Matt Eichmann - Vice President, Investor Relations Pete Watson - President and Chief Executive Officer Larry Hilsheimer - Executive Vice President and Chief Financial Officer.

Adam Josephson - KeyBanc Ghansham Panjabi - R.W. Baird Chris Manuel - Wells Fargo Mark Wilde - Bank of Montreal George Staphos - Bank of America/Merrill Lynch Matt Krueger - R.W. Baird Alex Wong - Bank of America/Merrill Lynch Justin Bergner - Gabelli Howard Bryerman - PENN Capital.

Good morning. My name is Jessa, and I will be your conference operator today. At this time I would like to welcome everyone to the Greif 2016 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you. Mr.

Matt Eichmann, Vice President of Investor Relations, you may begin your conference..

Thank you, Jessa. Good morning everyone and welcome to the question and answer portion of Greif’s 2016 first quarter earnings conference call. Consistent with Greif's commitment to enhance transparency, yesterday morning we posted a slide presentation and recorded remarks regarding our 2016 first quarter results to our website.

This morning prior to market open, we posted an update to the price, volume and foreign currency impact to net sales slide, which is found as part of the appendix in materials we posted.

The update reflects changes to the levels of volume and selling price inputs used to determine the overall impact of the operations in the Paper Packaging & Services segment on Greif’s consolidated net sales. I’m now on Slide 2.

Responding to your written and live questions this morning are Pete Watson, President and Chief Executive Officer; and Larry Hilsheimer, Executive Vice President and Chief Financial Officer. Please turn to Slide 3. This morning’s question and answer session will contain forward-looking statements.

Actual results or outcomes may differ materially from those that may be expressed or implied. Please review our filings with the Securities and Exchange Commission for more information regarding the factors that could cause actual results to differ materially from these projections or expectations.

During this question and answer session, certain non-GAAP financial measures may be discussed, including those that exclude the impacts of acquisitions and divestitures, special items such as restructuring charges, and impairment charges and acquisition-related costs.

There are reconciliation tables included in our earnings release and a presentation posted on www.greif.com yesterday. The format for today’s call is to first respond to questions emailed to investors at greif.com regarding our first quarter results. We will then address live questions in the same sequence.

We appreciate those of you who took time to review our materials and submitted questions in advance. Similar questions have been combined so that we can efficiently address as many topics as possible. I now like to turn Pete Watson, Greif’s President and Chief Executive Officer for a few opening comments..

Thank you, Matt. First I would like to thank all of you who are able to join our first quarter conference call today. Our vision for Greif is clear and simple, and industrial packaging will be the best performing customer service Company in the world. Delivering exceptional value to our customers is our path to success.

We clearly remain committed to the transformation process that will deliver long-term value to our shareholders. I like to share three key highlights from our first quarter.

They include Class A earnings per share before special items was up 33% compared to the prior year; improved operational performance expanded our gross profit margin by 250 basis points compared to Q1 2015 and we continue to demonstrate greater fiscal discipline resulting in lower operating cost structure and improvement in our cash flow.

While I am pleased with the progress being made by our team, I'm quick to acknowledge that significant opportunities remain in each of our strategic business segments. With that I will turn it back to you Matt for questions..

Thanks Pete. This first question comes from Adam Josephson at KeyBanc and Ghansham Panjabi of R.W.

Baird, and Pete this question is for you, how much did lower input cost contribute to your 250 basis points of gross margin expansion? Can you provide a breakdown of how much improvement is done from lower input costs, pricing and restructuring improvements and finally can these margins be maintained?.

Thank you Adam, and Ghansham for the question. As you know there has been extensive focus on all of our businesses and our portfolios are improving our gross margins, so we are pleased with the continued improvement trend. So to answer the second part of the question first, I will say yes, we believe these levels can be maintained and improved.

