Executive Summary / Key Takeaways

• Greif has completed a radical portfolio transformation, divesting over $2.2 billion of capital-intensive containerboard and timberland assets to become a focused industrial packaging leader with pro forma leverage under 1.0x and a clear path to $1 billion EBITDA by 2027.

• The company's cost optimization program has delivered $50 million in run-rate savings in fiscal 2025, more than double its initial commitment, demonstrating operational discipline that management has expanded to $120 million by 2027, creating a structural earnings tailwind.

• Trading at 8.9x EV/EBITDA with a 3.4% dividend yield, Greif offers a compelling risk/reward profile as it pivots toward higher-margin, less cyclical polymer and closure solutions while competitors remain burdened by legacy industrial exposure.

• The exclusive IonKraft barrier technology, ramping in late 2026 and fully scaling in 2027, represents a proprietary growth driver that could expand addressable markets in agrochemicals and food packaging, where Greif is already gaining share.

• The primary risk is prolonged industrial demand softness in chemicals and construction, which management acknowledges is the key variable to their low-end guidance; however, the company's "value over volume" strategy and fortress balance sheet provide downside protection.

Setting the Scene: The New Greif Emerges

Greif, Inc., originally founded as Greif Bros. Corporation in 1877 and headquartered in Delaware, Ohio, is completing one of the most significant portfolio transformations in industrial packaging history. What began as a mid-2020s strategic review has culminated in the divestiture of the company's most capital-intensive businesses—containerboard ($1.8 billion) and timberland ($462 million)—to create a leaner, higher-return industrial packaging pure-play. This isn't a simple asset sale; it's a fundamental repositioning away from cyclical commodity paper markets toward resilient, margin-accretive polymer and metal packaging solutions.

The company now operates through four material-based segments: Customized Polymer Solutions, Durable Metal Solutions, Sustainable Fiber Solutions, and Innovative Closure Solutions (formerly Integrated Solutions). This structure reflects a deliberate strategy to align reporting with how customers buy packaging and how Greif creates value. The industrial packaging industry, a roughly $200 billion global market, is fragmented and highly competitive, with players like Sonoco (SON), Sealed Air (SEE), Silgan (SLGN), and Graphic Packaging (GPK) competing across various substrates. Greif's transformation moves it away from the capital-intensive, cyclical paper business where it was a smaller player and toward polymer and metal solutions where its global service network and reconditioning expertise create tangible differentiation.

The "Build to Last" strategy, articulated in late 2024, focuses exclusively on end markets that grow faster than GDP: agrochemicals, food and beverage, pharmaceuticals, and flavors & fragrances. These segments demand high-performance packaging with regulatory compliance, product protection, and sustainability credentials—exactly where Greif's polymer IBCs, steel drums, and closure systems excel. The macro environment remains challenging, with CEO Ole Rosgaard describing a "prolonged down cycle" amplified by trade uncertainties and weak construction and manufacturing end markets. Yet Greif's chosen markets have shown resilience, and the company's operational execution suggests it's building an enterprise built for durability, not just cyclical upturns.

Technology, Products, and Strategic Differentiation

Greif's competitive moat rests on three pillars: a global reconditioning network that enables circular economy solutions, a diversified material portfolio that meets varied customer needs, and proprietary technology that creates exclusive market opportunities. The reconditioning business, while not broken out separately, is embedded across the polymer and metal segments and provides recurring revenue streams while reducing customer total cost of ownership. This matters because it transforms a transactional drum sale into a long-term service relationship, creating switching costs that pure product competitors cannot replicate. In an industry where competitors like Sonoco and Silgan focus primarily on new container sales, Greif's ability to extend asset life through reconditioning provides both cost advantages and customer stickiness.

The IonKraft barrier technology represents Greif's most significant technological differentiator. This proprietary technology, exclusive to Greif through a partnership with a German university startup, addresses a critical need in agrochemical and food packaging for high-performance barrier properties. Management is deploying three production lines initially, with negotiations for additional capacity, expecting meaningful contribution beginning late 2026 and full ramp-up in 2027. This isn't an incremental improvement; it's a potential step-change in polymer packaging performance that could open new applications and command premium pricing. The exclusivity matters because it prevents commoditization and gives Greif a multi-year head start in high-growth end markets.

