Executive Summary / Key Takeaways

• Greif is strategically transforming its portfolio towards higher-margin, less cyclical polymer-based packaging solutions, complementing its established positions in durable metal and sustainable fiber packaging, to enhance profitability and reduce cyclical exposure.
• The company is executing a significant $100 million cost optimization program by the end of fiscal 2027, alongside strategic facility rationalization, aimed at improving operational efficiency and driving margin expansion from a 2024 baseline.
• Despite a historic and protracted period of industrial contraction, Greif demonstrated operational resilience in Q2 2025, reporting Adjusted EBITDA of $213.9 million and raising its low-end fiscal 2025 Adjusted EBITDA guidance to at least $725 million, reflecting better price/cost and execution.
• Greif's competitive advantages, including its global network, diverse material expertise, integrated services, and focus on "legendary customer service," enable it to outperform market trends in certain segments and maintain market position against larger, more specialized rivals.
• While macroeconomic uncertainty, particularly in North America, and elevated leverage remain near-term challenges, the company's focus on debt reduction and strategic initiatives position it to capture significant upside when industrial demand eventually recovers.

Setting the Scene: A Packaging Leader's Strategic Pivot

Founded in 1877, Greif, Inc. has evolved from its origins to become a global leader in industrial packaging products and services. Operating across more than 250 facilities in over 40 countries, the company provides a diverse portfolio spanning steel, plastic, and fiber drums, intermediate bulk containers (IBCs), corrugated products, and various integrated solutions like closures, linings, and adhesives. This extensive network and broad material expertise form a foundational strength, enabling local production and sales that offer flexibility and mitigate certain global trade risks like tariffs.

The industrial packaging market is characterized by fragmentation and intense competition, where factors beyond price, such as quality, service, and supply chain reliability, are critical differentiators. Greif competes with larger, more specialized players like Sealed Air (SEE) in protective packaging, Amcor (AMCR) and Berry Global (BERY) in plastics, and International Paper (IP) in paper packaging. Greif's strategic positioning leverages its integrated service offerings, including container reconditioning and lifecycle management, which provide a competitive edge in cost-sensitive segments and foster customer loyalty.

Greif's overarching strategy, "Build to Last," focuses on serving essential industries and capitalizing on its competitive advantages to drive long-term value. A key element of this strategy is a deliberate portfolio shift towards higher-margin, less cyclical polymer-based packaging solutions. This evolution is evident in the increasing contribution of polymers to the business mix, growing from approximately 10% in 2015 to around 20% by 2024, a trend accelerated by strategic acquisitions like Ipackchem.

The company's operational and technological differentiation lies not in a single proprietary material science breakthrough, but rather in its comprehensive expertise across multiple packaging materials and integrated manufacturing processes. Despite lacking proprietary, quantifiable technology differentiators, this allows Greif to offer tailored solutions and manage complex supply chains more effectively than competitors focused on a single material type. For instance, its capabilities in containerboard as a "champion of the independents" highlight its skill in handling diverse specifications and smaller runs with speed and profitability, differentiating it from larger scale-focused players like IP. Furthermore, the implementation of the Greif Business System 2.0, incorporating methodologies like Six Sigma in manufacturing plants, aims to drive continuous operational efficiency and quality improvements across its diverse footprint.

Navigating Macro Headwinds and Recent Performance

Greif's recent performance must be viewed within the context of a challenging macroeconomic backdrop, marked by a historic and prolonged period of industrial contraction that extended for 25 months through November 2024. This environment has resulted in soft demand across many industrial end markets, particularly in North America, which management describes as the most bearish region. Despite these headwinds, Greif's resilient business model and strategic execution have enabled it to deliver solid results.

In the second quarter of fiscal 2025, Greif reported Net Sales of $1385.7 million, a modest increase from $1371.0 million in the prior-year quarter, primarily driven by contributions from recent acquisitions and higher average selling prices. Gross Profit saw a significant increase to $319.5 million from $270.1 million, benefiting from factors impacting net sales and lower raw material costs. Operating Profit rose to $118.6 million compared to $98.1 million in Q2 2024. Adjusted EBITDA for the quarter was $213.9 million, a notable increase from $169.7 million in the same period last year, with the Adjusted EBITDA margin expanding by 300 basis points to 15.4%.

For the first six months of fiscal 2025, Net Sales were $2651.5 million, up from $2576.8 million in the prior year, largely due to acquisition contributions offset partially by the Delta divestiture. Gross Profit increased to $565.0 million from $491.7 million, driven by sales factors and lower raw material costs, though partially offset by higher manufacturing costs. Operating Profit for the six-month period was $178.5 million, up from $167.0 million. Adjusted EBITDA reached $359.0 million, compared to $306.7 million in the first six months of 2024. Net Income for the six months was $68.9 million, lower than $126.3 million in the prior year, primarily due to a significant one-time discrete tax benefit recognized in the first half of 2024.

