Greif Q3 2025 Earnings Report

Greif EPS Results

• Actual EPS: $1.03
• Consensus EPS: $0.81
• Beat/Miss: Beat by +$0.22
• One Year Ago EPS: $1.03

Greif Revenue Results

• Actual Revenue: $1.13 billion
• Expected Revenue: $740.23 million
• Beat/Miss: Beat by +$394.47 million
• YoY Revenue Growth: -2.60%

Greif Announcement Details

• Quarter: Q3 2025
• Date: 8/27/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 28, 2025
• Conference Call Time: 8:30AM ET

Greif (NYSE:GEF) is a global leader in industrial packaging products and services, with a history dating back to its founding in 1877. Headquartered in Cleveland, Ohio, the company has evolved from a regional barrel and drum manufacturer into a diversified packaging provider serving a wide range of end markets. Greif’s longstanding heritage in container solutions has positioned it as a trusted partner for customers seeking reliable, high-quality packaging options.

The company’s core business revolves around the design, manufacture and sale of industrial packaging products, including steel, plastic and fiber drums; intermediate bulk containers (IBCs); safety closures; rigid, flexible and reconditioned packaging; containerboard and protective packaging. Greif also offers services such as reconditioning of industrial containers, pack planning and supply chain management solutions. Its product portfolio caters to sectors including chemicals, food and beverage, pharmaceutical, agriculture and specialty products.

Greif operates in approximately 40 countries with more than 300 manufacturing and distribution sites across North America, Europe, Asia, Latin America and Africa. This extensive global footprint enables the company to serve multinational customers while adapting to regional requirements and regulations. Under the leadership of Chairman and Chief Executive Officer Michael F. Haws, Greif continues to pursue growth through operational excellence, innovation in sustainable packaging solutions and strategic acquisitions aimed at enhancing its product offerings and geographic reach.

Greif Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Greif announced the planned divestiture of its containerboard business and a Timberland sale closing in October, expected to generate net proceeds of €1,750,000,000 and reduce leverage below 1.2x.
• Positive Sentiment: The company has achieved $20,000,000 in run‐rate savings toward its $15–25 million fiscal ’25 target and realized a 40% line efficiency gain at its North Carolina plant, bolstering cost optimization efforts.
• Positive Sentiment: Adjusted EBITDA rose by $4,000,000 with a 70 bps margin improvement, while free cash flow surged nearly 400% to $171,000,000, underscoring the resilience of its model.
• Positive Sentiment: Greif raised its 11‐month EBITDA guidance midpoint to $730,000,000 and free cash flow midpoint to $310,000,000, driven by SG&A savings and lower timing‐related CapEx.
• Negative Sentiment: Third‐quarter volumes were mixed, with polymers up 2.2% but durable metals down 5.8% and sustainable fiber down 7.6%, reflecting lingering industrial demand softness.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Greif Third Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

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

[Bill D’Onofrio, VP - Corporate Development & IR at Greif]

Good morning, everyone, and thank you for joining Greif's fiscal third quarter twenty twenty five earnings conference call. Today, our CEO, Ole Rosgaard will provide a strategy and market update followed by our CFO, Larry Hilsheimer with a review of our financial results. Please turn to Slide two. In accordance with Regulation Fair Disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material non public information with you on an individual basis. During today's call, we will make forward looking statements involving plans, expectations and beliefs related to future events.

[Bill D’Onofrio, VP - Corporate Development & IR at Greif]

Actual results could differ materially from those discussed. We will be referencing certain non GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation. This quarter's results reflect our planned containerboard business divestment within discontinued operations. Unless otherwise noted, the financials and commentary presented today will relate to our continuing operations. I'll now hand the call over to Oli on Slide three.

[Ole Rosgaard, President, CEO & Director at Greif]

Thank you, Bill, and good morning, everyone. Thank you for joining us. At the outset, I want to recognize our 14,000 colleagues around the world. Their execution discipline, bias for action and commitment to our strategy make the difference. While all colleagues' contributions are meaningful, today, I want to briefly go off script to recognize one in particular, Gary Motts, Executive Vice President, General Counsel and Secretary to Greif will be retiring later this year.

