Good day. Thank you for standing by. Welcome to the Greif Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill D’Onofrio, Vice President of Investor Relations and Corporate Development.

Thank you, and good day, everyone. Welcome to Greif's fiscal third quarter 2024 earnings conference call. During the call today, our Chief Executive Officer, Ole Rosgaard, will provide you an update on current business trends, as well as the latest updates on our ongoing operating model change, which will be a focal point of our upcoming Investor Day on December 11. Our Chief Financial Officer, Larry Hilsheimer, will provide an overview of our third quarter financial results and our fiscal full-year guidance. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. Please turn to slide two. 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 reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. I'll now turn the presentation over to Ole on slide three.

Thank you, Bill. Hello, and thank you for joining us. Over the past quarter, I've had the privilege of visiting many of our more than 250 plants around the world. Each week, I make it a priority to spend time with our teams on the ground, often joining them in the early hours for the daily 6:00 a.m. safety meeting. These moments are truly energizing and remind me of the incredible commitment and dedication that our colleagues demonstrate every day. I'm tremendously proud of how our people live our purpose and values, driving safety, quality, operational excellence, and importantly, delivering legendary customer service. It's clear that these are more than just words. They are principles embodied in the work our teams do day in and day out across every location. I also want to extend a heartfelt thank you to our leaders and executive team for their outstanding leadership during this quarter. Working alongside such a committed and talented group of people is not just a source of pride for me, but also a privilege. As we review our results today, it's important to remember that the achievements we're sharing are the results of thousands of people pulling together, aligned by a shared purpose and values. I'm excited about where we're headed and the opportunities that lie ahead. At Greif, all the work we perform is focused on our purpose, creating packaging solutions for life's essentials. Wherever you are located today, listening to this, look around the room—the adhesive that holds your desk together, the chemicals used to manufacture your smartphone, the foam in your seat cushion, the soles in your shoes, the orange juice you had for breakfast, the vitamin supplements you took this morning, and the lubricants in the car you drove to work; all of these are essential, everyday products, and all of them at one time contained materials which were stored and shipped in Greif packaging products. We know that it was Greif products because Greif maintains leading positions in nearly all industrial packaging capabilities globally, and not by accident. Those leading positions are the result of the deeply entrenched competitive advantage we have developed in our business, the most critical of which is our legendary customer service, as outlined in our vision statements. Greif is in the middle of a significant evolution. We are making excellent progress on our strategic missions by following our principles, and all of this is engineered to create a flywheel of financial success through the Greif Business System. Towards the end of today's prepared remarks, I will provide you with some more information on the operating model changes we announced last December and are nearing completion on. For now, let's shift gears to near-term performance in fiscal Q3. Please turn to slide four. I'm pleased to report another solid quarter for Greif, where we continued to successfully manage through a variable and uncertain operating environment. All regions globally experienced net growth in the quarter, despite choppiness on an individual end market basis. Although small on a year-on-year basis, we are encouraged that North America has now evidenced the east to west demand improvements we have talked about over the past quarters. There's still significant runway to reaching a normalized level of volumes, but recent trends have us cautiously optimistic as we have exited the trough on volumes. This trend also applies to our LatAm region. APAC improvement, while expected, was also encouraging. As we mentioned, Q2 was negatively impacted by a short, but significant destocking as the Chinese New Year, but is now on the path to recovery. EMEA, our largest GIP market, at approximately 45% of GIP sales, saw a third straight quarter of sequential improvements. This is particularly important as underlying macroeconomic data from calendar Q1 into calendar Q2 continued to be negative with PMI fluctuating around the 45 mark. In both Q2 and Q3, lubes, chemicals, paints, and coatings end markets are a source of strength. This is equally notable as our volume performance in the quarter outpaced many of the leading companies serving those end markets. This outperformance demonstrates our legendary customer service paired with the Greif Business System in action. We are maintaining close relationships with our customers and then reacting with decisive action when change occurs. With that, I will turn things over to Larry on slide five to walk through our third quarter results.