Let me answer the first part of the question, due to the fact that we operate in an environment where we have over 240 operations in 50 countries, we are in different markets and currencies and we have a really wide product of offerings. Providing a specific breakdown of the impact in each category company-wide prevents – provides challenges.

So we will not specifically break out the amount of benefits in each area of improvement. But I will emphasize the four key levers that we are focused on to improve our gross margin.

First we have a strong emphasis on our margin management and product mix management in every single market we serve, and to reiterate our focus is on driving value over volume. Secondly we do have sourcing and supply-chain initiatives that reduce total cost of ownership, and that includes both raw material sourcing and transportation cost reductions.

Third we do improve and are focused on improving our plant operating efficiencies and finally fixing or eliminating underperforming operations through network consolidation are our continued emphasis. Our team is making progress on this, but again we have much more to do..

Thank you Pete.

This next question comes from Chris Manuel with Wells Fargo, and Larry this question is for you, can you provide an update on your current progress with divestitures?.

Thank you, Chris. Since 2014, we have now closed 12 and divested 17 plants or businesses in our portfolio. That does not include the business operations that were held for sale at the end of this quarter.

We will continue to explore footprint consolidation and assessing our portfolio to dispose the non-core and underperforming assets going forward, but the majority of the actions are behind us..

Thank you. Mark Wilde of Bank of Montreal and Ghansham Panjabi of R.W.

Baird asked a similar question, and Larry maybe you could touch on this, can you provide any update to your cost savings target particularly in terms of progress thus far versus long-term goals?.

Thanks for the question Mark and Ghansham. We remain committed to the run rate targets we presented last June, and plan to provide a comprehensive review at our upcoming investor day in June. However, we included a table on slide 6 of our presentation reflecting the trailing 12-month performance against our transformation metrics.

We are very pleased with the progress we are making and we continue to progress with our transformation journey and our run rate targets coming out of 2017 are the same as those outlined last year subject to the impact of changes in the underlying assumptions that were outlined in that presentation..

Larry, sticking with you please this next question came from Chris Manuel of Wells Fargo, what restructuring levers are still left to pull on the individual segments?.

Thanks again Chris. We are in the middle of the divestiture of the two assets held for sale in RIPS, North America, for which we recorded a first quarter impairment as required by GAAP. We expect that sale to close in Q2 of 2016. Those and other focused efforts are continuing to find discrete SG&A opportunities.

We will continue our focus in North America at RIPS. RIPS recently announced several small restructuring activities as they continue to focus on the underperforming assets as well as consolidation opportunities in their footprint. While the FPS performance has improved it does remain below our expectations.

We continue to review options to further improve this segment and we have additional work to do to improve Turkey’s productivity in particular. We also continue on a continuous basis to examine ways to enhance the operating efficiency of our organizational structure and anticipate further cost savings opportunities from that review..

Pete this next question is for you and comes from Mark Wilde at Bank of Montreal.

Can you provide an update on the market conditions you are seeing in Paper Packaging, what is your outlook for Paper Packaging’s operating profit and pricing?.

Thank you Mark for the question. Before I reflect on how that impacts our business, let me first start with a brief overview of what has been published out in the industry to provide context to our business.

Recently corrugated box shipments have shown weaker demand at negative 3.4%, containerboard mill operating rates and inventory levels are higher, and as we all know there has been a recent decline in the published containerboard pricing, which is much more severe in regard to medium mill liner.

Now the context to our business, our corrugated shipments in the first quarter in our sheet feeder operation compared to prior year is up over 12% and this is due to the addition of a second corrugator in our Southeastern operation in North Carolina, and we have also shown continued growth in our specialty product portfolio.

Our mill operating rates are consistent with the industry statistics, and it is aided by our internal demand growth.

In regard to pricing, our containerboard pricing is consistent with published index prices, and just for context the product mix in our mills is 75% medium and 25% liner, and as you know medium is seeing higher price deterioration than liner, and corrugated pricing as we see it is much less volatile than containerboard, and as you know over 90% of our shipments in corrugated come from our corrugated sheet feeders.

