Greif Class A Stock

Good day, and thank you for standing by. Welcome to the Greif Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Bill D'Onofrio, VP of Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining Greif's Fiscal Third Quarter 2026 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results and guidance.

Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis.

During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed.

Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation.

I'll now turn the call over to Ole on Slide 3.

Thank you, Bill, and good morning, everyone. Our third quarter results demonstrate that Greif continues to become a fundamentally stronger company. Over the past several years, we've been focused on strengthening the business in ways that are structural, not cyclical.

The results this quarter are another indication that those efforts are translating into higher earnings power, stronger cash generation and a more resilient company.

Despite ongoing geopolitical disruption and an uneven demand environment, we delivered approximately 25% adjusted EBITDA growth, expanded margins by more than 260 basis points, achieved our $90 million run rate cost optimization milestone early and reduced leverage to just 1.1x. Those results were not driven by stronger markets. They were driven by disciplined execution.

Across Greif, we continue to simplify the organization, structurally lower our cost base, improve commercial execution, optimize our manufacturing network and invest behind attractive growth opportunities. Every one of those actions make the business stronger regardless of where we are in the economic cycle.

Our cash generation is equally important. We expect free cash flow conversion around 50% this year, giving us the ability to invest in the business, complete disciplined bolt-on acquisitions, increase our dividend, maintain one of the strongest balance sheets in our industry and execute on our commitment to stock repurchases with a new repurchase plan, as Larry will further discuss in a moment.

Lastly, we remain committed to delivering $120 million of annualized cost optimization on a run rate basis by the end of next fiscal year, while continuing to improve margins, returns on capital and cash generation.

Let's turn to demand on Slide 4. As expected, the conflict in the Middle East continued to impact demand during the quarter. Even so, we saw encouraging sequential improvement across all 4 of our business segments.

In Polymer Solutions, volumes increased 1.5%, led by continued strength in IBCs and large polymer containers. While small polymer volumes were below last year's unusually strong comparison, they remain one of the strongest performing product categories in our portfolio over the past 2 years.

Metal Solutions also improved sequentially, although broader industrial markets remain soft and continue to reflect geopolitical uncertainty. Fiber Solutions likewise improved from the second quarter. Excluding last year's mill closure, underlying converting demand was close to flat, supported by improved performance in both partitions and tube and core.

Closures delivered another excellent quarter. Third-party demand increased mid-single digits, while total volumes increased high single digits as we continued to win attractive new business. While the pace of recovery remains uneven, we're encouraged by the direction of travel across the portfolio.

Equally important, we are continuing to win new customers, expand in attractive end markets and invest behind businesses where we see the best long-term opportunities. That gives us confidence that our growth is increasingly being driven by execution rather than simply waiting for markets to improve.

And with that, I'll turn the call over to Larry on Slide 5.

Thank you, Ole. Sales were approximately in line with prior year, while adjusted EBITDA improved by approximately 25%, driven primarily by better price/cost and structural cost optimization. These factors also led to adjusted EBITDA margins up over 260 basis points year-over-year and up 110 basis points sequentially from Q2 '26.

In addition to the operational efficiency savings we're delivering through our cost optimization using the Greif Business System framework, our team delivered margin and volume expansion in our target markets during a quarter with significant geopolitical disruption and complex supply chain challenges.

Our EBITDA improvement as well as significantly lower interest costs due to our strong balance sheet and favorable year-over-year quarterly taxes resulted in adjusted EPS improvement of nearly 90% year-over-year.

Adjusted free cash flow for the quarter was $58 million. In Q3, we strategically maintained higher inventory balances than typical to ensure continuity of supply for our customers throughout the volatility introduced from the Middle East conflict. That inventory was at a high dollar cost due to the increased raw material indices in Q3.

We expect both inventory levels and costs to normalize in Q4 and to finish the year with a free cash flow conversion around 50%. As Ole mentioned in his opening remarks, our strategy clearly shows in these financial results. We are incredibly proud of our team for yet again proving the quality of our business model.

Please turn to Slide 6. Turning to segment performance. Profitability remained resilient across the portfolio. In Polymer Solutions, gross profit dollars and percent were both up on positive volume, price/cost and structural cost optimization. In Metal Solutions, gross profit dollars improved year-over-year due to the continued cost optimization and variable cost management.

In Fiber Solutions, net sales were lower year-over-year due to the L.A. mill closure Ole mentioned, but converting volumes were solid. Margins were lower year-over-year due primarily to the impact of cost inflation with the offsetting impact of April's $60 a ton URB price increase now beginning to flow into the P&L, which we expect will improve fiber margins heading into Q4.

We announced an additional $60 per ton price increase in June and have fully implemented that price increase with our non-RISI customer base.

Our commercial discussions remain constructive, and we continue working with customers to align pricing with the value we provide in the current cost environment. While RISI has not reflected that increase, we believe that conclusion is inconsistent with the underlying fundamentals we're seeing, including healthy customer demand and higher year-over-year cost environment.

In Closures, volumes, price mix and cost optimization all led to gross profit dollar and percent increases year-over-year. This segment continues to drive profitability through technologically advanced products, new logo growth and strategic investment.

Please turn to Slide 7 to discuss guidance. We are updating our previous low-end adjusted EBITDA guidance assumption of $610 million to a range of $615 million to $635 million. While we continue to expect approximately $20 million of Middle East-related impacts, we have acted decisively across the business to offset at least a portion of that headwind. The revised guidance range represents approximately 10% to 13% EBITDA growth year-over-year.

We expect an adjusted free cash flow conversion of approximately 50% for the full year, which is reflected in the updated guidance range of $305 million to $325 million.

The primary changes in assumptions from previous guidance are higher working capital and restructuring costs, partially offset by better cash taxes than our previous low-end assumption. While we expect both inventory levels and dollar cost of inventory to be lower sequentially, some of the impact of higher indices from Q3 will persist through year-end.

Please turn to Slide 8 to discuss capital allocation. We will continue to invest in our future through high return on invested capital organic growth opportunities while maintaining a strong balance sheet, while we fully intend for leverage to remain below 2.0 and expect that below 1.5x is more realistic for the near term.

Our cash generation has allowed us to amplify shareholder returns. In addition to the $150 million share repurchase plan we completed earlier this year, we also announced a 10.7% increase to our recurring dividend, bringing our dividend yield to a compelling level. We will continue executing on share repurchases under our authorization.

Given our confidence in the business, we continue to believe our stock is an attractive investment. In that regard, we asked our stock repurchase committee of the Board to approve an additional $150 million stock repurchase plan.

We will manage the pace of repurchases with our balance of our long-term goal of approximately 2% of shares outstanding annually while also capitalizing on short-term opportunities in the event of event-driven or other dislocations.

Lastly, as we have previously communicated, we are actively pursuing organic growth-enabling bolt-on acquisitions, which allow us to penetrate new markets with our advanced polymer technologies.

Envaplast is a leading small polymer container producer in Spain, a market where Greif previously had limited small polymer presence. This acquisition provides a strong foothold to accelerate our organic growth strategy across EMEA while expanding our position in the agrochemical market, which represents the majority of Envaplast's business.

The acquisition aligns well with our disciplined M&A criteria, including EBITDA margins well above 18%, free cash flow conversions exceeding 50% and exposure to attractive, less cyclical end markets.

With that, I'll turn the call back to Ole on Slide 9.

Thanks, Larry. This quarter reinforces that the actions we've taken over the past several years are making Greif a fundamentally stronger company. We continue to structurally reduce costs, improve commercial execution, strengthen our portfolio through disciplined acquisitions and invest where we see the best long-term opportunities.

At the same time, we're converting more of our earnings into cash, allowing us to increase shareholder returns through dividend growth and share repurchases while continuing to invest in the business and maintain a strong balance sheet.

The most important takeaway from this quarter isn't simply that our financial results improved, is that the underlying business continues to improve. We believe that Greif that emerges from this cycle will be fundamentally stronger than the Greif that entered it, with higher earnings power, stronger cash generation, improved margins and a portfolio that is better positioned for long-term growth.

Before we open the call for questions, I'd like to thank the thousands of my colleagues around the world in the more than 35 countries in which we operate. Their commitment to serving customers safely, reliably and with excellence is what makes these results possible. Thank you.

We'll now open the line for your questions.

[Operator Instructions] Our first question will be coming from the line of Matt Roberts of Raymond James.

First, Larry, on URB, you spoke to the healthy demand and higher cost environment. Given recent trade commentary, how has URB trended so far in July versus 3Q?

Did you see any of the slowdown that some have reported? Or what areas have been performing well to drive that fiber volume outlook higher? And given that price wasn't recognized in July, maybe you could just speak to how your backlogs are trending and how that influences what you're anticipating on that index recognition?

Sure, Matt. Our operating rates have continued strong. I mean, we're -- our mill operating rates are 96%. And so the demand in the marketplace is strong. Like I said in my comments, we don't think the underlying fundamentals support RISI not recognizing the price. And we certainly have not had strong resistance from our non-RISI contract-based customers.

So we fully expect that, that should be recognized. We haven't built anything into our guidance, but we're seeing strong fundamentals matching up against the actions we took at closing our L.A. mill the prior year, which, by the way, was primarily CRB anyway. But no, things are operating at high levels for us.

And maybe on the polymer price mix and cost. That was strong in 3Q. I think last quarter, your expectations for any inflationary impact was muted given pass-throughs. So was there any timing mismatch there or more so attributable to better mix and how you're thinking about that price/cost dynamic in polymer for 4Q?

Yes. I mean, we have seen dramatic price increases in resin through Q3. And our teams have done an outstanding job of really executing and staying ahead of that inflationary price jump and virtually increasing prices day-to-day and working hand-in-hand with customers to face the reality of what the Middle East crisis is driving in that pricing element.

And we don't expect to see a continued dramatic increase like that, but nor do we expect a decrease. So our teams have done a good job staying ahead of it, and we believe we're in a good position.

[Operator Instructions] Our next question will be coming from the line of Ghansham Panjabi of Baird.

This is actually Josh Vesely on for Ghansham. Maybe, Ole, if we can just start off, obviously, you guys have been operating in a volatile operating environment over the last few months. So I would love to just hear your kind of current thoughts on what demand looks like on a regional basis for you guys. I know you touched on it a little bit on Slide 4, but any additional color would be helpful.

And then related to that, volume improved sequentially from 2Q. Just curious through 3Q if there was a sequential improvement month-to-month, or if there's volatility in the volume performance at all and how we should think about that going into 4Q?

Just to correct you, it's been more than a couple of months we've been operating in a volatile environment. 5 years by now.

Even more so.

Yes. So I mean, we are encouraged by the demand patterns that we have seen in the last few months. I will say that. But I will hesitate to confirm that this is an inflection.

While demand has improved globally, it's from a very low base, I would say. I would also highlight that our strategy has been to win new logos, which our commercial team have been very successful in.

And the end segments we have particularly focused on is our flavor and fragrance and pharma. We -- in fiber and steel, we continue to be pressurized by the chemical market and also muted housing markets. And just to remind you, those continue to be at a historic low. But our target end markets are performing consistently with what we expect.

What is most important is that we are controlling what we can control, right? So our commercial organization, they are pursuing market accretive new logo growth. And we're supplementing that with high ROIC organic CapEx.

And as we announced, we are pursuing bolt-on acquisition as well within the criteria that Larry outlined. So all of that, sort of, means that we're doing pretty well, but it's all self-help.

We're not really relying on the market. And when the Middle East crisis is over, I guarantee you there will probably be another crisis that needs to be dealt with.

Great. And then, Ole, you touched on this a little bit, too, but I kind of just wanted to go back to this commercial shift that you guys have been talking about for some time, just turning your sales force from farmers into hunters. It sounds like you're kind of bearing fruit there. Just curious what the progress is like on that? What kind of innings we're in there and how it's kind of tracking relative to your expectations?

Yes, we are very, very pleased with what's happened so far. I mean, I'll still say it's early days. We changed our commercial structure, and that's gone really well.

We've changed the way we remunerate for results. We're training. We changed the way we focus on end markets. Rather than selling a product, we're really focusing on solution selling. We're helping our customers solve their problems and their challenges. And that's been the approach all the time.

We have launched new tools out in the market to help our customers in terms of them helping themselves. So we talk about established customers. We call it Greif+, so that our sales organization can focus their time on finding new logos rather than serve existing customers.

So all that, it's a multitude of activities that's happening, but we are very pleased with our commercial organization and the way it's all taking shape.

Great. Great. And then maybe if I can just sneak in one more on M&A. If you could just update us quickly on kind of what the pipeline looks like for you guys? Just what are you seeing out in the market? And obviously, that's a key part of your growth strategy going forward. Just any thoughts there? And then if we should expect the cadence of M&A to kind of pick up over the next year?