Thank you, Ole, and thank you all for joining our call. As Ole mentioned, we made progress on our operating model change in the quarter and are nearing completion. In the meantime, we continue to execute our strategy well and produce solid financial results under the circumstances. Ipackchem integration continues and synergy capture is in line with our business case expectations. We additionally made steps towards simplifying our portfolio through the divestiture of Delta Petroleum Company, which provided additional debt paydown towards our long-term debt leverage ratio range of 2 times to 2.5 times. Please note that while our current leverage is at 3.66 times, this does not include the impact of the Delta sale proceeds received on August 1. The pro forma adjusted leverage, including Delta proceeds, would have been 3.59 times. As for financial results, we finished the quarter at $194 million of adjusted EBITDA, $34 million of free cash flow, and adjusted earnings per share of $1.03. This EBITDA performance was driven by the volume performance that Ole outlined in his remarks and was in line with our expectations. Our free cash flow performance was also aligned to our expectations for Q3 as we had modest working capital use as we ramped up the business with the nascent volume recovery. Please turn to slide six to walk through GIP results. In Q3, GIP saw demand improvement in all regions totaling nearly 5% on a global year-over-year basis. While this is encouraging, I remind you that on a global basis, the current volume shortfalls to 2022 levels are significant. GIP EBITDA margins remained strong on a sequential basis, supported by our continued mix shift into higher-margin polymer-based products. On a year-over-year basis, EBITDA margins were down 200 basis points due to expected cost inflation, primarily related to acquisitions, investments in our ongoing operating model change, and several one-time benefits in '23, which did not recur. Please turn to slide seven for PPS results. Our Paper business continued to experience the same conflicting dynamics as in Q2, continued improvement in volume and demand for our product coupled with partially unrealized paper price increases. We firmly believe these are warranted based on our significant input cost inflation, as well as improving demand. As a result, PPS margins continued to lag prior year. The paper solutions team is continuing to manage controllables well, including successful price increase implementation with our non-index based customers in URB. However, the outsized impact of the index-driven price cost dynamic, which we still view to not be in sync with real market trends, is a headwind we have and will continue to aggressively work to offset. Please turn to slide eight to discuss fiscal 2024 guidance. When considering our guidance update, we ultimately determined that maintaining our guidance range consistent with our Q3 call is appropriate. Relative to our Q2 guidance, we are anticipating slightly more favorable price costs due to better paper pricing and value-based pricing in GIP. In Q3, although volumes were positive in all regions year-over-year, the pace of that improvement was less than anticipated in Q2 and will present a slight headwind relative to prior guidance. We benefited from a variety of small cost tailwinds in SG&A relative to our prior guidance. However, some of that was offset by other items such as a slight headwind from the lack of contribution from Delta in Q4. What is important to remember when considering this Q4 guidance is the significance of certain tailwinds on the horizon. Our volumes, while improving, are still down significantly on a two-year stack. A return to 2022 volumes, which in fact were actually lower than '21, would be approximately $160 million of EBITDA. Adding the guidance midpoint of $700 million of EBITDA and the $160 million of volume-related increase, along with the incremental fiscal '25 impact of recently recognized paper price increase, would return EBITDA to over $900 million. In the near-term, we will continue to focus diligently on operational excellence and lean on our close customer relationships to ensure we maximize value capture when volume recovery begins in earnest. Please turn to slide nine to discuss capital allocation. We remain committed to our disciplined approach to capital allocation, and this quarter continued to demonstrate that through our capital deployment actions. We have long stated that our two priority deployment objectives are funding safety and maintenance CapEx, which ensures continued cash generation and funding our continually increasing dividend. Earlier this week, we announced another increase in our quarterly dividend. After those modest uses of cash, our next priority is growing our business aligned to our strategy. Earnings growth remains our core focus. However, sometimes it is wise to first shrink in order to enable that growth. We demonstrated that willingness this quarter with our sale of Delta. With that, I'll turn things back to Ole on slide 10 to provide you with a preview of our upcoming Investor Day.

