Greif, Inc.

Good day, and welcome to the GRIFE fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Matt Leahy. You may begin.

Thanks, and good morning, everyone. And first, let me apologize for the technical difficulties on our side. We were dialed in, and for some reason we lost audio, and we've been troubleshooting for the last several minutes. We truly appreciate your patience. Welcome to GRIF's fourth quarter fiscal 2023 earnings conference call. This is Matt Leahy, GRIF's vice president of corporate development and investor relations, and I'm joined by Ole Rosgaard, GRIF's president and chief executive officer, and Larry Hilsheimer, GRIF's chief financial officer. We will take questions at the end of today's call, and in accordance with regulation fair disclosure, please ask questions regarding issues you consider important because we're prohibited from discussing material non-public information with you on an individual basis. Please turn to slide two. As a reminder, during today's call, we'll make forward-looking statements involving plans, expectations, and beliefs related to future events, and 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 with that, I'd like to turn the presentation over to Ole on slide three.

Thanks, Matt, and good morning, everyone. And let me also apologize for the technical difficulties we had this morning. Looking back on fiscal year 2023, the second fiscal year on our Build to Last strategy, I'm humbled and in awe of the progress of our global growth team has made despite extraordinary macroeconomic headwinds. This year challenged us to execute with continued precision and excellence in a complex operating environment. I'm proud to say that in the face of ongoing demand challenges, the hard work from our teams resulted in the second best year in Greif's history on an adjusted EBITDA and adjusted free cash flow basis, surpassed only by our exceptional performance in 2022. Year over year, we improved both our EBITDA margins and our free cash flow conversion, even as primary product sales declined double digits across our businesses. A true testament to the commitment of our teams to operational excellence and our value over volume philosophy. Fiscal 2023 was a banner year for investing in the long-term health of Greif. We launched New organic growth projects in both PPS and GIP completed four acquisitions and announced the fifth in IPAC-Chem for an aggregate capital commitment of over $1 billion on M&A. We maintained our focus on returning capital to shareholders by increasing dividends per share by 7.5% and completing our $150 million share buyback program earlier in the year. And we did all this while maintaining a leverage rate ratio within our target range of two to two and a half times. At Greif, we often talk about managing the present while creating the future. We're doing both exceptionally. As we close out fiscal 2023, I'm proud of what we have accomplished and where we are going. But make no mistake, managing the present can be hard, especially when business is under pressure. And our business has been under pressure for some time, and we are continuing to face near-term headwinds, which Larry will cover with our low-end guidance and modeling assumptions for fiscal 2024. But as proven by 2023, we are built to handle exonerous impacts to our business by controlling what we can control. Our execution will remain strong and we will weather this storm and I have full confidence in our mission and our global drive team. After Larry provides a review of the fourth quarter, I will share with you a broader update about our growth strategy for future value creation on the build to last.

Larry, please turn to slide four. Thanks, Olin. In our fourth quarter, we generated nearly $200 million of adjusted EBITDA, $130 million of adjusted free cash flow, and $1.56 of adjusted earnings per share despite the complex operating environment. Our team's execution from the plant floor through corporate functions over the past year was truly extraordinary, and I would like to thank our colleagues for their hard work and commitment to delivering exceptional results in these difficult times. Later in the presentation, Ole will expand commentary around our recent M&A, but for now, I will remind our investors that the CoalPak and Reliance acquisitions both occurred during the fourth quarter. Therefore, Q4 results did not include the full contribution of these businesses, which, along with IPAC Chem in early 2024, will provide a benefit to our performance in the coming year. Let's turn to segment results starting on slide five. The fourth quarter in GIP saw more of the same challenges we have now faced for five straight quarters, an extremely weak industrial sector with demand at staggeringly low levels. Compared to Q4 of fiscal 22, global volumes in steel drums were off 8%, large plastics off 14%, and fiber drums down 19%. Only IVCs and small plastic volumes increased year over year, On a two-year stack basis, nearly all substrates globally in GIP are tracking down mid-teens. A reminder for investors related to this historic demand period in GIP, more than 85% of basic and specialty chemicals globally are consumed by the industrial sector. Global PMIs have been trending negatively since December of 2021 and tracking below 50 since September of 2022. Existing home sales in the U.S. are tracking at the lowest level since 2010. This is truly an unprecedented time with no comparable period, including the Great Recession, where we saw a steep drop in drum volumes that quickly recovered. While this is sobering data, we take pride in the results we have delivered. Those results have enabled us to continue to invest strategically in our Build to Last initiatives, focused on the future while managing costs and operations effectively. We are excited about the results of our GIP segment and what they will deliver when the industrial economy recovers. Please turn to slide six. Paper packaging's fourth quarter sales declined $84 million year over year, primarily due to lower volumes and growing price-cost pressures. We took approximately 62,000 tons of total downtime across our mill system in the fourth quarter compared to 35,000 in Q4 of last year. Container board fared better than URB with less economic downtime and better volumes in converting. But overall, the continued low volume environment combined with rising OCC costs during the quarter led to both EBITDA dollar and margin compression compared to the prior year. Our PPS team continues to control the controllables well, and did an extraordinary job on managing working capital to close out the year. Please turn to slide seven, where I'll discuss 2024 low-end guidance assumptions. As Ole mentioned in his opening remarks, and I've covered as well, we are sitting at a truly historic moment in time for Greif's businesses, with prolonged volume headwinds across GIP and markets we serve, and now a material price-cost headwind in PPS with rising OCC and lower RISC published prices. It's a challenging time to give four-year guidance because we do believe the demand environment will turn positively. We just don't know when. Given these multiple near-term headwinds and low visibility to a sustained recovery, we made the decision to present a low-end guidance to start fiscal 2024 of $585 million in EBITDA and $200 million in free cash flow. This guidance methodology is simple. It presents a continuation of demand, price, and cost trends for both businesses through the duration of fiscal 24 at current levels. In addition, this guidance does not include our recently announced price increases in Container Board, which we don't include in guidance until recognized by RISD. And it also excludes any impact from IPEC-CAM, which we expect will close sometime in calendar Q1. Our hope is that our actual fiscal 24 results will end up significantly above this low-end guidance. However, we've always stated that we do not guide based on hope. Our downside view is driven by current price cost in PPS and no volume inflections in 2024. We have seen some green shoots, but no identified compelling trends yet to give us conviction that a recovery is emerging. Note that if volumes recovered 50% of the gap to 2022 volumes, our EBITDA would increase approximately 85 million, and a 100% recovery would add approximately 170 million. Our business is designed to weather short-term cycles. We continue to delight our customers. We are firing on all cylinders and controlling what we can control. We're proud of our teams. And we know that we will continue to execute through this difficult time and come out on the other side a stronger, better business. The investments we are making under Build to Last are laying the foundation for breakout performance in the years to come. And I'd like to hand it back to Ole to cover more about our long-term strategy and growth plans.

