Executive Summary / Key Takeaways

• Greif is strategically transforming its portfolio towards higher-margin, less cyclical polymer-based packaging solutions and integrated products, supported by targeted acquisitions and divestitures.
• The company has initiated a significant $100 million cost optimization program targeting SG&A, network efficiency, and operations, with tangible progress already being realized towards fiscal 2027 goals.
• Recent financial performance, particularly in Q2 2025, demonstrates improving profitability driven by price/cost dynamics and operational execution, despite mixed end-market demand.
• Management raised its fiscal 2025 low-end guidance for Adjusted EBITDA to $725 million and Adjusted Free Cash Flow to $280 million, signaling confidence grounded in execution and improving market factors.
• Debt reduction remains a near-term priority, leveraging strong cash flow generation and proceeds from planned divestitures to return to the target leverage range and enhance financial flexibility.

Setting the Scene: A Packaging Leader's Strategic Evolution

Greif, Inc., with roots tracing back to 1877, has long been a foundational player in the industrial packaging sector, providing essential containers for a wide array of industries. Historically organized around geographic regions, the company has recently embarked on a significant strategic transformation under its "Build to Last" initiative. This evolution is fundamentally reshaping its business model, shifting focus towards a material-solutions-based structure designed to leverage deep product expertise, enhance operational efficiency, and capitalize on higher-growth, less cyclical end markets.

This strategic pivot recognizes that the dynamics of producing steel drums differ significantly from those of plastic containers or paperboard products. By realigning operations and commercial functions around Customized Polymer Solutions, Durable Metal Solutions, Sustainable Fiber Solutions, and Integrated Solutions, Greif aims to sharpen its competitive edge. This new structure is intended to foster greater subject matter expertise, optimize cross-selling opportunities across its diverse portfolio, and streamline the integration of future acquisitions, ultimately driving margin expansion and more predictable returns.

Within the competitive landscape, Greif operates alongside major players like Silgan Holdings (SLGN), Sonoco Products (SON), Pactiv Evergreen (PTVE), Packaging Corp of America (PKG), and Graphic Packaging Holding (GPK). While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Greif positions itself as a comprehensive global provider, offering a breadth of solutions that differentiates it from more specialized rivals. Its long-standing customer relationships and emphasis on service are key competitive factors, particularly in industrial segments where reliability and integrated solutions are highly valued.

Technological Expertise and Operational Advantage

Greif's competitive differentiation is not solely rooted in its broad product portfolio but also in its deep technological expertise across various materials and manufacturing processes. While not centered on a single, breakthrough "core technology" in the vein of advanced materials science, Greif's strength lies in its specialized knowledge within each material solution and its application of advanced operational methodologies.

In Customized Polymer Solutions, this expertise translates into the production of high-performance plastic packaging, including premium barrier and non-barrier jerrycans and rigid intermediate bulk containers (IBCs). The ability to engineer specific barrier properties, for instance, is critical for customers in sensitive industries like agrochemicals and pharmaceuticals, ensuring product integrity and safety. This specialized polymer processing and formulation capability provides a tangible benefit by meeting stringent customer requirements that standard packaging cannot, contributing to Greif's premium positioning in these markets.

Within Sustainable Fiber Solutions, the company's technological know-how extends to managing recycled fiber streams and producing various paperboard grades. This involves specialized processes for recycling, pulping, and forming containerboard, uncoated recycled board (URB), and coated recycled board (CRB). The focus on efficiency in these processes is crucial for cost management in a commodity-exposed business.

The Durable Metal Solutions segment relies on specialized metal forming, welding, and coating technologies for producing steel drums. The quality and durability of these drums, often used for hazardous materials, are paramount and depend on precise manufacturing techniques and material science expertise.

Furthermore, the Integrated Solutions segment, which produces complementary products like paints, linings, and adhesives, involves specialized chemical formulation and application technologies. The performance of these components directly impacts the functionality and protective qualities of the primary packaging, requiring distinct technological capabilities.

Underpinning these material-specific capabilities is the company's commitment to operational excellence through the Greif Business System 2.0, which incorporates methodologies like Six Sigma. This focus on process efficiency aims to reduce scrap, improve quality, and lower manufacturing costs across its global network of over 250 facilities. Specific, quantifiable metrics like percentage improvements in energy yield or degradation rates are not detailed, but the strategic intent is clear: leverage process technology and material expertise to drive efficiency, quality, and product performance, thereby enhancing the competitive moat and supporting margin expansion. This operational and technological foundation is presented as a key enabler of Greif's "legendary customer service" and its ability to command value-based pricing, even in challenging markets.