Yes. Well, first of all, obviously, the focus, as I just outlined, is organic growth, new logo growth. But we are supplementing that with tuck-in acquisitions. We've just announced one, Envaplast, but we have a healthy pipeline of similar companies that we are working on.

We expect to do a number of similar acquisitions a year. There's plenty of Envaplasts out there, and we know where they are, and we're actively working on that. So expect more to come in that. I would also say that what we're not doing is focusing on transformative M&A. We like our tuck-in strategy, and we will continue to focus on that.

[Operator Instructions] And I would now like to hand the conference back to Ole Rosgaard for closing remarks.

Thank you, and thank you for your questions today and your continued interest in Greif. Our priorities remain clear. We will continue to execute with discipline to strengthen our operations, investing in attractive growth opportunities, allocating capital thoughtfully and maintaining financial strength.

While none of us can predict exactly when markets will fully recover, we can control how well prepared we are. And we believe the Greif that emerges from this cycle will be fundamentally stronger than the Greif that entered it. That belief is grounded in the structural improvements we've made to the business and in the discipline in which our teams continue to execute every day. Thank you again for joining us today. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day and thank you for standing by. Welcome to the Greif Second Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill D'Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.

Good morning and thank you for joining Greif's Fiscal Second Quarter 2026 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results and guidance.

Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. I'll now turn the call over to Ole on Slide 3.

Thank you, and good morning, everyone. We continued to execute against our strategy during the second quarter with a particular focus on productivity and cost optimization, which remains a core driver of our margin improvements. I'm pleased to report that we have achieved $75 million of savings, putting us on track toward our full year target range of $80 million to $90 million.

We remain confident in that range for the full year as we went into the year anticipating the first half performance we delivered. As a reminder, the broader program is a total commitment of $120 million by fiscal year-end 2027. That figure represents only defined actions we have full confidence will be actioned by the end of 2027. We continue to explore opportunities that haven't yet met that threshold, which could result in upside to the $120 million in the future.

Additionally, we ended the quarter with a leverage ratio of 1.1x even after completion of our $150 million share repurchase program. Simply put, this is the strongest balance sheet in our nearly 150-year history. We understand that value, which gives us the financial flexibility to achieve our 3 highest capital deployment priorities. Organically growing our business while continuing to grow our dividend and repurchase shares, all while maintaining a leverage ratio below 2x.

Our confidence in driving value through those 3 priorities is possible because of our improving margin profile and durable free cash flow generation. In the quarter, EBITDA dollars improved 7.5% year-over-year. Margins improved 110 basis points and free cash flow improved by $93 million compared to Q2 2025, which, by the way, also included cash flow from the divested containerboard business.

Those results demonstrate our ability to drive returns through volatility and disruptive impacts on our business from the conflict in the Middle East. We have one of the most engaged and agile workforces in our industry as evidenced by our latest Gallup engagement score in the 91st percentile. So, we know how to deal with situations like these.

Our team has proven time and again the ability to navigate challenging disruptive macroeconomic events. We've been doing it for almost 150 years and have weathered even greater disruption during that time. Our focus, first and foremost, goes to the affected region, ensuring the safety of our colleagues, customers and suppliers. We're also monitoring price/cost, making sure to stay ahead of cost inflation driven by the supply chain constraints this conflict has caused. The situation is dynamic, and we expect that it's going to continue to evolve, but we'll manage through it effectively.

While we sincerely hope for a resolution soon, we also recognize the risks the conflict presents on broader demand and industrial sentiment. As such, we are adjusting our full year EBITDA guidance to reflect the disruptive impact experienced in Q2 and continued softness related to the conflict through year-end.

Larry will discuss the EBITDA guidance change in a moment. For now, let's talk about what we experienced in Q2 on Slide 4, please. Underlying industrial end market demand remained consistent with what we've seen over the past 12 months. That broad demand picture was overlaid by direct impacts to our business in Q2 related to the Middle East conflict. We experienced intermittent periods of shutdowns in at least one of our facilities in the region. While the total EBITDA loss was less than $5 million in Q2, potential for continued disruption is factored into our guidance.

We have also seen in real time the impacts of raising or rising input costs due to the conflict, but we are exhibiting our usual action bias, and our teams are doing a fantastic job keeping ahead of inflation with our own pricing actions. This action bias extends to our supplier relationships, too, where we are in constant communication and ensuring continuity of supply for our customers. We also saw a few notable volume bright spots in parts of our business. First, as expected, small containers were resilient in the quarter due to a solid start in the Ag season.

Second, tube and core, while still soft, has been improving in our 2 largest end markets, the North American paper and film industries. We also announced a $60 to $70 URB price increase to offset the inflation we are experiencing, which was recognized at $60 a ton in April by RISI, which will result in an increase in our contract customers through negotiated pass-through provisions.

Lastly, closure volumes were also resilient with total volumes flat year-over-year. While volumes continue to be mixed on an absolute basis, they have consistently been most resilient in the areas of our portfolio in which we are growing. This validates our strategy and progress towards a less cyclical end market mix.

It is clear our growth strategy is sound, and when a meaningful inflection on demand does occur, Greif will unlock significant operating leverage and earnings growth. In the meantime, our focus will continue to be on managing volatility through pricing, cost management and productivity, which has helped offset the current volume environment and support continued profitability. With that, I'll turn the call over to Larry to walk through the financials on Slide 5.

Thank you, Ole. Sales were approximately in line with prior year, and adjusted EBITDA improved by 7.5%, which reflects our decisive cost actions overcoming the weak volume environment. Adjusted EBITDA margins were up 110 basis points year-over-year and up 230 basis points sequentially from Q1 of 2026. Both were a result of value-based pricing as well as the continued benefits of our cost optimization program. Our EBITDA improvement as well as significantly lower interest cost due to our historically strong balance sheet and favorable year-over-year quarterly taxes resulted in adjusted EPS improvement of over 60% year-over-year. Adjusted free cash flow improved 107% or $90 million compared to Q2 2025, a quarter which also included approximately $30 million of cash flow from our divested containerboard business.

Excluding that contribution, free cash flow improved by over 200%. These are all notably strong performance measures for a company which continues to operate in an industrial recessionary environment, which additionally experienced disruption from the conflict in the Middle East. Ole and I are incredibly proud of our team for proving the quality of our business model once again.

Please turn to Slide 6. Turning to segment performance. Profitability remained resilient across the portfolio. In Polymer Solutions, while volumes improved, gross profit was slightly down year-over-year due primarily to product and geographic sales mix. Within Metal Solutions, gross profit dollar and percent both improved year-over-year due to continued cost optimization and variable cost management. In Fiber Solutions, net sales were lower year-over-year due to volumes and our mill closures in 2025. Despite lower volumes, positive year-over-year pricing and cost management helped gross profit margins improve by 50 basis points. Within Closures, third-party volumes declined to low single digits, while total volumes were flat year-over-year. Gross profit dollars and margin both increased on an absolute basis, reflecting strong price/mix and continued operational improvements.

Please turn to Slide 7 to discuss guidance. When we issue low-end guidance, we factor in all reasonably possible factors that may influence our business in the year ahead to present a view of performance in a low operating environment. When we issued guidance in early November 2025, we did not consider the potential for a conflict in the Middle East. As such, we are revising our low-end guidance to $610 million of adjusted EBITDA while maintaining our low-end adjusted free cash flow guidance of $315 million. To be clear, if not for the already incurred and potential direct impacts of the conflict, we would not have changed our low-end guidance. Thus, our updated EBITDA guidance reflects the estimated direct disruptive impact we experienced in Q2 related to the Middle East conflict in addition to a revised volume assumption, which considers a scenario where the Middle East conflict drives further volume softness.

Our prior guidance assumed metals and fiber volumes flat to down low singles and polymer and closure volumes up low singles. Our revised volume assumptions are Metal, Fiber and Closures down mid-singles and polymers flat. Guidance also reflects a net tailwind of $5 million for the impact of a $60 URB increase, which we expect will benefit the P&L starting in July, but will be partially offset by the $5 a ton increase in OCC, which is already impacting the P&L.

Our impressive free cash flow results this quarter demonstrate the resilience of our business model and ability to drive cash regardless of volatility. We are confident in maintaining our low-end free cash flow guidance of $315 million. While EBITDA is expected to be possibly $20 million lower, we are also assuming a $20 million lower working capital source due to higher raw material indexes and actions taken to ensure continuity of supply for our customers. These impacts are offset by a lower expectation of cash taxes. With our current visibility today, we have full confidence in this revised guidance. We sincerely hope for a resolution to the Middle East conflict soon. Our commitment to you is regardless of the volume environment in the remainder of the year, we will continue to control the controllables while maintaining our strong balance sheet.

Please turn to Slide 8 to discuss capital allocation. Our capital allocation priorities remain unchanged. We will continue to invest in our future through high returns on invested capital organic growth opportunities while maintaining a strong balance sheet. The only M&A we are considering is organic growth-enabling bolt-ons, and we fully expect leverage to remain below 2x. Two additional capital allocation updates from this past quarter.

First, as Ole mentioned earlier, shortly following Q2, we completed our $150 million share repurchase program. We retained an additional authorization of $300 million, which we are not currently utilizing but plan to do so in a disciplined and value-accretive manner.

Second, this past quarter, we also refinanced our debt facilities, extending our term loans to 2031 and resulting in a current weighted average interest rate of 3.14%. Access to the Farm Credit System provides us a competitive advantage in lending, lowering the overall interest impact on earnings for any debt that we do take on, while we remain committed to below 2x ratio. With that, I'll turn the call back to Ole on Slide 9.

Thanks, Larry. Before wrapping up, I'd like to highlight that last week, we issued our 17th annual sustainability report, which is available at greif.com/sustainability. We encourage our investor community to read this report as the sustainable, durable nature of all our products is a distinct competitive advantage, which also drives value creation at Greif. To summarize the quarter, while near-term demand conditions remain mixed, we continue to make strong progress on the controllable factors that drive long-term value creation. We are a packaging leader to essential industries with durable competitive advantages that enable us to accelerate profitable growth even in a soft demand environment through cost optimization, variable price cost discipline and a portfolio mix shifting towards less cyclical end markets. This is all driven by a disciplined capital allocation strategy, which ensures durable total shareholder return via a healthy balance sheet, smart organic investments in growth end markets and attractive dividend and consistent share repurchases.

Taken together, Greif is a compelling value thesis with strong underlying earnings power and a management team laser-focused on driving shareholder return in all environments. Thank you for joining us today, and we will now open the call for questions.

[Operator Instructions] And our first question comes from the line of Ghansham Panjabi of Robert W. Baird.

This is actually Will [Cauthen] on for Ghansham. So, you finished the $150 million program in early April with $300 million still authorized. Balance sheet currently sits in a good position. But understanding the context of the current macro backdrop, is the plan to continue to bias towards share buybacks? And can you give us an update on what the M&A pipeline looks like in terms of segment mix and size?

Will, yes, so first of all, our focus is on organic growth, and we're deploying CapEx to support organic growth. And then secondly, M&A is -- our focus there is really secondary. We have a very healthy pipeline. We continue to focus on that. But the M&A we will be doing will be targeted M&A to, let's say, complement our organic growth efforts.

Yes. And with respect to the share repurchase, we do have the authorization. And as we've stated, we intend to be regular buyers of our stock we work with our board on specific executions against that authorization and plan to be talking with our board at our upcoming board meeting.

Okay. That's very helpful. And if I could just sneak one more in? Can you talk about your pricing actions to offset the higher raw material costs, how they're going? And can you quantify or at least give a high-level view of how we can expect those price increases to flow through over the final 2 fiscal quarters?

The majority of our contracts with our global customers have a price adjustment mechanism. And we have changed most of them. So, they now operate on a monthly basis, and they follow the index. So as raw materials go up, prices adjust automatically. And that ensures that we are always ahead of the wave in terms of the volatility we currently experience, and that protects our margins.

Yes. And the other thing, and you've heard us talk about this before, but one of the things that we improved dramatically over the last 7 years or so was providing openers in our contracts for other cost increases. So, the team has done an excellent job of executing on that. And customers, they're managing this well, too. They know they're facing the same things we are. And so it's going very well.

And our next question will be coming from the line of Richard Carlson of Wells Fargo.

Congrats on all the execution that's happening. Clearly, a good story here. I want to start just with the guidance because at the beginning of the year, you provided a bridge as far as what we'd expect, volumes are expected to be flat and then most of the growth is going to come from SG&A and price cost. So now that volumes are going to be down, wondering what that -- what the bridge would now look like, specifically around the SG&A and price cost?

Yes. I mean, essentially, what's changed is our teams have done a really great job of driving cost out through supply chain efforts, sourcing efforts, all of our SG&A efforts and it's allowed us to offset the impacts of that volume degradation as well as really selling value again over volume. And so, we're driving price cost very well. So really, the only true change outside of those things netting is the Middle East conflict direct and expected potential impacts.