Ole? Thanks, Larry. If you could please turn to slide eight. Build to Last is about producing quality results on an annual basis. But it's also more than that. It's about leading through our values. Our purpose, vision, and missions all reflect our goal to better serve our colleagues and customers throughout the world. And I would like to briefly highlight a few achievements in 2023 on each of our missions and how they set us up for future success. The Customer Satisfaction Index has long been one of our most reliable measures of success in delivering legendary customer service, which directly aligns to our vision of being the best performing customer service company in the world. Our aspirational target is 95%, and we are proud that in 2023, our average score was 94%. We also recently completed our 13th Net Promoter Score Survey of nearly 5,000 customers, receiving a result of 68, a new growth record and a leading score within the manufacturing industry. Consider the macroeconomic context of these results. Our customers clearly know we are devoted to serving them with excellence, particularly when times are tough, and we are being rewarded for it. Under Creating Thriving Communities, We completed our sixth annual Gallup survey this year with over 90% colleague participation, and the results again showed an improvement in engagement, placing us firmly within the top quartile of all manufacturing companies surveyed across the world. We also show our industry leadership through our commitment to sustainability under Protect Our Future. And this year, we published our 14th annual sustainability report with our new 2030 targets around climate, waste, circularity, supply chain, and DE&I. This mission is a foundational element of our long-term success, and I highly encourage our investors to visit the sustainability page of our website to read more about our initiatives. please turn to slide nine. Now that we have two years under the Build to Last strategy, we want to provide a broader update on some ongoing internal strategic initiatives that we believe are the pillars of driving long-term value creation for all stakeholders. First, we shared with you the benefits throughout 2023 from centralizing our global operations, supply chain, and IT functions under the OneDrive banner. We are building out these functions to serve a larger footprint of businesses in the future with the expectation of a growing scale advantage. Second, in alignment with our OneDrive mentality, we are executing an organizational shift from geography-based operations to substrate-based operations. This structure was piloted in 2023 in GIP North America and resulted in plant and regional level operating efficiencies, improved best practice sharing, and better decision making around capital investments and growth. We will use this fiscal year to prepare and plan to update you with a more complete picture as we get closer to implementation targeted for the beginning of full year 2025. Additionally, we plan to change our fiscal year end to September 30th, beginning in fiscal year 2026. This change has been requested by our investors and analysts for years, and we believe it will better align us to the standard industry calendar and increase our exposure to the investment community. Importantly, All these initiatives have been part of our Build to Last strategy from inception, and our expectations is they will make us better at driving results, improving transparency, and increase equity value creation. Enacting these changes takes time and effort, which will result in some short-term SG&A cost inflation in the coming fiscal year. But we firmly believe that these changes will lead to a better and more successful Greif in the future. In addition to the internal work being done, I'm also excited about our recent growth through targeted M&A. Please turn to slide 10. At our investor day in 2022, we outlined Greif's acquisition priorities in three areas. Unique downstream converting in paper, sustainability-aligned reconditioning services, and pursuing a roll-up acquisition strategy in the resin-based jerry cans and small plastics markets. These acquisition verticals share the same very attractive attributes. They are aligned to growing end markets, hold strong circularity characteristics, and enjoy an elevated margin profile. With a growing addressable jerrycan market of 3.1 billion, we see a great opportunity to be the global leader in this high-performance packaging sector, as we have the technical capability, product offering, and scale to service customers in all our markets. We accelerated our growth in this market over the past year with the acquisitions of Li Container, Reliance Products, and look to bolster our position following the close of the IPAC Chem acquisition, which we anticipate by the end of our fiscal second quarter. In summary, we will enter 2024 positioned to become one of the largest, most technically sophisticated small plastic product offerings in the world. Please turn to slide 11. Another objective of our acquisition path is to build greater balance in our portfolio from an end market and substrate perspective. The transactions announced in fiscal 2023 give Greif greater exposure to secular growth trends in agricultural and specialty chemicals, as well as exposure to newer markets for us in pharmaceuticals and medical diagnostics. The jerrycan and small plastic product line is extraordinarily versatile, and our teams are excited about the follow-on organic growth potential as we serve and grow with customers in these markets. Additionally, you will notice that nearly 75% of the acquisitions completed or announced in fiscal 2023 were resin-based, improving our overall sustainability profile as most of these products can be recycled and reused and require less energy and raw materials to manufacture. Please turn to slide 12. A final note on acquisitions. In addition to the improved in-market mix and sustainability benefits, we are also buying great businesses. These companies are the companies we are acquiring, and those in our M&A pipeline are materially margin-accretive and have better free cash flow characteristics than our legacy drive business. Over time, this path, along with the work our teams are doing to continuously improve our base business every day, will drive our performance towards our long-term goals of 18% plus EBITDA margins and well over 50% free cash conversion. We will continue to utilize our strong balance sheet and remain disciplined on acquisitions going forward while actively lowering our leverage through a combination of debt pay down and EBITDA growth. Our capital allocation strategy will remain balanced, ensuring the financial strength and growth of the business for years to come. In closing on slide 14, let me remind you of the reasons I'm so excited for the long-term growth prospects at Greif and why we remain well-positioned to weather this historically soft demand and pricing environments. I have full confidence in our ability to control what we can control and excel through successful execution of our build to last strategy. We have proven over the past two years that we have the team and strategy to perform in complex operating environments. We have managed the business tightly while also investing for the future. We have accelerated our growth through M&A and high-impact organic growth projects. And lastly, we are keeping a long-term lens regarding our operations and business strategy. The cumulative impact of our efforts will result in a more robust, efficient, growth-oriented and defensible business model, which we believe positions Greif for success and strong earnings growth as the cycle normalizes. We thank you for your interest in Greif. And operator, will you please open the line for questions?

Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Genshim Punjabi of Baird. Your line is open.

Hey, guys. Good morning.

Morning, Genshim.

Morning. Just making sure the audio is working. I guess first off on the Ibadan Bridge, Larry, $819 million generated fiscal year 23. Can you just give us more color in terms of the non-volume variances I'm just trying to reconcile down to your 595, which would be a pretty significant step down relative to the almost $200 million you generated in EBITDA and 4Q.