[Ole Rosgaard, President, CEO & Director at Greif]

Gary is a cornerstone example of what makes Greif so special. Over his distinguished twenty plus year career at Greif, he has impacted so many lives through his work. For myself, Gary has been a constant source of certain leadership, reason, coaching and strategic vision. And I know that both I personally and Wright colleagues globally are foundationally better because of his guidance. I'm sitting in the room with him right now, and I can see from his face that even now, he prefers to be recognized only as part of the Greater Drive team.

[Ole Rosgaard, President, CEO & Director at Greif]

But today, we need to recognize him as an individual too. Gary, thank you for everything you have done for us, and best wishes for your upcoming retirement. Thank you, Olin. Dennis Hoffman, Grice's Deputy General Counsel, will assume Gary's role effective October 1. Dennis has worked closely with Gary for the last fifteen years, and we have full confidence in his ability to carry on Gary's legacy of legal excellence.

[Ole Rosgaard, President, CEO & Director at Greif]

Thank you both for your commitment to Bryte. Now back to the quarter. We're taking cost out and transforming the business. At times, that work can be uncomfortable, but our people know that is not that is how the company grows, moves from good to great and ultimately creates shareholder value. We continue to accelerate our portfolio transformation and cost optimization.

[Ole Rosgaard, President, CEO & Director at Greif]

The divestments of our containerboard business is planned to close at the end of the month and our planned Timberland divestment set for October 1 for favorable tax planning purposes. Cash proceeds net of tax for these transactions will be approximately €1,750,000,000 which we anticipate will put our leverage ratio below 1.2 times. These divestitures sharpen our portfolio to concentrate our efforts on markets where we have the greatest ability to grow and deliver margin expansion, capital efficiency and durable shareholder returns. Additionally, as of Q3, we have achieved $20,000,000 in run rate savings towards our $15,000,000 to $25,000,000 fiscal twenty twenty five commitments, about $15,000,000 of which is SG and A and the remainder through network optimization such as the Nassau California closure, which was announced earlier in August. Another key component of our cost optimization is operating efficiency gain.

[Ole Rosgaard, President, CEO & Director at Greif]

To that end, we want to highlight a smaller but equally meaningful change occurring in one of our shop floors. Recently, our colleagues in the Wellcome, North Carolina Tubing Core plant improved progress efficiency related to changeovers, which improved line efficiency by over 40%. At Investor Day, we spoke about the aggregation of marginal gains. This is a great example. The stand alone impact of this project is not material to drive as a whole, but when all facilities take the same mindset and drive from good to great, it will really move the needle.

[Ole Rosgaard, President, CEO & Director at Greif]

It is regular wins like this that daily increase our conviction in outpacing our stated $100,000,000 cost reduction commitments. Please turn to Slide four. Our Q3 results once again show that the markets we've chosen to invest in are the most resilient even in a mixed macro environment. Customized polymer volumes were up 2.2%, led by low double digit growth in small containers, offset by mid single digit declines in IBCs and large drums. Our focused end markets, agrochemicals, pharma, flavor and fragrance and food and beverage, continue to outperform, underscoring the power of our portfolio shift.

[Ole Rosgaard, President, CEO & Director at Greif]

Durable metals volumes declined 5.8%, reflecting low double digit softness in North America and low single digit declines in EMEA. Housing and petrochemicals have been sluggish all year, and bulk chemical markets trended downwards in Q3, which also drove softness in EMEA. Our strategy in this business remains value over volume and cash generation, which is evident in our improved year over year gross profit margins. Sustainable fiber volumes declined 7.6%. URB mills operated at above 90% capacity.