Thank you, Larry. Greif has an Investor Day coming up on December 11 in Midtown New York. And one item I would like to preview with you today or for you today, which will be important to our discussion in December, is our ongoing operating model change. We are currently in the process of organizing our operations and commercial functions by material solution as opposed to geography. While still ongoing, we now have better clarity on the lively material solution verticals, which will encompass that organizational structure: polymers, metals, paper, integrated products, and our land portfolio. Through organizing by Material Solutions, we plan to capture three distinct benefits, all of which we will discuss in detail at our upcoming Investor Day. First, it will enable us to accelerate market alliance and value-driven growth through concentrating commercial and operations functions by subject matter expertise. That will enable us to better capitalize on our comprehensive suite of packaging solutions by optimizing pricing and account planning to drive higher margins. Secondly, by realigning functions, we will maximize the effectiveness of all our enabling functions. It will better align business results to individual functions and drive accountability at all levels of the organization. The cost efficiencies driven by that approach will also enhance margins. Lastly, it will allow us to provide a deeper level of transparency to our investor community and help us to provide more predictable returns. It will streamline our capital allocation prioritization and execution, allowing us to deploy cash for growth faster. It will also enhance our speed and ability to integrate acquisitions effectively and expand synergy capture on future deals. Additionally, we are currently assessing whether this upcoming change will result in a change to externally reported segments. We have frequently heard feedback from our investor community that our current external segmentation is not sufficiently detailed on a product basis to clearly show the growth and margin profile of these leading businesses. That assessment is still ongoing, but we are confident that the end result will provide the transparency our investors are looking for. And starting at our Investor Day, we plan to shift our cadence of talking about the business primarily by Material Solution and end markets with some regional color added. Please turn to slide 11. Part of the driving force behind our operating model change relates to shifting the mix of products in our portfolio, specifically our growth of polymers as a percentage of sales. We have been very clear in that focus that our growth priorities lie in resin or more accurately, polymer-based packaging solutions, and we have acted decisively on that focus over the past 24 months. In 2015, our business mix was approximately 10% in polymer-based packaging solutions. As of our previous Investor Day in 2022, that mix had shifted to 15%. And now, in just two short years, that mix is now approximately 20%. We anticipate that shift to continue as we have significant runway for further growth in our polymer-based products. This quarter, the sale of Delta further accelerated that portfolio shift. While Delta is a solid business and we received great value for it, it's not core to Greif's growth priorities and core competitive advantages as it served much more cyclical end markets. For those reasons, we have parted ways, and in doing so, added balance sheet flexibility by paying down debt with the proceeds. Please turn to slide 12. To our investors, we sincerely hope you make the time to come visit us at our Investor Day on December 11. And as a reminder, please reach out to [email protected] with any questions or to request a registration. I hope you have enjoyed our presentation today and I would like to reaffirm to you that our vision to be the best performing customer service company in the world also extends to our financial customers. We are deeply committed to validating your investment in us through continued solid financial results and are proactively modernizing and evolving our business to warrant continued and increased investments. One hour at earnings is not sufficient time to properly communicate the myriad of ways we are creating value at Greif, and so, I'm confident that after our half day together in December, you will depart with strong confirmation that Greif is primed for breakout success in both the near and long term through our proven execution on the Build to Last strategy. Thank you once more. And operator, will you please open the lines for Q&A?

Certainly. And our first question will be coming from Matt Roberts of Raymond James. Your line is open.

Hi. Good morning. Ole, Larry and Bill, thank you all very much. Ole, I appreciate Slides 10 and 11 and the prelude to Investor Day here. So, without stealing too much thunder from December, maybe could you help me understand the margin contribution or benefit you've received as a result of that mix shift and how incremental margins on the poly-based products compare to the total portfolio average? Or maybe is there a longer-term margin target you think is achievable either in GIP or in that polymer-based business within GIP?

