Investor Presentation Investor Presentation October 2008 October - - PowerPoint PPT Presentation

Investor Presentation

October 2008

Investor Presentation

October 2008

Safe Harbor

Forward-Looking Statements This presentation contains certain forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “estimate,” “target,” and similar expressions, among others, identify forward-looking statements. All forward- looking statements are based on information currently available to management. Such forward-looking statements are subject to certain risks and uncertainties that could cause events and the Company’s actual results to differ materially from those expressed or implied. Please see the disclosure regarding forward-looking statements immediately preceding Part I of the Company’s Annual Report on Form 10- K for the fiscal year ended October 31, 2007. The Company assumes no obligation to update any forward-looking statements. Regulation G This presentation includes certain non-GAAP financial measures that exclude restructuring and other unusual charges and gains that are volatile from period to period. Management believes the non-GAAP meas res pro ide a better indication of operational performance and a more stable platform on hich measures provide a better indication of operational performance and a more stable platform on which to compare the historical performance of the Company than the most nearly equivalent GAAP data. All non-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation and on the Greif W b it t if

2

Web site at www.greif.com.

Investment Thesis

• Diversity (geographic / segment / asset class) – a competitive

advantage

• Financial flexibility and access to alternate sources of liquidity
• Rigorous enterprise risk management process

g p g p

• Contingency actions to protect profits / mitigate headwinds
• GBS

a catalyst for creating value and "controlling the

• GBS – a catalyst for creating value and controlling the

controllable"

• Balanced focus on defense and offense – execute growth

Balanced focus on defense and offense execute growth strategy of consolidation, emerging markets and adjacencies

Focus Discipline Passion p

Diversified Business Platform

(Dollars in millions) (Twelve months ended July 31, 2008)

Sales $3,681 Operating Profit * $398 Industrial Packaging Sales $2 970 Paper Packaging S l $691 Timber S l $20 Sales $2,970 Operating Profit * $304 Sales $691 Operating Profit * $73 Sales $20 Operating Profit * $20

4

* Before restructuring charges and timberland disposals, net. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.

Performance Trajectory

(D ll i illi ) $3,681 $3,322 $3 000 $3,500 $4,000 (Dollars in millions)

1997 2008(1) CAGR Net Sales $688 $3,681 17% Operating Profit(2) $35 $398 25% “Re earn the “Earn

$1,456 $1,633 $1,916 $2,209 $2,424 $2,628 $2,000 $2,500 $3,000

Operating Profit(2) $35 $398 25% “Re-earn the Right to Grow” and Grow”

$846 $853 $964 $688 $500 $1,000 $1,500 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(1)

March 30, 1998

Acquired Sonoco Products’ industrial packaging business f $223 illi

March 2, 2001

Acquired Van Leer Industrial Packaging from Huhtamaki for

March 4, 2003 Launched Transformation to Greif Business System September 22, 2006

Acquired Delta Petroleum for $98 million for $223 million

November 1, 1998

CorrChoice joint venture formed (Greif

• wnership 63.24%)

$555 million

September 30, 2003

Remaining interest in CorrChoice obtained

November 30, 2006

Acquired steel drum and closures businesses of Blagden Packaging for €205 million

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€205 million (1) Twelve months ended July 31, 2008. (2) Before restructuring charges and timberland disposals, net. See GAAP to Non -GAAP reconciliation included in the Appendix of this presentation.

Our Aspirations

Break-away momentum

• Organic growth: ≥ 5% (GDP + 2

points)

• Operating profit margin: ≥12 5%

Preferred productivity partner

• Compelling value proposition

based on what customers are willing to pay for Growth Operating profit margin: ≥12.5%

• SG&A/net sales: ≤ 7.5%
• RONA: ≥ 25%
• ROIC ≥ WACC: 5 points

willing to pay for

• Low-cost provider of high-quality

products with consistent and reliable delivery Value People Productivity Strong performance ethic T t Productivity imperative