[Ole Rosgaard, President, CEO & Director at Greif]

However, converting was mixed with tube and core down low single digits and fiber drums down high single digits due to sluggish North American industrial end markets. Integrated Solutions volumes grew 2.6% led by strong volumes in recycled fiber. So from a big picture point of view, our volume performance clearly shows our strategy is working. But for the time being, customer sentiment remains cautious, and the macro economy as a whole is not robust. We will consider that operating environment as we look to full year 2026 guidance next quarter. Larry, please take over on Slide five.

[Larry Hilsheimer, EVP & CFO at Greif]

Thank you, Oleg. Hello, everyone. As a reminder, the Q3 financials are presented excluding the Containerboard divestment, except for free cash flow, which compares total operations to prior year total operation. Adjusted EBITDA dollars increased $4,000,000 while EBITDA margins increased 70 basis points driven by improved price cost in our Fiber, Polymers and Integrated segments, which more than offset volume softness across the portfolio. Free cash flow rose by almost 400% to $171,000,000 in the quarter.

[Larry Hilsheimer, EVP & CFO at Greif]

This result once again demonstrates the resilience of our business model regardless of macroeconomic conditions. Please turn to Slide six. In Polymers, sales improved on volume, price and mix with growth concentrated in our target end markets. Gross profit dollars increased by over $10,000,000 and gross margins increased 150 basis points as we continue to drive structural cost improvement through, Great Business System two point zero. Metals saw lower sales from both price and volume as industrial demand softness persisted in North America and increased in EMEA.

[Larry Hilsheimer, EVP & CFO at Greif]

Gross profit dollars were about flat, but gross margin was up due to value over volume discipline and Gregg Business System two point zero gains. Fiber sales were down due to the converting demand softness Ole spoke of. However, gross profit dollars were up $8,000,000 and gross margins were up three sixty basis points due to better risky published price cost dynamics. Integrated Solutions, excluding the prior year impact of the Delta divestment was about flat on both sales and gross profit with gross margin down 160 basis points due to product mix. Please turn to Slide seven to discuss guidance.

[Larry Hilsheimer, EVP & CFO at Greif]

Our revised eleven month guidance midpoint of $730,000,000 of EBITDA is raised $5,000,000 from the previous low end to current midpoint and revised free cash flow midpoint of $310,000,000 is raised $30,000,000 from our previous low end to current midpoint. The increase in EBITDA is due primarily to better SG and A from cost optimization gains, while our price cost and volume assumptions are largely unchanged. The increase in free cash flow is primarily from the EBITDA increase plus lower expected CapEx spend, which is timing related to ongoing maintenance and growth projects. As the containerboard divestment is not finalized, we have not adjusted full year guidance for the impact of the divestment. Our combined adjusted EBITDA guidance includes contribution of $122,000,000 in sales and $25,000,000 of EBITDA in each August and September related to containerboard, which is driven by the prime season for our profitable triple wall business.

[Larry Hilsheimer, EVP & CFO at Greif]

This is in addition to the Q3 year to date contribution of $872,000,000 of sales and $168,000,000 of EBITDA from containerboard. I'll now turn it back to Holi for closing on Slide eight.

[Ole Rosgaard, President, CEO & Director at Greif]

Thanks, Larry.

[Ole Rosgaard, President, CEO & Director at Greif]

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

[Operator]

Certainly. Our first question will be coming from George Staphos of Bank of America Securities Inc. Your line is open, George.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thank you. Hi, everyone. Good morning. Thanks for the details. Congratulations to Gary and Dennis as well.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Nice touch, Ole. From my vantage point, had a few questions. Number one, can you tell us how much of the guidance raise for the year was related to containerboard? I know you said it was really SG and A, but was there any notable change there relative to containerboard? Second question, can you tell us about price cost trends as we're entering the fiscal fourth quarter and really kind of the horizon into 2026 to the extent you can comment relative to metal?

