Greif, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Greif Q3 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. We'd like to ask you that you limit yourself to one question and one follow-up during the Q&A. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. Thank you. I'd now like to hand the conference over to your speaker for today. Matt Eichmann, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Jack, and good morning, everyone. Welcome to Grice's third quarter fiscal 2020 earnings conference call. On the call today are Pete Watson, Grice President and Chief Executive Officer, and Larry Hilsheimer, Grice Chief Financial Officer. Pete and Larry will take questions at the end of today's call. In accordance with regulation fair disclosure, we encourage you to ask questions regarding issues you consider material because we are prohibited from discussing significant non-public information with you on an individual basis. Please limit yourself to one question and one follow-up before returning to the queue. Please turn to slide two. As a reminder, 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'll be referencing certain non-GAAP financial measures and reconciliation to the most directly comparable GAAP metrics can be found in the appendix of today's presentation. And now I turn the presentation over to Pete on slide three.

Hey, thank you, Matt, and good morning, everyone. Thank you for joining us today. As we expected, during the third quarter, we faced unprecedented economic turmoil caused by the global health pandemic. But the Greif team responded and delivered solid results through strong cost control and operational discipline. Through that focus, we generated solid free cash flow and paid down debt. This is only possible thanks to the commitment of our global Greif team, their extraordinary dedication to our business and our customers, and the pride they have in safely packaging and protecting critical goods and materials that serve the greater needs of our communities all around the world. The COVID-19 pandemic remains an evolving situation. We are focused on executing enhanced health and safety protocols to safeguard the health of our colleagues and ensure the continuity of our supply chain to serve our customers. During the quarter, we achieved an all-time high trailing four-quarter customer satisfaction index score, which further strengthens our standing with customers. And while profits were lower due to soft industrial demand and a significant price-cost squeeze in our paper-patching business, free cash flow remained roughly flat to the prior year, and we have reduced net debt by more than $260 million versus the prior year quarter. Please turn to slide four. A rigid industrial packaging business delivered solid third quarter results despite significant volume decreases due to weak demand in the global industrial economy. Global steel drum volumes declined by 10% versus the prior year quarter, and demand was strongest in China where volumes rose 6% thanks to an improving economic activity. As you move west to our mayor region, demand was weaker. While the Middle East and North Africa business delivered steel growth of 6% versus the prior year, and the Mediterranean region grew by low single digits, our central and western European steel drum vines declined by low double digits due to weak chemical and lubricant demand. America's region experienced the weakest conditions, with steel drum vines in the U.S. down by almost 20% versus prior year. This was a result of weak demand for industrial paints, chemicals, and lubricants. Global IBC production fell by roughly 1% as we faced weaker demand from specialty and bulk chemical customers. RIP's third quarter sales fell roughly $79 million versus the prior year quarter on a currency neutral basis due to lower volumes and raw material price declines and corresponding contractual pricing adjustments. Despite the decline in sales, RIP's third quarter adjusted EBITDA fell by only $5 million versus the prior year quarter due to lower raw material costs, primarily attributable to roughly a $5 million opportunistic sourcing benefit, and strong cost control that resulted in lower year-over-year manufacturing expenses and segment SG&A expense. Finally, despite considerable external challenges in the quarter, RIP continues to demonstrate improved EBITDA. On a trailing four-quarter basis, the Ridge Industrial Patching business is already delivering profits well within their fiscal 2022 commitment range. I'd ask that you please turn to slide five. I'd like to spend a moment to discuss what we are currently seeing in the market. The weak volumes in Q3 were anticipated and communicated during our second quarter call, but we believe the worst is behind us as our year-over-year steel drum volume comparisons improved throughout the quarter after bottoming in May. That said, the pace of improvement is somewhat slower than what we had anticipated at Q2. This slide highlights major end-market progression for our largest ripped substrates, which is steel drums. And broadly speaking, we continue to see positive demand for food, flavors, and fragrances during the quarter. There is improving demand for chemicals as the auto manufacturing is returning, but we continue to experience softness in industrial paints, coatings, and lubricants. I'd ask you to please turn to slide six. The flexible product segment third quarter sales fell roughly 5% versus the prior year quarter on a currency neutral basis due to soft demand, raw material price declines, and corresponding contractual pricing adjustments. Third quarter adjusted EBITDA was roughly flat for the prior year despite those lower sales thanks to strong cost control resulting in lower SG&A segment expense. I'd ask if you'd turn to slide seven. Paper packaging's third quarter sales fell by roughly $70 million versus the prior year quarter, primarily due to lower published container board and box board prices and the divestiture of our consumer packaging group. We took 10,000 tons of container board economic downtime early in Q3, but none in July or thus far in August. Paper packaging's third quarter adjusted EBITDA fell by roughly $39 million versus the prior year, largely due to product mix and a significant $37 million price cost squeeze. The team also demonstrated strong cost control management and offset some of the headwind through lower manufacturing and SG&A expense versus the prior year. If I could ask you to please turn to slide eight to give you some color on what we're seeing in the PPS markets. Volume in our core choice corrugated sheet feeder network improved by 4% versus the prior year quarter. Volumes have progressively strengthened since May due to improving demand and durables and a recovery in the auto supply chain and solid e-commerce growth. In our tube and core business, fiscal third quarter volumes were down 10% versus the prior year, but showed progressive improvement in the quarter and was down 4% in July. We continue to see some demand weaknesses most pronounced in non-container board paper mill segments and textile end market segments. Film and construction market demand continues to remain positive. I'd like to now turn the presentation over to our Chief Financial Officer, Larry Hilsheimer.