Yeah, sure thing. That's an obvious question, right? So if I walk through it, we have a year-over-year impact because of the strengthening dollar against our bucket of currencies of about $29 million. We also had throughout the year a series of sort of one-off, one-time items. For example, we had insurance recovery of about $6 million related to a fire where the costs were actually in 22. We had another fire recovery, same thing, before we had some legal recoveries. We had utility refunds that AMEA issued because of the high cost. It was some governmental initiatives. And then a tax recovery down in Brazil of about $6 million that was an operating type of tax. So all of those were, they flowed in throughout the year. They weren't like big lumps. But they totaled up to $29 million. So we don't anticipate those to reoccur. So between those two items, you have almost $60 million. We then have just a The paper pricing element in cost price squeeze in PPS is roughly $140 million year over year to where we are right now. Now, again, that does not take into account the price increase we just announced, which we will be implementing January 1st. And then GIP, a little bit of just index timing on our forecast on cost is about a $17 million drag year over year. And then we have some investments in, Ole mentioned us going to segment structure. We've got cost of that about $6 million that we believe will generate a lot of benefits for us from that concentrated focus on different segments going forward. We also are investing, as we've talked a lot about, our digitization efforts in IT. that we anticipate future strong benefits of. The gap will require us to expense it. We view it more as an investment. But it's that net of the benefits, so we believe we'll start to see some benefits this year, is about $8 million. That'll turn into, turn around to more benefit generation in 25, 26 and going forward. And then there's just about $5 million of other inflationary things, those kind of matters. So that should get you from the 819 to 585.

Okay, that's super helpful. And then the volume recovery, you know, the 100% of $170 million, you know, like the scale that you gave us, is that relative to two years ago? Is that just to make sure I have that right?

That's just relative to 22. So, yeah, I guess that'd be two years ago, 24-22. If we went back actually to what we look at sort of the last normalized year because of, you know, COVID, everything else going on, you go back to 19, the volume recovery would be even higher numbers. But, yeah, the 174 is relative to 22.

Okay. Got it. Perfect. Thank you. And then in terms of your comments on green shoots, you know, more color there, and then just lastly, On the CapEx guidance, is that reflective of the low-end assumption? And if so, is that something that would be scaled up if the year turns out to be better than you think?

Yeah, in the green shoots, it's mostly just what we started to see in our container board business. We've seen, I don't think we're ready to call it a trend yet or an inflection point, but certainly the last couple of months have been much better and our mill system is full at the moment and backlogs are good. So that's what we're talking about. We really haven't seen it any place else. And in, I'm sorry, what was the second part of that?

Oh, CapEx guidance, thank you.

CapEx guidance, yes, we've said, hey, look, guys, if we actually end up with a year that's at this low end, we're gonna manage our CapEx spend to just, you know, not have anything to do with our strength because obviously we could do more, but more just to manage it appropriately for investors. If we do see an inflection point, we would probably up our CapEx, but it wouldn't be proportional on that same ratio. Obviously, there's a core amount of CapEx that we have to do every year to make sure we maintain critical maintenance. Obviously, that's what impacts our you know, cash generation ratio.

Okay, terrific. Thank you so much, and happy holidays to all of you.

Thank you, guys. Thank you.

And one moment for our next question.

Our next question will come from Kashin Keeler of Bank of America.

Your line's open.

Yeah, hi. Good morning. This is Kashin. I'm from Georgia. We had a conflict this morning, business-related, So just on container board, I know you're not including it in guidance here, but I guess can you generally just speak to your rationale behind the price increases? And then you also talked to some improvement just on container board. It's trending better relative to URB. So just on the demand front there, can you talk at all just how that may be trended throughout the quarter and what you're hearing from your customers on that front as well?

Yeah, I mean, we are raising the prices because we, like everybody else, have faced inflationary cost pressures. Obviously, OCC is up. We deliver great services to our customers, and demand's been up. So we've gone out with that, and it will be effective January 1st. That's essentially it.

Okay, and then just on demand and container board?

Yeah, you've got that trend. Yeah. Are you talking about fourth quarter?

Yeah.

Yeah, so the mills, let's see here. Yeah, mills are half a percent, and in sheets and core choice, 2.8%. In box part, we were down 6.9%, and tubing core down 7.6%. Yeah.

So sequentially a significant turnaround because we've been running negative. So.

Okay. Understood. Um, appreciate that color. Um, and then, you know, I know you've, you've done a number of acquisitions or announced a number of this year. Um, and only you talk to, you know, MNA being part of the story kind of longer term here. Um, and on past call, you've talked to stuff maybe in the kind of immediate term pipeline. So at this point, you know, is there anything that, you know, you could potentially execute on in the coming year? Or how can we kind of think about that?

I mean, we haven't closed on IPAC yet. That will close here in the first calendar quarter. They need to IPAC him. You know, they operate in nine countries. And given the volume situation we have at the moment and our guidance, we're not sort of going out aggressively to buy, but we have the means to do something and we remain opportunistic over the next six months in terms of what's available and we're not gonna miss a good opportunity to do a good deal.

Yeah, the thing I would also just share is even if we had hit this low end, if that's all that happens this year, we still are well within any of our debt covenants and we'll, you know, be in great shape going forward. I mean, even if we got to just like recovering 50% of our volume this year, you know, we would, with IPAC, we'd still be right around three on a leverage ratio. And, you know, obviously as we recover, you know, we think there's significant upside. And to put a little point on that, you know, so we're out at 585. If we recovered paper and pricing margins to the average of the last five years, we'd pick up 101 million. If we recapture the volume, we already said that's 174 million. If we add IPAC Chem in there, say roughly 60, we're up to 920 million. If those things happen, we're already back down in our debt ratio target.

Got it. Understood.

And then just one last one, and I'll turn it over. Just with the change in terms of your fiscal year, you know, is it possible at all to quantify what the inflation might be or what costs you might incur related to that?

Yeah, the fiscal year change thing is relatively minor. It's a couple million dollars kind of thing for that element of it.

Got it.

Thanks. I'll turn it over.

And one moment for our next question.

Our next question will come from Adid Threstra of Stifel. Your line is open.

Good morning. Thanks for taking my questions. If you could just talk about what you're watching as indications of change in the business fundamentals and what needs to happen to support a positive turn is coming and you would feel more comfortable providing a guidance range.