So regarding the outlook for our business for the balance of the year, due to the reported market conditions we see a $15 million headwind to our operating profit and this is included in our full year guidance. If I may, I would like to make a few more overall comments. As we all know this has always been a cyclical business.

With the challenges today there is much less volatility than in past history and similar market conditions. So long-term our view is this is an excellent business. It is a very important part of Greif’s portfolio..

Thank you Pete. Larry the next several questions have to do with SG&A, so I will stick with you. This question comes from George Staphos at Bank of America/Merrill Lynch.

Yes, Greif previously guided to SG&A savings for fiscal 2016 to be $26 million to $30 million less than 2015, with $90 million realized in Q1, should we expect the savings to moderate as we progress through fiscal 2016?.

Thank you for your question George. Yes, as you recalled accurately, we did indicate in the fourth quarter call $26 million to $30 million of savings.

I will also just remind everyone that we indicated $21 million to $23 of that was from currency benefits, $10 million to $14 million were discrete items of further expense reduction that would be offset by wage and benefit increases of $5 million to $7 million.

At that time we indicated we wouldn’t take our focus off of identifying other opportunities and that those activities have led to some success that we now expect our SG&A savings to range between $30 million to $35 million less than the 2015 actuals. Again that will include the currency benefit and the offsets I previously mentioned.

Note that quarter-over- prior year quarter comparison becomes more challenging as the year evolves because of the actions that we took last year. We will continue though to search for other discrete opportunities to reduce cost further. We just have not incorporated any unidentified opportunities yet into our guidance..

And following on about SG&A Larry, Adam Josephson at KeyBanc asked how much lower do you think your quarterly SG&A expense can go from the current $93 million, and are these SG&A cuts having an adverse impact on the business?.

Thank you for the question Adam. We have made significant cuts, but we really have done them carefully trying to be fair and sensitive to our colleagues, but making certain that we drive value for our shareholders.

We have been able to reorganize things in a manner to remove inefficiencies and eliminate redundant or duplicative operations, do things like cut back on travel and entertainment, professional cost and putting in controls to manage those things, so that we don't backtrack and lose that benefit going forward.

In combination with our foot print consolidation, we have also been able to do so with no fear of damage to our business. We do believe there are further opportunities, but we will continue to do it very methodically and in a fashion that will be sustainable.

We expect further reductions will be targeted and in pockets, but not across the board and we will continue to treat our colleagues with respect. But we still do have way to go to get to the commitment levels that we made last June, and we intend to do so. .

Thank you.

George Staphos from Bank of America/Merrill Lynch asks with regards to free cash flow guidance, are there any factors we should be mindful of giving you increased the bottom end of the range, but maintained the top end? Also what are your expectations for working capital?.

Thank you George. Our outlook for the macroeconomic environment precluded us from increasing the top end of our free cash flow range. We elected only to tighten the range as a result of the gross margin improvement and better than expected SG&A reductions, which are obviously offsetting the weaknesses seen in the paper packaging and services segment.

As to working capital, on the Q4 call, we mentioned that our operating working capital management would result in a 4 million positive to $18 million impact of free cash flow.

We continue to stay with that range, although we work to scrutinize our opportunities with the ultimate goal of enhancing our operating working capital performance this year and in future years..

Thank you, Larry. This next question came from several investors.

Are you confident in maintaining your dividend policy?.

Yes, we are. We don’t have a concern about maintaining the policy particularly given the path of transformation driven improvement we are on. We do understand the reason interested parties continue to raise the concern, but let me try to mitigate the concerns. Free cash flow is certainly something we watch as do many of those interested parties.

Looking at dividends paid relative to cash flow is natural comparison. And free cash flow is a good metric, but it's actually just one measure in a more complicated matrix involving acquisitions, dispositions, capital structure, and etcetera.