Strategic Portfolio Optimization and Cost Discipline

Greif's strategic evolution is actively reshaping its portfolio through targeted M&A and divestitures. The acquisition of Ipackchem in March 2024 significantly bolstered its Customized Polymer Solutions segment, particularly in high-performance small plastic packaging for target growth markets like agrochemicals and food & beverage. This move aligns with the company's stated objective to increase its exposure to polymer-based products, which have grown from approximately 10% of sales in 2015 to around 20% by Q3 2024, attracted by their higher margins and lower cyclicality compared to some legacy businesses.

Concurrently, Greif is rationalizing its portfolio by divesting non-core assets. The sale of Delta Petroleum Company in Q3 2024 removed a business serving more cyclical end markets. Looking ahead, the announced intention to sell the Soterra timber portfolio in Q1 2025 further simplifies the business structure and is intended to provide proceeds for debt reduction. These actions underscore a deliberate strategy to focus resources on core, high-return areas and enhance financial flexibility.

Complementing the portfolio shift is a significant focus on cost optimization. Greif has launched a $100 million cost optimization program, measured against a fiscal 2024 baseline, targeting realization by the end of fiscal 2027. This initiative encompasses SG&A rationalization, network optimization, and operating efficiency gains driven by GBS 2.0. Progress is already being made, with $10 million in run rate savings achieved by Q2 2025 towards a fiscal 2025 run rate target of $15 million to $25 million. The company expects to realize $5 million of these savings within fiscal 2025.

Network optimization includes difficult but strategic decisions, such as the permanent closure of paperboard mills in Austell, Georgia, and Fitchburg, Massachusetts (announced Q1 2025), and the LA paperboard mill (announced Q2 2025). These closures, while impacting approximately 140 positions across Austell and Fitchburg, are expected to yield a combined annual bottom-line EBITDA benefit of $10 million starting in fiscal 2026 by increasing the efficiency of the remaining mill network. These mill closures alone contribute $20 million towards the $100 million long-term optimization target. Management emphasizes that this program involves over 70 work streams across the entire P&L and is not back-loaded, indicating a steady effort towards achieving the target. This cost discipline is a critical lever in expanding margins and achieving the long-term financial targets.

Financial Performance and Liquidity

Greif's recent financial performance reflects the impact of strategic initiatives and the prevailing macroeconomic environment. For the three months ended April 30, 2025 (Q2 2025), net sales were $1,385.7 million, a modest increase from $1,371.0 million in the prior year quarter, primarily driven by higher average selling prices and contributions from recent acquisitions, partially offset by lower volumes in some segments and negative FX impacts. Gross profit saw a significant increase to $319.5 million from $270.1 million, benefiting from improved price/cost dynamics and lower raw material costs, leading to a notable expansion in gross profit margin to 23.1% from 19.7%. Selling, General and Administrative (SGA) expenses increased to $172.6 million from $167.2 million, mainly due to recent acquisitions and higher compensation and amortization expenses, representing 12.5% of net sales compared to 12.2% in the prior year. Operating profit rose to $118.6 million from $98.1 million. Net income for the quarter increased slightly to $54.5 million from $52.0 million. Adjusted EBITDA, a key profitability metric for the company, saw a substantial increase to $213.9 million in Q2 2025 from $169.7 million in Q2 2024, with the Adjusted EBITDA margin improving to 15.4%.

For the first six months of fiscal 2025, net sales were $2,651.5 million, up from $2,576.8 million in the prior year period, driven by acquisition contributions and higher paper prices, partially offset by divestiture impacts and lower volumes. Gross profit increased to $565.0 million from $491.7 million, with the margin expanding to 21.3% from 19.1%. SGA expenses rose to $340.3 million from $313.0 million. Operating profit was $178.5 million compared to $167.0 million. Net income for the six months decreased to $68.9 million from $126.3 million, primarily due to a significant one-time discrete tax benefit recognized in the prior year period. Adjusted EBITDA for the first six months increased to $359.0 million from $306.7 million.

Segment performance in Q2 2025 highlighted the strategic shift: Customized Polymer Solutions saw significant increases in net sales ($329.3M vs $285.6M) and Adjusted EBITDA ($53.4M vs $34.9M), driven by acquisitions and growth in target end markets. Durable Metal Solutions experienced declines in net sales ($378.9M vs $413.7M) and Adjusted EBITDA ($63.7M vs $64.5M) due to softer industrial demand. Sustainable Fiber Solutions reported higher net sales ($599.1M vs $580.1M) and a substantial jump in Adjusted EBITDA ($79.5M vs $49.5M), benefiting from favorable price/cost dynamics, particularly in paper. Integrated Solutions saw decreases in net sales ($78.4M vs $91.6M) and Adjusted EBITDA ($17.3M vs $20.8M), primarily due to the Delta divestiture.