Well, what needs to happen is, I mean, obviously there's a lot of factors involved, but if we see a interest rate reduction, we will probably see some improvements in the housing sector. And the housing sector, when people move houses, drives a lot of the business we see from our paint end segments, but also on container boards. That would be a huge positive. Probably the biggest, I would say. And then you have all the issues on geopolitical conflicts we have around the world. That has an effect as well.

Those would probably be the biggest. Yeah, I would just ask you to reflect on last year. We came out after our first quarter call with low-end guidance. By the second quarter, we gave a range. When we see something, we will react and get everybody the information that you'd rather see. But I'll also tell you, you know, a year ago on this call, at this time, our paper customers were telling us they thought business was going to bounce back in January. Our chemical companies were saying first or second quarter calendar last year. And by the time we got to the first quarter, everybody was like, oh, my, what's going on? And it started extending further and further out. So, you know, And I'll also reflect on the Great Recession. When we did see an inflection point, it was rapid. The demand kicked off aggressively. So hopefully we start to see a recovery that ties to some of the things that Ole just mentioned, and we are well-positioned to respond.

And Audit, I'll just add to that as Matt. So when you just look globally at industrial production, You know, ISM PMIs were peaking in May of 2021 and trending down almost since then. They've actually been trending negatively globally since September of 2022 in a contractionary period for over 12 months. You know, our global industrial business is levered to some of those trends, you know, if not directly. So I think if you look for a turn or recovery in PMI or ISM, that could also indicate we're probably seeing a demand recovery as well.

All right, thanks a lot. And just about the cadence of price and volume by quarter, maybe within each segment, it seems like within both, they have the toughest comp and one can sequentially improve and maybe it's flat year over year, sort of kind of what you built into your guidance. Am I thinking about this correctly?

Yeah, we didn't really look at the price-cost. I'm not ready to answer that on a quarter-by-quarter basis. No, we didn't make that answer. I didn't go back and look at where we were on each, but I guess just off the top, things trended throughout the year, obviously with OCC going up in the paper business throughout the year, and we got price cuts more back half of the year. That would say that you'd be better at the end of the year than at the beginning, but then we've got our price increase announced that we are implementing on January 1st, so that would obviously help more in the second quarter than the first.

And the first quarter tends to be the lowest in our business cycle as well.

All right, just one last one from me. So the deals that you've already closed, what's the rollover contribution to sales even on free cash flow, assumed in the guidance from that?

I can give you EBITDA is roughly $20 million in terms of the contribution to 2024. You know, generally these businesses collectively are running at a 60% free cash flow conversion. We haven't guided to that, but, you know, I'm not sure what their cap next needs are next year, but that's directionally accurate from an EBITDA perspective.

All right. Thank you for taking my question.

And one moment for our next question. Our next question will come from Roger Spitz of Bank of America. Your line is open.

Thank you. Good morning. First, what was IBC's fiscal Q4 volume increase on a percentage basis? And would you have for steel, plastic, fiber, and IBCs the full fiscal year 2024 volume changes on a percentage basis?

Hi, Roger. I can give you the first one in Q4 was a contraction of 4.3%. on IBCs.

Oh, OK. I thought you said up. OK, my fault. And you don't have the full year to hand is what you're saying for all four?

Full year is a contraction of 9.5%. OK.

Why does small plastic packaging businesses have higher margins than your legacy large packaging? you know, isn't small plastic packaging more fragmented and large packaging really only has maybe three producers with maybe 80% global market share? So, you know, a less fragmented business.

Yeah, number one, it is a less consolidated business across the globe. There's a lot of players. It's also a more sophisticated product to produce. On small plastic and the air can, you could kind of split it up in three buckets. You have a commodity market, then you have the middle, you know, a little bit commodity, a little bit premium, and then you have the premium market, which is really where we operate, where you have things like barrier technologies, you have special designs, and that sort of thing.

One thing to supplement Ole's answer, because Ole was answering on IBCs on a same store basis without the impact of Centurion acquisition. So on Centurion, with Centurion in, our volumes on IBCs were up 2%. And for 24, we would expect them to be up 12 year over year.

Got it. Thank you very much for your time.

Thank you. You're welcome.

One moment for our next question. And as a reminder, if you would like to ask a question, please press star 11 and wait for your name to be announced. Our next question comes from Gabe Hodge of Wells Fargo. Your line's open.

Good morning, guys. Hey, Gabe. I'm sure you've been called worse.

I wanted to ask something a little bit that's been in the publications here recently. about imported uncoated recycle boards. And just historically speaking, not been really a paper grade that's been imported. And I think for a variety of reasons, one of which is there are probably other paper grades that are higher price points that could be justified to be imported. But I'm just curious if you all have seen this in the past or if, in fact, you can confirm that it's something that you've seen in the marketplace. I'll stop there.

Yeah, Gabe, it's something that there's always been some. It is really minor in the overall market. We've seen a little bit more, but it's not substantial.

Okay. And I guess to revisit the bridge question, I apologize in advance, but you, Larry, laid out, I think, a lot of the negative factors to get to the 585, but weren't necessarily giving yourselves credit for any of the positives that would be included, even, you know, taking into account sort of what you're assuming, um, and the guidance and or what you're experiencing today, at least on the container board side. And what I mean by that is it sounds like the system is full at this point, which would imply no economic downtime in the container board mill system. So Matt throughout plus 20 or acquisitions, um, I don't know if I have the exact number correct. I want to say there was about 120,000 tons of economic downtime in your seaboard system, assuming some of that comes back. Those will all be additive sort of just based on what your assumptions are today. Is that the right way to think about it?

Partially. I mean, we have built in some relatively minor growth from container boards. in the year, but it's like $60 million. Now, we're also closing down our Santa Clara mill, so that will take a little bit out. But, yeah, you're right. We're being relatively conservative in that low-end guidance. I mean, it's low-end because it's low-end.

Okay. Santa Clara, remind me, is that CRB?

Santa Clara. Yes, yes, yes. Okay. No, no, no. Container board. No. Oh, CIP. No, it's container board.

Is there tonnage on that?

Oh, boy, we have that somewhere. Let me check. We'll get that, Gabe.

Okay. All right. That'll be it. Thank you.

And I'm sure no further questions. I would now like to hand the call back to Matt Leahy for closing remarks.

All right. Well, thank you everyone again for your patience today and our challenges at the beginning of the call. We hope you all have a wonderful holiday.