The Greif Business System, the company's operational excellence framework, enables repeatable performance across 250 facilities in 40 countries. This system is the engine behind the cost optimization program that delivered $50 million in run-rate savings in fiscal 2025, more than double the initial $15-25 million commitment. Approximately $15 million came from network design and operating efficiency, including AI-driven scrap reduction and improved overall equipment effectiveness (OEE), while the remainder from SG&A reduction, including the elimination of 8% of professional roles in Q4 2025. This isn't temporary cost-cutting; it's structural efficiency gains that management has expanded to $80-90 million in 2026 and $120 million by 2027.

Financial Performance & Segment Dynamics: Evidence of Transformation

Greif's financial results tell a story of margin expansion amid revenue headwinds, exactly what one would expect during a portfolio transition in a weak industrial economy. For the nine months ended July 31, 2025, continuing operations revenue declined 1% to $3.23 billion, yet adjusted EBITDA increased 2.1% to $412.4 million, with margins expanding 140 basis points to 13.0%. This divergence—growing EBITDA on declining sales—demonstrates the power of the cost optimization program and the portfolio shift toward higher-margin businesses.

The segment performance reveals the strategic logic behind the transformation. Customized Polymer Solutions, the growth engine, delivered 16.4% revenue growth year-to-date to $964.2 million, driven by $97.2 million from the Ipackchem acquisition and strong organic volume and pricing. Gross margins expanded 220 basis points to 21.6%, while adjusted EBITDA grew 12.1% to $112.7 million. This segment serves the resilient agrochemical, pharma, and food markets that are central to the "Build to Last" strategy. Management noted that while large polymer drums and IBCs faced mid-single-digit declines due to EMEA industrial softness, small containers showed positive momentum driven by agrochemical demand—a clear validation of the focus on growth end markets.

Durable Metal Solutions, while facing volume headwinds, exemplifies the "value over volume" approach. Year-to-date revenue declined 7.2% to $1.12 billion on lower volumes and pricing, yet adjusted EBITDA fell only 2.1% to $122.4 million, and gross margins expanded 80 basis points to 20.7%. The segment generated healthy cash flow by optimizing its cost structure and maintaining pricing discipline in a weak market. This matters because it demonstrates Greif's ability to manage for profitability even when industrial demand is soft, a capability that will become more valuable as the portfolio shifts toward less cyclical markets.

Sustainable Fiber Solutions shows the clearest evidence of price/cost management success. Year-to-date revenue declined 2.6% to $900.3 million, yet adjusted EBITDA jumped 10% to $155.8 million, with gross margins expanding 230 basis points to 22.3%. The segment benefited from lower raw material costs and the recognition of URB price increases. Management has conviction that demand warrants the full $50-70 per ton URB price increase announced in March 2025, beyond the $30 per ton already recognized. With URB mills operating above 90% capacity and a $530,000 monthly impact for every $10 per ton price change, the earnings leverage is significant. However, fiber drums remain "really off" due to weakness in the chemical industry, a reminder that not all legacy products fit the future strategy.

Innovative Closure Solutions, despite a 14% revenue decline year-to-date to $246.4 million due to the Delta divestiture, maintains 30%+ gross margins and is winning new business through innovation and cross-selling. The segment's adjusted EBITDA declined 41% to $21.5 million, but this reflects the loss of Delta's earnings; the underlying closures business is growing. Management's decision to rename the segment and put "extreme focus" on closures, with a new leader dedicated to M&A and organic growth, signals this will be a priority for capital deployment.

The consolidated cost structure improvement is striking. SG&A expenses as a percentage of sales increased to 14.7% year-to-date from 13.7%, but this includes amortization from acquisitions and compensation expenses. The underlying cost optimization is real: management expects SG&A to be below 10% of revenue in the long term, a combination of revenue recovery and continued cost reduction. The $50 million in run-rate savings achieved in fiscal 2025 represents more than double the initial commitment, and the path to $120 million by 2027 is credible given the early success.

