Investor Presentation March 2010
Investor Presentation
March 2010
Safe HarborForward-Looking Statements
This presentation contains certain forward-looking information within the meaning of the PrivateSecurities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “estimate,” “target,”and similar expressions, among others, identify forward-looking statements. All forward-lookingstatements are based on information currently available to management. Such forward-lookingstatements are subject to certain risks and uncertainties that could cause events and the Company’sactual results to differ materially from those expressed or implied. Please see the disclosure regardingforward-looking statements immediately preceding Part I of the Company’s Annual Report on Form 10-Kfor the fiscal year ended October 31, 2009. The Company assumes no obligation to update anyforward-looking statements.
Regulation G
This presentation includes certain non-GAAP financial measures that exclude restructuring and otherunusual charges and gains that are volatile from period to period. Management believes the non-GAAPmeas res pro ide a better indication of operational performance and a more stable platform on hich tomeasures provide a better indication of operational performance and a more stable platform on which tocompare the historical performance of the Company than the most nearly equivalent GAAP data. Allnon-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliationbetween GAAP and non-GAAP measures are available at the end of this presentation and on the GreifW b it t if
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Web site at www.greif.com.
Greif Profile
• Founded in 1877 as a packaging companycompany
• Initial public offering in 1926
• Diversified business platform
• Leading industrial packaging companywith over 30% global market share
• Approximately 200 operations in morethan 45 countries
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Twelve months ended January 31 2010
Diversified Business Platform(Dollars in millions)Twelve months ended January 31, 2010
Sales $2,836
Operating Profit (1)
$304
Industrial Packaging
Paper Packaging
Land Management
Sales $2,302
Operating Profit (1)
$250
Sales $514
Operating Profit (1)
$32
Sales $20
Operating Profit (1)
$22
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(1) Before restructuring charges, restructuring-related inventory charges, acquisition-related costs and timberland disposals, net. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.
Performance Trajectory(Dollars in millions)
2000 2010(1) CAGR
Net Sales $964 $2,836 12%,
Re-Earn the Right to Grow Earn and Grow
March 4 2003
(1)
March 2, 2001Acquired Van Leer Industrial Packaging from Huhtamaki for $555 million
March 4, 2003Launched
Transformation toGreif Business System
September 22, 2006
Acquired Delta Petroleum for $98 million
September 30, 2003
Remaining interest in CorrChoice obtained
November 30, 2006
Acquired steel drum and closure businesses of Blagden Packaging for €205 million
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(1) Represents the twelve months ended January 31, 2010.
Our AspirationsTop-quartile performance• Organic growth: 5.0%
• Operating profit margin: 12.5%
Top-quartile performance metrics• Organic growth: 5.0%
• Operating profit margin: 12.5%SG&A t t l 7 5%
Preferred productivity partner• Compelling value proposition
based on what customers are willing to pay for
Growth • SG&A to net sales: 7.5%• OWC to net sales: 7.5%• RONA: 25.0%
• SG&A to net sales: 7.5%• OWC to net sales: 7.5%• RONA: 25.0%
willing to pay for• Low-cost provider of high-quality
products with consistent and reliable delivery
Value
People ProductivityPeople Productivity
Strong performance ethicT t
Strong performance ethic• Transparent governance
Productivity imperative• Real-cost productivity: ≥ 4% per year• Transparent governance
structure• Performance management • Talent and succession
management
a spa e t go e a cestructure
• Performance management • Talent and succession
management
ea cost p oduct ty % pe yea• Capital productivity
› Asset turns: ≥ 2x› World-class strategic sourcing
capabilities
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management capabilities
Note: Performance metrics over a complete business cycle.