And Richard, if I can just add, just to remind everyone, we've been here before. We -- just to mention a few recent events, beyond COVID, we've had port strikes with Venezuela. We dealt with the Ukraine conflicts. We've had a closure of the Suez Canal and quite a few regional crisis in the Middle East. But when you operate almost 250 plants in over 40 countries and you have these occurrences, you just know what to do, and we have an exceptional supply chain organization that takes care of our customers in this respect.

Got it. And then with URB, RISI recognized your price increase pretty much immediately, we're already seeing some containerboard hikes occurring supplemental to what we've already seen this year. Do you think the URB market could handle another price increase on top of what you and your competitors have already announced?

We've been very successful over the past years. We don't comment on future price increases. But one thing I do want to correct in the script, I didn't catch a typo earlier. I said there was a $5 million benefit from the URB price increase. It was actually $11 million and netted with the $2 million of impact on OCC. It's actually a $9 million lift, not $5 million. So, we're executing well on that, and that's running through. And that was mostly to offset inflationary costs, if not all. And we'll continue to monitor that situation and take action as deemed appropriate.

Great. And then one more for me, guys, and then I'll hop back in the queue. So, you maintained your CapEx guide for the year. Can you remind us of what the split between maintenance and growth is? And is this something that if things get tighter, you could pull back a little bit more? Or are you wanting to continue to focus on the projects that you have at hand?

Yes. We're in obviously an extremely strong balance sheet position. So, we're executing against our capital opportunities appropriately. About $85 million or so is maintenance CapEx, some of which is maybe we're doing more now than we may have, but we've got things that we want to get done. So, we're focused on that. We may have another $5 million to $10 million of safety. And then the remainder is organic growth opportunities heavily focused on the resin-based sector and particularly on our small plastics area, which is or small polymers, which is obviously showing the growth that we expected when we did our acquisitions.

Our next question will be coming from the line of Matt Roberts of Raymond James.

Apologies if I missed, but I'm going to ask a couple on the volume side. So, the guide -- first on polymer, guide, I believe, implies no sequential improvement, but you noted continued strength on ag chem. So maybe what are the puts and takes in second half and how those target end markets are performing versus any drags that you may be seeing? Similarly, on metal, I believe the guide implies no sequential improvement despite the easier comp. So, are the trends worsening there? Or is that more so the operational disruption that's factored in? And how does that disruption impact in second half compared to the $5 million that you called out in 2Q?

If we take -- first of all, Matt, if we take the tensions out disruption in the Middle East out, then volume in Q2 was very, very similar to Q1. We haven't seen any inflection points. And as Larry mentioned, where we see inflection or growth is really in our small polymer, in particular, in the ag chem segment. And we expect that to continue. Where we have seen a decline as a result of the Middle East disruption is primarily in steel -- and we can't really talk about the future, but that will probably continue until we have a resolution. So, for the rest of the year. Yes, we don't see an inflection point for the rest of the year.

Okay. That's certainly understandable. And you have had a lot of success on the cost initiatives. So, when volumes eventually do turn, whenever that is, how are you all thinking about the incremental margin within each segment versus historical rates, understanding there's been some movement between segments and shifting there. So, kind of what are you assuming on the incremental once you get back to flat or growing volume either?

I'm sorry. The incremental margin lift is exponential. I mean we're operating at very efficient levels right now. And yet we have capacity in virtually every factory we have around the world without adding any labor component, leveraging the fixed cost structures. And so, in most plants, as we get incremental volume, there's a step level and it varies plant by plant, but you're going to have over 50% margins on some of this lift with some volume recoveries. For us, a significant portion, I mean, we'll have significant lift. And then as we add shifts, the margin will drop back down. But we have really, really big opportunity on an inflection point on volume recovery.

Let me also remind that all the cost measures we've done are all structural. They're not coming back. For instance, we have reduced our professional workforce by 12%, and that's a structural reduction. And that's what Larry says, once volume even returns to a normalized level, we are in an extremely good position to capitalize on that.

Our next question will be coming from the line of Richard Carlson of Wells Fargo.

Just a couple of quick more. I guess, first, incremental $10 million in cost savings quarter-over-quarter. Can you talk about what drove that? Was it anything new? Or is it just moving another quarter forward with some of the actions that you have already put in place?

Yes. It's really just additional movement forward on our structural cost across our organization. There's some element of SG&A, but the vast majority is footprint improvements and structural costs within our operations as well as some incremental sourcing benefits.

Got it. And then last one for me, and then we'll take everything else off-line. But Slide 4, with the geographic exposure, you have softness across all regions, which is the same as what you showed last quarter. So, I'm just wondering, obviously, a lot has happened since last quarter. Is there any -- I know you guys don't talk about regional performance per se, but anything you can call out that has changed from last quarter? Any pockets of strength you're seeing anywhere? Just wondering if -- since everything says softness, if there's anything you want to call out as being maybe better or worse?

Yes, we had some changes in the Middle East. Yes. Other than that, it's pretty much like the first quarter, whether you say in APAC or Latin America or North America.

I'm showing no further questions. I would now like to turn the conference back to Ole Rosgaard for closing remarks.

Thank you and thank you for the discussion. I just want to remind everyone that demand remains soft, and we are not yet seeing an inflection. What really matters is how we respond. We are executing with discipline. We are generating strong cash and operating from a much stronger balance sheet. Our strategy is unchanged, build organic growth and stay selective on capital allocation. We are a stronger Greif today and well positioned to outperform through the cycle. Thank you for your interest.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Greif First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to today and thank you for coming today, Bill D’Onofrio Vice President of Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining Grace's Fiscal First Quarter 2026 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results. Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis.

During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation.

I'll now turn the call over to Ole on Slide 3.

Thank you, Bill, and thank you all for joining us today. We entered 2026 from a position of strength despite a still muted industrial backdrop. Our Q1 performance demonstrates the progress we are making on 2 critical fronts: delivering solid financial results in the presence while also making progress on our longer-term build-to-last strategy. .

During the quarter, volumes performed as anticipated, remaining in line with expectations due to continued softness in the industrial economy. Our EBITDA margin profile continues to improve meaningfully, up 260 basis points year-over-year, which is the result of decisive actions taken on our cost optimization.

As a result, adjusted EBITDA increased 24% versus prior year, and our results came in as expected. Based on this performance, we are reaffirming our 2026 guidance. Following the portfolio rationalization we undertook in 2025. Our leverage is now historically low, enabling significant capital flexibility to create shareholder value.

In Q1, we completed 130 million of the 150 million share repurchase program we announced 3 months ago, given our strong free cash flow projection for the year with a conversion ratio of 50%, we fully anticipate remaining well below a leverage of 2x. Our strong free cash flow generation and balance sheet strength allows us to fund value creative organic growth, including growth CapEx in our existing operations and higher return end markets. As we drive growth externally, we are also accelerating internal transformation.

Our run rate cost optimization is now at $65 million. which reflects primarily SG&A actions taken early in fiscal 2026, which will benefit EBITDA for the majority of the year as contemplated in our original guidance. As a reminder, our fiscal 2026 year-end run rate commitment is $80 million to $90 million. We are confident in the progress we are making, and we believe we are demonstrating our ability to manage the presence while continuing to shape the future.

Please turn to Slide 4. Our end market performance reflects the reality of broader economic conditions remaining soft. In customized Polymer Solutions, demand was essentially flat overall. IBC volumes were up low singles, small containers down low singles and large containers down mid-single digits due to continued industrial softness.

This is consistent with our expectations heading into the year. And we expect small containers to sequentially improve into Q2 as ag seasonality picks up.

Chewable Metals Solutions remained under pressure with softness across regions, especially with chemical customers. We continue to focus this business on cost discipline and cash generation. Sustainable Fiber Solutions saw volume declines in converting due to North America industrial softness, but the mills ran at solid operating rates throughout the quarter.

Innovative closure solutions volumes declined high singles from both metal and polymer closure demand, driven by the industrial softness I just spoke on. Importantly, total sales, which reflect sales both direct to third parties and sold through our polymers and metals businesses were approximately flat due to strong price/mix with volume down only mid-singles.

This shows that our highest-performing products remained the most resilient in the quarter. Overall, Q1 performance was consistent with our expectations and reflects our ability to improve margins through disciplined execution even in a muted industrial environments.

With that context, I'll turn it over to Larry to walk through the financials on Slide 5.

Thank you, Ole, and hello, everyone. Adjusted EBITDA for the quarter increased 24% and margins improved 260 basis points to 12.3%, reflecting improved price cost and the significant benefit of structural cost optimization. While Q1 adjusted free cash flow was lower year-over-year, this is primarily due to the inclusion in the prior year of cash flow from recently divested businesses. .

Excluding that impact, the core cash engine and continuing operations improved year-over-year, supported by EBITDA growth, lower interest expense following deleveraging and reduced maintenance capital post our containerboard sale. As we discussed last quarter, Q1 is seasonally the lowest quarter for free cash flow and we have full confidence in our full year low-end adjusted free cash flow guidance of $315 million, an approximate 50% conversion expectation.

Our earnings strength showed in our earnings per share results up 140% year-over-year, driven by higher EBITDA, lower interest expense despite year-over-year increased tax expense. Please turn to Slide 6. In Customized Polymers, gross profit was down on approximately flat volumes due to primarily product mix despite cost optimization gains.

Durable metals gross profit was slightly up and improved year-over-year primarily from structural cost optimization. Fiber sales were impacted by the demand softness we anticipated and discussed during our Q4 call. Margins, however, expanded year-over-year driven by cost discipline and favorable year-over-year pricing in OCC costs.

Innovative closure sales is presented as total sales to properly reflect the margin profile as gross profit reflects profitability of both direct external sales and external sales sold through the metals or Polymers businesses.

Net sales does not include the external sales sold through the metals and Polymers businesses. Total sales were roughly flat year-over-year, but gross profit was up due to strong mix and continued benefits from our cost optimization. Please turn to Slide 7. We are reaffirming our low-end 2026 guidance of $630 million in adjusted EBITDA and $3 million in adjusted free cash flow.

As discussed in Q4, this guidance reflects significant structural cost optimization, year-over-year price cost changes in fiber as reflected in RISI as of our Q4 call and net flat volumes for the full year. Our Q1 results came in largely consistent with our guidance expectations. Price and raw material costs were slightly better than planned, volumes and manufacturing costs slightly behind in SG&A in line.

No individual bucket change with material and the net impact of all these elements was consistent to our expectations, giving us confidence in reaffirming guidance. Please turn to Slide 8. Our capital allocation framework remains focused on pursuing margin-accretive organic growth and delivering high return on invested capital.

Our leverage is historically low and our maintenance CapEx needs are significantly reduced from last year, both of which free up capacity to pursue high-return organic growth investments. We intend to continue to increase our dividend over time and have completed -- nearly completed the $150 million share repurchase program we announced last quarter. We continue to believe our stock is still one of the most compelling value propositions we can invest in.

And as such, in December, our board approved a new $300 million share repurchase authorization. We will execute on this new authorization in a disciplined manner, incorporating repurchases as part of our ongoing and balanced capital allocation with a goal to repurchase up to 2% of our shares outstanding annually.

As Ole mentioned, we can achieve these goals while still remaining well below our 2x leverage. That balance sheet strength and our strong free cash flow generation allow us to accelerate organic investment funding growth CapEx within our existing operations and higher return end markets, even in a muted macro environment. Please turn to Slide 9 for closing remarks from Ole.

Thanks, Larry. As we look ahead, we remain grounded in the realities of a still cautious demand environment, but we are not standing still. We're executing on cost, on capital and on strategy. The work we've done to transform Drive is not cyclical, it's structural, and it shows how we perform, how we invest and how we allocate capital. .

My sincere thanks to our colleagues all around the world for driving this transformation with me. We remain focused on managing the presence while also building the next era of durable value creation for Greif. Thank you for your support. Operator, please open the lines for

questions.

[Operator Instructions] And our first question will be coming from Gabe Hajde of Wells Fargo Securities LLC.

Ole, Larry, I wanted to ask, I mean, you guys have been operating sort of in this unit environment now for 3 years and have done a really good job of kind of hitting the low end guidance and even moving up a little bit. .

I'm curious, Larry, you kind of talked about some costs coming in a little bit better, and that gives you confidence in the full year -- but the volume performance here in fiscal Q1 was maybe a little bit even below what we were expecting.

So was there anything, I guess, as the quarter progressed from an inventory management standpoint from your customers, that jumps out at you. And then just being a little bit more back-end weighted, I'm curious if you can talk about trends in the fiscal so I said it kind of implies a pretty good ramp into the back half of the year on the volume play.