• Real-cost productivity: ≥ 4% per year
• Transparent governance

structure

• Performance and consequence

management

• Talent and succession
• Capital productivity

› OWC/net sales: ≤ 7.5% › Asset turns: ≥ 2x › World-class strategic sourcing

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• Talent and succession

management g g capabilities

The Framework for Achieving Aspirations

The Greif Way

Greif Production System Greif

Working Capital Gl b l

Greif Operating System

Operational Excellence Commercial Excellence Global Supply Chain Strategy People Performance Management

Core Processes

Excellence

7

g

Processes

Industrial Packaging

Net sales Operating profit(2)

$2,654 $2,970

$2,425 $2,600 $2,775 $2,950

$229 $304

$200 $240 $280 $320

2002 2008(1) CAGR $1,268 $2,970 16% 2002 2008(1) CAGR $41 $304 42% $1,268 $1,384 $1,621 $1,804 $1,993

$1 ,375 $1 ,550 $1 ,725 $1 ,900 $2,075 $2,250

$41 $70 $112 $123 $167

$40 $80 $120 $160 $200

Served markets Competitive advantages

$ ,

$1 ,200 $ ,3 5 2002 2003 2004 2005 2006 2007 2008 $- 2002 2003 2004 2005 2006 2007 2008

(1) (1)

▲ Leading market position ▲ Global footprint ▲ Compelling value proposition

Chemicals, paints and pigments, petroleum, industrial coatings

▲ Compelling value proposition ▲ Comprehensive product portfolio ▲ Strong customer relationships

Agriculture Pharmaceutical

8

(1) Twelve months ended July 31, 2008. (2) Before restructuring charges. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.

Most Comprehensive Industrial Packaging Portfolio

Plastic Fibre Steel Water Bottles IBC

Closures

Global Presence

#1 #1 #2 #4 #1 #1

Mauser* Schutz

Greif’s global market share exceeds 30%

9 * Acquired by Dubai International Capital LLC in 2007.

Paper Packaging

$654 $691

$700 $800 $900

$60 $68 $73

$60 $75 $90

Net sales Operating profit(2)

2002 2008(1) CAGR $324 $691 14% 2002 2008(1) CAGR $21 $73 24% $324 $504 $568 $608 $620 $654

$400 $500 $600

$21 $30 $29 $41

$15 $30 $45

Served markets Competitive advantages

$324

$300 2002 2003 2004 2005 2006 2007 2008 $- 2002 2003 2004 2005 2006 2007 2008

(1) (1)

▲

Customer focus

▲

Fully-integrated containerboard network network

▲

Highly efficient sheet feeder footprint Improving fundamentals

Packaging Feed and Seed

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▲

Improving fundamentals

(1) Twelve months ended July 31, 2008. (2) Before restructuring charges. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.

Fully-integrated Paper Packaging Network

7 Box Plants Massillon, Ohio Mill 6 Specialty Corrugated Plants Riverville, Virginia Mill 6 Sheet Feeder Plants 2 Multiwall Bag Plants

600 000 tons Production 800 000 tons Consumption Annual containerboard requirements >100% of production capacity 600,000 tons 800,000 tons

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Annual containerboard requirements >100% of production capacity

Timber

Served Markets

Timber, timberland, special use properties.

▲ Properties located in Arkansas, Alabama, ▲ Properties located in Arkansas, Alabama,

Louisiana and Mississippi in the United States and the Quebec and Ontario provinces in Canada.

▲ 66,250 acres (22%) identified as special use

ti t 7/31/08

Competitive advantages

properties at 7/31/08.

▲ Undervalued timberland assets

(book value $199 million at 7/31/08).

▲ Opportunities to monetize special use

p g

2001 Timber established as a line of business and portfolio began to be actively managed. 2001 2007 Over $200 million of timber

▲ Opportunities to monetize special use

properties.

▲ 295,400 acres in North America in attractive

locations, including 267,950 acres in the United States and 27 450 acres in Canada 2001 – 2007 Over $200 million of timber assets have been monetized. 2006 Special use properties

• identified. Gains total $29.4

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United States and 27,450 acres in Canada. million since the beginning of 2006.