We believe that one way to look at it more comprehensively is to look at our level of indebtness in conjunction with free cash flow in dividends. You might recall that during fiscal year 2011, we increased our net debt from approximately 860 million to over 1.2 billion due to heavy CapEx and acquisitions that year.

From that point until the end of the first quarter of 2016, we have had free cash flow of roughly 560 million.

We paid dividends of 418 million and reduced our debt to nearly 1.1 billion, while spending every single dollar of CapEx that we deemed appropriate, averaging over a $140 million per year in a period during which we had no desire to make significant acquisitions.

I'd also point out that those figures that I just covered included the just completed first quarter when we had a cash use of 56 million in addition to paying dividends of 25 million. Furthermore, our free cash flow guidance this year is a 125 million to 150 million, after again all the capital that we look and desire to spend.

And we expect to pay dividends of roughly 99 million. We're in the midst of driving substantial improvements in operations and free cash flow, so that we can re-earn the right to grow inorganically if we choose to do so in the future.

Finally, I would just add that the board has the utmost confidence in our business and recently declared the dividend following our most recent board meeting..

Thank you, Larry. Pete, these next two questions I think will come over to you. The first one comes from George Staphos, Bank of America/Merrill Lynch. He asks, can you update us on the new Steel Drum plant in Saudi Arabia. And what impact you expect from a sales and EBIT standpoint in FY16..

Yes. Thank you, George, for the question. The new Steel Drum plants in Jubail, Saudi Arabia, and it's be operation late May or early June. Now, the volume in this operation from our primary customer is expected to ramp-up gradually, during the balance of our fiscal year which as you know ends in October.

Due to the graduated volume trend, the expected impact to our revenue and profits are not expected to be material this year. And that input is part of our forward guidance..

Thank you, Pete. This next question came from Ghansham Panjabi of R.W. Baird.

Can you quantify any benefit from raw material cost during the quarter, and what's your outlook for the remainder of fiscal 2016?.

Yes. Thank you, Ghansham. Again, similar to my earlier answer on gross margins. Due to the complexity of operating over 240 plan operations in 50 countries around the world, we will not specifically quantify the impact from raw material cost during the quarter or any quarter to be frank. But I will provide a little bit of insight.

So, on our resin based product and rigid industrial packaging business, which is our plastic drums and IVCs, which represents less than 20% of our total revenue in that business segment. Lower resin prices did contribute to lower material cost and was one part of the reason for gross margin improve in the segment.

And other benefits were just as important which included margin management activities, product redesign, favorable mix, as well as productivity efficiency in all of our operations. And Ghansham, looking forward, we do not expect to see any material benefits related to raw material cost movements..

Thank you, Pete. Larry, this question is for your and comes from multiple investors and analysts.

What role were you thinking around improving guidance, what assumptions particularly FX are included? How much low do you think your quarterly SG&A expense can go?.

Thank you for question.

The improved guidance due to the following somewhat repeating a few things said earlier, but we expect better than anticipated SG&A savings now in the range of $30 million to $35 million less than last year, noting again the comparisons going forward on a quarter over prior year quarter become more difficult due to accents taken in the later quarters last year.

Most of those eight major SG&A reductions were made and like I said we will continue to look for small pockets of opportunity. We also anticipate continued and further benefit from our focusing on improving gross profit margin with the levers that Pete mentioned earlier, as well as the continued focus on improving underperforming operations.

However, we anticipate that those will be primarily offset by the $15 million headwind at an operating profit level that Pete mentioned from our paper packaging and services business, as well as just general sluggish industrial economy as impeding growth.

Finally, we're very confident based on the performance that we're seeing out of our business leaders and their teams and the challenges that we put in front of them and that let us to feel confident to raise the level of guidance. As to FX, I'll just walk through that.

When we bridge this in the fourth quarter call, we started with last year's earnings at $2.18 per adjusted share. We backed out the $0.08 of earnings that we had from Venezuela last year. We then indicated that we expected FX impact of negative $0.12 to negative $0.08.