Segment performance reflects the mixed demand environment and strategic actions. Customized Polymer Solutions saw strong growth in both sales and Adjusted EBITDA, benefiting from acquisitions like Ipackchem and resilience in target end markets like agrochemicals and food/beverage. Durable Metal Solutions experienced lower sales and volumes due to exposure to softer industrial markets but maintained relatively stable Adjusted EBITDA, partly through value-over-volume discipline. Sustainable Fiber Solutions reported increased sales and a significant jump in Adjusted EBITDA and margins, driven by recognized paper price increases and lower raw material costs, despite slightly lower volumes year-over-year. Integrated Solutions saw declines in sales and profitability, primarily impacted by the divestiture of the Delta Petroleum business.

Strategic Initiatives and Competitive Positioning

Greif is actively pursuing strategic initiatives to enhance its long-term performance and competitive standing. A major focus is the $100 million cost optimization program, targeting savings from SG&A rationalization, network optimization, and operating efficiency gains through GBS 2.0 by the end of fiscal 2027. By Q2 2025, the company had achieved $10 million in run rate savings towards this goal. This initiative includes strategic facility closures, such as the L.A. paperboard mill (72k tons capacity) and the Austell and Fitchburg mills (100k tons containerboard, 90k tons URB capacity), aimed at streamlining operations and improving profitability, with expected EBITDA benefits from redeploying tons to more efficient facilities.

The portfolio shift towards polymers is a core strategic driver. The acquisition of Ipackchem for $582.1 million was a significant step, adding high-performance plastic packaging capabilities and contributing to the growth of the Customized Polymer Solutions segment. This segment's Adjusted EBITDA margin of 16.2% in Q2 2025 demonstrates the attractive profitability profile of these targeted markets. Complementing this, the divestiture of the Delta business and the planned sale of the Soterra timber portfolio are intended to simplify the portfolio and generate proceeds for debt reduction, aligning the business more closely with its core packaging strengths.

In the competitive landscape, Greif differentiates itself through its comprehensive product offering across multiple materials and its integrated service model. While competitors like SEE, AMCR, BERY, and IP may hold larger market shares in specific material types or exhibit higher profitability margins (e.g., SEE's Operating Margin of 14% TTM vs. GEF's 8.62% TTM), Greif's ability to provide a wider range of solutions and services allows it to serve customers more completely. Its "value over volume" strategy helps maintain margins in competitive markets where some players may price aggressively to gain share. The company's strong customer service reputation, evidenced by high engagement scores and awards, fosters loyalty and helps retain business even when faced with lower-priced alternatives.

Financial Health, Outlook, and Risks

Greif's liquidity is supported by operating cash flows and access to credit facilities. The company generated strong Adjusted Free Cash Flow of $110 million in Q2 2025 and has raised its full-year fiscal 2025 Adjusted Free Cash Flow guidance to $280 million. Managing debt is a key priority, with leverage at 3.53 times Adjusted EBITDA at the end of fiscal 2024, above the target range of 2.0-2.5 times. Proceeds from the planned Soterra sale and accelerating cash flow generation are earmarked for debt reduction, and management is confident in its ability to lower leverage as volumes recover. The company remains in compliance with its debt covenants.

For fiscal 2025, Greif has raised its low-end Adjusted EBITDA guidance to at least $725 million. This guidance reflects the positive impact of better price/cost dynamics, particularly in the fiber segment, operational efficiencies, and initial contributions from the cost optimization program. However, it incorporates conservative assumptions regarding volume recovery and accounts for headwinds such as unfavorable foreign exchange and higher operating costs. The decision to provide only low-end guidance underscores the prevailing market uncertainty and the lack of a clear, sustained rebound in industrial demand.

Potential upside to the guidance exists, primarily driven by a more robust recovery in industrial volumes, which management estimates could provide a $160 million EBITDA lift if volumes return to 2022 levels. Further realization of announced paper price increases and acceleration of the $100 million cost optimization savings also represent potential tailwinds not fully captured in the current low-end outlook.

Key risks to the investment thesis include the potential for a prolonged industrial downturn, which would continue to pressure volumes and profitability. Volatility in raw material costs, energy prices, and transportation expenses can impact margins. Challenges related to integrating acquisitions, executing the cost optimization program, and managing facility closures could affect financial results and timelines. While direct tariff exposure is limited, indirect impacts on overall market demand remain a concern. Competition is intense, and maintaining market share and pricing power requires continuous operational excellence and value delivery.

Conclusion

Greif is a seasoned packaging company currently undergoing a significant strategic evolution to enhance its resilience and growth profile. By pivoting towards higher-margin polymer solutions, optimizing its cost structure through aggressive initiatives, and leveraging its core competitive strengths in customer service and operational expertise across diverse materials, Greif is positioning itself for improved performance.

While the current macroeconomic environment presents undeniable challenges, reflected in mixed demand trends and elevated leverage, the company's recent financial results and raised low-end guidance demonstrate its ability to execute effectively even in a downturn. The clear focus on debt reduction and the substantial potential upside from volume recovery and strategic savings provide a compelling narrative for investors looking beyond the current cycle. Greif's blend of operational discipline, strategic portfolio management, and commitment to customer value suggests it is well-equipped to capture opportunities and deliver enhanced shareholder value as industrial markets eventually rebound.