Good day, and thank you for being here. Welcome to the Greif Third Quarter 2025 Earnings Call. Please note that today’s conference is being recorded. I will now turn the call over to your speaker, Bill D'Onofrio. Please proceed.

Good morning, everyone, and thank you for joining Greif's Fiscal Third Quarter 2025 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results. Please turn to Slide 2. 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. 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. We will be referencing certain non-GAAP financial measures and a reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. This quarter's results reflect our planned containerboard business divestment within discontinued operations. Unless otherwise noted, the financials and commentary presented today will relate to our continuing operations. I'll now hand the call over to Ole on Slide 3.

Thank you, Bill, and good morning, everyone. Thank you for joining us. I want to take a moment to recognize our 14,000 colleagues around the world. Their discipline, proactive approach, and dedication to our strategy truly make a difference. While every colleague's contributions are significant, I’d like to briefly acknowledge one individual today—Gary Martz, our Executive Vice President, General Counsel, and Secretary, who will be retiring later this year. Gary embodies what makes Greif special. Over his remarkable career of more than 20 years here, he has positively impacted many lives through his work. Personally, Gary has been a reliable source of leadership, guidance, and vision. I know that both I and our global colleagues at Greif are better for his mentorship. I see that even now, he prefers to be acknowledged as part of the greater Greif team. However, today we need to honor him as an individual as well. Gary, thank you for all that you have done, and best wishes for your retirement. Dennis Hoffman, Greif's Deputy General Counsel, will take over Gary's responsibilities effective October 1. Dennis has collaborated closely with Gary for 15 years, and we are confident in his ability to continue Gary's legacy of legal excellence. Thank you both for your dedication to Greif. Now, back to the quarter. We are focused on reducing costs and transforming the business, which can sometimes be challenging. However, our team understands that this is essential for the company’s growth, moving from good to great, and ultimately creating shareholder value. We are accelerating our portfolio transformation and optimizing costs. The sale of our containerboard business is expected to close at the end of this month, and our planned timberland sale is scheduled for October 1 for tax planning purposes. We anticipate net cash proceeds from these transactions to be about $1.75 billion, which should lower our leverage ratio to below 1.2x. These divestitures will refine our portfolio, allowing us to focus on markets where we can grow and enhance margins, capital efficiency, and deliver sustainable returns to shareholders. Additionally, as of Q3, we have achieved $20 million in run rate savings towards our fiscal 2025 target of $15 million to $25 million, with about $15 million coming from SG&A and the rest through network optimization, including the closure of the Merced, California facility announced earlier in August. Another important aspect of our cost optimization strategy is improving operational efficiency. For instance, our team in the Welcome, North Carolina tube and core plant has recently enhanced changeover efficiency, boosting line efficiency by over 40%. At Investor Day, we discussed the concept of cumulative small improvements, and this is a great example. While the direct impact of this project may not significantly affect Greif as a whole, the mindset of striving for continuous improvement across all facilities will greatly influence our success. Such regular achievements bolster our confidence in surpassing our $100 million cost reduction commitment. Please turn to Slide 4. Our Q3 results reaffirm that the markets we are investing in remain resilient, even amid a mixed macro environment. Customized polymer volumes increased by 2.2%, driven by low double-digit growth in small containers, though this was countered by mid-single-digit declines in IBCs and large drums. Our targeted markets, including Agrochemicals, Pharma, Flavor & Fragrance, and Food & Beverage, continued to excel, demonstrating the strength of our portfolio shift. Durable metals volumes fell by 5.8%, reflecting weaknesses in North America and minor declines in EMEA. The housing and petrochemical sectors have been sluggish this year, and bulk chemical markets showed a downward trend in Q3, contributing to softness in EMEA. We continue to prioritize value over volume and cash generation, evident in our improved gross profit margins year-over-year. Sustainable fiber volumes decreased by 7.6%. URB Mills operated at over 90% capacity, but converting was mixed, with tube and core down slightly and fiber drums down by a larger margin due to weak North American industrial markets. Integrated Solutions volumes grew by 2.6%, primarily driven by robust recycled fiber sales. Overall, our volume performance clearly indicates that our strategy is effective. However, customer sentiment remains cautious, and the overall macroeconomic environment is weak. We will factor this into our full-year 2026 guidance next quarter. Larry, please continue with Slide 5.