We're probably at the higher end of that right now, maybe even a tick above $8 million to $12 million impact. So, $0.08 to $0.13 maybe, $8 million to $13 million kind of number now.

We talked about the fact we had favorable tax impacts last year to discreet tax planning opportunities that would not repeat, which was $12 million to $16 million or a $0.12 to $0.16 negative impact.

But then, we expected an increase related to improved operational performance net of tax and non-controlling interest that was $0.19 to $0.49, that we'd be raising that to $0.24 to $0.54 which would then take us to $2.10 to $2.40 per share.

On the FX matter, the complex nature of our supply chain makes it difficult to really get trade value out of specific predictions on currency rates in specific countries.

What we've tried to do is provide that guidance on an earnings per share basis as well as just indicate that if you applied the index factor that we provided on the basket of our revenue worldwide, we saw the FX impact in our original predictions at about 6% of our revenue that we plan for 2016.

We bumped that up to about 6.5%, based primarily on the continued deterioration of the ruble, little bit better full-year expectation on the euro, just because the first quarter was a little better than we anticipated. But we expect that it will continue to fall relative to the dollar for the remainder of the year.

And then the Brazilian real is also contributing to that bump up from 6% to 6.5% for that index to be applied against our overall revenue..

Thank you, Larry. This next question comes from Adam Josephson in at KeyBanc. And maybe you can touch on this as well too.

What was your leverage ratio at quarter end and is that on total debt or net debt basis and what's your path to the deleveraging the balance sheet?.

Thank you, Adam. Our leverage ratio utilizing net debt and trailing 12 month EBITDA before special items was 2.8 times, that includes Q1 which is usually our worst quarter for our leverage due to the business seasonality. Our total debt is well below the peaks that we saw in 2012 and 2013 and has declined by about 30,000 year-over-year.

We expect that to decrease further by year-end, which will improve our ratio further and obviously our EBITDA will continue to increase in coming years due to transformation activities. And so, we are confident of our ratio getting down into our targeted range of two to 2.5 times..

Thank you, Larry. Pete, this next question is for you. It also comes from Adam Josephson who writes "What do your value your timberland on a per acre basis and what are the recent comparable transaction prices?".

Yes. Thank you, Adam, for the question. So, if I could I'd answer the second part of the question first. So, we think the Plum Creek transaction was announced in September around pension funds in Washington, Alaskan, Oregon, offers the best comparable, primarily because of footprint of those properties is very similar to ours in the published values.

So, that deal was $2150 per acre. So, we would expect our values to be comparable to that Plum Creek transaction..

Thank you, Pete. Larry, this next question is for you from George Staphos with Bank of America Merrill Lynch.

What is great considered be normalized margins for the RIPS and flexible segments?.

George, thank you, for the question. As background, I would direct you to the transformation targets we provided for each strategic business unit as presented in the June of 2015's earnings call.

As you recall we setup broad corporate wide metrics of 20% gross profit, 10% or less SG&A and 10% or more operating profit on a run rate basis coming out of 2017. At that time we emphasized that the most important was of course the bottom line.

We also indicated we would try to do better than those commitments and we remain firm in those commitments subject to the underlying assumptions then provided.

That said, we reflect a gross profit margins in the 19% to 20% range for each RIPS and flexibles with slightly higher gross profit margin in paper packaging and services and land management which netted to the 20% level overall.

We feel very good about the progress we're making on margin and remain committed to driving further improvement, while working diligently to protect the games we have made to-date. We do realize things can vary from quarter-to-quarter, rapid raw material price swings can impact margins from time to time.

But over time we believe that these objectives are fair and appropriate normalized margin objectives..

Thank you, Larry. And Larry, one more question from Adam Josephson at KeyBanc.

For how much longer do you expect to have significant impairment charges, you've had a substantial amount over the past few year and how long will they continue?.