Yes. Hi, Matt, I certainly can. Maybe first, just remind you of our M&A selection criteria. So, when we review target companies, one of the criteria is to make sure that the EBITDA margin is accretive to our current margins. And that means that we're only looking at companies with a margin at or above 18%. And we're also looking at companies with a free cash flow in excess of 50%. And the segments that we're looking at is primarily polymer, like resin-based segments in the premium end of the markets. And you will typically find those companies having up to like mid-20 EBITDA margins. Obviously, we have a current business, so even with the acquisitions we make now, once they're accretive, it's not changing the margins for the whole enterprise. But in the long term, you will see a trend towards reaching the 18% margin.

Thanks, Ole. I appreciate that and look forward to hearing more in December. And as a follow-up, Larry, you noted in the presentation, continued price/cost headwinds, albeit sequentially improving. And since last quarter, we've seen OCC come down slightly and $20 go through on URB that you did mention. So, maybe relative to your expectations you gave in the last quarter, at current prices, where is the price/cost range tracking in your guide? And is there a certain price you need to see either in URB or containerboard to be at the midpoint there? Or would any changes here on out be more of a 2025 impact? Thank you all, again, for taking the questions.

Thank you, Matt. In the quarter, we saw better-than-expected benefits from price increases due to recognitions that were more favorable than we had anticipated. We initially planned for only partial recognition of the higher prices, but in June, we recognized $40 for containerboard and $20 for URB in August. This had a positive effect on our revised full-year guidance. Additionally, we experienced stronger-than-expected value-based pricing benefits in GIP, as our teams focused on value rather than volume, which contributed positively. Raw material costs also provided some upside. Regarding paper pricing guidance, we believe there could be further increases; however, I don't foresee anything for the remainder of our fiscal year. Still, we are optimistic that we will see some recognition in 2025 due to industry-wide inflationary pressures and improving demand trends, especially in containerboard. While volumes improved, they were slightly below our expectations. We had mentioned last quarter that we anticipated a lift in demand, but it turned out to be more mixed than we hoped, resulting in a slight downward adjustment relative to our Q2 guidance. We also made some improvements in miscellaneous cost buckets, although this was offset by the loss of fourth-quarter EBITDA from Delta due to its sale. Overall, this led to no changes in our guidance range. Looking beyond 2024, the environment is changing rapidly, and we are awaiting further developments from the Fed in September, which could significantly influence our outlook. We will address guidance more comprehensively during our next call.

Appreciate all the color. Thank you guys, again.

Thank you. And one moment for our next question. Our next question will be coming from Ghansham Panjabi of Baird. Your line is open.

Yes, thank you, operator. Good morning, everybody. I guess going back to slide six, where you're talking about your near-term outlook within GIP and customer sentiment and so on and so forth. Can you just give us a bit more color as it relates to your direct conversations with customers in the context of the environment that we have today? And then, just in terms of your volumes that are starting to plateau at a sort of a lower for longer volume dynamic basically, maybe touch on competitive activity, are you seeing anything different than the usual competition that you've seen in the industry over time?

Thank you, Ghansham. To start, market competition remains intense. While we observe some positive volume trends, the number of tenders and RFQs continues to be very high. Some market participants are pricing at levels that we consider to be unsustainable in order to maintain their volume. We are committed to our value over volume strategy and prioritize building trusted relationships with our customers. Our team's dedication to operational excellence and this philosophy have been key to sustaining our margin strength in GIP over recent quarters, despite the competitive landscape. Historically, we've seen customers return to us after seeking lower-priced options, and we believe our superior quality and exceptional customer service are unmatched. Over time, these customers tend to come back, which benefits us in the long run. Regarding our recent performance, in Q2, the strongest volume came from lubricants, bulk chemicals, and paints and coatings. However, as noted in our customers’ earnings calls, their outlooks for these end markets are not as optimistic as before. Our investments in various sectors have also produced mixed results. While the food and beverage sector has performed well, the agricultural chemicals sector has yet to recover from earlier destocking. A recent Wall Street Journal article highlighted that this year, North American farmers are expected to have a good crop but will still face financial losses, impacting their investments in fertilizers and equipment. Overall, our teams have excelled in engaging with customers and monitoring changing demand patterns, resulting in solid volume performance. When compared to some of the larger players in the markets we serve, like lubricants and bulk chemicals, we've outperformed thanks to our quick response times. However, we will not become complacent. We will maintain our focus, as demand signals remain mixed. We will continue to strengthen our connections with our customers as a crucial supply chain partner, which we expect will help us achieve better volume performance than the industry average.

