Greif, Inc. GEF announced that by Aug 31 it will shut down its Flexible Products & Services (FPS) plant in the Kingdom of Saudi Arabia and reallocate equipment to other Greif FPS facilities as part of a normal restructuring.
In 2010, Greif had formed the Flexible Packaging joint venture with Dabbagh and its subsidiary, National Scientific Company Limited. The Flexible Packaging joint venture owns the operations in the Flexible Products & Services segment, with the exception of the North American multi-wall bag business.
The Flexible Products & Services segment is a global leading producer of flexible intermediate bulk containers and manufacturer of industrial and consumer shipping sacks and multiwall bag products in North America. Its flexible intermediate bulk containers consist of a polypropylene-based woven fabric that is produced at its production sites as well as sourced from strategic regional suppliers.
The Flexible Packaging joint venture strategically aims to establish a global industrial flexible products enterprise through a series of targeted acquisitions and major investments in plant, machinery and equipment. The plant in Saudi Arabia contributes a small portion to the joint venture's overall fabric production capacity.
Grief reported second-quarter fiscal 2014 (ended Apr 30, 2014) adjusted earnings of 57 cents per share, down 17.4% from 69 cents per share in the year-ago quarter, due to disrupted production at its flexible products manufacturing facility in Turkey.
Revenues improved 1.1% year over year to $1,100.7 million from $1,088.9 million. The year-over-year growth in net sales was primarily attributable to increase in selling prices, partially offset by the negative impact from foreign currency translation.
Sales from the Flexible Products & Services segment went down 6.3% year over year to $105.3 million. The decrease in net sales was attributed to a decrease of 5.6% in selling price and 1.7% in volume due to the disturbance at the manufacturing facility in Turkey and product mix, partly offset by a 1% positive impact of foreign currency translation. The segment reported an operating loss of $10.3 million, compared with the prior-year profit of $0.8 million.
For fiscal 2014, Greif trimmed its EBITDA guidance in the range of $475 million to $505 million from the previous band of $490 million to $540 million. Excluding timberland gains of around $20 million or 20 cents per share, earnings per share were also lowered to the new band of $2.48 to $2.80 from $2.60 to $3.15.
Greif anticipates a gradual global economic recovery during fiscal 2014, which should result in moderate sales and volume improvement, along with slightly higher raw material costs. The company expects that the Rigid Industrial Packaging segment will benefit from moderate volume growth, especially in Europe.
In addition, the Flexible Products segment is repositioned for sustainable growth and profitability during the second half of 2014, depending on the implementation of specific actions regarding the disrupted production at the manufacturing facility in Turkey.
The company is expected to benefit from the sale of select non-core assets. Greif's plans to accelerate restructuring actions will also drive growth. However, foreign exchange volatility and social and political unrest remain headwinds.
Delaware, OH-based Greif manufactures and sells industrial packaging products, bulk containers, and containerboard and corrugated products worldwide. The company provides services such as blending, filling, packaging and recycling of industrial containers for a wide range of industries. Greif also manages timber properties in North America and offers land management consulting services.
Greif currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Crown Holdings Inc. CCK, Graphic Packaging Holding Co. GPK and Sonoco Products Co. SON. All of these companies hold a Zacks Rank #2 (Buy).
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