Yes. Thanks, Gabe. I mean, I have to say that, I mean, demand conditions, they remain muted and in particular, across fiber in steel and that's like reflecting the continued pressure in both in industrial and chemical end markets. In some of our end segments, you will see some seasonality in there which will pick up -- mean that it will pick up during the Q2.

But importantly, the environment really is not changing. Last week, I visitors about 8 customers in various parts of the world. And the message is really the same. Conditions are still muted. But importantly, that doesn't mean we're standing still, as you quite rightly pointed out. Our commercial teams are executing within 10 we are really transforming our commercial team to hunters from farmers.

We are deploying capital for organic growth. We're adding capacity in spots where we can see we can sell that capacity. So we are being extremely aggressive in the market in that respect.

One thing to supplement what Ole said is we have seen volume trajectory in our small plastics start Q2 in a very positive way. Yes.

Okay. And then I guess on the OCC front, any insights there? I know you guys obviously have the recycling operations. It seems like expectations are still for pretty flat here in the first, call it, half of '26, anything that you point out for us there?

I just agree with that. That's our feeling as well, Gabe.

Okay. And CapEx, you called out a couple of growth projects. It sounds like it's mostly small format plastics. Any particular geography or area that you want to call out for us?

I mean it is sort in various regions. We have -- in Europe, we are deploying additional capacity where we have like really, really good business cases on it. We have, like in Africa, where I've just been, we have like the whole mining sector in Southern Africa is -- I won't call it is exploding, but it's picking up significantly due to the run on precious metals. .

And a lot of the products we manufacture in that part of the world actually goes into mind. So that regionally, when we add capacity in this respect, we get the ROIC on it almost immediately. We have added capacity in India. And last year, we did it in Singapore as well. for specific customers where we end up with long-term contracts. So I'm confident that we will see that continue. And the opportunity is certainly there.

Our next question will be coming from George Staphos of Bank of America Securities.

On the topic of volume, I was hoping you might be able to give us a bit more color in terms of what you're seeing with metal. Recognizing, as you said, maybe things were a little bit weaker but not terribly out of line.

Where are you seeing some strength, if at all, within the end markets within metal where things perhaps weaker. And I remember, Larry and how you had been expecting some pickup to be helpful in housing if it were to occur relative to these business in your business overall? Any thoughts on what you're seeing out of your markets that are exposed to housing at this juncture?

I'll make a comment first and then Larry [indiscernible] on how things we'll follow up on that. obviously, for our metal, the biggest segment that the end segment is chemicals and chemicals, one of their large segments is housing. .

We have not seen any pickup there and demand remains muted as I said. And it's all -- when housing picks up and when we see an improvement there, we will see an improvement at the mining aspect I mentioned earlier could be an important one because when you do mining, that you don't bring anything out of mind. So all the equipment you have in the mine needs a lot of loop all the time, and that's brought into mines in metal containers and you leave those metal containers in the mines in this chefs that come landfills, you don't bring it up. you can't bring polymer products in a mine because if it catches fire, then you have toxic fumes. But as I said, the metals, we are managing that for cash.

So I'll let Larry comment on housing side.

Yes, George, it's interesting. There have been a couple of headlines in the last couple of months of resale of existing home is ticking up a bit, I think in like November made than 5%. It's nice to see the headline. It's interesting to get a little bit underneath it. I think we've shared before that existing home sales are 19.

What's more, I guess, I'll call it interesting. And I look at it as interesting because I think it truly is an upside because I do believe it will turn at some point. existing home sales today are actually on a population-adjusted basis at the levels of 1982. 1982 had 16% mortgage rates, and we were in a recession. And so they are really decimated.

And as we've said before, when people go to sell an existing home, they spend money to fix it up, do all this. The new person moves in cars out what everybody hopes fixed up, buys new appliances, paints, buys new furniture. So it really is a big driver for the chemicals industry at us, but it is not there yet.

I guess the positive I think of it is it's become a real issue for the current administration. You can see Trump talking about not allowing corporate investment in housing, you also see some discussion of portable mortgages, which is an interesting concept that's been in the U.K. for quite some time.

So there's a lot of focus on it. But it really gets down to what's the resale prices and what's the interest rates.

Okay. I appreciate that. Larry, 2 last ones, I'll turn it over, and I'll ask them together. One, can you remind us where you think the price cost on fiber will sort of anniversary right now, things are good. Is that a second half issue? Or should you be running relatively positively throughout the year? .

And then margins in polymers were a little bit weaker than we were expecting. I know gross margin wasn't down as much EBITDA was down a bit more than we were expecting. What was driving that? And what are the implications going forward?

Yes. I'll take the -- yes is the answer on the fiber question. It will be later part of the second half of the year that, that will annualize. On the polymer side, it really is just a mix issue. So we were down somewhat, and we expect this on our small polymers and our large plastic drums, which are better margin products than the IBCs where volumes were up a bit. and medium.

So really, it was just a mix issue, George, not anything on the cost or the price side.

George, just to elaborate that on polymer gross profit margins, they were slightly lower year-over-year in Q1, primarily driven by the mix and manufacturing costs, as Larry pointed out. Volumes were also lower in small plastics and large plastics and they are among our higher-margin polymer products.

And overall, that reduced contribution from those products that had a short-term impact on margins. And then lastly, then disconnected. Manufacturing costs across our network were higher. We are actively addressing manufactured costs, and we expect that to improve as the year progresses.

It just seems like EBITDA margin delta was worse than the gross margin delta Anyway, I'll turn it over. If you have any thoughts on that, we'd take them otherwise good luck in the quarter.

Yes, George, it's back to the issue that we've talked about and why we move to gross profit. It gets to be the allocation issue of overhead cost is what the driver on the EBITDA differences.

And our next question will be coming from Mike Roxland of Truist Securities.

Ole, Larry, Bill and Dan. Just wanted to follow up quickly on volumes. Obviously, declining about 5%. In 1Q, the EBITDA guide assumes flat, maybe slightly up volumes for the year. What gives you confidence that, that volumes are going to improve? And if volumes do remain weak, can you just talk I say weak, maybe flat, down low single digits. What does that imply for your EBITDA guide for the year?

Yes. I'll hit the EBITDA guidance here. I'll just repeat. We are extremely confident it's why we go with the low-end guidance. There's various elements that go into that. But on the volume side, we had expected Q1 to be low in some products is a little lower. As I said earlier, we're seeing a pickup in the small plastic volumes going now. And as Ole mentioned and he'll add something here, too, but the -- we're very optimistic about our commercial team and the incentives that we put in place in the early early things that we're seeing out of those efforts. But Ole?

Yes. First, the bridge was never built on Q1 year-over-year performance. It reflects how we expect volumes to progress and normalize across the year. And as we have established, Q1 came in softer than last year, but nothing we saw a change in our full year view.

And importantly, [indiscernible] commercial teams, they remain extremely active. As I mentioned, we have done a lot of organizational changes in the company. We have transformed or are transforming our global commercial organization from farmers to hunters. We are changing or have been changing the incentive program for that.

We are targeting CapEx where we see organic growth opportunities, and we do that in a very disciplined way, where we're targeting short-term gains. And basically, we've already seen customer wins and share of wallet gains with existing customers, which again supports our confidence in volume progressing as the year unfolds.

That's very helpful. And so basically, what it comes down to as volumes were weaker in 1Q, but given some of the commercial activities that you're seeing, you think those wins should creep up or should occur sometime in the back half that will allow you to achieve your volume guide for the year. Is that fair? .

Absolutely. That's fast there.

Absolutely. Perfect. Got it. And just one quick follow-up. With the -- just slowing up on George's question regarding the price cost spread in fiber. I thought that was going to be more of -- you thought you lapped that in fiscal 2Q. And if that's the case, I mean, what is the company doing to address that headwind as you lap that?

Yes. I mean you saw the $40 a ton in URB was last May, rolled in, in June and July, and the OCC was through the last part of the year. So it's that second half of our year with more of it coming in the last quarter just because of the way some of the contractual pass-throughs work. That's all it is, Michael.

Got it. Okay. Perfect. And then one last question. Just you mentioned, I think, last quarter deploying a very unique proprietary form of barrier technology. Only -- you said you guys on wants to have that Wondering if you could provide any more color around the technology, what it does, the competitive advantage you give you? And have you received any orders on that -- we are using that technology.

Yes. It's called the SIX technology. We have received orders. We have -- the first machine is fully operational in France. We have 3 more machines in production that will be deployed during this year. and that will be followed by further machines. And so far, very good, actually.

Yes. The financial impact for this year is not significant, Michael, but we are very, very optimistic about this technology and its impact -- and we're ramping it up.

Good luck in the quarter.

And our next question will be coming from Matt Roberts of Raymond James.

Ole, Larry, Bill going to start in fiber. I think you noted converting was down mid-single digits this quarter, which I believe is down from low single-digit decline seen last quarter. And on the operating rates, I believe you said last quarter it was 90% before that 95% and now solid.

So maybe where are operating rates trending now versus those prior 2 quarters? And does that support price that was previously taken and in 2 of the cores, you understandably lapping some paperboard supply cuts that were in 2025. When do we lap those? When should we expect tube and cores and fiber more generally to return to growth?

Yes. So I mean, first of all, the URB mills that took about, I think, about 14,000 tons of economic downtime in Q1, but that was all due to converting softness. And then converting saw similar MSD declines. And the largest driver is basically the paper industry where we supply cost for SBS and CRB grades. We do expect fiber profitability to improve sequentially. There's a lot of activities in the pipeline.

That's helpful. And on the price cost, Larry, last quarter, you gave a bridge the $30 million in price cost, I think $18 million of that was in the URB price and lower it sounds like there aren't any changes in expectations from OCC or URB price.

But any other impacts or puts and takes from nonmaterials impacts, whether that be energy or freight?

No. I mean it's -- there's a lot of things going on. I mean, obviously, Matt, I mean, like we're doing a really great job on our cost takeouts. I mean you've probably read about health care cost inflation across all industries in the U.S. So we're beating those inflation impacts and still delivering on what we have.

But in terms of any differences relative to what we laid out in our Q4 guidance walk. There aren't any other than just getting down to, for example, we've now cut 10% of our headcount. On the professional side, we're up to 220 headcount reductions. We continue to work that, and those are focused on our overall objective, but also overcoming inflationary challenges.

That's very helpful. And if I can get one last one in. Just on the repurchase I think you said $130 million of the $150 million was exhausted during the quarter. Is that remaining 20%, is that still outstanding utilized quarter-to-date?

Or was it replaced by the $300 million on that $300 million I know you committed now to that 2% annual buyback. Should we expect any more in 2026? Or is that more 2027 given you've already about doubled that target so far in '16?

I'll do the first part. So we've done $130 million, and we still have 20 remaining. That will probably be concluded up to the summer here. The price of the BC obviously helps that at the moment. And then what happens next? I'll leave for Larry to...

Yes. I mean -- so the $300 million is incremental to the $150 million, Matt, and yes, then, our go-forward intention is to do roughly 2%. But we think our stock is a very good buy, and we could end up deciding to talked to our board about more than that, but we're committed to the 2% level going forward and obviously subject to our Board's approval.

[Operator Instructions] Our next question will be coming from Daniel Harriman of Sidoti & Company.

I wanted to follow up on the prior share repurchase question. And you guys have been very clear in recent calls and your focus to deploy capital where you see the highest returns. So with the 130 purchased in the recent quarter, I'm just curious how should we think about the cadence of the $300 million authorization versus potential acquisitions as you guys look to reach some of your longer-term EBITDA and free cash flow targets.

Yes, Daniel. I mean we'll be flexing depending on what we see in terms of the markets and where our stock price is and what's going on in our M&A pipeline, which -- we continue to have a robust pipeline of tuck-ins, small tuck-in deals, but our big focus is organic growth, but we're also active. So we'll just be reacting to where the market is and where we're at on capital deployment needs internal and external?

If I could just supplement that on deploying capital. Our focus is organic growth. no doubt about it. And as and when we see an M&A deal that can complement that, and it's a tuck-in then and it fits our criteria, then we will approach that in a disciplined way. But our sole or not our primary focus is organic growth.

All right. Congrats on your continued execution.

And I would now like to turn the conference back to Ole Rosgaard for closing remarks.

Thank you very much, and thank you again for your interest and for your time and for your questions today. Greif has entered fiscal 2026 with strong momentum. Our 24% increase in EBITDA dollars, expanding EBITDA margins and meaningful cost reductions demonstrate our ability to drive returns in the muted demand environment.

We have also reduced leverage to 1.2x while reducing or returning approximately $130 million to shareholders through disciplined share repurchases as discussed. This performance underscores the strength of our portfolio, the effectiveness of our operating model and our ability to convert execution into results.

Our strategy is working, and we are positioned to continue delivering durable earnings and cash flow improvements. Have a great rest of your day. Thank you.

This concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Greif Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Bill D'Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.

Good morning, everyone, and thank you for joining Greif's Fiscal Fourth Quarter 2025 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results and 2026 guidance.

Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation.

Two important reporting clarifications for this quarter. First, our containerboard business was sold on August 31. As such, that business is presented as discontinued operations for its 1-month contribution to the quarter. Unless otherwise noted, all financial results and commentary discussed today will relate to continuing operations only. Second, due to our fiscal year-end change, Q4 reflects a 2-month reporting period, August and September. For consistency, all prior year comparatives in today's presentation are also shown on a 2-month basis for August and September.

I'll now hand the call over to Ole on Slide 3.

Thanks, Bill, and thank you all for listening in today and for your interest in Greif. With the short 2025 fiscal year due to our fiscal year change, the 2 months fourth quarter, the sale of our containerboard business this quarter and the ongoing cost optimization program, we know there's a significant amount of change and noise for this quarter. This shows up in our tax results, which Larry will be discussing in a moment. Thank you for bearing with us.

We are excited for the long-term earnings growth and value creation our strategy is unlocking. We closed fiscal '25 as a more focused, more agile and more strategically aligned company than at any time in our history. Our transformation is accelerating and the results are beginning to show. On October 1, we finalized the sale of our land management business, generating $462 million in proceeds. Those funds were used immediately to reduce debt, and our pro forma leverage ratio is now under 1x. We have entered fiscal 2026 with a meaningfully stronger balance sheet with enhanced capital efficiency built for resilience.

Together with the divestiture of our containerboard business in the fourth quarter, we have reshaped Greif's portfolio to concentrate our efforts where we have the greatest opportunity to grow EBITDA, expand margins, generate cash, reduce cyclability and deliver durable returns for our shareholders. We are pleased to report our latest Net Promoter Score survey result of 72, an improvement of 3 points from last year and further extending our world-class customer service performance. That improvement is a direct reflection of the trust our customers place in us and our ability to deliver for them. The best companies build stronger relationships when things are difficult and our NPS reflects our conviction that we will capture significant value when demand returns.

As Larry will touch on in a moment, our full year '26 guidance despite being low end, reflects continued earnings growth and a free cash flow conversion rate of 50%, demonstrating our progress towards the long-term objectives laid out at Investor Day in December. We are proud of how we ended fiscal 2025 but even more energized by what lies ahead. Our Build to Last Strategy is firmly embedded in our organization. We are shaping and sharpening our portfolio, strengthening our balance sheet and investing for sustainable growth.

Please turn to Slide 4. Our commitment to value creation shows in how we manage cost. In fiscal '25, we achieved $50 million in run rate savings from our cost optimization program, more than double our stated full year '25 commitments. To date, we have achieved approximately $15 million in savings related to network design and operating efficiency. This is not limited to strategic footprint actions. It also includes deploying AI solutions to reduce scrap and improve OEE, strategic planning actions to minimize freight and maximize on-time deliveries and structural improvements to our global procurement strategy.

The remaining run rate savings are related to SG&A. Our updated business model has enabled much more efficient decision-making. It has also led to difficult but necessary decisions to eliminate areas of redundant cost in the updated model.

As of quarter end, we have eliminated approximately 8% of professional roles within the company or 190 positions. These changes have been carefully considered over this past year and were acted on in Q4 in a manner which allowed us to communicate to impacted colleagues our heartfelt appreciation for their contributions to Greif. These actions drove the significant acceleration beyond our previous full year '25 commitments. Due to our progress to date, we are raising our anticipated fiscal '26 cumulative cost saving run rate commitment from $50 million to $60 million to $80 million to $90 million. We will also expand our anticipated full year '27 cumulative run rate commitment from $100 million to $120 million.

Our cost optimization program has continued to evolve since the start of the year. What began as a top-down initiative is now being fueled from the ground up. Across the organization, our colleagues are embracing the challenge, identifying new opportunities, driving local action and creating meaningful change. This work is making Greif a more focused and agile organization, better positioned to capture value as demand returns. Importantly, this isn't just about taking cost out. It's about building an agile next-generation Greif. The Greif Business System enables repeatable excellence across more than 250 sites in 40 countries, allowing us to do more with fewer resources. We are removing unnecessary layers to empower local leaders and speed up decision-making and we are embedding a mindset of efficiency, responsiveness and value creation across every function and facility. This isn't a onetime initiative. It's a structural shift in how we operate, compete and grow.

Please turn to Slide 5. Significant finding from our cost optimization program, which is now realizable as the divestment of containerboard are the clear and meaningful synergies in operating adhesives and recycled fiber as part of Sustainable Fiber solutions. Therefore, beginning in fiscal '26, those products will be reported within our Fiber segment results. These changes are designed to enhance our go-to-market approach while also benefiting our cost optimization program. This leaves the Integrated Solutions segment as primarily closures. Effective October 1, we are renaming that segment to Innovative Closure Solutions, which is a highly profitable and critical growth focus for us.

Please turn to Slide 6. Our Q4 results reinforce our strategic focus on 4 target end markets. In Customized Polymer Solutions, volumes were flat year-over-year. However, small containers continued positive volume momentum driven by the agrochemicals end markets. This is an area where we have been investing to grow both organically and through M&A. Mid-single digit declines in both IBC and large polymer drums, driven by softness in industrial markets in EMEA during the quarter offset the positive growth in small containers.

In Durable Metals, volumes declined 6.6%, reflecting softness across industrial end markets. Our team remains focused on managing the business for cash flow and optimizing costs while maintaining a strong position that will capitalize on growth as demand returns. Sustainable Fiber volumes declined 7.7%, reflecting approximately 1.7 million tons of URB economic downtime during September. Converting was also negatively impacted by continued soft fiber demand -- sorry, soft fiber drum demand. Integrated Solutions continues to see volume improvement driven by closures. These products generating 30% plus gross margin continue to win new business through innovation and cross-selling, including on our Greif+ digital platform.

In wrapping up my section, I'll close by pointing to a few items, which clearly demonstrate through the noisiness of full year '25, the value creation occurring under our strategy. Our polymers and closure business are growing. Our cost optimization is well ahead of plan and it has expanded to 120 million of anticipated total commitments. Our free cash conversion was nearly 50% in 2025 and expect it to be at 50% in 2026. Our pro forma leverage is below 1x. Greif is a strong, durable company and we are accelerating our value creation.

I'll now turn it over to Larry for the financials on Slide 7.

Speaker 3.

Thank you, everyone -- thank you, Ole. Hello, everyone. As a reminder, our results are presented excluding the containerboard divestment, except for free cash flow, which compares total operations to the prior year. Additionally, due to our fiscal year change, Q4 reflects a 2-month reporting period, August and September. For consistency, all prior year comparatives in today's presentation are also shown on a 2-month basis. Adjusted EBITDA for the quarter was $99 million, which was 7.4% above the prior year. EBITDA margins also expanded year-over-year by 140 basis points due to better price cost across all segments and the building momentum of our cost optimization.

Adjusted free cash flow also improved year-over-year by over 24.3% due to the increase in EBITDA and our team's strong working capital management to close the year. As noted in our presentation, SG&A includes $28 million of operating costs specifically related to the containerboard divestment, which are excluded from EBITDA. Excluding these costs, SG&A was slightly above the prior year quarter due primarily to the 2-month quarter, including certain annual or quarterly costs, which were incurred over a shorter year. Adjusted EPS for the quarter was $0.01 relative to $0.59 in the prior year quarter. Our Q4 tax expense was impacted by nonrecurring items affecting pretax income and the residual nature of continuing operations after removing discontinued operations. Tax expense also includes various taxes either not based on income or not directly correlated to current period income, the impact of which is magnified due to the lower income reported in this 2-month period. Finally, the tax expense was also influenced by the mix of earnings across the jurisdictions in which we do business.

Please turn to Slide 8. In Polymers, growth was led by small containers, consistent with our long-term strategic focus on less cyclical, margin-accretive end markets. Sales and gross profit were both up year-over-year with margin tailwinds from mix, pricing and operational discipline. In metals, results reflected volume softness in industrial end markets. Sales and volume declined but we continue to generate healthy cash flow and remain focused on cost reduction and enhancing agility to react as demand recover. In fiber, the decline in sales was tied to volume with URB mill downtime late in the quarter. Despite that, gross profit dollars and margin improved year-over-year due to continued benefits from price cost and tight cost management. Integrated Solutions sales and gross profit dollars declined year-over-year primarily due to lower published OCC prices in our recycled fiber group. Volumes in recycled fiber and closures were both solid and the product mix impact of closures led to higher gross margins year-over-year.

Please turn to Slide 9. Given the continued demand environment we are operating in, we believe it is prudent to present low-end guidance to begin fiscal '26. Our low-end scenario assumes flat to low single-digit volume declines in metals and fiber. It also assumes low single-digit volume improvement in polymers and closures from growth in our target end markets. The net impact of these volumes assumption is flat volume-related EBITDA performance to prior year. Transportation and manufacturing costs were also assumed flat, representing cost savings on our cost optimization, offsetting normal inflationary cost increases. The 2 major positive drivers in our bridge are SG&A and price cost, both of which reflect the accelerated progress on our cost optimization program. SG&A of $45 million reflects $39 million of incremental cost optimization, of which $17 million is within the fiscal year '25 run rate and $19 million is within the fiscal '26 run rate, both of which are expected to benefit fiscal '26. The additional $9 million represents lower variable costs, including incentives.

Price/cost reflects $12 million of incremental cost optimization. This is primarily in the form of sourcing benefits in polymers and closures, while metals cost base is assumed flat. Price/cost also reflects an $18 million incremental benefit of URB pricing recognized in fiscal '25 and lower expected OCC costs. Lastly, to round out our bridge, a $10 million EBITDA headwind from the lack of land management and a benefit of a $7 million positive FX driven by the weakening of the U.S. dollar. Our free cash flow low end guidance is $315 million, a 50% conversion ratio, demonstrating our progress towards our long-term objectives. We expect to spend approximately $155 million on CapEx this year. Our lower cash interest cost reflects our strong balance sheet and our other cash use includes approximately $40 million of cash restructuring related to the cost optimization as well as pension costs. Working capital assumes a source of $50 million, driven by both low-end volume assumptions and optimization gains.

Please turn to Slide 10. With our pro forma leverage below 1.0x and strong cash flow guidance of $315 million, we anticipate minimal cash needs for debt service costs in the year ahead. Similarly, after divesting our most capital-intensive business earlier this year, our maintenance CapEx needs are approximately $25 million lower. Given the strength of our balance sheet and strong and durable free cash flow generation, our capital allocation outlook demonstrates the value creation driven by our business model. As a result of our fiscal year-end change, our scheduled Board of Directors meeting is now 1 month following each quarterly earnings release, still aligned to the previous fiscal calendar. As such, our dividend payments will be considered as usual by the Board on that same cadence with the next meeting occurring on December 9.

Further, based on our strong conviction in our own ability to meet our long-term commitments and our belief that our stock currently presents compelling value, we plan to execute as quickly as possible on an approximately $150 million open market repurchase plan, utilizing our available authorization of approximately 2.5 million shares. Additionally, we intend to seek Board approval of a new stock repurchase authorization that will enable continued repurchases as part of our go-forward capital allocation strategy, which we expect to include regular stock repurchases of up to 2% per year of our outstanding equity value. While that leaves ample capacity for growth capital, we're going to be prudent in allocating it while maintaining our strong balance sheet. Where we do deploy growth capital, we will prioritize thoughtful and focused organic investments, which drive high returns on capital.

Please turn to Slide 11 for closing from Ole.

Thank you again for your interest in Greif. We acknowledge that the last 11 months have been bumpy given all the change occurring, and that showed up in this quarter in our tax results. As always, my commitment to you is transparency and candor. We are proud of how we finished fiscal 2025, more focused, more efficient and more aligned with our long-term strategy. We're also excited for a cleaner outlook in full year '26 and we'll continue to communicate progress on our strategy with as much clarity as possible. The divestments of containerboard and Land Management have meaningfully reshaped our business. We're now positioned with a sharper portfolio, lower capital intensity and stronger financial flexibility than ever before. Our cost optimization program is ahead of plan and with an expanded $120 million commitment by the end of 2027. We are building a stronger business, one that creates value in any environment and delivers accelerating performance as volumes return. Thank you for your continued support.

Operator, please open the lines for questions.

[Operator Instructions] one moment for our first question, which will be coming from Ghansham Panjabi of Baird.

So I guess, first off, on polymers and your comments about growth in some of the target markets that you've realigned towards. Can you just give us some more color on that, Ole? I mean many of these end markets you referenced ag and flavors, et cetera, are still quite challenged just based on what's happening at the CPG level, et cetera. So what is driving that improvement? Is it share gains? Is it just commercial success? What's going on there?