Our Catalyst – Greif Business System
The Greif WayGreif Production S tSystem
Greif Operational
WorkingCapital
Global Operating System
Operational Excellence
Commercial Excellence
Supply Chain
Core Processes
Strategy People Performance Management
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Greif Business System Illustrated
Operational Commercial Global Sourcing Working Capital
Holistic Approach
Excellence Excellence and Supply Chaing p
Key Overall Equipment Pocket Margin Identify key suppliers & Fully integrated yElements
q pEffectiveness (OEE)
5S (Sort/Set in Order/Shine/Standardize/
Sustain)
l
g
Account Management
Value Selling
Channel
y y ppsource raw material requirements effectively
Reduce raw material price volatility
O d l d li i
y gglobal cash management system
Strong credit approval process
Line Balancing
Visual Management
Value Stream Mapping
Channel Management
Performance Management
Orderly deliveries
Aggressively pursue direct and indirect cost savings
Automated tools to manage and monitor cash requirements
GBS diagnostics have identified approximately $100 million of additional cost savings.
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(Dollars in millions)RONA Value Stream
S iti it **
ILLUSTRATIVE PURPOSES ONLY
KPI A t bilit$11
$32Operating Profit
Sales
100%3,200
Value
Volume*
GDP+2% ComEx
ComEx/
x+
Sensitivity**
Price
KPI Accountability
$32
$17
Labor
MaterialsRONA
25%
12.5%COGS
77.5%
Depreciation
400Value
53%
ComEx/Sourcing
x+
- Spread
$3
$4
2.5%
SG&A
7 5%
8%
Overhead
11.5%ROIC
17 5%
OpEx
OpEx+
+-
-
UPMH
OEE
$2
7.5%
Fixed Capital
Freight
5%
A/R
17.5%
WACCSourcing
ComEx
+
+
-
DSOCapital Turnover
2.0 Turns
2 Turns
Working Capital
20 Turns
1,600
A/R
12 Turns
Inventories
14 Turns
10% ComEx
Sourcing
+
++
+
Flow
Ben
efit
Economic Profit
=
DSO
DIO
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20 Turns 14 Turns
A/P
9 Turns* Volume impact = sales - material - labor – freight.** Operating profit impact of 1% change.
Sourcing- C
ash 7.5 pts.
DPO
Strategy Statement• Continue to strengthen the core
> Industry consolidationE i k t> Emerging markets
> Product line extensions
O G f S• Optimize and embed the Greif Business System throughout theenterprise to achieve top quartile profitability and lowest costproducer status while enhancing safety and quality.
• Pursue adjacencies.
• Emphasize sustainability in all of the company’s activities to meet• Emphasize sustainability in all of the company s activities to meetor exceed our stewardship responsibilities as a global citizen, andcreate long-term competitive and shareholder advantages.
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• Fix, sell or close underperforming assets.
2010 Goals
• Deliver operating profit comparable to record levels of 2008 and top-quartile returns
• Permanent cost reduction / margin improvement of at least $120 million
• Optimize and leverage GBS – catalyst for performance improvement and acquisition integration
• Disciplined execution of growth strategy and portfolio optimization
• Protect financial and operational flexibility
Focus Discipline Passion
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p
Industrial Packaging(Dollars in billions)
Served marketsNet sales
Lubricants, Oilsand Additives
2005 2010(2) CAGR
$1.8 $2.3 6%
(Dollars in billions)
Agriculture
Pharmaceutical
Competitive advantagesOperating profit margin (1)
Pharmaceutical
Chemicals
(2)
Leading market position
Growing global footprint
C lli l iti
Competitive advantagesOperating profit margin
Compelling value proposition
Comprehensive product portfolio
Strong customer relationships (2)
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(1) Calculated as operating profit before restructuring charges, restructuring-related inventory charges and acquisition-related costs divided by net sales. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.
(2) Represents the twelve months ended January 31, 2010.
Most Comprehensive Industrial Products and Services Portfolio
Plastic FibreSteelIntermediate Bulk
Containers ClosuresGlobal
PresenceFilling &Blending
#1 #1#2 #4 #1
Mauser
Schutz
Greif’s global market share exceeds 30%
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Greif s global market share exceeds 30%
Paper Packaging(Dollars in millions)
Served marketsNet sales
2005 2010(2) CAGR
$608 $514 (4)%
(Dollars in millions)
• Automotive• Automotive• Building Products• Food• Packaging
Competitive advantagesOperating profit margin (1)
(2)
Customer focus
Integrated containerboard network
p gp g p g
Integrated containerboard network
Highly efficient sheet feeder footprint(2)
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(1) Calculated as operating profit before restructuring charges divided by net sales. See GAAP to Non-GAAP reconciliation included in the Appendix of thispresentation.