Okay, thanks, Ole. Very comprehensive. And then on the reorganization by substrate versus geography, is this something that the customers themselves have been pushing for or is it just a natural evolution based on all the acquisitions you've done and the scale of the company at this point? And just separately, what percentage of your sales base in GIP goes to multinationals that want a cross-border supplier?

Well, first of all, the changes we are anticipating to make, number one, yes, it's really to serve our customers better. So, if you think of GIP and PPS; in GIP, we have all types of materials that we're making, whether it's polymer-based, steel, fiber drums, and so on. So, in a way, our teams are kind of jacks-of-all-trades. And what we want to do in our drive to be even better is to really focus on one material solution. So blow-molding a jerrycan is obviously different from making a steel drum. So separating, like jerrycans out in a separate SBU, under a separate SBU management, means that all they need to think about is to be the best in the world in making jerrycans and that will help our customers with even better quality. And at the same time, we are doing that for each of our material solutions. And then, we've extracted the commercial organization out of all those. So, our commercial organization becomes an enabling function, so to speak, under a Chief Commercial Officer, and that will drive up sales and cross-sales. In the past, a salesperson would have visited a customer in the morning and another salesperson from Greif comes to sell another product in the afternoon. By combining sales this way, we will just be much more effective in that, and it will also drive margins, and we will be able to serve our customers better. And then lastly, when we do an M&A, we will be even more effective in integrating these companies into our structure. So, overall, the structure has been designed or is being designed for growth.

And one moment for our next question. Our next question will be coming from Mike Roxland of Truist Securities. Your line is open.

Thank you, Ole, Larry, and Bill, for addressing my questions. I wanted to quickly follow up on your last response regarding the portfolio transformation. Will this require additional headcount due to the salesforce split?

Well, you mean in our evolution to modernize the organization?

Exactly, yes.

It's not designed to reduce headcount. That has never been...

He asked if you would be increasing it?

No, we won't increase it. We've had some questions about whether we will be taking out headcount, and it's not designed to take our headcount, but we do believe we will be able to operate much more effectively. And as we are adding volume or growing our volume, we will be able to do that without adding further headcount to the organization. So, in effect, we will be operating much more effectively. But we certainly won't be adding.

Got you. I was just wondering if your sales force is now going to become specialists in targeted products. Please continue.

Yes. No, the sales force will be more generalist and they will turn more from farmers to hunters. And then we have created a very strong product management function that will be more of a support to sales or rather than our sales teams acting as product managers, we will have a dedicated central product management function by material solution, serving the sales teams, but also our customers.

Got it. That was very clear. Thank you, Ole. In terms of Global Industrial Packaging, what do you attribute your outperformance relative to the market to? Obviously, you showed sequential improvement in EMEA despite PMIs remaining depressed. So I'm wondering if there's something that you're doing differently, some type of restocking? Like, how are you able to outperform despite the broader market still being somewhat challenged?

I want to acknowledge our teams for their hard work, but it's really our commitment to customer service that drives our success. We've all experienced poor service from a vendor or store and shared that negative experience with others, promising ourselves we wouldn't return. On the flip side, when we receive exceptional service, we enthusiastically recommend it to others, often willing to pay a little extra for that level of care. This principle applies to our customers as well. We have consistently focused on delivering outstanding customer service, and we continue to improve. We strive for excellence, knowing we may never fully achieve it, but in doing so, we've become leaders in our field, which contributes to our strong performance in today's challenging environment.