Thank you, Adam. Obviously we look forward to not having impairment charges. The impairment that we took was this quarter was the result of two non-core assets that were held for sale at the end of the quarter. The vast majority of the impairment came from goodwill allocations. This obviously was what drove us to a GAAP loss result for the quarter.

Looking forward, we expect these higher levels of impairments and restructuring that we've had for the last couple of years to tail off as we get closer to the end of our transformation journey..

Great. Thank you, Larry. Thank you, Pete. Just at this time we're going to move over to live questions. So, I'll turn the call back over to you.

Please?.

Thank you. [Operator Instructions] Your first question comes from the line of Chris Manuel from Wells Fargo Securities. Please go ahead..

Good morning, gentlemen. Thank you, for taking our questions. Just a couple around some of the different regions and volumes I guess in particular. So, as I look through and I do appreciate I guess you updated that this morning. It looks like the only changes down in the paper segment perhaps but we can touch on that in a moment.

But when you look through kind of the business trajectory, North America down 10%, Latin America up to AMEA up six, APAC down five, etcetera. What, I mean those are a quite a bit different than perhaps what we look at if we were to see just say industrial production.

You maybe give us some color flavor with respect to what's happening in those regions? Why in the May are you so strongly outperforming, is there something to do with mix or geography or product or what have you there and maybe why in North America you're underperforming, is it related to certain region, certain products, etcetera?.

Now, Chris, this is Pete. I'll take that and I'll if you don't mind I'll start a little broader context specific around the rigid industrial packaging and then I'll make some comments on each of the regions.

So, our sale and then specifically about rigid industrial packaging, our sales variance is around 16% and the main part of that is FX on a balance, although there are certain components of volume the price that make that up. And I do want to comment, our strategy is based on value and not volume.

And that really has a lot of emphasis when I talk and make comments on North America. Got a huge emphasis on customer service margin management and act of product mix management. Our gross strategy IBCs continues to progress very strongly specifically in AMEA and APAC.

One other comment around the markets and the regions, we expect to see steel raw material pricing to increase as we move forward in 2016. And it's really a result of some of the tariff and duties being placed on exports in the U.S. and AMEA. I think that industry is doing a much better job of managing supply versus demand.

And just recently in last few days in China there has been a much greater appetite to take economic downtime and close high cost assets which is a really new trend in that part of the world and then we also see iron ore prices arising very fast. So, with that context let me walk through the regions for you Chris.

In AMEA, as you referenced, we had a really solid results for the quarter. The volumes were much stronger and Steel Drums, it's all led by Western Europe and parts of Eastern Europe, predominantly Russia. I think part of the currency situation where our customers are more competitive on a global scale at Europe and some other parts of the country.

And the demand is much stronger in Europe, Western and Eastern Europe on the petroleum and lubricant segments. Another big factor in our volumes in AMEA has to do double-digit growth in our IBCs and that's led by strong performance in Germany and Russia for the quarter.

And new segments that drove that strength, pass to the commodity chemicals and food. If you move down to APAC, where our volumes were lower in large Steel Drums, our strength in IBCs was very impressive, over 30% in IBCs.

The lower steel drum volume in APAC is more representative of what's happening to the overall industrial demand in that region, mainly China and Singapore. And the demand segments that have led that drop or chemicals and lubricants. And we believe our volume is proportionate to that demand loss in that region.

I will say that our APAC had record results in the quarter. So, again we're not chasing volume, we are really putting a huge emphasis on value, serving our customers, managing our margins, and actively managing our product mix to the benefits of results.

When you go to North America, I will tell you I am very pleased with the continued positive improvement of their business performance and of the lower volume in large Steel Drum that is greater than the market demand certainly.

But I just want to make a reminder to everybody, throughout 2015 we did reduce on a conscious basis our Steel Drum capacity by over 20% and part of that reduction was that we would focus on margin management activities and upsell our products mix to improve our business performance.