Financial Review

Financial Profile

Dollars in millions

(1) (1)

2002 2003 2004 2005 2006 2007 2007

(1)

2008

(1)

Net Sales $1,633 $1,916 $2,209 $2,424 $2,628 $3,322 $3,176 $3,681 O ti P fit

(2)

$ 92 $ 121 $ 155 $ 171 $ 238 $ 311 $ 293 $ 398 Operating Profit

( )

$ 92 $ 121 $ 155 $ 171 $ 238 $ 311 $ 293 $ 398 Net Income

(2)

$ 32 $ 43 $ 83 $ 96 $ 140 $ 190 $ 177 $255

(2)

RONA

(2)

7.5% 10.1% 13.3% 15.9% 21.5% 21.3% 21.3% 24.4% Free Cash Flow $ 112 $ 52 $ 180 $ 175 $ 164 $ 296 $ 164 $164

(1) Twelve months ended July 31. (2) Before restructuring charges, debt extinguishment charges, timberland disposals, net and cumulative effect of change in accounting principle.

14

See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.

Strong Cash Generation

(1)

$1 200 $1,400

(Dollars in millions) Purchases of

$800 $1,000 $1,200

Purchases of PP&E, net $300

$400 $600 $800

Operating Cash Flow $1,279 Acquisitions $523 Di id d Free Cash Flow $979

$200 $400

Other $262 Dividends $159 Share Repurchases $35

$0

Cash Sources Cash Uses

15% of Operating Cash Flow Returned to Shareholders

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(1) Fiscal 2002 to 2007

2007-2009: Earn and Grow Phase

Greif Business System Growth I d t

2009 Goals

Value Creation

+ =

Industry consolidation Emerging

2009 Goals

Operating Profit Margin(1) ≥ 12.5% SG&A/

The Greif Way

Working

Emerging markets Core business

Net Sales ≤ 7.5% OWC(2)/ Net Sales ≤ 7.5%

Performance

Operational Excellence Commercial Excellence Capital Global Supply Chain

adjacencies

Return on Net Assets(3) ≥ 25.0%

Strategy People Performance Management

(1) Operating profit margin equals operating profit, before restructuring charges and timberland disposals, net, divided by net sales. (2) Operating working capital equals accounts receivable (less allowances) plus inventories less accounts payable

Focus Discipline Passion

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(2) Operating working capital equals accounts receivable (less allowances) plus inventories less accounts payable. (3) Return on net assets equals operating profit, before restructuring charges and timberland disposals, net, divided by long-term debt plus short-term borrowings less cash and cash equivalents, plus shareholders’ equity.

Same-Structure

(1) Roadmap to 2009 Targets

(D ll i illi )

$75 $60 $40 $450

(Dollars in millions)

Operating Profit

(2)

Net Sales

$3,600 $275 $75 $3,100 $ ,

+5% CAG

Greif Business System

2006 Organic 2009 2006 2009 Strategic Operational

CAG R

Roadmap/Agenda Workstream Target

1. Organic Growth Commercial Excellence ≥ 5%

Adjusted(1) g Growth Target Adjusted(2) Organic Target g Sourcing p Excellence

1. Organic Growth Commercial Excellence ≥ 5% 2. Low-cost Producer Operational Excellence 3 - 5% of cost of products sold 3. Leverage Global Spend Strategic Sourcing 3 - 5% of total spend 4. Scalable Infrastructure Administrative Excellence ≤ 7.5% SG&A to net sales 5 Asset Utilization Working Capital ≤ 7 5% OWC to net sales 17 5. Asset Utilization Working Capital ≤ 7.5% OWC to net sales

(1) Includes the impact of Delta and Blagden acquisitions. (2) Before restructuring charges and timberland disposals, net. See GAAP to Non-GAAP reconciliation included in the Appendix of this presentation.