This concludes today's conference. Thank you for participating. You may now disconnect. Thank you. Thank you. Thank you. Good day and welcome to the GRIFE fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will be given at that time. As a reminder this call may be recorded. I would like to turn the call over to Matt Leahy. You may begin.

Thanks and good morning everyone. And first let me apologize for the technical difficulties on our side. We were dialed in and for some reason we lost audio and we've been troubleshooting for the last several minutes. We truly appreciate your patience. Welcome to GRIF's fourth quarter fiscal 2023 earnings conference call. This is Matt Leahy, GRIF's vice president of corporate development and investor relations, and I'm joined by Ole Rosgaard, GRIF's president and chief executive officer, and Larry Hilsheimer, GRIF's chief financial officer. We will take questions at the end of today's call, and in accordance with regulation fair disclosure, please ask questions regarding issues you consider important because we're prohibited from discussing material nonpublic information with you on an individual basis. Please turn to slide two. As a reminder, during today's call, we'll make forward-looking statements involving plans, expectations, and beliefs related to future events, and 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 with that, I'd like to turn the presentation over to Ole on slide three.

Thanks, Matt, and good morning, everyone. And let me also apologize for the technical difficulties we had this morning. Looking back on fiscal year 2023, the second fiscal year on our Build to Last strategy, I'm humbled and in awe of the progress of our global gripe team has made despite extraordinary macroeconomic headwinds. This year challenged us to execute with continued precision and excellence in a complex operating environment. I'm proud to say that in the face of ongoing demand challenges, the hard work from our teams resulted in the second best year in Gripe's history on an adjusted EBITDA and adjusted free cash flow basis, surpassed only by our exceptional performance in 2022. Year over year, we improved both our EBITDA margins and our free cash flow conversion, even as primary product sales declined double digits across our businesses. A true testament to the commitment of our teams to operational excellence and our value over volume philosophy. Fiscal 2023 was a banner year for investing in the long-term health of Greif. We launched New organic growth projects in both PPS and GIP completed four acquisitions and announced the fifth in IPAC-Chem for an aggregate capital commitment of over $1 billion on M&A. We maintained our focus on returning capital to shareholders by increasing dividends per share by 7.5% and completing our $150 million share buyback program earlier in the year. And we did all this while maintaining a leverage rate ratio within our target range of two to two and a half times. At Greif, we often talk about managing the present while creating the future. We're doing both exceptionally. As we close out fiscal 2023, I'm proud of what we have accomplished and where we are going. But make no mistake, managing the present can be hard especially when business is under pressure. And our business has been under pressure for some time, and we are continuing to face near-term headwinds, which Larry will cover with our low-end guidance and modeling assumptions for fiscal 2024. But as proven by 2023, we are built to handle exonerous impacts to our business by controlling what we can control. Our execution will remain strong and we will weather this storm and I have full confidence in our mission and our global drive team. After Larry provides a review of the fourth quarter, I will share with you a broader update about our growth strategy for future value creation on the build to last.

Larry, please turn to slide four. Thanks, Olin. In our fourth quarter, we generated nearly $200 million of adjusted EBITDA, $130 million of adjusted free cash flow, and $1.56 of adjusted earnings per share despite the complex operating environment. Our team's execution from the plant floor through corporate functions over the past year was truly extraordinary, and I would like to thank our colleagues for their hard work and commitment to delivering exceptional results in these difficult times. Later in the presentation, Ole will expand commentary around our recent M&A, but for now, I will remind our investors that the CoalPak and Reliance acquisitions both occurred during the fourth quarter. Therefore, Q4 results did not include the full contribution of these businesses, which, along with IPAC Chem in early 2024, will provide a benefit to our performance in the coming year. Let's turn to segment results starting on slide five. The fourth quarter in GIP saw more of the same challenges we have now faced for five straight quarters, an extremely weak industrial sector with demand at staggeringly low levels. Compared to Q4 of fiscal 22, global volumes in steel drums were off 8%, large plastics off 14%, and fiber drums down 19%. Only IVCs and small plastic volumes increased year over year, On a two-year stack basis, nearly all substrates globally in GIP are tracking down mid-teens. A reminder for investors related to this historic demand period in GIP, more than 85 percent of basic and specialty chemicals globally are consumed by the industrial sector. Global PMIs have been trending negatively since December of 2021 and tracking below 50 since September of 2022. Existing home sales in the U.S. are tracking at the lowest level since 2010. This is truly an unprecedented time with no comparable period, including the Great Recession where we saw a steep drop in drum volumes that quickly recovered. While this is sobering data, we take pride in the results we have delivered. Those results have enabled us to continue to invest strategically in our Build to Last initiatives focused on the future while managing costs and operations effectively. We are excited about the results of our GIP segment and what they will deliver when the industrial economy recovers. Please turn to slide six. Paper packaging's fourth quarter sales declined $84 million year over year, primarily due to lower volumes and growing price-cost pressures. We took approximately 62,000 tons of total downtime across our mill system in the fourth quarter compared to 35,000 in Q4 of last year. Container board fared better than URB with less economic downtime and better volumes in converting. But overall, the continued low volume environment combined with rising OCC costs during the quarter led to both EBITDA dollar and margin compression compared to the prior year. Our PPS team continues to control the controllables well, and did an extraordinary job on managing working capital to close out the year. Please turn to slide seven, where I'll discuss 2024 low-end guidance assumptions. As Ole mentioned in his opening remarks, and I've covered as well, we are sitting at a truly historic moment in time for Greif's businesses, with prolonged volume headwinds across GIP and markets we serve, and now a material price-cost headwind in PPS with rising OCC and lower RISC published prices. It's a challenging time to give full-year guidance because we do believe the demand environment will turn positively. We just don't know when. Given those, these multiple near-term headwinds and low visibility to a sustained recovery, we made the decision to present a low-end guidance to start fiscal 2024 of $585 million in EBITDA and $200 million in free cash flow. This guidance methodology is simple. It presents a continuation of demand, price, and cost trends for both businesses through the duration of fiscal 24 at current levels. In addition, this guidance does not include our recently announced price increases in Container Board, which we don't include in guidance until recognized by RISD. And it also excludes any impact from IPEC-CAM, which we expect will close sometime in calendar Q1. Our hope is that our actual fiscal 24 results will end up significantly above this low-end guidance. However, we've always stated that we do not guide based on hope. Our downside view is driven by current price cost in PPS and no volume inflections in 2024. We have seen some green shoots, but no identified compelling trends yet to give us conviction that a recovery is emerging. Note that if volumes recovered 50% of the gap to 2022 volumes, our EBITDA would increase approximately 85 million. And a 100% recovery would add approximately 170 million. Our business is designed to weather short-term cycles. We continue to delight our customers. We are firing on all cylinders and controlling what we can control. We're proud of our teams. and we know that we will continue to execute through this difficult time and come out on the other side a stronger, better business. The investments we are making under Build to Last are laying the foundation for breakout performance in the years to come, and I'd like to hand it back to Ole to cover more about our long-term strategy and growth plans. Ole?