Got it. Really well...

Yes, of course, high quality.

No, I'm sorry. Please go ahead.

I was just going to add, you know on top of that, providing top quality products, as you would expect.

Got it. And just one final question before turning it over. Just in terms of PPS and non-index customers, how much of your business is non-index? And are you fully implementing the announced price increases with those non-index customers?

Yes, I'll let Larry take that one.

Yes, when we analyze the data, approximately 35% of our customers are in the URB space. We have experienced significant success in this area. While I can't confirm that it's exactly 100% of that 35%, it's very close.

Got it. Thank you guys very much, and good luck in the final quarter.

Thanks, Mike.

Thank you. And our next question will be coming from Gabe Hajde of Wells Fargo. Your line is open.

Ole, Larry, Bill, good morning.

Good morning.

Good morning Gabe.

I wanted to ask if you could help us in fiscal '25 with some of the known items you mentioned, particularly regarding Delta Petroleum. You indicated there might be a $15 million to $20 million annualized EBITDA impact from the assets sold, along with price increases that are reflected in the indices. Additionally, I noticed some higher compensation items mentioned in the press release. Are those returning to normal, and are there any other one-time items we should consider for next year?

Sure. The number for Delta is indeed high. Our $90 million translates to about 8.5 times after accounting for stranded costs and similar factors. That business fluctuates throughout the year, with the fourth quarter expected to be somewhat higher, nearing $4 million during that period. For the full year, it's 8.5 times $90 million. Regarding pricing, we implemented a $20 increase on URB, which will contribute approximately a million in the fourth quarter since it primarily takes effect in October. Over a full year, this $20 increase on URB equates to about $650,000 per month. I'm trying to recall the incremental price increase on containerboard. Matt, could you remind me of the figure for containerboard?

It's $750 for $10.

Yes, $750 for $10. So how much is it?

And that was recognized in June. So it'll be fully beneficial to Q4.

Right. Yes. Does that address that question?

It does. I mean, the other thing I was thinking about was. I don't think that I heard economic downtime mentioned in the prepared remarks or in the slides. Just curious kind of where you guys are running in the system today?

Yes. We've been running full out in our containerboard business. We've had some economic downtime in our URB space. Do you have that number?

It was nothing significant from the other...

Yes, I know it's minor, so...

And economic performance is strong across all paper grades, but we are close to optimal levels from a backlog perspective in containerboard.

Yes.

Okay. And one last one, just on the M&A front. Obviously, you guys have been active there. You called out kind of being 3.6 times levered on a pro forma basis. Are there still opportunities out there, given kind of where we are in the interest rate cycle or do you feel like it might get more competitive again if the Fed, in fact does cut?

No, we still have many opportunities, Gabe. We have a strong pipeline and are actively engaged with numerous companies and owners. We will continue this effort. We don't always control the timing, so we need to keep pushing forward. If an opportunity arises, even if the timing isn't perfect, we have the capability to pursue it. However, our current priority is to reduce our debt to achieve a leverage ratio of 2 to 2.5.

Understood. Thank you.

Thank you. One moment for our next question. And our next question will be coming from Brian Butler of Stifel. Your line is open.

Thank you. Good morning. Thanks for taking the questions.

Good morning, Brian.

Just maybe on the first one. When you talk about that $160 million kind of in a more normalized volume environment. What has to happen for that? I mean, are we there at current kind of volumes right now if those just kind of sustain through the back or through 2025? Or do we really need to see some step-up in the macro recovery to kind of get back to kind of the normalized 2022 levels?

