Greif Q2 Profit Down, Cuts FY Outlook - Update

(RTTNews) - Industrial packaging products maker Greif Inc. (GEF), Wednesday reported a drop in profit for the second quarter, hurt mainly by higher expenses and due to an illegal occupation of its facility. Moving ahead, the company lowered its full-year earnings outlook, based on slow recovery of the global economy.

Delaware, Ohio-based Greif 's second-quarter profit dropped to $35.8 million or $0.61 per Class A share from to $40.2 million or $0.69 per Class A share last year. On average, seven analysts polled by Thomson Reuters expected earnings of $0.67 per share for the quarter. Analysts' estimates typically exclude special items.

The company said its earnings for the quarter was negatively impacted by about $20 million due to an illegal occupation of a Turkey manufacturing facility and weather-related conditions.

Commenting on the results, Chief Executive David Fischer said, "Our Paper Packaging segment achieved record second quarter operating profit; however, our quarterly results were adversely impacted by a prolonged, illegal occupation at the Hadimkoy, Turkey flexible products manufacturing facility and severe weather-related conditions that significantly affected two of our business segments."

Revenues for the second quarter grew 1.1 percent to $1.10 billion from $1.09 billion a year ago. Seven analysts had a consensus revenue estimate of $1.12 billion for the quarter.

Sales growth was driven largely by a 2.3 percent increase in selling prices but partially offset by a negative 1.0 percent impact from foreign currency translation.

Sales from rigid industrial packaging segment inched up 1.4 percent to $784.3 million, while sales from the paper packaging rose 5.4 percent to $205.0 million. Sales of flexible products and services declined 6.3 percent to 105.3 million.

Gross margin for the quarter remained flat with last year at 18.6 percent, while selling, general and administrative expenses increased 11.1 percent to $135.4 million.

Looking forward to fiscal year 2014. the company now expects earnings of $2.48 to $2.80 per Class A share, down from a prior estimate of $2.60 to $3.15 per Class A share. Analysts currently estimate earnings of $2.99 per share for the year.

Like most of packaging companies, Greif too has been struggling against weak demand from Western Europe amidst the uncertain global economic conditions.

"The slow motion global economic recovery is anticipated to continue during the remainder of fiscal 2014, resulting in moderate sales volume improvement and slightly higher raw material costs in certain regions," the company said.

GEF closed Wednesday's regular trade at $54.50, down $0.55 or 1.00%, on the NYSE.