We've also spent a good amount of time in improving on the performance operations. But I will tell you, in our Gulf Coast operations we continue to see really weak demand from our chemical sector. Our fiber drum volume is flat and that's in spite of our largest customer still having an extended shutdown.

So, we're actually quite pleased with the progress for our fiber drum trajectory in a market environment that is sluggish at best. And finally in Latin America, despite of Brazil and the industrial economy problems, our performance is quite improved and we are pleased with what they've done.

Our large steel volume is down based on that challenging industrial economy predominantly out of Brazil, because that's a high proportion of our volume in Latin America. But I will say our plastic drum business is growing relative to some of the food and produce markets in our Latin American countries.

Overall, I am very pleased with the improvement of the business and the opportunities. We are creating greater value for the RIPS business. On the PPS segment or the Paper Packing Segment, as in on my comments earlier, we saw a good growth in our corrugated sheet feeding operation. Again that's significantly higher than market demand.

And that's predominantly around our new sheet feeder in North Carolina and we're seeing really good growth on our specialty product portfolio. Our mill volume was fairly consistent with the industry statistics at this point. And with that, if you have any other questions, I'd be happy to answer them, Chris..

Okay. Well, my follow-up is kind of related than to a couple of the other two segments. You started to touch on paper. And it looks like you guys revise some the numbers in the deck from yesterday to today.

So, I mean maybe first part, what was the part of the revision, but I would have guessed that I think in yesterday's number you had volumes up close to a 9%. And that probably makes sense or seem to make more sense given you said you were adding I think it was 8% of so capacity through the mill footprint and then corrugator.

So, I'd have guessed you'd have had upper single digit opportunity. So, now it looks like it's revised down to kind of 4% and then priced 4%. So, two parts here, what does that look like the rest of the year or does that suggest then you're not running those mill all the way at full capacity there. So, that's kind of the question on the paper piece.

And then the flexibles piece, down 12.5%, how much longer should we continue to see a significant attrition there before it kind of bottoms up?.

That's great. So, what I'll do is have Larry comment on the changes to the attachment this morning and then I'll make comments further outlook in paper patching and flexible products..

Yes, Chris. As we were going through things, we had had a question previously that we dug further into and recognize that internal sale of tonnes from our mills to our plants. So, an intercompany sale of 15,000 tonnes had been included in the volume factor, so that obviously was should not have been reflected in that volume segment.

So, we revised the figures..

So, looking forward in the paper packaging segment. Our expectation is to run to demand, so we're not going to run volume for volume sake. I see going forward in the both segments to be similar to what we saw in the first quarter.

I think there is always going to be soft spots in given months, but I think overall I think the trend we saw in our first quarter will be similar to what we should expect going forward in our plan. In the flexible product segment, the largest drop in that volume is relating to North America.

We've actually been to be quite honest underperforming in that segment. Some parts of our Central Europe for our loop business is down because of some margin management activities we are doing, but I'll tell you in Asia-Pacific in our one loop business in Central and Eastern Europe, those volumes are positive.

We still have a lot of work to do in the FPS segments, specific around North America volumes..

Thank you..

Your next question comes from the line of Justin Bergner from Gabelli. Please go ahead..

Good morning..

Hey, Justin..

Hey. My first question just relates to raw materials. I mean, given that you need to sort of manage the business and incentivize people in the business.

How do you internally get a grip on changing raw material prices to make sure that operating results of that you're incentivizing business leaders on are not you know moved significantly one way or another by raw material input cost?.

Justin, this is Pete. And thank you for the question. So, in regard to incentivizing our people, our incentives are cascaded throughout based on profit. And part of that profit is great profit and part of it is operating unit profit. So, and I'll broadly answer raw material management to our performing in a business.

So, that is one of the inputs; a very large input.

I would say a bigger factor is how we manage our margins and that again is decisions we make every day and our choices in how we price business and the choices in which products we sell to and how we manage our product portfolio mix and then it's combining of how we manage our inventories to the raw material trends and then operating efficiently as possible to expand and maintain or expand our gross margins..

