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Greif sees income drop
Originally published:  01/04/2012
Greif, the world’s largest producer of steel drums, has announced a first-quarter net income of $23.9m, down 42.3 per cent from the $41.4m posted this time last year. However, its net sales still increased over the same period from $943.8m to $992.7m. “Continued weakness in the industrial sector and market pressure, especially in Europe, were challenging issues through the first quarter [of] 2012 for the Rigid Industrial Packaging and Services and Flexible Products and Services segments,” says president and CEO David B Fischer. “There are initial signs of improvement in recent sales volumes. Contingency actions that we implemented beginning in the second half of 2011 are helping to mitigate the impact of these market conditions. We remain focused on integrating acquisitions and implementing plans to increase cash flow during 2012.”
Net sales at the company’s Rigid Industrial Packaging & Services division, increased 8 per cent year-on-year from $653.9m to $703.3m. On a same-structure basis, though, sales volumes declined 6 per cent due to market pressure, especially in Europe, although they nonetheless benefited from an 11 per cent increase stemming from acquisitions. Over the quarter, average selling prices rose 4 per cent, primarily due to the pass-through of higher raw material costs.
While gross profit remained relatively stable over the period, dropping slightly from $121.2m to $120.6m, operating profit fell more substantially, dropping from $46.1m this time last year to $32.8m. “Solid results in North America were primarily offset by weak results in Europe and Asia,” Greif reports. Likewise, EBITDA also fell over the same period from $67m to $58.3m for the same reason.
Quarterly net sales also declined for Greif’s Flexible Products & Services Division, falling from $128m in the first quarter of 2011m to $114.8m. This $13.2m decline, the company says, “was attributable to lower sales volumes due to weak market conditions in Europe, which represents a majority of this segment’s sales”. Although gross profit slipped from $24.5m a year ago to $23.7m, operating profit nonetheless increased from $1.4m to $2.3m, with “the negative impact of lower volumes and higher restructuring charges more than offset by lower acquisition-related costs”. That said, EBITDA for the quarter was down from $6.9m to $6.5m.
Looking ahead, Greif “anticipates overall modest sequential quarter improvement despite continuation of challenging market conditions, especially in Europe, for its Rigid Industrial Packaging & Services and Flexible Products & Services businesses”. Market conditions, though, are expected to improve during the second half of the company’s fiscal year. As such, Greif “reaffirms that EBITDA is anticipated to be between $500m and $550m for 2012”.