Thanks, Larry. If you could please turn to slide eight. Build to Last is about producing quality results on an annual basis. But it's also more than that. It's about leading through our values. Our purpose, vision, and missions all reflect our goal to better serve our colleagues and customers throughout the world. And I would like to briefly highlight a few achievements in 2023 on each of our missions and how they set us up for future success. The Customer Satisfaction Index has long been one of our most reliable measures of success in delivering legendary customer service, which directly aligns to our vision of being the best performing customer service company in the world. Our aspirational target is 95%, and we are proud that in 2023, our average score was 94%. We also recently completed our 13th Net Promoter Score Survey of nearly 5,000 customers, receiving a result of 68, a new growth record and a leading score within the manufacturing industry. Consider the macroeconomic context of these results. Our customers clearly know we are devoted to serving them with excellence, particularly when times are tough and we are being rewarded for it. Under Creating Thriving Communities, We completed our sixth annual Gallup survey this year with over 90% colleague participation, and the results again showed an improvement in engagement, placing us firmly within the top quartile of all manufacturing companies surveyed across the world. We also show our industry leadership through our commitment to sustainability under Protect Our Future. And this year, we published our 14th annual sustainability report with our new 2030 targets around climate, waste, circularity, supply chain, and DE&I. This mission is a foundational element of our long-term success, and I highly encourage our investors to visit the sustainability page of our website to read more about our initiatives. please turn to slide nine. Now that we have two years under the Build to Last strategy, we want to provide a broader update on some ongoing internal strategic initiatives that we believe are the pillars of driving long-term value creation for all stakeholders. First, we shared with you the benefits throughout 2023 from centralizing our global operations, supply chain, and IT functions under the OneDrive banner. We are building out these functions to serve a larger footprint of businesses in the future with the expectation of a growing scale advantage. Second, in alignment with our OneDrive mentality, we are executing an organizational shift from geography-based operations to substrate-based operations. This structure was piloted in 2023 in GIP North America and resulted in plant and regional level operating efficiencies, improved best practice sharing, and better decision making around capital investments and growth. We will use this fiscal year to prepare and plan to update you with a more complete picture as we get closer to implementation targeted for the beginning of full year 2025. Additionally, we plan to change our fiscal year end to September 30th, beginning in fiscal year 2026. This change has been requested by our investors and analysts for years, and we believe it will better align us to the standard industry calendar and increase our exposure to the investment community. Importantly, All these initiatives have been part of our Build to Last strategy from inception, and our expectation is they will make us better at driving results, improving transparency, and increase equity value creation. Enacting these changes takes time and effort, which will result in some short-term SG&A cost inflation in the coming fiscal year, but we firmly believe that these changes will lead to a better and more successful Greif in the future. In addition to the internal work being done, I'm also excited about our recent growth through targeted M&A. Please turn to slide 10. At our investor day in 2022, we outlined Greif's acquisition priorities in three areas. Unique downstream converting in paper, sustainability-aligned reconditioning services, and pursuing a roll-up acquisition strategy in the resin-based jerry cans and small plastics markets. These acquisition verticals share the same very attractive attributes. They are aligned to growing end markets, hold strong circularity characteristics, and enjoy an elevated margin profile. With a growing addressable jerrycan market of 3.1 billion, we see a great opportunity to be the global leader in this high-performance packaging sector, as we have the technical capability, product offering, and scale to service customers in all our markets. We accelerated our growth in this market over the past year with the acquisitions of Li Container, Reliance Products, and look to bolster our position following the close of the IPAC Chem acquisition, which we anticipate by the end of our fiscal second quarter. In summary, we will enter 2024 positions to become one of the largest, most technically sophisticated small plastic product offerings in the world. Please turn to slide 11. Another objective of our acquisition path is to build greater balance in our portfolio from an end market and substrate perspective. The transactions announced in fiscal 2023 give Greif greater exposure to secular growth trends in agricultural and specialty chemicals, as well as exposure to newer markets for us in pharmaceuticals and medical diagnostics. The jerrycan and small plastic product line is extraordinarily versatile, and our teams are excited about the follow-on organic growth potential as we serve and grow with customers in these markets. Additionally, you will notice that nearly 75% of the acquisitions completed or announced in fiscal 2023 were resin-based, improving our overall sustainability profile as most of these products can be recycled and reused and require less energy and raw materials to manufacture. Please turn to slide 12. A final note on acquisitions. In addition to the improved in-market mix and sustainability benefits, we are also buying great businesses. These companies are the companies we are acquiring, and those in our M&A pipeline are materially margin-accretive and have better free cash flow characteristics than our legacy drive business. Over time, this path, along with the work our teams are doing to continuously improve our base business every day, will drive our performance towards our long-term goals of 18% plus EBITDA margins and well over 50% free cash conversion. We will continue to utilize our strong balance sheets and remain disciplined on acquisitions going forward while actively lowering our leverage through a combination of debt pay down and EBITDA growth. Our capital allocation strategy will remain balanced, ensuring the financial strength and growth of the business for years to come. In closing on slide 14, let me remind you of the reasons I'm so excited for the long-term growth prospects at Greif and why we remain well-positioned to weather this historically soft demand and pricing environments. I have full confidence in our ability to control what we can control and excel through successful execution of our build to last strategy. We have proven over the past two years that we have the team and strategy to perform in complex operating environments. We have managed the business tightly while also investing for the future. We have accelerated our growth through M&A and high-impact organic growth projects. And lastly, we are keeping a long-term lens regarding our operations and business strategy. The cumulative impact of our efforts will result in a more robust, efficient, growth-orientated and defensible business model, which we believe positions Greif for success and strong earnings growth as the cycle normalizes. We thank you for your interest in Greif. And operator, will you please open the line for questions?

Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Genshim Punjabi of Baird. Your line is open.

Hey, guys. Good morning.

Morning, Genshim.

Morning. Just making sure the audio is working. I guess first off on the Ibadan Bridge, Larry, $819 million generated fiscal year 23. Can you just give us more color in terms of the non-volume variances I'm just trying to reconcile down to your 595, which would be a pretty significant step down relative to the almost $200 million you generated in EBITDA and 4Q.