Liquidity remains supported by operating cash flows and credit facilities. Net cash provided by operating activities for the first six months of 2025 was $105.6 million, an improvement from $92.0 million in the prior year period, reflecting better working capital management. Net cash used in investing activities was $31.7 million, a significant decrease from $662.6 million in the prior year, which included the Ipackchem acquisition. Net cash used in financing activities was $53.7 million compared to cash provided of $584.9 million in the prior year. Adjusted Free Cash Flow for Q2 2025 was $110 million, up from $59 million in Q2 2024. The company's debt leverage ratio stood at 3.53x at the end of fiscal 2024 (October 31, 2024), pro forma 3.59x including the Delta sale proceeds, above its target range of 2.0x-2.5x. Debt reduction is a key priority, leveraging cash flow generation and divestiture proceeds.

Outlook and Path to Future Targets

Greif's management maintains a cautious but confident outlook for fiscal 2025, reflected in its decision to provide low-end guidance. The company raised its fiscal 2025 Adjusted EBITDA guidance to at least $725 million (up from $710 million) and Adjusted Free Cash Flow guidance to $280 million (up from $245 million). This upward revision is grounded in demonstrated execution and improving market factors, particularly better price/cost performance observed in Q2 2025 and revised higher expectations for the second half of the year, notably benefiting from RISI-recognized paper price increases.

The guidance incorporates specific assumptions, including continued benefits from price/cost dynamics, contributions from recent acquisitions, and progress on cost optimization initiatives. However, it also factors in a more bearish volume assumption compared to previous guidance and the impact of higher incentive compensation due to improved performance. Management views volume recovery as the largest variable for potential upside beyond the low-end guidance, highlighting significant untapped operating leverage, particularly in the Durable Metal Solutions segment.

Looking further ahead, Greif has set ambitious targets of achieving $1 billion in EBITDA and $500 million in free cash flow by fiscal 2027. This bridge is expected to be built through a combination of known positive discrete items (including the run rate impact of paper pricing), volume recovery as industrial markets improve, and the realization of the $100 million cost optimization program. The progress on cost savings and the strategic realignment are presented as key enablers for achieving these targets, positioning Greif for enhanced profitability and cash flow generation when demand accelerates.

Risks and Challenges

Despite strategic progress and improving financial performance, Greif faces several risks and challenges that could impact its investment thesis. Macroeconomic volatility and the ongoing industrial contraction remain significant headwinds, particularly affecting demand in segments exposed to chemicals, petroleum, and automotive end markets. While Greif has demonstrated an ability to outperform market trends in certain regions like EMEA through customer service and operational agility, a sustained downturn could continue to pressure volumes and profitability.

Intense market competition and pricing pressure, especially in the Durable Metal Solutions and certain paper segments, pose ongoing challenges. Maintaining the "value over volume" philosophy requires discipline and risks temporary market share losses if competitors aggressively pursue volume at lower margins. Fluctuations in raw material costs (steel, resin, fiber), energy prices, and transportation expenses can impact margins, although Greif's pass-through mechanisms and hedging strategies aim to mitigate some of this exposure.

The execution of strategic initiatives, including the integration of acquisitions like Ipackchem and the realization of the $100 million cost optimization program, carries inherent risks. Delays or unexpected costs in integration or restructuring activities could impact anticipated synergies and savings. While goodwill impairment testing indicated fair values exceeding carrying values, particularly for the Customized Polymer Solutions - Small Plastics/Jerrycans unit with limited headroom (2%), a significant downturn in specific markets could necessitate future impairment charges.

Furthermore, global supply chain disruptions, changes in tax regulations, and increasing environmental compliance costs present potential headwinds. While Greif's local-to-local operating model offers some resilience against tariffs and regional disruptions, it is not immune to broader global economic or regulatory shifts.

Conclusion

Greif is undergoing a deliberate and strategic transformation, pivoting towards a more resilient and higher-margin portfolio centered on Customized Polymer Solutions and integrated offerings, while optimizing its traditional Durable Metal and Sustainable Fiber segments. The recent financial results, particularly in Q2 2025, demonstrate tangible progress, with improving profitability driven by effective price/cost management and operational execution, even amidst a challenging industrial backdrop.

The announced $100 million cost optimization program, coupled with portfolio rationalization through targeted divestitures and mill closures, provides a clear roadmap for margin expansion and enhanced efficiency. Management's decision to raise fiscal 2025 guidance reflects growing confidence in the company's ability to execute and capture value from improving market dynamics, particularly in paper pricing. While macroeconomic uncertainty and competitive pressures persist, Greif's focus on operational excellence, technological expertise within its material solutions, and legendary customer service positions it to outperform its peers and capitalize on the eventual recovery in industrial demand. The commitment to debt reduction further strengthens the financial profile, paving the way for future growth and shareholder returns towards the ambitious 2027 targets. For investors, Greif represents a compelling opportunity in a foundational industry, driven by strategic evolution and disciplined execution.