(D ll i illi )

2009 Pro Forma RONA Value Stream

OP Impact

(Dollars in millions) Sales 100% 3600 Volume* GDP+2% Price Value

> Sales/Comex > Sales/Comex $36 $12

x +

p 1% Change Accountability

Labor Materials Operating Profit 12.5% COGS 76% Depreciation 450 GDP+2% 53%

> Sourcing $19

+

• RONA

25% 4% SG&A 7 5% 8% Overhead 10% x + +

• > Operations

> Operations $3 $4

25% 7.5% Fixed Capital Freight 5% A/R ROIC + +

> Sourcing $2

Capital Turnover 2 Turns 3 Turns Working Capital 12 Turns 1800 A/R 10 Turns Inventories 12 Turns 18% WACC + + + +

• > Sales/Comex

> Sourcing Cash Flow Benefit

18 12 Turns 12 Turns A/P 10 Turns 8.5% * Volume impact = sales - material - labor – freight.

• > Sourcing

Financial Targets

2007 - 2009

Annual Organic Sales Growth (average) 5% Net Debt to Net Capitalization 30% - 40% p % % Annual Dividend Payout 30% - 35% Annual Capital Expenditures ($ in millions) $110 - $135 Spread Over Cost of Capital 7.5% - 10% p p

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Compelling Investment Opportunity

• Diversity: customers, products, geography and people
• Leading market positions in industrial packaging

Leading market positions in industrial packaging

• Focused, fully-integrated paper

packaging network

The Greif Way

• Undervalued timber portfolio
• Greif Business System: proven

catalyst for unlocking value

Operational Working Capital Global

Strategy People Performance Management

catalyst for unlocking value

• Record of strong top-line growth and

value creation

Operational Excellence Commercial Excellence Supply Chain

• Experienced management team

Focus Discipline Passion Focus Discipline Passion

Appendix

GAAP to Non-GAAP Reconciliation

R N A Return on Net Assets

UNAUDITED (Dollars in millions)

2002 2003 2004 2005 2006 2007 GAAP operating profit $ 101.2 $ 65.4 $ 108.7 $ 191.9 $ 246.2 $ 289.6 Restructuring charges 2.8 60.7 54.1 35.7 33.2 21.2 Timberland disposals, net (12.1) (5.6) (7.5) (56.3) (41.3) 0.6 Non-GAAP - operating profit before restructuring charges and timberland disposals, net $ 91.9 $ 120.5 $ 155.3 $ 171.3 $ 238.1 $ 311.5 Average cash (1) $ (30.8) $ (27.2) $ (36.1) $ (67.9) $ (148.9) $ (120.4) Average short-tern borrowings(1) 19.3 21.5 16.6 17.9 24.6 34.9 Average current portion of long-term debt(1) 30.0 3.0 1.2

• Average long-term debt(1)

627.8 634.3 592.8 446.8 449.7 645.1 Average shareholders' equity(1) 583.7 566.9 590.0 677.9 779.6 904.0 Average net assets $ 1,230.0 $ 1,198.5 $ 1,146.5 $ 1,074.7 $ 1,105.0 $ 1,463.6 GAAP return on net assets (GAAP operating profit divided by average net assets) 8.2% 5.5% 9.3% 17.9% 22.3% 19.8% Non-GAAP return on net assets (non-GAAP operating profit before restructuring Non GAAP return on net assets (non GAAP operating profit before restructuring charges and timberland disposals, net divided by average net assets) 7.5% 10.1% 13.3% 15.9% 21.5% 21.3%

(1) Amounts used in the calculation for this graph are based upon the average balances as of the beginning of the fiscal year and end of each fiscal quarter for the years presented.

GAAP to Non-GAAP Reconciliation

O ti P fit d R t N t A t Operating Profit and Return on Net Assets

2007 (1) 2008 (1)

UNAUDITED (Dollars in millions)

GAAP operating profit $ 270.6 364.0 $ Restructuring charges 22.6 33.5 Timberland disposals, net 0.1

• Non-GAAP operating profit before restructuring

charges and timberland disposals, net $ 293.3 397.5 $ Average cash (2) (129.1) $ (104.9) $ Average short-term borrow ings 36.1 44.7 Average long-term debt 604.6 687.6 Average shareholders' equity 862.4 1,003.1 Average net assets 1,374.0 $ 1,630.5 $ g , $ , $ GAAP return on net assets (GAAP operating profit divided by average net assets) 19.7% 22.3% Non-GAAP return on net assets (non-GAAP

• perating profit before restructuring charges and

(1) Twelve months ended July 31. timberland disposals, net divided by average net assets) 21.3% 24.4%

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(2) Amounts used in the calculation for this graph are based upon the average balances as of the beginning of the fiscal year and end of each fiscal quarter for the years presented.