Thank you, Ole. Hello, everyone. As a reminder, the Q3 financials are presented excluding the containerboard divestment, except for free cash flow, which compares total operations to prior year total operations. Adjusted EBITDA dollars increased $4 million, while EBITDA margins increased 70 basis points, driven by improved price/cost in our Fiber, Polymers, and Integrated segments, which more than offset volume softness across the portfolio. Free cash flow rose by almost 400% to $171 million in the quarter. This result once again demonstrates the resilience of our business model regardless of macroeconomic conditions. Please turn to Slide 6. In Polymers, sales improved on volume, price, and mix with growth concentrated in our target end markets. Gross profit dollars increased by over $10 million and gross margins increased 150 basis points as we continue to drive structural cost improvement through Greif Business System 2.0. Metals saw lower sales from both price and volume as industrial demand softness persisted in North America and increased in EMEA. Gross profit dollars were about flat, but gross margin was up due to value over volume discipline and Greif Business System 2.0 gains. Fiber sales were down due to the converting demand softness Ole spoke of. However, gross profit dollars were up $8 million, and gross margins were up 360 basis points due to better RISI published price/cost dynamics. Integrated Solutions, excluding the prior year impact of the Delta divestment was about flat on both sales and gross profit with gross margin down 160 basis points due to product mix. Please turn to Slide 7 to discuss guidance. Our revised 11-month guidance midpoint of $730 million of EBITDA is raised $5 million from the previous low end to current midpoint and revised free cash flow midpoint of $310 million is raised $30 million from our previous low end to current midpoint. The increase in EBITDA is due primarily to better SG&A from cost optimization gains, while our price cost and volume assumptions are largely unchanged. The increase in free cash flow is primarily from the EBITDA increase plus lower expected CapEx spend, which is timing related to ongoing maintenance and growth projects. As the containerboard divestment is not finalized, we have not adjusted full year guidance for the impact of the divestment. Our combined adjusted EBITDA guidance includes contribution of $122 million in sales and $25 million of EBITDA in each August and September related to containerboard, which is driven by the prime season for our profitable triple wall business. This is in addition to the Q3 year-to-date contribution of $872 million of sales and $168 million of EBITDA from containerboard. I'll now turn it back to Ole for closing on Slide 8.

Thanks, Larry. We are executing our Build to Last strategy with discipline and conviction, reshaping the portfolio, optimizing our cost structure, and leaning into markets where our competitive advantages are strongest. We're doing this at a time when demand recovery is still ahead of us, which means that as volumes return, the operating leverage in our business will be significant. This only strengthens our confidence in achieving our 2027 commitments and in our ability to consistently deliver lasting value for our customers, our colleagues, and importantly, our shareholders. Operator, will you please open the lines for questions?

Our first question will be coming from George Staphos of Bank of America Securities, Inc.

Congratulations to Gary and Dennis as well. Nice touch, Ole. From my vantage point, I had a few questions. Number one, can you tell us how much of the guidance raise for the year was related to containerboard? I know you said it was really SG&A, but was there any notable change there relative to containerboard? Second question, can you tell us about price cost trends as we're entering the fiscal fourth quarter and really kind of the horizon into '26. To the extent you can comment relative to metal. And then lastly, I know you were happy with the growth in your targeted areas in polymers, but I was a little bit surprised to see some weakness in IBC. And so can you tell us how trends, maybe it's in EMEA, are starting to affect the polymers business?

George, I'll let Ole address the polymer stuff. But first on your guidance question, no containerboard impact in raising that played through as we expected. Generally, the guidance raise was off of our low end. Some of the detriment we've seen in what's going on in metals worldwide actually probably brought us down from what we would hope for. The raise is primarily related to SG&A cost reductions taken relative to our optimization plan. On the metals pricing going into the year, steel costs have been relatively flat at this point. We don't really see any inflections going on. So we don't expect anything with significant index changes going into the calendar quarter or now new first quarter; we don't anticipate anything significant, George. And I'll turn it over to Ole on the polymer question.