Yes. Let me first give you some sort of general comments. So our macro environment is, as you know, in a prolonged down cycle and that's amplified by trade and tariff uncertainties. Demand softness remains a major driver for our customers' demand. And for example, weak end markets in construction and manufacturing are hurting volumes. In terms of the ag sector, we decided as part of our Build to Last Strategy to go into the -- or invest in end segments that grows faster than GDP. One of them was the agrochemicals market that is serviced by small containers and jerry cans, and we consolidated that market to become a global leader. And that has really paid off and it's in that market, particularly, we have seen significant growth. But when you look at these factors, our operational excellence, cost discipline, cost-out program and all the actions we just mentioned, that means that, that portfolio has become even more valuable to us in the near term.

Got it. And then in terms of fiscal year '26 guidance specific to EBITDA, how should we think about the sequencing of that on a year-over-year basis? Is it sort of flat to down in the first half and then an improvement in the back half? What's your baseline assumption at this point?

Ghansham, it's as usual, the first quarter will be the weakest, and let's talk about it roughly 20% of the year. And then the rest of the quarters will be 25% to 30% each, sort of modeled the same way after prior year.

Got it. And then just one final one, Larry, as it relates to the low end, if you will, guidance characterization, is it just purely volumes that would be determined as it relates to maybe the upper end bandwidth? Is that how we should think about that?

I think volumes would be the big driver for certain. But also, we have found acceleration in our cost optimization program. As Ole mentioned in his prepared remarks, this is really catching fire among our colleagues and we have a program of identifying ideas from the ground up. So we also think there's upside in our cost optimization numbers for the year as well.

And our next question will be coming from Mike Roxland of Truist Securities.

Congrats on all the progress. Just wanted to follow up on Ghansham's question in terms of the '26 guide. So Larry, if volumes come in weaker because certainly we've heard about weaker volumes from a majority of our companies this earnings season thus far, is cost the leverage that you have available to pull to offset incremental volume weakness to meet your guide for '26?

Yes. I would say 2 things. The bottom line answer to your question is yes. We can always pull back further on shifts and temporary furloughs and those kind of things. However, this is what we said, this low-end guidance. This is pretty pessimistic on the volume assumptions already. So we don't anticipate that being an item, Michael. But yes, we still could pull incremental levels on a variable cost basis if we needed to.

Michael, just remind you that throughout the year, pricing has been under pressure and that's due to oversupply and weak demand. And despite of that, we have increased our margins and performed solidly. And I don't think that will change going into 2026.

Got it. Very helpful. In terms of the cost optimization programs, you guys raised that for '27 by $20 million. As you've gone through the portfolio, do you -- can you comment on whether there's even more upside to be had or additional cost opportunities that you've come across that maybe you haven't specified right now but you've really scrutinized and you think that even there is an additional amount above and beyond the incremental $20 million?

Obviously, our sites are much further and much higher, but we use the word commitment here. And at the moment, we are very, very comfortable committing to the $120 million we talked about. But obviously, as Larry just alluded to, that number could go up as we go through the year but we want to get a little bit closer before we would be able to increase our commitments. But we are very bullish about that.

Mike, we have a stage-gate process where there's a lot of discipline before we get to something we classify in stage-gate 3 and 4, which is where we're more certain. But yes, we believe there's potential upside.

Got it. And then final question before turning it over. Last quarter, you mentioned a few times on the call that some of your larger chemicals companies -- or customers, excuse me, were not doing so well. We see that through in earnings. Your IBC volumes declined mid-single digits this quarter. They were down mid-single digits last quarter and have been weak for some time now. Now realizing that chemicals is a cyclical business, have any of those customers indicated to you that they intend to like maybe close capacity permanently or rightsize their businesses? And if so, what does that ultimately mean for your IBC business longer term?

I mean, as I said, the demand softness is out there it's a major driver for our customers and they have adjusted their business. And they are -- a lot of them are relying in terms of chemicals on construction and manufacturing as end markets. I don't think that it will get any worse. That's my personal opinion when I speak to customers and see the numbers. But big question is when will it get better? And we're not sitting here waiting for it to get better. Just as you've seen, we are acting. We are highly focused on organic growth. We're deploying capital for organic growth in the specific segments that we have alluded to. We are taking cost out of our business and our business is generating a lot of cash and we're doing our share buyback of $150 million. So we're helping ourselves. We're controlling what we can control, and we're not in a waiting position. Of course, when volumes return, that will be nice, and we will take that as an extra benefit.

Yes, Michael, I would supplement Ole's comments, if this makes sense, we're hearing less bad comments, less bad than they were. And the other thing that's somewhat encouraging is the trending down of mortgage rates. As most housing industry analysts, investors believe that if you get with a 5-something interest rate pent-up demand in existing homes sales will take off. That's a big driver for the chemical companies and therefore, for us.

We're encouraged by the 2x rate cuts we've seen, but it's not going to change anything overnight. But if we see more rate cuts, it will have a positive effect on demand, we believe.

And our next question will be coming from Matt Roberts of Raymond James.

I appreciate all the color. Can you hear me okay?

Yes, yes.

Okay. Great. Good to see the cost coming through and all your color on capital allocation. And on capital allocation, so balance sheet is in a great spot. You initiated the open market repurchase for $150 million. So given that low leverage and the now newly discussed long-term repurchasing intentions of, I believe, it was 2% per year. Does that change how much capacity remains for M&A? Or has the hurdle rate for M&A changed versus your view of, I think, what you said stock offering compelling value. And all those things considered, where do you expect leverage to shake out by year-end '26?

Let me just answer the first one and let Larry deal with the leverage one. So on M&A, I mean, first of all, our focus is on growing much faster organically and we are deploying CapEx for that. We have a number of areas we have invested in for organic growth. In terms of M&A, we've said many times, we have a very solid pipeline. We keep working on the pipeline. We don't expect any transformational M&A to happen. We have our focus on what we would call tuck-in M&A to complement what we're doing organically. And our criteria remain the same. We are looking at M&A with EBITDA margins in the 20s, 50% free cash flow conversion and primarily within Polymers and primarily within the closures segments.

Yes. You might want to supplement that, Ole, maybe talk about -- talk to the group about hunters and farmers and also about IonKraft maybe.

Yes. So we have reorganized our entire commercial organization globally and from being -- we've been farmers in the past and taking really good care of our existing customers but we've changed that to become more hunters now. We've changed the incentive program. We've changed the way we operate commercially. And we are targeting around 8% organic growth. That's part of -- that part is securing additional volume, extra share of wallet, but it's also deploying CapEx in terms of new capacity where we see that -- we have also invested in a new -- it started off as a start-up out of a university in Germany. We created a partnership with the start-up, and we are now investing in that and we are deploying a very unique proprietary form of barrier technology that only we have. And we're just ramping that up right now. We have 3 lines on order and we are negotiating further lines. And this is something that's exclusive to us. And we will see that start to come through towards the end of '26 and really ramping up in '27.

Yes. And Matt, purpose that, obviously, the focus that we are really driving a different growth pattern than we have in the past. But relative to our leverage ratio, we're obviously in a really good place. And with the free cash flow generation that we're talking about, I think it's very highly likely, even with our stock repurchase and things we do, very highly likely, we'll remain under 1.5x by the end of next year. It's possible if some things came up that were attractive, we'd be higher than that, but I don't see any scenario where we'd be over 2x at any chance. So really, we'll remain in that range for the foreseeable future.

Very helpful. Secondly, on the closures. So isolating that as a stand-alone segment, Ole, I know you did touch on this in the prepared remarks, so I apologize if I missed any of that. But are there operational changes here or more of a symbolic shift as closures have been a growth focus. And now with the -- as lower recycled fiber has been a drag on the margins in Integrated Solutions, how should we think about the margin profile and growth of that segment going forward?

The closure has always been very attractive for us. It's a unique part of our business that comes with very high and attractive margins. There's a lot of growth opportunities out in the market for closures. And for example, with the 3 acquisitions we made in Polymers, most of them were using closures from other companies than our own. So there was a big synergy there we'll be executing on. Closures, we separated that out now in a separate segment really to put extreme focus on this segment. We have a new leader in that business as well. And his focus will be growth, M&A growth but importantly, also organic growth. And we'll deploy CapEx accordingly to that. So hopefully, you will see us in the many quarters to come growing that segment significantly.

And our next question will be coming from George Staphos of Bank of America Securities, Inc.

I also -- I just want to give you some credit here. By sell or hold, the company has really done a wonderful job transforming itself over the last 10 years and moving to a more, if you will, common fiscal quarter end, I think, really helps everybody on the street. So we thank you for that, guys. And we know it wasn't an easy undertaking. So thanks so much for that. I guess my first question, can you talk about, Larry and Ole, the growth rates that you saw relative to your guidance entering fiscal '26? I assume your assumptions are consistent with what the exit rates are, but were there any exit rates that were maybe trending below what's embedded in your guidance, recognizing you've got a lot of levers to pull, et cetera, as was talked about earlier on the call.

Yes. I mean when you look across our portfolio within the fiber segment, probably one of the weakest lines that we had is our fiber drums. So fiber drums were down double digits, which was more than we expected them to be down. We expected them to be down less than that, high single digits. So that was a trend that was worse. On the other hand, small polymers did better than we expected. So those were the 2 primary ones that were different than our expectations going into the quarter, George.

Our guidance going forward is essentially aligned to what we started to see. So in our low-end guidance, as we said, we've got low single-digit up on polymers and on closures with more in the small polymers than in the large polymers. And then within metals and fiber, we've got low single-digit declines just as a low-end guidance assumption.

Understood. Okay. And you're saying drums at this juncture, fiber drums, those have gotten back to kind of your guidance range or even though they started pretty weak. Would that be fair?

No, they're just really off right now. And it's all tied to the whole chemical industry sector. So yes, we're not bullish on any kind of significant growth in that one right now.

Okay. I was hoping you could go a little bit further into the SG&A pickup that you're expecting this year. Thank you for the bridge and the discussion on the $45 million. Can you talk about what's in sort of the activity that you took in from fiscal '25 into fiscal '26, What, if anything, is different about what's in for this year on the fiscal '26 actions? And just any other color on the $45 million would be great.

Yes. The predominance of our SG&A takeouts are related to the headcount numbers that Ole gave on the 8% of our overall professional headcount. And the majority of those actions were taken in the fourth quarter. So they play out into the entire year going forward. We also have a lot of things where we've moved more things to low-cost countries. We've also taken in where we had contractors in our IT organization that you think are temporary and then all of a sudden, they're around 8 years. Well, you're better off to hire them as employees and then you're better off to offshore things. Our IT group has also done a fabulous job of rationalizing our IT licenses, which is a significant cost. We've restructured how we're doing our AI activities and going to a model that's basically pay for what you eat instead of a basic core per person license. So there's a whole bunch of elements that go into those cost saves. But those are the predominant ones that are driving the major numbers.

Okay. And on that point, Larry and Ole, you talk about changing the incentives and the approach to organic growth in the organization, that sounds exciting. And at the same time, for understandable reasons and to benefit because you're getting savings from it, you're cutting headcount. Are there any areas where you're maybe a little bit more -- maybe word is not the right term but you've got to stretch a little bit further to get everything done on the front end of the business while you're reengineering the back end. Any tension points there?

Not really, George. I mean, we decided not to do the SG&A as like thousand needles. That's why we took the actions in Q4 to get most of that behind us. We -- in terms of the commercial organization, we have by and large, protected that because we're really focusing on organic growth, although we have been rearranging that, as you say, with the incentive program. But we're doing a lot of other things there as well in terms of how we manage performance in sales. And we have -- I mean, Tim Bergwall, who's our Chief Commercial Officer, he's just doing a fantastic job with his team to do that. And it doesn't happen overnight and we still got a long way to go in that area.

Okay. My last question, a couple of parts, and I'll turn it over out of courtesy. Sorry, I've gone long here. One, I assume the pricing change in integrated/closures is just the effect of OCC, but can you talk about what the pricing change was actually within closures? Given you've done a lot of other things to simplify the organization, any thought perhaps at some point to simplifying the share structure between the Class A and Class B? And then lastly, with great resources and everything you've done to have the balance sheet where it is, comes great responsibility. Where are your customers telling you they'd like you to most sort of grow inorganically from an end market standpoint so that you get the highest return going forward?

That was a lot of questions.

We've been doing this a while.

The first one was...

The price impacts on the Integrated segment between RFG and Closures.

So first of all, the reason for why we put the recycled fiber group and adhesives into the fiber solutions group was that they're serving that group. It's the same customer, and it's -- the adhesives is going into fiber also amongst customers. And to have that managed by the same leader made sense. And that was part of that -- as part of that, we could take out a leadership level. And that left sort of Integrated as a stand-alone closure business.