(2) Represents the twelve months ended January 31, 2010.
Land Management
Core Timberlands 229,350 0 229,350
United States Canada Total
Special Use Land 34,900 25,050 59,950
Total Acres 264,250 25,050 289,300
L d M t i l ti h ti l d ti f U S ti b ti• Land Management involves active harvesting, sale and regeneration of U.S. timber properties,Special Use (Higher and Better Use, surplus and development land) sales, timberland management, wildlife stewardship, recreation and development.
• Undervalued timber portfolio with book value of $208 million at January 31, 2010.p $ y ,
• Over $225 million of timber properties have been monetized since 2001.
• Timber properties are located in Alabama, Louisiana and Mississippi in the United States and the Provinces of Quebec and Ontario in Canada
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the Provinces of Quebec and Ontario in Canada.
Financial ReviewFinancial Review
Financial Profile(Dollars in millions)
2005 2006 2007 2008 2009 2010(3)
CAGR
(Dollars in millions)
Net Sales $2,424 $2,628 $3,322 $3,777 $2,792 $2,836 4%
(1)Operating Profit
(1)$ 165 $ 242 $ 312 $ 425 $ 277 $ 304 15%
RONA(1) (2)
15.4% 21.9% 21.3% 25.5% 15.7% 16.8%
(1) B f t t i h t t i l t d h i iti l t d t d ti b l d di l t
( )Before restructuring charges, restructuring-related charges, acquisition-related costs and timberland disposals net. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.
(2) An explanation of the calculation of RONA is included in the Appendix of this presentation.
(3) Represents the twelve-months ended January 31, 2010.
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Financial Objectives(1)
(Dollars in millions)(Dollars in millions)
Annual Organic Sales Growth 5%
Total Debt to Total Capitalization 30% - 40%
Annual Dividend Payout 30% - 35%
A l C it l E dit $85 $145Annual Capital Expenditures $85 - $145
Spread Over Cost of Capital 7.5% - 10%
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(1) Over a complete market cycle.
Strong Cash Generation(Dollars in millions)
Purchases of
(Dollars in millions)
Purchases of PP&E, net
$81
Other $7
Operating Cash Flow
$267
Acquisitions$91
Free Cash Flow(1)
$186
Cash Dividends$88
33% of Operating Cash Flow Returned to Shareholders in Fiscal 2009
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(1) Free cash flow = operating cash flow – purchases of PP&E, net
Cash Dividends(Dollars per Class A Common Share)(Dollars per Class A Common Share)
2000-2009: 22%CAGR
• More than 75 consecutive years of cash dividends paid
• 30%-35% payout target over complete business cycle
• 3.1% current yield (1)
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(1) Based on cash dividends paid during last 12 months (February 1, 2010).