[George Staphos, Managing Director at Bank of America Merrill Lynch]

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

[Larry Hilsheimer, EVP & CFO at Greif]

George, I'll let Ole address the Polymer stuff. But first on your guidance question, no container board impact in raising that play through as we expected. Generally, guidance raise realized that was off of our low end. So some of the detriment we've seen in what's going on in metals worldwide actually probably brought us down from what we would hope for. And the raise is primarily related to SG and A cost reductions taken relative to our optimization plan.

[Larry Hilsheimer, EVP & CFO at Greif]

On the metals pricing going into the year, steel costs have been relatively flat at this point. We don't really see any inflections going on. So we don't expect anything with significant index changes going into the calendar quarter are now new first quarter. We don't anticipate anything significant. George, I'll turn it over to Oli on the polymer question.

[Ole Rosgaard, President, CEO & Director at Greif]

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

[Larry Hilsheimer, EVP & CFO at Greif]

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

[George Staphos, Managing Director at Bank of America Merrill Lynch]

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

[Larry Hilsheimer, EVP & CFO at Greif]

I had look at trailing 12 through July, George, was $218,000,000 So it was $211 when we cut the deal in 2018. It's 25,000,000 per month right now, but that's the highlight deal kind of number. So that's you know it's always you get into like our former first quarter is always the weakest. And so that pattern I'm sure will continue for BCA to address with you.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Okay. And EMEA has not had an effect on the Polymers business so far in Industrial? You didn't really talk about IBCs. Thanks and I'll turn it over guys.

[Ole Rosgaard, President, CEO & Director at Greif]

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

[Larry Hilsheimer, EVP & CFO at Greif]

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

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Okay. Thank you,

[Operator]

And our next question will be coming from Michael Roxland of Truist. Your line is open, Michael.

[Niccolo Piccini, Equity Research Associate at Truist Securities]

Yes. Hi, guys. This is Nico Buchino on for Michael Roxland. Thanks for taking my questions. I guess just first off, congrats on the strong cash flow performance thus far this year.

[Niccolo Piccini, Equity Research Associate at Truist Securities]

Just curious on how you think the business should perform from a cash generation perspective following the divestitures? And how do you weigh capital allocation opportunities at your forecasted lower leverage ratio?

[Larry Hilsheimer, EVP & CFO at Greif]

Yes. I mean we all of our businesses are generally fairly consistent in terms of their cash flow generation. So we don't really anticipate anything shifting. As we've said consistently, our objective is to be a 50% free cash flow generator relative to our performance. So we're on that path, obviously, north of 40% this time.

[Larry Hilsheimer, EVP & CFO at Greif]

And the businesses that we'll acquire have to meet that 50 plus percent free cash flow conversion unless there's some other compelling if we bought a 30 plus percent margin business that was capital intensive and it was 40%, we'd be happy, okay? So we expect cash flow generation to be good. Clearly, the debt pay down for capital flush, that said, our biggest constraint on deploying capital has always been human capital to get the projects done. We did see a drop off in our CapEx for this quarter. Frankly, part of that was because in our original guidance, we had stuff for the containerboard business, which obviously some of that we cut out because it didn't make sense for the new buyer and that kind of thing.

[Larry Hilsheimer, EVP & CFO at Greif]

So that helped us redo it. And we backed up strategically and said, let's look at our portfolio of projects and prioritize things. And then we had some delays with deliveries on equipment and that kind of thing. So we expect the proceeds of the two transactions to save us interest cost if we do no acquisitions next year, about $120,000,000 Part of that's related just to the timing of when we can pay taxes. We mentioned that we did we're doing this Saterra deal on October 1 for tax reasons.

[Larry Hilsheimer, EVP & CFO at Greif]

That's because by moving it one day into that year, saves us $13,000,000 of tax permanently, saves us about $4,000,000 on a timing of our payments element. And there's actually some other tax savings in the future related to that. All that means we're going to have lots of capital available to deploy against high return organic CapEx projects. And so we've been exploring a lot of those along with our acquisition pipeline. And Igor, let

[Ole Rosgaard, President, CEO & Director at Greif]

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

[Niccolo Piccini, Equity Research Associate at Truist Securities]

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

[Larry Hilsheimer, EVP & CFO at Greif]

You sort of broke up there. Was Glenn. Oh, sorry. Yes.