Outlook, Management Guidance, and Execution Risk

Greif's management has adopted a "low-end only" guidance approach for fiscal 2026, reflecting the absence of compelling demand inflections and a cautious macroeconomic outlook. This isn't conservatism for its own sake; it's a disciplined recognition that the industrial economy remains in a prolonged down cycle. The FY2026 low-end guidance assumes flat to low single-digit volume declines in metals and fiber, offset by low single-digit volume improvement in polymers and closures, resulting in flat volume-related EBITDA performance. This matters because it shows management is planning for continued softness while positioning the cost structure to deliver earnings growth regardless.

The key drivers of the 2026 EBITDA bridge are entirely within management's control. SG&A savings of $45 million reflect $39 million of incremental cost optimization, split between the fiscal 2025 run rate and new 2026 initiatives, plus $9 million from lower variable costs including incentives. Price/cost benefits of $12 million come from sourcing improvements in polymers and closures, while $18 million flows from the full-year benefit of URB pricing actions taken in 2025. These internal levers matter more than volume recovery in the near term, demonstrating that Greif has multiple ways to win even if industrial demand remains weak.

The balance sheet transformation provides strategic optionality. With pro forma leverage below 1.0x and $2.3 billion in combined proceeds from divestitures, Greif has minimal cash needs for debt service. Management plans to execute a $150 million open market share repurchase "as quickly as possible" using existing authorization of approximately 2.5 million shares, and will seek Board approval for a new authorization of up to 2% of outstanding equity value per year. This capital allocation framework—dividends first, debt paydown second (though leverage is already low), and organic growth third—signals confidence in the business model's durability.

The 2027 financial commitments of $1 billion EBITDA and $500 million free cash flow are ambitious but achievable. The path includes over $100 million of known discrete items (primarily price/cost benefits), volume recovery accelerated by the enhanced business model, and $120 million of cost savings. Management's track record of exceeding cost targets lends credibility to these commitments. As CFO Larry Hilsheimer noted, "Our biggest constraint on deploying capital has always been human capital to get the projects done," suggesting the limitation is execution capacity, not financial resources.

The primary execution risk is volume recovery. Management explicitly states that volume is "the big driver" and the "largest variable for upside" to guidance. The industrial economy's prolonged weakness, amplified by trade uncertainties and weak construction and manufacturing end markets, remains the key external variable. However, Greif's transformation reduces exposure to the most cyclical segments while positioning the company to capture disproportionate upside when demand returns.

Risks and Asymmetries: What Could Break the Thesis

The most material risk to Greif's investment thesis is a sustained downturn in industrial end markets, particularly chemicals, construction, and manufacturing. These sectors drive demand for metal drums, fiber drums, and large polymer containers, which still represent a significant portion of revenue. CEO Ole Rosgaard's commentary that "housing sales are at their lowest since '95" and "auto builds are lowest in 3 years" reflects the challenging environment. The company's guidance assumes no near-term improvement, but a further deterioration could pressure volumes beyond the low-end assumptions, making the cost savings insufficient to offset top-line declines.

Customer concentration in the chemical industry remains a vulnerability. While Greif is diversifying toward agrochemicals, pharma, and food, the legacy business still depends heavily on chemical customers whose demand is tied to industrial production. The fiber drum business is "really off" due to chemical sector weakness, and management is "not bullish on any kind of significant growth" in this area. If chemical demand remains depressed for an extended period, it could create a headwind that even aggressive cost management cannot fully offset.

Competitive pressure from larger players like Sonoco and Silgan could intensify, particularly in polymer and metal packaging. Sonoco's acquisition-driven scale (46% revenue growth in 2025) and Silgan's strong positions in consumer-oriented rigid packaging create formidable competitors with greater resources for R&D and market expansion. Greif's smaller scale post-divestiture could limit its ability to compete on price or invest in innovation at the same level. However, Greif's differentiated service model and reconditioning capabilities provide some defense against pure price competition.

The cost optimization program, while successful to date, faces diminishing returns as it scales to $120 million. The initial $50 million was achieved by eliminating 8% of professional roles and implementing network efficiencies; the next $70 million may require more difficult operational changes that could impact customer service or manufacturing flexibility. If execution falters, the 2027 EBITDA commitment could be at risk.