GAAP to Non-GAAP Reconciliation

O ti P fit Operating Profit

UNAUDITED (Dollars in millions) 1997 (Dollars in millions) 1997 GAAP operating profit 29.8 $ Restructuring charges 6.2 Timberland disposals, net (0.8) Timberland disposals, net (0.8) Non-GAAP operating profit before restructuring charges and timberland disposals, net 35.2 $

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GAAP to Non-GAAP Reconciliation

O ti P fit b S t Operating Profit by Segment

UNAUDITED (Dollars in millions)

2002 2003 2004 2005 2006 2007 2008 (1) Industrial Packaging GAAP - operating profit 38.9 $ 21.9 $ 67.0 $ 91.4 $ 143.4 $ 213.4 $ 275.0 $ Restructuring charges 2.3 47.9 45.0 31.4 24.0 16.0 29.4 Non-GAAP - operating profit before restructuring charges 41.2 $ 69.8 $ 112.0 $ 122.8 $ 167.4 $ 229.4 $ 304.4 $ Paper Packaging GAAP - operating profit 20.2 $ 17.9 $ 20.5 $ 36.3 $ 50.8 $ 62.5 $ 69.0 $ Restructuring charges 0.4 12.5 8.9 4.3 9.2 5.2 4.0 Non-GAAP - operating profit b f t t i h 20 6 $ 30 4 $ 29 4 $ 40 6 $ 60 0 $ 67 7 $ 73 0 $ before restructuring charges 20.6 $ 30.4 $ 29.4 $ 40.6 $ 60.0 $ 67.7 $ 73.0 $ Timber GAAP - operating profit 42.1 $ 25.5 $ 21.2 $ 64.2 $ 51.9 $ 13.7 $ 20.2 $ Restructuring charges 0.1 0.4 0.2 0.1

• 0.1

Ti b l d di l t (12 1) (5 6) (7 5) (56 3) (41 3) 0 6 Timberland disposals, net (12.1) (5.6) (7.5) (56.3) (41.3) 0.6

• Non-GAAP - operating profit

before restructuring charges and timberland disposals, net 30.1 $ 20.3 $ 13.9 $ 8.0 $ 10.6 $ 14.3 $ 20.3 $

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(1) Twelve months ended July 31.

GAAP to Non-GAAP Reconciliation

N t I Net Income

UNAUDITED (Dollars in millions)

2002 2003 2004 2005 2006 2007 GAAP - net income $ 31.0 $ 9.5 $ 47.8 $ 104.7 $ 142.1 156.4 $ Restructuring charges, net of tax 1.8 42.0 40.9 25.7 23.4 15.9 Debt extinguishment charge, net of tax 6.6

• 2.0
• 17.5

Timberland disposals, net of tax (7.8) (3.9) (5.7) (36.2) (26.0) 0.5 Cumulative effect of change in g accounting principle

• (4.8)
• Non-GAAP - net income before

restructuring charges, debt extinguishment charge, timberland disposals, net and cumulative effect

• f change in accounting principle

$ 31.6 $ 42.8 $ 83.0 $ 96.2 $ 139.5 $ 190.3

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GAAP to Non-GAAP Reconciliation

N t I

UNAUDITED (Dollars in millions)

Net Income

2007 (1) 2008 (1) GAAP - net income $ 143.1 $ 228.9 Restructuring charges, net of tax 16.3 25.6 Debt extinguishment charge net of tax 17 3 0 2 Debt extinguishment charge, net of tax 17.3 0.2 Timberland disposals, net of tax 0.1

• Non-GAAP - net income before restructuring charges, debt

extinguishment charge and timberland disposals, net $ 176 8 $ 254 7 $ 176.8 $ 254.7

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(1) Twelve months ended July 31.