Yes. On the polymer, the growth markets, George, the ones I mentioned earlier, Food & Bev, Agrochemical in particular, where we are the global leader. We expect those demand trends that we've seen simply to continue. Just to comment on metal as well, the metal index has been largely stable through Q3, and we don't see any impact expected going forward from that as well.

Yes. I'll supplement one thing, George, and I made this in my comments, we had anticipated containerboard being good in this last part of the year because this is the time of year when people are harvesting watermelons and pumpkins and buying their triple wall boxes for those things going into the grocery stores and stuff. So these months are always our most profitable in that part of the business.

Okay. Just a point of clarification, if I could, and I'll turn it over. One, do you have a sense of what the current normalized EBITDA would be for containerboard? I mean we can add up what you've reported with what is coming on...

I look at the trailing 12 months through July, which was $218 million. It was $211 million when we finalized the deal and has now reached $218 million. Currently, it's averaging $25 million per month, but that's a noteworthy figure. Historically, our first quarter has always been the weakest, and I expect that trend will continue for BCA as well.

Okay. And EMEA has not had an effect on the Polymers business so far in Industrial? You didn't really talk about IBCs.

No, the main segments that are down are evident, and you can see that, George, when you look at the last earnings of the large chemical companies. That's reflective of the current market situation, whether in EMEA or North America, with North America being the weakest.

Yes. And IBCs, like we said, were down, offset by double-digit growth in the small polymer product.

And our next question will be coming from Michael Roxland of Truist.

This is Nico Piccini on for Michael Roxland. I guess just first off, congrats on the strong cash flow performance thus far this year. Just curious on how you think the business should perform from a cash generation perspective following the divestitures and how do you weigh capital allocation opportunities at your forecasted lower leverage ratio?

We believe all of our businesses are generally stable in terms of cash flow generation, so we do not expect any significant changes. Our goal remains to achieve a free cash flow generation of 50% relative to our performance. Currently, we are above 40%, and any businesses we acquire will need to meet or exceed a 50% free cash flow conversion, unless they offer some compelling reasons otherwise. For instance, if we acquire a business with a margin of over 30% that is capital-intensive and has a 40% cash flow, we would still consider it favorable. We foresee good cash flow generation ahead, and following our debt reduction, we have ample capital. However, our primary constraint in deploying capital has always been the availability of human resources to execute projects. We did notice a decrease in our capital expenditures this quarter, in part due to our decision to cut back on some projects in the containerboard business that no longer aligned with the new buyer's interests. This adjustment allowed us to reevaluate and prioritize our project portfolio. Additionally, we experienced delays in equipment deliveries. We expect to save about $120 million in interest costs from the two transactions, assuming no acquisitions next year. Some of this relates to tax payment timing; for instance, we structured the Soterra deal to benefit from tax savings, amounting to a permanent reduction of $13 million. We will also have additional tax savings in the future linked to this. Overall, we will have substantial capital available for high-return organic capital expenditure projects, and we are actively exploring numerous opportunities in this area alongside our acquisition pipeline.

And Nico, let me just lay out the allocation priorities we have. Obviously, the first one is dividends, safety, and maintenance of our equipment. And after that is debt paydown, but obviously, we're in a very good place now with our leverage. The significant last one is organic growth. And as Larry mentioned, we have a solid pipeline of opportunities for organic growth that we're working on.

Got it. That was very helpful. Just following up maybe on the EBITDA guidance discussion. Can you just help me frame how that top end is hit and if that's just better performance on the SG&A and cost out? Or is that maybe a volume return?

You sort of broke up there, Nico.

Sorry. Yes. Just on the high end of the EBITDA guidance, is reaching that more dependent on the SG&A and cost out or...

No, that's pretty much settled. That range primarily depends on the volume of activity during the month. It's a very narrow range, and it allows for fluctuations based solely on whether volume increases or decreases. That's the main factor influencing it, with only a few minor considerations.

And our next question will be coming from Ghansham Panjabi of Baird.

Ole, considering the current state of your balance sheet and the various portfolio adjustments you've made recently, is enhancing your exposure to more defensive end markets a key strategic focus for you regarding potential acquisitions? How should we view your considerations related to exploring different verticals in your portfolio? Please share your strategic insights on this matter.

