145.7 million in the year-ago quarter.
Segmental Performance
Rigid Industrial Packaging & Services: This segment reported sales of $752.7 million, down 3.8% from $782.1 million in the year-ago quarter. The decrease in net sales was owing to a 3.2% impact of unfavorable foreign currency translations and volume decreases of 1%, partly offset by net price increases of 0.4%. Adjusted operating income went down to $46.7 million from $50.8 million in the year-ago quarter.
Flexible Products & Services: Sales from this segment went down 12.6% year over year to $100 million. The decline in net sales was caused by volume decrease of 9.3%, primarily due to reduced sales of $13 million as a result of the sale of the multiwall packaging business and lost sales towing to the impact of the occupation of a manufacturing facility in Turkey during the second quarter of 2014. The segment reported an operating loss of $56.2 million, compared with the prior year loss of $12.6 million.
Paper Packaging: Sales decreased 2% year over year to $186.6 million, impacted by lower selling prices of 1.4% and lower volumes of 0.6%. The segment reported adjusted operating profit of $41.4 million, up 4.3% from $39.7 million in the year-ago period. The increase was driven by gain on the sale of a business, partly offset by increased transportation costs.
Land Management: This segment’s sales increased 20.5% year over year to $8.8 million driven by higher sales of timber. Operating income declined significantly to $5.6 million.
Financial Position
Greif ended the quarter with cash and cash equivalents of around $85 million as of Oct 31, 2014, as against roughly $78 million as of Oct 31, 2013. Cash from operations during the fourth quarter was $145 million versus $131.6 million in the prior-year quarter.
Long-term debt was roughly $1.1 billion as of Oct 31, 2014, compared with $1.2 billion as of Oct 31, 2013. Capital expenditures were $43.9 million in the reported quarter versus $53.8 million the prior-year quarter.
Fiscal 2014 Performance
Greif’s adjusted earnings of $2.36 per share for fiscal 2014 slumped 12.3% from $2.69 a share in fiscal 2013. Earnings, however, came ahead of the Zacks Consensus Estimate of $2.20. Including special items, earnings were $1.56 per share for the year compared with $2.47 in fiscal 2013.
Revenues for the full year increased marginally by 0.5% year over year to $4.24 billion from $4.22 billion in fiscal 2013. However, revenues missed the Zacks Consensus Estimate of $4.44 billion.
Guidance
Greif expects global economy to improve modestly in fiscal 2015. The company guided its adjusted earnings per share for fiscal 2015 in the band of $2.25 to $2.35.
Per Greif’s restructuring plans, the company sold several businesses during the fourth quarter. It remains focused on accelerating restructuring actions through facility closures and sale of non-core assets. Greif will also implement SG&A cost savings actions throughout 2015 and beyond.
However, negative trends in Europe and Latin America remain headwinds. Foreign currency volatility also remains challenging for the company, as strengthening of the U.S. dollar against other currencies will continue to impact its revenues and net income.
Delaware, OH-based Greif makes and sells industrial packaging products, bulk containers, and containerboard and corrugated products worldwide. The company provides services such as blending, filling, packaging and recycling of industrial containers for a wide range of industries. Greif also manages timber properties in North America and offers land management consulting services.
Greif currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same sector include Mobile Mini, Inc. (MINI), Silgan Holdings Inc. (SLGN) and Mueller Water Products, Inc. (MWA). All these stocks carry a Zacks Rank #2 (Buy).
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