Ole, what was the price change in closures, really what I'm asking?

Yes. The price change in Closures, George, was basically $12 million of benefit from procurement activities and that was in the polymers and closures. That's the segment. It's not the OCC side of it. And then with respect to share structure, I mean, that's something that we continue to dialogue and look at but nothing on the -- in the near term on anything like that. And then what was the third question?

Where are your customers telling you to...

Yes, on nonorganic, basically, I mean, our customers like us to serve them in any of their needs that they have. So us getting broader enclosures where we might be able to serve more of their needs. Clearly, they've enjoyed us getting more into like the small plastics that we didn't use to serve on a global basis. That's been a positive. But there's nothing else that they're out there asking us to get into right now other than the one Ole went over on IonKraft which is just a brand-new technology that is more highly recyclable, very favorable environmentally. And we just had UN approval on the first container with this step in. It's a very unique opportunity for us.

Just to remind that we -- our NPS of 72 is just unheard of in our industry and that gives you an idea of how close we are to our customers. I'll mention an unnamed customer who has been establishing new plants in several countries. And every time they do that and this is a multinational, they come to us and ask if we could provide capacity on that particular location. And we go in and we do a long-term agreement and then we add lines or build a plant to service them. And that's an example of what customers ask us for and how close we are to them.

Our next question will be coming from Gabe Hajde of Wells Fargo.

I had a question about the Durable Metals business, which is now going to be your largest. And if memory serves, I don't know, 40% to 45% of that sits in Europe. And not to put you guys on the spot, but looking at a decent list of chemical plant closures across Continental Europe, Eastern Europe, et cetera. I know you're talking about volumes being down, I think, flat to down low single digits. Can you talk about just maybe -- I know by region, historically, you kind of gave us performance in the legacy segments. Things have been changed around a little bit. But I think you mentioned in your prepared remarks, Europe slowed down. And so maybe just by region, sort of what your expectations are in that.

It's interesting -- it's actually been a little bit of astounding to us. So for example, the North American steel business has been down similar levels to EMEA quarter-by-quarter. But on a 2-year stack, EMEA steel was actually up every quarter this year. every single quarter.

They have consistently performed better than North America. And then we have also -- as and when customers reduce capacity, we do the same. I mean, plants where we have been operating at two shifts, we now have gone down to 1 shift as an example. And we do that because we're managing that business for cash basically. So the closures that has happened, they have already been factored into our production capacity.

Okay. I guess the second question is kind of revisiting a little bit on the M&A front. Is there a scenario where maybe there are just kind of some tuck-ins along the way? And I think, Larry, you said you don't really envision a situation where you're above 2x levered. And so between now and 2027, I didn't see the $1 billion reiterated. And again, I know it's tough when you're moving assets around. But is that still explicitly sort of the target given sort of what you know about the M&A environment right now?

Yes. I mean, for us, on that, Gabe, I mean, it's still our objective to get there but we're not going to slowly deploy capital to get there. But if you just walk through, we gave low-end guidance. So obviously, our hope is that we do better than our low-end guidance. So if you take the $630 million and you then look at our $120 million commitment, that's a net another $45 million. So you're already up to $675 million. We're hoping you see industrial volume recovery. Obviously, that's a big component. It's been a component of our original stack was $140 million. I mean those things get you up to $815 million. We do some tuck-in acquisitions. We invest in organic CapEx and IonKraft and other opportunities. We still think there's a path to get there. But it's not like, okay, we're going to go chase M&A to get there and risk doing bad deals. We're just not going to do that.

But the $140 million are largely intact in terms of going back to the 2022 volumes.

Yes.

And this concludes our Q&A session. I would now like to turn the call back over to Ole Rosgaard for closing remarks.

Thank you. Thank you for joining us today. Our disciplined focus on margin expansion, cash generation and reducing cyclability is delivering meaningful high-quality returns for our shareholders, further validating your investment and confidence in Greif. We really appreciate your time and your partnership. Thank you.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Greif Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Bill D'Onofrio. Please go ahead.

Good morning, everyone, and thank you for joining Greif's Fiscal Third Quarter 2025 Earnings Conference Call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results.

Please turn to Slide 2. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you can consider important because we are prohibited from discussing material nonpublic information with you on an individual basis. During today's call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed.

We will be referencing certain non-GAAP financial measures and a reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. This quarter's results reflect our planned containerboard business divestment within discontinued operations. Unless otherwise noted, the financials and commentary presented today will relate to our continuing operations.

I'll now hand the call over to Ole on Slide 3.

Thank you, Bill, and good morning, everyone. Thank you for joining us. At the outset, I want to recognize our 14,000 colleagues around the world. Their execution discipline, bias for action and commitment to our strategy make the difference. While all colleagues' contributions are meaningful, today, I want to briefly go off script to recognize one in particular, Gary Martz, Executive Vice President, General Counsel and Secretary to Greif will be retiring later this year. Gary is a cornerstone example of what makes Greif so special. Over distinguished 20-plus year career at Greif, he has impacted so many lives through his work.

For myself, Gary has been a constant source of servant leadership, reason, coaching and strategic vision. And I know that both I personally and Greif colleagues globally are foundationally better because of his guidance. I'm sitting in the room with him right now, and I can see from his face that even now, he prefers to be recognized only as part of the greater Greif team. But today, we need to recognize him as an individual, too. Gary, thank you for everything you have done for us and best wishes for your upcoming retirement.

Thank you, Ole.

Dennis Hoffman, Greif's Deputy General Counsel, will assume Gary's role effective October 1. Dennis has worked closely with Gary for the last 15 years, and we have full confidence in his ability to carry on Gary's legacy of legal excellence. Thank You both for your commitment to Greif.

Now back to the quarter. We're taking cost out and transforming the business. At times, that work can be uncomfortable. But our people know that is not -- that is how the company grows, moves from good to great and ultimately creates shareholder value. We continue to accelerate our portfolio transformation and cost optimization. The divestment of our containerboard business is planned to close at the end of the month and our planned timberland divestment set for October 1 for favorable tax planning purposes. Cash proceeds net of tax for these transactions will be approximately $1.75 billion, which we anticipate will put our leverage ratio below 1.2x. These divestitures sharpen our portfolio to concentrate our efforts on markets where we have the greatest ability to grow and deliver margin expansion, capital efficiency and durable shareholder returns.

Additionally, as of Q3, we have achieved $20 million in run rate savings towards our $15 million to $25 million fiscal 2025 commitments, about $15 million of which is SG&A and the remainder through network optimization, such as the Merced, California closure, which was announced earlier in August. Another key component of our cost optimization is operating efficiency gain. To that end, we want to highlight a smaller but equally meaningful change occurring in one of our shop floors. Recently, our colleagues in the Welcome, North Carolina tube and core plant improved progress efficiency related to changeovers, which improved line efficiency by over 40%. At Investor Day, we spoke about the aggregation of marginal gains. This is a great example. The stand-alone impact of this project is not material to Greif as a whole, but when all facilities take the same mindset and drive from good to great, it will really move the needle. It is regular wins like this that daily increase our conviction in outpacing our stated $100 million cost reduction commitment.

Please turn to Slide 4. Our Q3 results once again show that the markets we've chosen to invest in are the most resilient even in a mixed macro environment. Customized polymer volumes were up 2.2%, led by low double-digit growth in small containers, offset by mid-single-digit declines in IBCs and large drums. Our focused end markets, Agrochemicals, Pharma, Flavor & Fragrance and Food & Bev continued to outperform, underscoring the power of our portfolio shift. Durable metals volumes declined 5.8%, reflecting low double-digit softness in North America and low single-digit declines in EMEA. Housing and petrochemicals have been sluggish all year, and bulk chemical markets trended downwards in Q3, which also drove softness in EMEA.

Our strategy in this business remains value over volume and cash generation, which is evident in our improved year-over-year gross profit margins. Sustainable fiber volumes declined 7.6%. URB Mills operated at above 90% capacity. However, converting was mixed with tube and core down low single digits and fiber drums down high single digits due to sluggish North American industrial end markets. Integrated Solutions volumes grew 2.6%, led by strong volumes in recycled fiber. So from a big picture point of view, our volume performance clearly shows our strategy is working. But for the time being, customer sentiment remains cautious and the macro economy as a whole is not robust. We will consider that operating environment as we look to full year 2026 guidance next quarter.

Larry, please take over on Slide 5.

Thank you, Ole. Hello, everyone. As a reminder, the Q3 financials are presented excluding the containerboard divestment, except for free cash flow, which compares total operations to prior year total operations. Adjusted EBITDA dollars increased $4 million, while EBITDA margins increased 70 basis points, driven by improved price/cost in our Fiber, Polymers and Integrated segments, which more than offset volume softness across the portfolio. Free cash flow rose by almost 400% to $171 million in the quarter. This result once again demonstrates the resilience of our business model regardless of macroeconomic conditions.

Please turn to Slide 6. In Polymers, sales improved on volume, price and mix with growth concentrated in our target end markets. Gross profit dollars increased by over $10 million and gross margins increased 150 basis points as we continue to drive structural cost improvement through Greif Business System 2.0. Metals saw lower sales from both price and volume as industrial demand softness persisted in North America and increased in EMEA. Gross profit dollars were about flat, but gross margin was up due to value over volume discipline and Greif Business System 2.0 gains. Fiber sales were down due to the converting demand softness Ole spoke of. However, gross profit dollars were up $8 million and gross margins were up 360 basis points due to better RISI published price/cost dynamics. Integrated Solutions, excluding the prior year impact of the Delta divestment was about flat on both sales and gross profit with gross margin down 160 basis points due to product mix.

Please turn to Slide 7 to discuss guidance. Our revised 11-month guidance midpoint of $730 million of EBITDA is raised $5 million from the previous low end to current midpoint and revised free cash flow midpoint of $310 million is raised $30 million from our previous low end to current midpoint. The increase in EBITDA is due primarily to better SG&A from cost optimization gains, while our price cost and volume assumptions are largely unchanged. The increase in free cash flow is primarily from the EBITDA increase plus lower expected CapEx spend, which is timing related to ongoing maintenance and growth projects.

As the containerboard divestment is not finalized, we have not adjusted full year guidance for the impact of the divestment. Our combined adjusted EBITDA guidance includes contribution of $122 million in sales and $25 million of EBITDA in each August and September related to containerboard, which is driven by the prime season for our profitable triple wall business. This is in addition to the Q3 year-to-date contribution of $872 million of sales and $168 million of EBITDA from containerboard.

I'll now turn it back to Ole for closing on Slide 8.

Thanks, Larry. We are executing our Build to Last strategy with discipline and conviction, reshaping the portfolio, optimizing our cost structure and leaning into markets where our competitive advantages are strongest. We're doing this at a time when demand recovery is still ahead of us, which means that as volumes return, the operating leverage in our business will be significant. This only strengthens our confidence in achieving our 2027 commitments and in our ability to consistently deliver lasting value for our customers, our colleagues and importantly, our shareholders.

Operator, will you please open the lines for questions?

[Operator Instructions] Our first question will be coming from George Staphos of Bank of America Securities, Inc.

Congratulations to Gary and Dennis as well.

Nice touch, Ole. From my vantage point, I had a few questions. Number one, can you tell us how much of the guidance raise for the year was related to containerboard? I know you said it was really SG&A, but was there any notable change there relative to containerboard?

Second question, can you tell us about price cost trends as we're entering the fiscal fourth quarter and really kind of the horizon into '26. To the extent you can comment relative to metal.

And then lastly, I know you were happy with the growth in your targeted areas in polymers, but I was a little bit surprised to see some weakness in IBC. And so can you tell us how trends, maybe it's in EMEA, are starting to affect the polymers business?

George, I'll let Ole address the polymer stuff. But first on your guidance question, no containerboard impact in raising that played through as we expected. Generally, the guidance raise and realized that was off of our low end. And so some of the detriment we've seen in what's going on in metals worldwide actually probably brought us down from what we would hope for. And the raise is primarily related to SG&A cost reductions taken relative to our optimization plan. On the metals pricing going into the year, steel costs have been relatively flat at this point. We don't really see any inflections going on. So we don't expect anything with significant index changes going into the calendar quarter are now new first quarter, we don't anticipate anything significant, George. And I'll turn it over to Ole on the polymer question.

Yes. On the polymer, the growth markets, George, the ones I mentioned earlier, Food & Bev, Agrochemical in particular, where we are the global leader. We expect that -- those demand trends that we've seen simply to continue. And just to comment on metal as well. The metal index has been largely stable through Q3, and we don't see any impact expected going forward from that as well.

Yes. I'll supplement one thing, George, and I made this in my comments, we had anticipated containerboard being good in this last part of the year because this is the time of year when people are harvesting watermelons and pumpkins and buying their triple wall boxes for those things going into the grocery stores and stuff. So these months are always our most profitable in that part of the business.