[Niccolo Piccini, Equity Research Associate at Truist Securities]

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

[Larry Hilsheimer, EVP & CFO at Greif]

No. No. It's that's pretty much locked. This is that range is really just dependent on volume of what happens in the month. I mean it's a very tight range obviously and it's just giving us a range therefore if volumes up or volumes down.

[Larry Hilsheimer, EVP & CFO at Greif]

That's really the only flex in there. There's minor other items, but that's the majority item.

[Niccolo Piccini, Equity Research Associate at Truist Securities]

Got it. Thank you. I'll turn it over.

[Operator]

And our next question will be coming from Ghansham Panjabi of Baird. Your line is open.

[Ghansham Panjabi, Senior Research Analyst at Baird]

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

[Ole Rosgaard, President, CEO & Director at Greif]

I mean, as we laid out on Investor Day, we started off with the end markets. That's where we started looking. How big are the end markets and which end markets are growing faster than GDP in general. And those are the ones I mentioned, the food and chemical, the pharma and so on. And then after that, we then look at what products are sold into those end markets that are part of our core business.

[Ole Rosgaard, President, CEO & Director at Greif]

And that is our polymer based containers and caps and closures. And that's really where our focus is. Of course, we have a legacy business in renewable metals and so on, and that's also core business, and we maintain that. But generally, that's, as you know, is our cash cow. And all the cash and the earnings we generate there, we invest in these growth markets.

[Ghansham Panjabi, Senior Research Analyst at Baird]

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

[Larry Hilsheimer, EVP & CFO at Greif]

Yes. I think generally, I mean, obviously, we've got our cost optimization. And we should realize $25,000,000 or so in twenty twenty six million And then we already said we'd have run rate of 50,000,000 to 60,000,000 coming out of next year. So that's the other element that would go into it, Ghansham.

[Ghansham Panjabi, Senior Research Analyst at Baird]

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

[Ole Rosgaard, President, CEO & Director at Greif]

If you mean in relation to tariffs, not really. Tariffs the impacts that we see from tariffs is still well below $10,000,000 It's not material for us. And remember, we tend to I mean, operating in 40 countries, we source locally, we manufacture locally, we sell locally. So it's not really something that has an impact on us.

[Ghansham Panjabi, Senior Research Analyst at Baird]

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

[Ole Rosgaard, President, CEO & Director at Greif]

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

[Ole Rosgaard, President, CEO & Director at Greif]

We see that that's where the growth has been and which clearly demonstrates that our strategy is the right one.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay. Thanks so much. Good luck in the quarter.

[Ole Rosgaard, President, CEO & Director at Greif]

Thanks, Dan. Thanks, Ken. Thank

[Operator]

you. Our next question will be coming from Gabe Hodge of Wells Fargo. Gabe, your line is open.

[Gabe Hajde, Research Analyst at Wells Fargo]

Guys. Want to revisit Gabe, must be kind of golfer with the Hodge name now.

[Gabe Hajde, Research Analyst at Wells Fargo]

Appreciate it, Larry. I want to revisit the kind of starting point for 2026 and I recognize you're not giving 2026 guidance. But I thought the $730,000,000 number, it technically includes another, I guess, 50,000,000 from August and September in there. So really we're kind of talking about like you said a 02/18 number or $220,000,000 So $730,000,000 less $220,000,000 is a starting point and then we got to annualize it, so eleven months to twelve months, is that

[Larry Hilsheimer, EVP & CFO at Greif]

that's correct. I missed that on Ghansham's question. You're right on that, Dave.

[Gabe Hajde, Research Analyst at Wells Fargo]

Okay. Well, there's a lot of moving parts. So we're just trying to keep our bearings over here. The other one a little late in the call. I think you guys had bought out, I saw in the cash flow statement a minority or non controlling interest to the tune of $40,000,000 What was that?