Yeah, sure thing. That's an obvious question, right? So if I walk through it, we have a year-over-year impact because of the strengthening dollar against our bucket of currencies of about $29 million. We also had throughout the year a series of sort of one-off, one-time items. For example, we had insurance recovery of about $6 million related to a fire where the costs were actually in 22. We had another fire recovery, same thing, before we had some legal recoveries. We had utility refunds that AMEA issued because of the high cost. It was some governmental initiatives. And then a tax recovery down in Brazil of about $6 million that was an operating type of tax. So all of those were, they flowed in throughout the year. They weren't like big lumps. But they totaled up to $29 million. So we don't anticipate those to reoccur. So between those two items, you have almost $60 million. We then have just a The paper pricing element in cost price squeeze in PPS is roughly $140 million year over year to where we are right now. Now, again, that does not take into account the price increase we just announced, which we will be implementing January 1st. And then GIP, a little bit of just index timing on our forecast on cost is about a $17 million drag year over year. And then we have some investments in, Ole mentioned us going to segment structure. We've got cost of that about $6 million that we believe will generate a lot of benefits for us from that concentrated focus on different segments going forward. We also are investing, as we've talked a lot about, our digitization efforts in IT. that we anticipate future strong benefits of. The gap rules require us to expense it. We view it more as an investment. But it's that net of the benefits, so we believe we'll start to see some benefits this year, is about $8 million. That'll turn into, turn around to more benefit generation in 25, 26 and going forward. And then there's just like a $5 million of Southern or other inflationary things. Uh, those kinds of matters. So that should get you from the, uh, uh, eight 19 to five 85.

Okay. That's super helpful. And then the volume recovery, you know, the a hundred percent of 170 million, you know, I like the scale of what you gave us. Is that relative to two years ago? Is that just to make sure I have that right?

That's just relative to 22. So yeah. Yeah. I guess that'd be two years ago, 24, 22. If we went back actually to what we look at sort of the last normalized year because of, you know, COVID, everything else going on, you go back to 19, the volume recovery would be even higher numbers. But, yeah, the 174 is relative to 22.

Okay. Got it. Perfect. Thank you. And then in terms of your comments on green shoots, you know, more color there, and then just lastly, on the CapEx guidance, is that reflective of the low-end assumption? And if so, is that something that would be scaled up if the year turns out to be better than you think?

Yeah, in the green shoots, it's mostly just what we started to see in our container board business. We've seen, I don't think we're ready to call it a trend yet or an inflection point, but certainly the last couple of months have been much better and our mill system is full at the moment and backlogs are good. So that's what we're talking about. We really haven't seen it anyplace else. And in, I'm sorry, what was the second part of that?

Oh, CapEx guidance, thank you.

CapEx guidance, yes, we've said, hey, look, guys, if we actually end up with a year that's at this low end, we're going to manage our CapEx spend to just, you know, not have anything to do with our strength because obviously we could do more, but more just to manage it for appropriately for investors. So if we do see an inflection point, we would probably up our capex, but it wouldn't be proportional on that same ratio. You know, obviously there's a core amount of capex that we have to do every year to make sure we maintain critical maintenance. And obviously that's what impacts our you know, cash generation ratio.

Okay, terrific. Thank you so much, and happy holidays to all of you.

Thank you, John. Send to you.

And one moment for our next question.

Our next question will come from Cashin Keeler of Bank of America.

Your line's open.

Yeah, hi. Good morning. This is Cashin on for George. He had a conflict this morning, business-related. So just on container board, I know you're not including it in guidance here, but I guess can you generally just speak to your rationale behind the price increases? And then you also talked to some improvement just on container board. It's trending better relative to URB. So just on the demand front there, can you talk at all just how that may be trended throughout the quarter and what you're hearing from your customers on that front as well?

Yeah, I mean, we are raising the prices because, you know, we, like everybody else, have faced inflationary cost pressures. Obviously, OCC is up. You know, we deliver great services to our customers, and demand's been up. So we are, we've gone out with that, and it will be effective January 1st. That's essentially it.

Okay, and then just on demand in container board?

Yeah, you've got that trend. Yeah.

Are you talking about fourth quarter?

Yeah.

Yeah, so the mills, let's see here. Yeah, mills are half a percent, and in sheets and core choice, 2.8%. In box part, we were down 6.9%, and tubing core down 7.6%. Yeah.

So sequentially a significant turnaround because we've been running negative. So.

Okay. Understood. Um, appreciate that color. Um, and then, you know, I know you've, you've done a number of acquisitions or announced a number of this year. Um, and only you talk to, you know, MNA being part of the story kind of longer term here. Um, and on past call, you've talked to stuff maybe in the kind of immediate term pipeline. So at this point, you know, is there anything that, you know, you could potentially execute on in the coming year? Or how can we kind of think about that?

I mean, we haven't closed on IPAC yet. That will close here in the first calendar quarter. They need to IPAC him. You know, they operate in nine countries. And given the volume situation we have at the moment and our guidance, we're not sort of going out aggressively to buy, but we have the means to do something and we remain opportunistic over the next six months in terms of what's available and we're not going to miss a good opportunity to do a good deal.

Yeah, the thing I would also just share is even if we had hit this low end, if that's all that happens this year, we still are well within any of our debt covenants and we'll be in great shape going forward. I mean, even if we got to just like recovering 50% of our volume this year, you know, we would, with IPAC, we'd still be right around three on a leverage ratio. And, you know, obviously as we recover, you know, we think there's significant upside. And to put a little point on that, you know, so we're out at 585. If we recovered paper and pricing margins to the average, of the last five years, we'd pick up 101 million. If we recapture the volume, we already said that's 174 million. If we add IPAC Chem in there, say roughly 60, we're up to 920 million. If those things happen, we're already back down in our debt ratio. Target.

Got it. Understood.

And then just one last one, and I'll turn it over. Just with the change in terms of your fiscal year, you know, is it possible at all to quantify what the inflation might be or what costs you might incur related to that?

Yeah, the fiscal year change thing is relatively minor. It's a couple million dollars kind of thing for that element of it.

Got it.

Thanks. I'll turn it over.

And one moment for our next question.

Our next question will come from Adid Threstra of Stifel. Your line is open.

Good morning. Thanks for taking my questions. If you could just talk about what you're watching as indications of change in the business fundamentals and what needs to happen to support a positive turn is coming and you would feel more comfortable providing a guidance range.