Okay. Just a point of clarification, if I could, and I'll turn it over. One, do you have a sense of what the current normalized EBITDA would be for containerboard? I mean we can add up what you've reported with what is coming on...

I look at trailing 12 through July, George, was $218 million. So it was $211 million when we cut the deal and $218 million. It's $25 million per month right now, but that's a highlight kind of number. So that's -- it's always -- you get into like our former first quarter was always the weakest. And so that pattern, I'm sure will continue for BCA to address with you.

Okay. And EMEA has not had an effect on the Polymers business so far in Industrial? You didn't really talk about IBCs.

No, it's -- the main segments that are down, just have a look at it, and you know that, George, the large chemical companies out there, just look at their last earnings, and that's kind of how the market is at the moment, whether it's in EMEA or North America. But North America is the weakest.

Yes. And IBCs, like we said, were down, offset by double-digit growth in the small polymer product.

And our next question will be coming from Michael Roxland of Truist.

This is Nico Piccini on for Michael Roxland. I guess just first off, congrats on the strong cash flow performance thus far this year. Just curious on how you think the business should perform from a cash generation perspective following the divestitures and how do you weigh capital allocation opportunities at your forecasted lower leverage ratio?

Yes. I mean we -- all of our businesses are generally fairly consistent in terms of their cash flow generation. So we don't really anticipate anything shifting. As we've said consistently, our objective is to be a 50% free cash flow generator relative to our performance. So we're on that path, obviously, north of 40% this time and the businesses that we'll acquire have to meet that 50-plus percent free cash flow conversion unless there's some other compelling -- if we bought a 30-plus percent margin business that was capital intensive and it was 40%, we'd be happy, okay? So we expect cash flow generation to be good. Clearly, with the debt paydown, we're capital flush. That said, our biggest constraint on deploying capital has always been human capital to get the projects done. We did see a drop-off in our CapEx for this quarter.

Frankly, part of that was because in our original guidance, we had stuff for the containerboard business, which obviously some of that we cut out because it didn't make sense for the new buyer and that kind of thing. So that helped us do it. And we backed up strategically and said, let's look at our portfolio of projects and prioritize things, and then we had some delays with deliveries on equipment and that kind of thing. So -- we expect the proceeds of the 2 transactions to save us interest cost if we do no acquisitions next year, about $120 million.

Part of that's related just to the timing of when we can pay taxes. We mentioned that we did -- we're doing the Soterra deal on October 1 for tax reasons. That's because by moving it 1 day into that year, it saves us $13 million of tax permanently, saves us about $4 million on a timing of our payments element. And there's actually some other tax savings in the future related to that. All that means we're going to have lots of capital available to deploy against high-return organic CapEx projects. And so we've been exploring a lot of those along with our acquisition pipeline.

And Nico, let me just lay out the allocation priorities we have. Obviously, the first one is dividends, safety and maintenance of our equipment. And after that is debt paydown, but obviously, we're in a very good place now with our leverage. And then the significant last one is organic growth. And as Larry mentioned, we have a solid pipeline of opportunities for organic growth that we're working on.

Got it. That was very helpful. Just following up maybe on the EBITDA guidance discussion. Can you just help me frame how that top end is hit and if that's just better performance on the SG&A and cost out? Or is that maybe a volume return?

You sort of broke up there, Nico.

Sorry. Yes. Just on the high end of the EBITDA guidance, is reaching that more dependent on the SG&A and cost out or...

No, it's -- that's pretty much locked. That range is really just dependent on volume of what happens in the month. I mean it's a very tight range, obviously. And it's just giving us a range therefore, if volume is up or volume is down. That's really the only flex in there. There's minor other items, but that's the majority item.

And our next question will be coming from Ghansham Panjabi of Baird.

I guess going back to the question on capital allocation. Ole, as you think about the balance sheet you have and all the many decisions you've made in terms of portfolio adjustments in the last few months, is increasing your exposure to perhaps more defensive end markets a strategic priority for you as you consider acquisitions? Or how should we think about -- maybe are you looking at a different vertical as it relates to the portfolio, et cetera? Just give us a bit more from a strategic standpoint, your thoughts as it relates to that.

I mean, as we laid out on Investor Day, the -- we started off with the end markets. That's where we start looking. How big are the end markets and which end markets are growing faster than GDP in general. And those are the ones I mentioned, the Food & Bev, Agrochemical, the Pharma and so on. And then after that, we then look at what products are sold into those end markets that are part of our core business. And that is our polymer-based containers and caps and closures. And that's really where our focus is. Of course, we have a legacy business in Durable Metals and so on. And that's also core business, and we maintain that. But generally, that, as you know, is our cash cow and all the cash and the earnings we generate there, we invest in these growth markets.

Okay. And then as it relates to guidance, just given there's so much going on with your divestitures and also you're changing the number at your fiscal year, et cetera, is it as simple as $730 million at the midpoint of guidance for EBITDA for 2025 for 11 months and then you would strip out the containerboard impact, which is $168 million and then adjust obviously for 12 months. Is that how we should think about a baseline for the starting point for next year?

Yes. I think generally, I mean, obviously, we've got our cost optimization, and we should realize $25 million or so in '26. And then we already said we'd have a run rate of $50 million to $60 million coming out of next year. So that's the other element that would go into it, Ghansham.

Okay. Perfect. And then just finally, as it relates to the operating environment, again, a lot of event-driven uncertainty with tariffs, et cetera. Is there any change that you see plus or minus as it relates to perhaps your view when you last reported as it relates to the operating environment as you dug through the various regions you're exposed to?

If you mean in relation to tariffs, not really. Tariffs -- the impacts that we see from tariffs is still well below $10 million. It's not material for us. And remember, we tend to -- I mean, operating in 40 countries, we source locally, we manufacture locally, we sell locally. So it's not really something that has an impact on us.

And in terms of the demand environment for your customers as it relates to tariffs, any change there, good or bad?

That's a little bit harder. We don't really -- we haven't really seen any changes yet. But obviously, some of our large chemical customers, it's very clear that they are not doing so well, and that's something we're following very closely. And I can say that if you look at the regions, North America and EMEA, they have remained soft. And we haven't really seen any significant change. The biggest change is really on polymers and especially the chosen strategy we have. We see that that's where the growth has been, and it clearly demonstrates that our strategy is the right one.

Our next question will be coming from Gabe Hajde of Wells Fargo.

I want to revisit the kind of starting point for '26, and I recognize you're not giving '26 guidance. But I thought the $730 million number, it technically includes another, I guess, $50 million from August and September in there. So really, we're kind of talking about, like you said, a $218 million number or $220 million. So $730 million less $220 million is a starting point, and then we got to annualize it, so 11 months to 12. Is that correct?

Yes, that's correct. Yes. I was -- yes, I missed that on Ghansham's question. You're right on that, Gabe.

Okay. Well, there's a lot of moving parts. So we're just trying to keep our bearings over here. The other one, a little late in the call, I think you guys had bought out, I saw in the cash flow statement, a minority or a noncontrolling interest to the tune of $40 million. What was that?

That was on our North American IBC recycling business that we had purchased 3 years ago. Is that right?

[indiscernible].

So we bought out the remainder of it.

Yes, we owned 80%, and we bought out the remaining 20%.

Perfect. And last one for me. It seemed like at the Investor Day, the pipeline was pretty full on M&A. And I appreciate that these things can move around and you don't necessarily dictate when people are ready to sell. But can you talk about maybe just broadly the market for M&A and things that you're working on?

I would say the same, as we said last time, we have a very, very solid pipeline. We have tuck-ins. We have larger ones, and we continue to be in close dialogue with the owners of all those businesses. We don't dictate when things are happening. We don't know that, but it's important that we stay close to it. And the people we talk to and the companies we look at, they all fit our strategy. And just to remind you is within Polymers, we are looking at businesses that at least generates 18% EBITDA margin and that has a 50% free cash flow conversion. And they operate in these 4 growth segments that I mentioned earlier that when things come up, we -- obviously, we're ready to move. But at the moment, we're very pleased with where we are with the leverage that we have created.

[Operator Instructions] Our next question will be coming from Matt Roberts of Raymond James.

You spent some time already talking about capital allocation, but maybe I'll try again. So given your leverage, so at the land, you'd be at 1.2x. I mean that's well below the long-term 2 to 2.5x range. So what is an upper leverage range you would be comfortable with following any potential deal? And as you look at those target markets, whether that's pharma or other ones, how do asking multiples compare to prior deals you've done? And given where volumes are currently and the commitment to $1 billion in EBITDA in '27, does that 1.2x leverage figure allow for a greater immediacy or appetite for a more transformative deal?

Yes. So Ole obviously already gone through the target markets that we're involved with in the M&A pipeline. And so that's -- we're focused on that. We're not aware of any transformational deals on the market right now. So I mean, we don't see anything that's a $3 billion deal or anything, kind of thing. In terms of our leverage ratio, we like to target in that 2 to 2.5x. But as we've shown previously, if we can find the right strategic fit in businesses that have the free cash flow generation that we look for, that allows us to pay down debt pretty rapidly.

As you've seen, our debt ratio has come from 3.6 to 3.1 in the 3 quarters this year. So we address that leverage ratio pretty rapidly. So we'd be looking at -- we could do a $1 billion deal now and still be within our target ratio range. You do a $2 billion -- $3 billion deal and still be back in it very rapidly if we have businesses that meet the criteria we're looking at. And we're only going to buy businesses that meet the criteria. So it's really just going to be dependent on when things come to market, are they good strategic fit. We've said this before, but we've been down the aisle of marriage on deals a couple of times now. And at the end, we ran away from the church because we -- as much as it looked attractive going in, we figured out the bride was pretty ugly at the end. So we'll keep looking for the pretty bride.

Very good Larry. I appreciate the color there. Great analogy. Switching gears, if you could stay on the same analogy, that would be great. But fiber, you've seen a lot of moving pieces there, containerboard coming out, land out, drums are now in this segment since you've resegmented. So with the $218 million coming out in containerboard in 11 months, I mean, how should we think about what's remaining in that fiber business in '26 in terms of margin or driving cost out of that business, recognizing there's still some price to flow through? Just any color you could give there on that fiber for 2026.

I'll make a comment and then Ole can add on. I mean, one of the key tenets of our strategy that we've talked about before, but we haven't talked about today is we want to be #1 or #2 in a market. And we are #1 in fiber drums in the U.S., and we're #2 in our URB business. So we like those positions because it means you're a market leader on what's going on and not the back end of the tail of the dog like maybe we were in containerboard. So we like the dynamics of the business right now, the demand on the fiber drum part is weak because of industrial. But anyway, that's a high-level thing on...

Yes. I can't come up with an analogy like Larry. But if you look at -- I mean, our URB business, we are clearly one of the leaders in that business, and we like that business. And that's primarily tube and core, but then we have our fiber dumps as well. So our URB capacity right now is around 630 tonnes. We have some CRB capacity, 65 tonnes, but that's a swing mill that we can swing to URB. So our focus is really on URB where we are well integrated into our converting assets.

Okay. That's all very helpful. And maybe if I could squeeze just one more in here. On Integrated Solutions, that margin came in lower in 3Q, volumes are still up. So what drove the variance in margin quarter-over-quarter within that segment? And what is expected on a go-forward basis to get that back above 20%? And in that Integrated Solutions. I mean you discussed potential investments in closures as well. How do you think about maybe longer-term external sales impacting the longer-term growth rate in that Integrated Solutions business, if material at all?

Yes. OCC was the big driver of the margin squeeze as the paper industry has picked up a bit, obviously, our recycled fiber business has been selling more, but we all know where OCC pricing cost is. And the big value to us of that business is having a secure supply chain of OCC, which you remember a number, it seems like age in history now, but there -- a number of years ago, everybody was struggling to find OCC. So you want to make sure you have that to support the primary business. And with respect to margins, one of the reasons that we really like caps and closures is it's one of our better margin businesses. And every target that we're looking at in caps and closures would significantly exceed the target levels that we talk about in our M&A strategy.

And I would now like to turn the conference back to Ole Rosgaard for closing remarks.

Thank you, operator, and thank you again for all your thoughtful questions today. I want to leave you with this. Greif today is a fundamentally stronger, more focused and more resilient company than ever before. We are simplifying our portfolio. We're strengthening our balance sheet and unlocking significant efficiencies that will create durable shareholder returns. We are not waiting for the macroeconomic environment to improve. We are creating our own path forward with execution discipline, a bias for action and a clear Build to Last strategy. As demand recovers, our sharpened portfolio and operating leverage will amplify results. We have line of sight to our 2027 commitments, and I'm confident that the actions we are taking now will position Greif to deliver outsized value for years to come. To put it simply, Greif is a company you can invest in with confidence. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.