[Larry Hilsheimer, EVP & CFO at Greif]

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

[Ole Rosgaard, President, CEO & Director at Greif]

Fall. Fall, four years Okay.

[Larry Hilsheimer, EVP & CFO at Greif]

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

[Gabe Hajde, Research Analyst at Wells Fargo]

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

[Ole Rosgaard, President, CEO & Director at Greif]

I would say the same. As we said last time, we have a very, very solid pipeline. We have talk ins. We have larger ones. And we continue to be in close dialogue with the owners of all those businesses.

[Ole Rosgaard, President, CEO & Director at Greif]

We don't dictate when things are happening. We don't know that. But it's important that we stay close to it. And the people we talk to and the companies we look at, they all fits our strategy. And with just to remind you is within Polymers, we are looking at businesses that at least generates 18% EBITDA margin and that has a 50% free cash flow conversion.

[Ole Rosgaard, President, CEO & Director at Greif]

And they operate in these four growth segments that I mentioned earlier. That when things come up, we obviously, we're ready to move. But at the moment, we're very pleased with where we are with the leverage that we have created.

[Gabe Hajde, Research Analyst at Wells Fargo]

Okay. Thank you.

[Operator]

Our next question will be coming from Matt Roberts of Raymond James. Your line is open, Matt.

[Matt Roberts, Research Analyst at Raymond James Financial]

Hey, Ole, Larry, Bill, good morning. Hi, Matt. You spent some time already talking about capital allocation, but maybe I'll try again. Given your leverage, so after land, you'd be at 1.2 times, and that's well below the long term two to 2.5 range. So what is an upper leverage range you would be comfortable with following any potential deal? And as you look at those target markets, whether that's pharma or other ones, how do asking multiples compare to prior deals you've done? And given where volumes are currently and the commitment to $1,000,000,000 in EBITDA in '27, does that $1.2 leverage figure allow for greater immediacy or appetite for a more transformative deal?

[Larry Hilsheimer, EVP & CFO at Greif]

Yes. So Ole obviously already gone through the target markets that we're involved within the M and A pipeline. And so that's we're focused on that. We're not aware of any transformational deals on the market right now. So I mean, don't see anything that's a $3,000,000,000 deal or anything kind of thing. In terms of our leverage ratio, we like to target in that two to 2.5 times. But as we've shown previously, if we can find the right strategic fit in businesses that have the free cash flow generation that we look for, that allows us to pay down debt pretty rapidly.

[Larry Hilsheimer, EVP & CFO at Greif]

As you've seen, our debt ratio has come from 3.6 to 3.1% in the three quarters this year. So we address that leverage ratio pretty rapidly. So we'd be looking at we could do $1,000,000,000 deal now and still be within our target ratio range. You do a $2,000,000,000 $3,000,000,000 deal and still be back in it very rapidly if we have businesses that meet the criteria we're looking at. And we're only going to buy businesses that meet the criteria.

[Larry Hilsheimer, EVP & CFO at Greif]

So it's really just going to be dependent on when things come to market, are they good strategic fit. We've said this before, but we've been down the aisle of marriage on deals a couple of times now. And at the end, we ran away from the church because we as much as it looked attractive going in, we figured out the bride was pretty ugly at the end. So we'll keep looking for the pretty bride.

[Matt Roberts, Research Analyst at Raymond James Financial]

Very good, Larry. I appreciate the color there.

[Larry Hilsheimer, EVP & CFO at Greif]

I like the analogy.

[Matt Roberts, Research Analyst at Raymond James Financial]

Great analogy. Switching gears, if you could stay on the same analogy, that would be great. Fiber, you've seen a lot of moving pieces there, containerboard coming out, land out, drums are now in this segment since you've re segmented. So with the $218,000,000 coming out from containerboard in eleven months, I mean, how should we think about what's remaining in that fiber business in 2026 in terms of margin or driving cost out of that business, recognizing there's still some price to flow through? Just any color you could give there on that fiber for Yes. '20

[Larry Hilsheimer, EVP & CFO at Greif]

I mean, I'll make a comment and then Oleg can add on. I mean, one of the key tenants of our strategy that we've talked about before, but we haven't talked about today is we want to be number one or two in the market. And we are number one in fiber drums in The U. S. And we're number two in our URB business.

