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Greif grows in many ways
Originally published:  01/10/2011
RESULTS US-headquartered Greif has upped its quarterly turnover while further bolstering it product and service offering through the acquisitions of Fustiplast and pack2pack
Greif has posted both record third quarter net sales of $1.1bn and a record third quarter operating profit of $108m compared to 2010 respective figures of $921.3m and $95.7m. Nonetheless, net income over the same period fell from $66m to $63m. “Our strong growth in net sales for the quarter benefited from acquisitions during the last 12 months, higher selling prices and the positive impact of foreign currency translation,” says chairman and CEO Michael J Gasser.
However, he notes, rigid industrial packaging demand in North America and western Europe was lower than anticipated during the final three weeks of the quarter. “There has been some recovery in demand based on August orders and shipments, on a seasonally adjusted basis, but at a lower level than earlier in the year,” Gasser says, adding that Greif is therefore “implementing actions to mitigate the financial impact of these developments”.
In terms of its Rigid Industrial Packaging & Services segment, quarterly net sales grew 17.9 per cent year-on-year from $681.7m to $804m. This increase, the company says, was “primarily due to higher selling prices, the positive impact of foreign currency translation and acquisitions” but was partially offset “by lower sales volumes due to decreased demand during the last three weeks of July in North America and western Europe on a same-structure basis”. At the same time, operating profit increased slightly from $71.5m to $72.0m concurrent with a rise in EBITDA from $89.6m to $91.5m.
Net sales for its Flexible Products & Services, meanwhile, more than doubled from $66.9m 12 months ago to $141.2m “due to sales attributable to flexible intermediate bulk container (FIBC) companies acquired during the second half of fiscal 2010”. Hand in hand with this, the segment saw both its operating profit and EBITDA over the period jump from $2.8m to $7.7m and from $3.3m to $10.1m, respectively.
Buy and build
“During the third quarter, we completed a €200m [$280.8m] senior note offering to facilitate growth and improve our liquidity,” Gasser says. The company “also executed two rigid industrial packaging acquisitions”, viz a European steel drum producer with a capacity of around 1m units per annum and, significantly, Italy’s Fustiplast. Maintaining operations in Germany and Brazil as well as its native Italy, Fustiplast produces a wide range of plastics drums and jerrycans as well as the patented Flubox® line of blow-moulded composite intermediate bulk containers (IBCs), which Greif has been producing under licence in Scandinavia since March 2010.
The Fustiplast acquisition marks an important strategic step for Greif. Already the world’s largest steel drum producer with a global market share of around 55 per cent, it has now identified rigid IBCs, along with FIBCs and reconditioning, as one of its ‘three growth platforms’. “Market demand for rigid IBCs is growing faster than the overall rigid industrial packaging market,” Greif president and COO David Fischer told analysts during an earnings conference call. “We will manufacture rigid IBCs in select Greif facilities around the world made possible by previous GBS [Greif Business System] operational achievements that have made floor space available for the production of additional products.”
In a similar vein, Greif has also now acquired pack2pack (p2p), a major European packagings reconditioner formed when Greif acquired Blagden’s European and Asian new steel drum and closures operations in 2007. Boasting an annual capacity of around 3.5m units across eight locations in Belgium, the Netherlands, Germany, France, the UK, Austria and Norway, p2p will now become part of Greif ’s EarthMindedTM Life Cycle Services business that collects, reconditions, remanufactures and recycles used industrial containers.
“Now that we have established a solid base in North America and Europe we will be accelerating global implementation of our strategy for EarthMinded Life Cycle Services,” Fischer stated. “Beyond the complementary fit with rigid industrial packaging, reconditioning represents a strategic opportunity for Greif to establish a global leadership in this area,” he continued. “We believe that we can leverage our manufacturing and logistics capabilities to achieve superior returns in this business.”