I mean, as we laid out on Investor Day, we started off with the end markets. That's where we start looking. How big are the end markets and which end markets are growing faster than GDP in general? And those are the ones I mentioned, the Food & Bev, Agrochemical, the Pharma, and so on. After that, we then look at what products are sold into those end markets that are part of our core business. And that is our polymer-based containers and caps and closures. That's really where our focus is. Of course, we have a legacy business in Durable Metals and so on. And that's also a core business, and we maintain that. But generally, that, as you know, is our cash cow and all the cash and the earnings we generate there, we invest in these growth markets.

Okay. And then as it relates to guidance, just given there's so much going on with your divestitures and also you're changing the number at your fiscal year, et cetera, is it as simple as $730 million at the midpoint of guidance for EBITDA for 2025 for 11 months and then you would strip out the containerboard impact, which is $168 million, and then adjust obviously for 12 months? Is that how we should think about a baseline for the starting point for next year?

Yes. I think generally, I mean, obviously, we've got our cost optimization, and we should realize $25 million or so in '26. And then we already said we'd have a run rate of $50 million to $60 million coming out of next year. So that's the other element that would go into it, Ghansham.

Okay. Perfect. And then just finally, as it relates to the operating environment, again, a lot of event-driven uncertainty with tariffs, et cetera. Is there any change that you see plus or minus as it relates to perhaps your view when you last reported as it relates to the operating environment as you dug through the various regions you're exposed to?

If you are referring to tariffs, the impact we experience is minimal, well below $10 million, and not material for us. We operate in 40 countries, sourcing, manufacturing, and selling locally, so tariffs do not significantly affect us.

And in terms of the demand environment for your customers as it relates to tariffs, any change there, good or bad?

That's a little bit harder. We haven't really seen any changes yet. However, it is clear that some of our large chemical customers are not doing so well, and we are closely monitoring that situation. Looking at the regions, North America and EMEA have remained soft, with no significant changes. The most notable development is in polymers, particularly due to our chosen strategy. We see that as the area of growth, which clearly shows that our strategy is the right one.

Our next question will be coming from Gabe Hajde of Wells Fargo.

I want to revisit the kind of starting point for '26, and I recognize you're not giving '26 guidance. But I thought the $730 million number, it technically includes another, I guess, $50 million from August and September in there. So really, we're kind of talking about, like you said, a $218 million number or $220 million. So $730 million less $220 million is a starting point, and then we got to annualize it, so 11 months to 12. Is that correct?

Yes, that's correct. I missed that on Ghansham's question. You're right on that, Gabe.

Okay. Well, there's a lot of moving parts. So we're just trying to keep our bearings over here. The other one, a little late in the call, I think you guys had bought out, I saw in the cash flow statement, a minority or a noncontrolling interest to the tune of $40 million. What was that?

That was on our North American IBC recycling business that we had purchased 3 years ago. So we bought out the remainder of it.

Yes, we owned 80%, and we bought out the remaining 20%.

Perfect. And last one for me. It seemed like at the Investor Day, the pipeline was pretty full on M&A. And I appreciate that these things can move around and you don't necessarily dictate when people are ready to sell. But can you talk about maybe just broadly the market for M&A and things that you're working on?

I would say the same as before, we have a very strong pipeline. We have smaller acquisitions as well as larger ones, and we maintain close communication with the owners of those businesses. We do not control the timing of these transactions, and we cannot predict that, but it is crucial for us to stay engaged. The companies we are considering align with our strategy. To remind you, within Polymers, we are targeting businesses that generate at least an 18% EBITDA margin and have a 50% free cash flow conversion. They operate within the four growth segments I mentioned earlier, and when opportunities arise, we are prepared to act. Currently, we are very satisfied with our leverage position.

Our next question will be coming from Matt Roberts of Raymond James.

You spent some time already talking about capital allocation, but maybe I'll try again. So given your leverage, so at the land, you'd be at 1.2x. I mean that's well below the long-term 2 to 2.5x range. So what is an upper leverage range you would be comfortable with following any potential deal? And as you look at those target markets, whether that's pharma or other ones, how do asking multiples compare to prior deals you've done? And given where volumes are currently and the commitment to $1 billion in EBITDA in '27, does that 1.2x leverage figure allow for a greater immediacy or appetite for a more transformative deal?