On the positive side, several asymmetries could drive upside beyond the low-end guidance. Volume recovery in industrial markets would flow directly to EBITDA given the fixed cost leverage in the manufacturing network. The IonKraft barrier technology could open new markets and command premium pricing, though this is more of a 2027 story. M&A in the fragmented polymer and closures space could accelerate growth, with management noting they "could do a $1 billion deal now and still be within our target ratio range."

Valuation Context: Positioning for Value Creation

At $66.45 per share, Greif trades at an enterprise value of $4.97 billion, representing 8.89x trailing EBITDA and 0.74x sales. This valuation sits at a discount to some packaging peers but reflects the company's recent transformation and still-recovering margins. Sonoco trades at 7.57x EBITDA but carries higher leverage (1.64x debt/equity vs. Greif's 0.46x) and lower growth in core industrial markets. Sealed Air commands 9.87x EBITDA but faces its own volume headwinds and higher cyclical exposure. Silgan trades at 9.06x EBITDA with stronger consumer packaging exposure but greater leverage (2.18x debt/equity). Graphic Packaging, at 7.15x EBITDA, remains tied to the paper cycle that Greif is exiting.

The more relevant metrics for Greif's new profile are free cash flow-based. With pro forma leverage below 1.0x and guidance for $315 million in free cash flow in fiscal 2026 (50% conversion ratio), Greif trades at approximately 12.3x forward free cash flow. This is reasonable for an industrial packaging company with improving margins and a 3.43% dividend yield that consumes only 89% of earnings. The planned $150 million share repurchase represents nearly 4% of the current market cap, providing a tangible catalyst for per-share value creation.

The company's balance sheet strength is a key differentiator. With total debt reduced by over $2 billion from divestiture proceeds and available borrowing capacity of $404 million under an $800 million revolver, Greif has the firepower for both organic investment and strategic acquisitions. Management's comment that they "could do a $1 billion deal now and still be within our target ratio range" highlights the strategic optionality. The target leverage ratio of 1.5-2.0x provides ample headroom for value-creating M&A in the fragmented polymer and closures markets.

Historical multiple analysis is challenging given the portfolio transformation, but the current EV/EBITDA of 8.89x appears reasonable for a business targeting $1 billion EBITDA by 2027. If Greif achieves this target and trades at a market multiple of 9-10x EBITDA, the implied enterprise value would be $9-10 billion, representing 80-100% upside from current levels. This assumes no multiple expansion for the higher-quality, less cyclical business mix, which seems conservative.

Conclusion: A Transformed Industrial Packaging Leader

Greif has executed a radical portfolio transformation that positions it as a focused, higher-margin industrial packaging leader with best-in-class operational discipline and a fortress balance sheet. The divestiture of over $2.2 billion in capital-intensive containerboard and timberland assets, combined with the successful integration of Ipackchem, has created a company built for resilience rather than cyclicality. The cost optimization program's dramatic over-delivery—$50 million in 2025 savings versus a $15-25 million target—demonstrates management's ability to drive structural efficiency gains that should persist through the cycle.

The investment thesis hinges on two critical variables: execution of the $120 million cost savings target by 2027 and volume recovery in industrial end markets. While management has adopted a prudent low-end guidance approach assuming continued demand softness, the company's "value over volume" strategy and fixed cost leverage position it to deliver earnings growth regardless of macro conditions. The exclusive IonKraft barrier technology and the high-margin closures business provide organic growth drivers that are independent of the industrial cycle.

Trading at 8.89x EBITDA with pro forma leverage below 1.0x and a 3.43% dividend yield, Greif offers a compelling risk/reward profile. The balance sheet strength provides downside protection and strategic optionality for M&A, while the cost savings program and portfolio mix shift create a clear path to the 2027 targets of $1 billion EBITDA and $500 million free cash flow. For investors willing to look through near-term industrial weakness, Greif represents a transformed industrial packaging leader positioned to deliver durable returns as the economy recovers and the new strategy fully scales.