We need a significant change. To give you some context, comparing volumes to Q3 '22, total GIP was down 4.3% from Q3 '21. The following year saw a further decline of 10.7%. So far, we've only recovered 4% of that loss. There was a notable drop across the board. For IBCs, we were up 9.5% in Q3 '22 compared to '21, but down 13.7% in '22. Due to acquisitions, we've rebounded strongly. For paper and total mill volumes, we were down 2.6% from '21 to '22 and then down 16.3% the next year, with only a 7.9% recovery since then. We have a long way to go to return to previous volume levels. This situation reflects a broader macro issue rather than just minor changes. Looking at our overall PPS, if we returned to normal volume levels—not factoring in the effects of price changes—there’s potential for an additional $56 million in EBITDA from our PPS business. Our entire GIP business could see a $90 million increase, and the acquisitions we've made could add another $21 million if they reach normalized volumes. This is a significant macro challenge across the entire landscape.

Brian, if I can just add a little bit of color to the $160 million as well. So, as Larry alluded to, that's not one single factor, as you have to consider that much of current volume dynamics is driven by macroeconomic factors. So, while we proved in Q3 that we can outpace the macro on volume, it is still the primary bottleneck to truly rebound in demand. And one major factor in that equation is the current interest rate situation. In previous instances, interest rate costs have been shown to drive production, specifically pent-up housing demands, both for new builds and existing housing sales. And that would be a major volume driver for us. As you know, when you move house or buy a new house, you do more than just buy the house, you paint the walls on the old house for it to sell better. You may buy new carpets, appliances, and hundreds of other items for, you know, when that happens. And all of those things, they drive industrial production and demand for our products. And then another component, as an example, would be ag. I just talked about that earlier, and we are experiencing short-term softness. Some of it is interest rate play in action too. And as that softness abates, again, you will see that end segment improve. So, there's a lot of factors involved in returning to the $160 million.

Okay, that's helpful. For my second question, what is the timeline for implementing the evolution of your operating model? During this period, will there be any short-term effects, such as slower sales or increased costs, as the changes are made?

On sales, no. Regarding costs, we are obviously making these changes in conjunction with adjusting our fiscal year, and there are some costs associated with that, but they are not significant.

Yes, we had disclosed, Brian, that we were going to end up incurring about $6 million to $7 million related to just the cost of going through this change.

Okay. And is that change kind of completed in fiscal '24 here or does that really roll into '25 as well?

We will be moving into this model starting November 1, and we will provide the details in December.

Okay. And then maybe one last one. On your shift towards more polymers versus kind of the other segments, how do you view kind of the market organic growth for the polymers in that kind of specialty piece that you're moving into versus the other segments? What does that organic growth look like?

Well, first of all, just why are we doing this? Well, we are growing in polymer-based products because the margin profile is much, much higher and the cyclicality of those products is much, much lower. So we want to be a higher-margin company, that's a lot less cyclical. On the organic side. I mean next week, I'm traveling to Malaysia to open a new IBC plant, which is polymer. We are adding lines all over the world all the time. We opened earlier this year, we opened another IBC plant in Turkey. So, yes, Brian, we are also growing organically.

Okay. Thank you for taking the questions.

And our next question will be coming from George Staphos of Bank of America Securities. Your line is open, George.

Hi everyone, good morning. I hope you're all doing well. We've discussed Europe in various ways during the call. Ole, do you believe there will come a time when you won't be able to outperform Europe despite your model and excellent customer service? Or do you think that in the next few quarters you will still outperform in Europe given the current sluggish conditions? If you could provide some quantification to this somewhat qualitative question, that would be helpful. Additionally, can you share the exit trends for your main business as you head into the fourth quarter? I'm particularly curious about what you're observing in CorrChoice regarding marginal trends. I'll stop there for now, but I may have a follow-up later.

Thank you, George. Regarding Europe, I believe we can still outperform. Looking back at our philosophy of prioritizing value over volume, we've turned down a significant amount of business in the past, and now we are starting to see that business returning to us. This is one reason we will continue to excel. Additionally, we are concentrating on growing in areas where we haven't been very strong historically, particularly in food and pharma. Our teams are working diligently to enter those segments because they offer higher margins, are more stable, and less cyclical. With these factors combined, I believe we will maintain strong performance in Europe. We've also increased our capacity organically. In terms of CorrChoice, it showed sequential growth.