[Larry Hilsheimer, EVP & CFO at Greif]

So we like those positions because it means you're a market leader on what's going on and not the back end of the tail of the dog like maybe we were in containerboard. So we like the dynamics of the business. Right now, the demand on the fiber drum part is weak because of industrial. But anyway, that's a high level thing

[Ole Rosgaard, President, CEO & Director at Greif]

on Yes. I can't come up with an analogy like Larry. But if you look at I mean, our URB business, we are clearly one of the leaders in that business, and we like that business. And that's primarily tube and core, but then we have our fiber drums as well. So our URB capacity right now is around six thirty tonnes.

[Ole Rosgaard, President, CEO & Director at Greif]

We have some CRB capacity, 65 tons, but that's a swing mill that we can swing to URB. So our focus is really on URB, where we are well integrated into our converting assets.

[Matt Roberts, Research Analyst at Raymond James Financial]

Okay. That's all very helpful. And maybe if I could squeeze maybe just one more in here. On the Integrated Solutions, that margin came in lower in 3Q, volumes are still up. So what drove the variance in margin quarter over quarter within that segment?

[Matt Roberts, Research Analyst at Raymond James Financial]

And what is expected on a go forward basis to get that back above 20%? And in that Integrated Solutions, I mean, you discussed potential investments in closures as well. How do you think about maybe longer term external sales impacting the longer term growth rate in that Integrated Solutions business, if material at all? Thanks again for taking all the questions.

[Larry Hilsheimer, EVP & CFO at Greif]

Yes. OCC was the big driver of the margin squeeze. As the paper industry has picked up a bit, obviously, our recycled fiber business has been selling more, but we all know where OCC pricing cost is. And the big value to us of that business is having a secure supply chain of OCC, which you'll remember a number it seems like ancient history now, but there are a number of years ago everybody was struggling to find OCC. So you want to make sure you have that to support the primary business.

[Larry Hilsheimer, EVP & CFO at Greif]

And with respect to margins, one of the reasons that we really like Caps and Closures is it's one of our better margin businesses. And every target that we're looking at in Caps and Closures would significantly exceed the target levels that we talk about in our M and A strategy.

[Matt Roberts, Research Analyst at Raymond James Financial]

Very helpful. Thank you again.

[Operator]

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

[Ole Rosgaard, President, CEO & Director at Greif]

Thank you, operator, and thank you again for all your thoughtful questions today. I want to leave you with this. GRIVE today is a fundamentally stronger, more focused and more resilient company than ever before. We are simplifying our portfolio. We're strengthening our balance sheet and unlocking significant efficiencies that will create durable shareholder returns.

[Ole Rosgaard, President, CEO & Director at Greif]

We're not waiting for the macroeconomic environment to improve. We are creating our own path forward with execution discipline, a bias for action and a clear build to land strategy. As demand recovers, our sharpened portfolio and operating leverage will amplify results. We have line of sight to our 2027 commitments, and I'm confident that the actions we are taking now will position Grive to deliver outsized value for years to come. To put it simply, GRIVE is a company you can invest in with confidence. Thank you.

[Operator]

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

Participants

Executives

• Bill D’Onofrio, VP - Corporate Development & IR
• Ole Rosgaard, President, CEO & Director
• Larry Hilsheimer, EVP & CFO

Analysts

• George Staphos, Managing Director at Bank of America Merrill Lynch
• Niccolo Piccini, Equity Research Associate at Truist Securities
• Ghansham Panjabi, Senior Research Analyst at Baird
• Gabe Hajde, Research Analyst at Wells Fargo
• Matt Roberts, Research Analyst at Raymond James Financial