Yes. Ole has already discussed the target markets we're exploring in the M&A pipeline. We're concentrating on that. Currently, we don't see any transformational deals available. There aren't any $3 billion opportunities that we have identified. Regarding our leverage ratio, we prefer to maintain it in the range of 2 to 2.5 times. However, as we've demonstrated before, if we find the right strategic fit in companies that generate the free cash flow we require, we can pay down debt quite quickly. As you may have noticed, our debt ratio has decreased from 3.6 to 3.1 in the last three quarters this year. We're addressing that leverage ratio efficiently. We could pursue a $1 billion deal now and remain within our target range. A $2 billion or $3 billion deal could also keep us within that range if we find businesses that align with our criteria. We will only acquire companies that meet those standards. Ultimately, it will depend on the timing of market opportunities and whether they provide a good strategic fit. We've explored potential deals before and ultimately decided against them because, despite an attractive initial appearance, we realized they did not meet our expectations. We'll continue our search for desirable opportunities.

Very good, Larry. I appreciate the color there. Great analogy. Switching gears, if you could stay on the same analogy, that would be great. But fiber, you've seen a lot of moving pieces there, containerboard coming out, land out, drums are now in this segment since you've resegmented. So with the $218 million coming out in containerboard in 11 months, how should we think about what's remaining in that fiber business in '26 in terms of margin or driving cost out of that business, recognizing there's still some price to flow through? Just any color you could give there on that fiber for 2026.

I'll make a comment and then Ole can add on. I mean, one of the key tenets of our strategy that we've talked about before, but we haven't talked about today is we want to be #1 or #2 in a market. We are #1 in fiber drums in the U.S., and we're #2 in our URB business. We like those positions because it means you're a market leader on what's going on and not the back end of the tail of the dog like maybe we were in containerboard. We like the dynamics of the business right now, the demand on the fiber drum part is weak because of industrial. But anyway, that's a high-level thing on...

Yes. I can't come up with an analogy like Larry. But if you look at our URB business, we are clearly one of the leaders in that sector, and we are pleased with it. Our URB capacity is currently around 630 tonnes. We have some CRB capacity of 65 tonnes, but that's a swing mill that we can convert to URB. Our primary focus is on URB, where we are well integrated into our converting assets.

Okay. That's all very helpful. And maybe if I could squeeze just one more in here. On Integrated Solutions, that margin came in lower in 3Q, and volumes are still up. So what drove the variance in margin quarter-over-quarter within that segment? What is expected on a go-forward basis to get that back above 20%? And in that Integrated Solutions. I mean, you discussed potential investments in closures as well. How do you think about maybe longer-term external sales impacting the longer-term growth rate in that Integrated Solutions business, if material at all?

OCC has been the main factor affecting our margin squeeze. The paper industry has shown some improvement, and our recycled fiber business is experiencing increased sales, but the pricing costs for OCC are well-known. The key advantage of this business is securing a consistent supply chain for OCC, especially since there have been times when sourcing OCC was a significant challenge. Ensuring we have a reliable supply is crucial for supporting our core operations. When it comes to margins, we are particularly fond of our caps and closures segment because it tends to have better margins. All the potential targets we are considering in caps and closures significantly exceed the targets we set in our M&A strategy.

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

Thank you, operator, and thank you again for all your thoughtful questions today. I want to leave you with this. Greif today is a fundamentally stronger, more focused, and more resilient company than ever before. We are simplifying our portfolio. We're strengthening our balance sheet and unlocking significant efficiencies that will create durable shareholder returns. We are not waiting for the macroeconomic environment to improve. We are creating our own path forward with execution discipline, a bias for action, and a clear Build to Last strategy. As demand recovers, our sharpened portfolio and operating leverage will amplify results. We have line of sight to our 2027 commitments, and I'm confident that the actions we are taking now will position Greif to deliver outsized value for years to come. To put it simply, Greif is a company you can invest in with confidence. Thank you.

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