Well, what needs to happen is, I mean, obviously there's a lot of factors involved, but if we see a interest rate reduction, we will probably see some improvements in the housing sector. And the housing sector, when people move houses, drives a lot of the business we see from our paint end segments, but also on container boards. That would be a huge positive. Probably the biggest, I would say. And then you have all the issues on geopolitical conflicts we have around the world. That has an effect as well.

Those would probably be the biggest. Yeah, I would just ask you to reflect on last year. We came out after our first quarter call with low-end guidance. By the second quarter, we gave a range. When we see something, we will react and get everybody the information that you'd rather see. But I'll also tell you, you know, a year ago on this call, at this time, our paper customers were telling us they thought business was going to bounce back in January. Our chemical companies were saying first or second quarter calendar last year. And by the time we got to the first quarter, everybody was like, oh, my, what's going on? And it started extending further and further out. So, you know, And I'll also reflect on the Great Recession. When we did see an inflection point, it was rapid. The demand kicked off aggressively. So hopefully we start to see a recovery that ties to some of the things that Ole just mentioned. And, you know, we are well positioned to respond.

And Audit, I'll just ask for that, add to that as Matt. You know, so when you just look globally at industrial production, You know, ISM PMIs were peaking in May of 2021 and trending down almost since then. They've actually been trending negatively globally since September of 2022 in a contractionary period for over 12 months. You know, our global industrial business is levered to some of those trends, you know, if not directly. So I think if you look for a turn or recovery in PMI or ISM, that could also indicate we're probably seeing a demand recovery as well.

Thanks a lot. And just about the cadence of price and volume by quarter, maybe within each segment, like seems like within both, they have the toughest comp and one can sequentially improves and maybe it's flat year over year, sort of kind of what you built into your guidance. Am I thinking about this correctly?

Yeah, we didn't really look at the price cost. I'm not ready to answer that on a quarter-by-quarter basis. No, we didn't take that in. Yeah, I didn't go back and look at where we were on each, but I guess just off the top, things trended throughout the year, obviously with OCC going up in the paper business throughout the year, and we got price cuts more back half of the year, so it's that would say that you'd be better at the end of the year than at the beginning. But then we've got our price increase announced that we are implementing on January 1st, so that would obviously help more in the second quarter than the first.

And the first quarter tends to be the lowest in our business cycle as well.

All right, just one last one from these. So, the deals that you've already closed, what's the rollover contribution to sales, EBITDA, and free cash flow, assumed in the guidance from that?

Audit, I can give you EBITDA is roughly $20 million in terms of the contribution to 2024. You know, generally, these businesses collectively are running at a 60% free cash flow conversion. We haven't guided to that, but, you know, I'm not sure what their cap tax needs are next year, but That's directionally accurate from an EBITDA perspective.

Thank you for taking my question.

One moment for our next question. Our next question will come from Roger Spitz of Bank of America. Your line is open.

Thank you. Good morning. First, what was IBC's fiscal Q4 volume increase on a percentage basis. And would you have, for steel, plastic, fiber, and IBCs, the full fiscal year 2024 volume changes on a percentage basis?

Hi, Roger. I can give you the first one in Q4 was a contraction of 4.3% on IBCs.

Oh, OK. I thought you said up. OK, my fault. And you don't have the full year to hand is what you're saying for all four?

Full year is a contraction of 9.5%. Okay.

Why does small plastic packaging businesses have higher margins than your legacy large packaging? You know, isn't small plastic packaging more fragmented and large packaging really only has maybe three producers with maybe 80% global market share? So, you know, a less fragmented business.

Yeah, number one, it is a less consolidated business across the globe. There's a lot of players. It's also a more sophisticated product to produce. You could, on small plastic and the air can, you could kind of split it up in three buckets. You have a commodity market, then you have the middle, you know, a little bit commodity, a little bit premium, and then you have the premium market. which is really where we operate, where you have things like barrier technologies, you have special designs and that sort of thing.

One thing to supplement Ole's answer, because Ole was answering on IBCs on a same store basis without the impact of Centurion acquisition. So on Centurion, with Centurion in, our volumes on IBCs were up 2%. And for 24, we would expect them to be up 12 year over year.

Got it. Thank you very much for your time.

Thank you. You're welcome.

One moment for our next question. And as a reminder, if you would like to ask a question, please press star 1-1 and wait for your name to be announced. Our next question comes from Gabe Hodge of Wells Fargo. Your line's open.

Good morning, guys. Hey, Gabe. I'm sure you've been called worse.

I wanted to ask something, a little bit that's been in the publications here recently, about imported uncoated recycle boards. And just historically speaking, not been really a paper grade that's been imported, and I think for a variety of reasons, one of which is... There are probably other paper grades that are higher price points that could be justified to be imported. But I'm just curious if you all have seen this in the past or if, in fact, you can confirm that it's something that you've seen in the marketplace. I'll stop there.

Yeah, Gabe. It's something that there's always been some. It is really minor in the overall market. We've seen a little bit more, but it's not substantial.

Okay. And I guess to revisit the bridge question, I apologize in advance, but you, Larry, laid out, I think, a lot of the negative factors to get to the 585, but weren't necessarily giving yourselves credit for any of the positives that would be included, even taking into account sort of what you're assuming in the guidance and or what you're experiencing today at least on the container board side. And what I mean by that is it sounds like the system is full at this point, which would imply no economic downtime in the container board mill system. So Matt threw out plus 20 for acquisitions. I don't know if I have the exact number correct. I want to say there was about 120,000 tons of economic downtime in your seaboard system, assuming some of that comes back. Those will all be additive sort of just based on what your assumptions are today. Is that the right way to think about it?

Partially. I mean, we have built in some relatively minor growth from container board in the year, but it's like $60 million. Now, we also are closing down our Santa Clara mill, so that will take a little bit out. But, yeah, you're right. We're being relatively conservative in that low-end guidance. I mean, it's low-end because it's low-end. Okay.

Santa Clara, remind me, is that CRB?

Santa Clara. Yes, yes, yes. Okay. No, no, no. Container board. No, no. Oh, CRB. No, it's container board. Mm-hmm.

tonnage on that let me check we'll get that good yeah okay all right that'll that'll be it thank you and I'm sure no further questions I would now like to hand the call back to Matt Leahy for closing remarks all right well thank you everyone again for your patience today and our challenges at the beginning of the call we hope you all have a wonderful holiday

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