Re-earning the Right to Premium Valuation• GBS – a catalyst enabling strong relative performance and value
creation during cyclical trough
• Diversity – a compelling competitive advantage
• Strong balance sheet and access to alternate sources of liquidity
• Balanced focus on defense (contingency planning/enterprise risk management) and offense
• Solid, experienced and performance-driven management team with record of accomplishment
Diversity > Strength > Performance
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AppendixAppendix
GAAP to Non-GAAP ReconciliationR t N t A tReturn on Net Assets
UNAUDITED(Dollars in millions) 2005 2006 2007 2008 2009 2010
GAAP operating profit 185.8$ 250.2$ 289.8$ 382.3$ 199.9$ 239.1$
(2)
p g pRestructuring charges 35.8 33.2 21.2 43.2 66.6 45.4Restructuring-related inventory charges - - - - 10.8 9.0Acquisition-related costs - - - - - 10.1Timberland disposals, net (56.3) (41.3) 0.7 (0.4) - -
Non-GAAP - operating profit before restructuring charges, restructuring-related inventory charges, acquisition-related costs and timberland disposals, net 165.3$ 242.1$ 311.7$ 425.1$ 277.3$ 303.6$
Average cash (1) (67.9)$ (148.9)$ (120.4)$ (101.0)$ (79.5)$ (81.9)$ Average short-term borrowings (1) 17.9 24.6 34.9 48.4 56.8 56.3 Average current portion of long-term debt (1) - - - - 3.5 7.5 Average long-term debt (1) 446.8 449.7 645.1 687.0 748.5 789.7 Average shareholders' equity (1) 677.9 779.6 904.0 1,030.4 1,034.9 1,036.8Average net assets 1,074.7$ 1,105.0$ 1,463.6$ 1,664.8$ 1,764.2$ 1,808.4$
GAAP return on net assets (GAAP operating profit divided by average net assets) 17.3% 22.6% 19.8% 23.0% 11.3% 13.2%
Non-GAAP return on net assets (non-
(1) Amounts used in the calculation for this graph are based upon the average balances as of the beginning of the
(GAAP operating profit before restructuring charges, restructuring-related inventory charges, acquisition-related costs and timberland disposals, net divided by average net assets) 15.4% 21.9% 21.3% 25.5% 15.7% 16.8%
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g p p g g gfiscal year and end of each fiscal quarter for the years presented.
(2) Represents the twelve months ended January 31, 2010.
GAAP to Non-GAAP ReconciliationO ti P fit M i b S tOperating Profit Margin by Segment
UNAUDITED(Dollars in millions) 2005 2006 2007 2008 2009 2010
Industrial Packaging
Net Sales 1 804 2$ 1 993 1$ 2 662 9$ 3 074 8$ 2 266 9$ 2 302 2$
(1)
Net Sales 1,804.2$ 1,993.1$ 2,662.9$ 3,074.8$ 2,266.9$ 2,302.2$
GAAP - operating profit 89.0$ 143.4$ 213.0$ 292.0$ 134.4$ 184.1$ Restructuring charges 31.4 24.0 16.0 34.0 65.7 46.5 Restructuring - related inventory charges - - - - 10.8 9.0 Acquisition-related costs - - - - - 10.1
Non-GAAP - operating profit before restructuring charges, restructuring-relatedrestructuring charges, restructuring related inventory charges and acquisition-related costs 120.4$ 167.4$ 229.0$ 326.0$ 210.9$ 249.7$
GAAP- operating profit margin 4.9% 7.2% 8.0% 9.5% 5.9% 8.0%Non-GAAP operating profit margin 6.7% 8.4% 8.6% 10.6% 9.3% 10.8%
Paper Packagingp g gNet Sales 607.8$ 620.3$ 653.7$ 696.9$ 504.7$ 513.8$
GAAP - operating profit 32.6$ 55.0$ 63.1$ 69.6$ 43.4$ 32.8$ Restructuring charges 4.3 9.2 5.2 9.1 0.7 (1.2)
Non-GAAP - operating profit before restructuring charges 36.9$ 64.2$ 68.3$ 78.7$ 44.1$ 31.6$
GAAP- operating profit margin 5.4% 8.9% 9.7% 10.0% 8.6% 6.4%Non-GAAP-operating profit margin 6.1% 10.3% 10.4% 11.3% 8.7% 6.2%
Land Management
GAAP - Operating profit 64.2$ 51.9$ 13.7$ 20.9$ 22.1$ 22.1$ Restructuring charges 0.1 - - 0.1 0.2 - Timberland disposals, net (56.3) (41.3) 0.7 (0.4) - -
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Non-GAAP - operating profit before restructuring charges and timberland disposals, net 8.0$ 10.6$ 14.4$ 20.6$ 22.3$ 22.1$
(1) Represents the twelve months ended January 31, 2010.