Well, all the businesses, but yes, lead with CorrChoice. Sorry about that.

I was just answering your second question. So sequentially, CorrChoice was also up nearly 10% as containerboard demand continued to improve, which was slightly better than we expected in our Q2 guidance. And I would remind you and our other investors of our niche role in North America containerboard as a champion of the independents, which gives us earlier visibility to demand cycles than our competition. As we have a view of the full markets, we are positioned well for this recovery. Champion of the independent is a competitive advantage to us. So we're skilled at handling complexity. We can produce any fluke, any size run and any lighter board combination with speed and profitability. So those are some of the reasons for why we see like that sort of growth in containerboard.

And Ole just in general, and what were the other exit trends that you were seeing in the quarter?

I can't really talk about quarter four, but the exiting quarter three, it's still choppy. I would say it's very choppy. It's a little bit like walking in sand. You take two steps forward and then you slide half a step backward. So, we have months where we see, yes, it's all coming. And then the following months, we see a dive again, and then the next month, it goes up again. But the overall trends are positive across the segment.

Yes, the one thing, August is always tough because it's you know, vacation holiday month in Europe. And so it always gets choppy. And it also goes to a lot to harvest seasons in the south of Europe. But they're substantially the same as what we saw exiting in July.

Thank you. Last question following I'll turn it over. You know, back to containerboard CorrChoice and the business overall. To the extent that you have a view and your customers could offer one that you'd share on this conference call, you know, volumes for the calendar second quarter in corrugated markets were okay, not great, you know, flat up a little bit, down a little bit, depending on what adjustment you wanted to make, but all very easy comparisons. What are your customers saying? What are you seeing through your businesses in terms of why we're seeing that market trend, recognizing you're doing better? And what kind of holiday calendar fourth quarter season are we setting up for in the corrugated markets, given what you're seeing? Thank you, guys, and good luck the rest of the year.

Thank you. Yes, we are getting similar feedback to what we have previously mentioned. It really seems to be a mixed situation out there. For example, if you read the comments from the Dow CEO during their earnings call, he sounds very optimistic, particularly if interest rates decrease and home sales pick up, and we share that perspective. We have also noticed that companies like Henkel are quite positive, and BASF has shown a favorable stance as well. In the paper business, we are experiencing the same mixed signals as reports from our contacts in the field. One week the market is strong, and the next week it declines. That’s why we characterize the situation as mixed.

And I think a rate drop will obviously affect it because, you know, average person looks at their credit card debt and their payments, and it's linked to the interest rates. And if they go down, they get a little bit more money between their hands, they shop more on Amazon, and it helps the industry. So, we don't have a crystal ball, that's what I'm trying to say.

Well, you're closer to it than we are. So we appreciate the color, as always. Thank you, guys.

Thank you.

And one moment for our next question. Our next question is a follow-up from Gabe Hajde of Wells Fargo. Your line is open.

Thank you. Real quick, when we're talking about, I guess, the different end markets, can you remind us, roughly speaking, in your North American GIP business, how much is directionally tied to housing?

It's difficult to give you a number on that. It really is, because if you take chemical, bulk chemicals is one of our largest ones. Some goes into insulation, some goes into the soles in your shoes, and some goes into the fridge you buy. It's just difficult to sort of play that out.

We don't have a estimate on that at all, Gabe.

No worries. Thank you.

And I would now like to turn the conference back to Ole for closing remarks.

Thank you. And first of all, a big thank you for all the questions and your continued interest in Greif. We really appreciate that. And we look forward to reporting our Q4 2024 earnings to you in early December and subsequently also seeing you at our Investor Day on December 11 in Midtown New York. Have a wonderful day, everyone.

And this concludes today's conference call. Thank you for participating. You may now disconnect.