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Greif Provides Q4 & FY14 Preliminary Financial Information

Greif, Inc. (GEF) released its preliminary select financial information for the fourth quarter and fiscal 2014. The company has decided to postpone the release of its fiscal 2014 and fourth quarter financial results until after the market closes on Jan 7, 2015.

The decision to delay the results was based on the change of the company’s independent registered public accounting firm during the fourth quarter of 2014, coupled with its review and assessment of the financial statement impact associated with the potential non-cash impairment charges and certain income tax accounting matters.

For fiscal 2014, Greif expects to report net sales of $4,378 million, higher than $4,353 million recorded in fiscal 2013. The company’s operating profit guidance stands at $298 million (based on preliminary estimates, with operating profit decreasing in the event non-cash impairment charges increase) and operating profit before special items of $341 million for fiscal 2014.

Greif projected fourth-quarter 2014 net sales of $1,082 million, less than $1,126 million recorded in fourth-quarter 2013. Net sales before the effect of acquisitions, divestitures and currency fluctuations for the fourth quarter of 2014 is expected to remain flat with the year-ago period.

Additionally, operating profit is expected to come in at $93 million (based on preliminary estimates, with operating profit decreasing in the event non-cash impairment charges increase) and operating profit before special items at $118 million in the fourth quarter of 2014.

Operating profit before special items include restructuring charges, acquisition-related costs, timberland gains and non-cash asset impairment charges. Some of these special items are preliminary estimates. Further, the company expects to record a non-cash impairment charge due to impairment indicators that occurred in the fourth quarter, which will be a significant portion of the goodwill and intangible assets associated with its Flexible Products & Services segment as of Oct 31, 2014.

Furthermore, the company may request a 15 day extension to file its annual report on Form 10-K for the fiscal year ended Oct 31, 2014, that would extend the required filing date for its Form 10-K to on or about Jan 14, 2015.

In its third-quarter 2014 earnings conference call, Greif guided Class A earnings per share in range of $1.98 to $2.08 for fiscal 2014 excluding the timberland gains of about $16.9 million or $0.20 per Class A share and potential future impairment charges. Additionally, earnings before interest, taxes, depreciation and amortization (:EBITDA) is expected to be in the range of $475 million to $505 million for fiscal 2014.

Greif’s adjusted earnings in third-quarter fiscal 2014 slumped 51% year over year to 41 cents per share, impacted by several actions consistent with its strategy that addressed capacity utilization issues in the flexible product segment and involved non-cash impairment charges and restructuring charges. Results also fell short of the Zacks Consensus Estimate.

During the third quarter, the company took necessary steps to strengthen its operations, which resulted in non-cash impairment charges, restructuring charges, and higher income tax expense. While these actions reduced Greif’s earnings in the quarter, it will drive growth as the company will continue to focus on its business portfolio.

Further Greif accelerated efforts to restructure select geographies and assets during the third quarter. The company sold a business in the Rigid Industrial Packaging & Service segment and closed its facility in the Kingdom of Saudi Arabia, while stating that additional actions will be implemented in the Flexible Products segment as this business is repositioned for sustainable growth and profitability.

Greif’s continual strategic investments and anticipated gradual global economic recovery should result in moderate sales and volume improvement. The company will also benefit from the sale of non-core assets and restricting actions. However, foreign exchange volatility as well as social and political unrest, remain headwinds.

Delaware, OH-based Greif manufactures 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 Crown Holdings Inc. (CCK), ARC Document Solutions, Inc. (ARC) and Century Aluminum Co. (CENX). All these stocks carry a Zacks Rank #2 (Buy).

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