Yes, Justin. I just, just to add in. We can gain down this. We obviously provide pricing guidance to our salesforce and they're not allowed to go outside that guidance without approval from the business unit. And business unit's driven on as Pete indicated from incentive standpoint, profitability in RONA.

So, the alignment is to our overall profitability is pretty direct..

Okay, thank you. Maybe I'll just ask the question in another way.

I mean, do you have internal matrix that try and look at the change of profitability internally, excluding the raw material tailwind or headwind?.

Yes, we do..

Okay, thank you. My other question relates to the volume that is said to be divested in rigid industrial packaging.

Is that volume that you anticipated divesting sort of if we go back three months in how large of a headwind might that be to sales or volumes once it's divested?.

When you talk about divestment, are you talking about that's different than when we close and consolidate our Steel Drum network in North America; is that correct?.

Yes. Talking about the asset that's impaired in the first quarter, pending a sale of that asset..

And your question is, have we accounted for that in our earnings guidance?.

No. My question was "Is that sort of a new divestment or is that something that was anticipated between months ago and can you give us any sort of perspective on how large a percent that will comprise of your sales or volumes in the RIPS segment?".

Yes. It's something that in the figures that we provide on this chart is not included because of the volume in that business. It distorts the drum figures, Justin.

But we knew that we were down going down a path of disposing of these units, we did not know exactly when we would enter into a sales transaction, a pending sales transaction, but that is now contemplated in the guidance for the reminder of the year..

Okay. So, just to clarify the percentage volume change figures don't include the business to be sold.

But I guess, shall I wait and sort of see how it affects the sales figures once it's sold or is there any color you can provide now on the size of that business to be sold?.

Yes. We probably should not do that, Justin. We are under an NDA and I think if I covered it we'd sort of disclose what it is..

Totally fair. Thank you..

[Operator Instructions] Your next question comes from the line of Mark Wilde from BMO Capital Markets. Please go ahead..

Good morning, Pete. Good morning, Larry..

Good morning, Mark..

Good morning..

I wondered, Pete, is it possible to get any updated thoughts on just a portfolio around the company.

Recently, you've been suggesting an openness to kind of looking at the whole portfolio of the company?.

You know, that's a fair question. I appreciate you asking so. My view is I really have an open lens on our portfolio and our biggest motivation is to provide shareholder value period. And that's long-term shareholder value.

So, in any of our business is broadly with the four portfolios or more specifically in each of the business segments there are portfolios inside of that. Our task is to improve the performance of the business and have very specific plans that had milestones with dates on what specifically has to be done to improve each business.

And if we fall short of that business, we have a remediation plans or at that point we might make decisions to fix, continue to fix or sell or close asset. So, I think that's at a general viewpoint, the way we look at all of our assets.

And again my view is it, if it doesn't bring long-term shareholder value to our investors, then it's a business or portfolio that doesn't make sense for Greif and we'll take action..

Yes, okay. So, I guess just it's kind of a follow-on. You actually gave some numbers this morning on sort of estimated value of the land, you said 2150 an acre from that Plum Creek transaction in September. It's a pretty good marker. That would put the value where you landed, it's something just north of $500 million.

If we go back and look at EBITDA in that segment over the last several years, it's been about $10 million to $20 million. And I think that's included some land sale. So, on that basis you are suggesting that the land is sort of 25 to 50 times EBITDA, and your stock is trading at about six to 6.5 times.

So, even assuming some tax leakage, why would you hold on to land, why would you not kind of sell it and reallocate that capital when there is such an enormous disparity between what the lands worth and where your equity trades?.

Yes. Mark, its Larry. Thanks for the question. And we have examined that from time to time looking at alternative structures to hold the land, dispose the land, those kind of things.

The tax spaces is extremely low and so the tax leakage you mentioned is not insignificant and to-date we have not had the specific need to access that capital to for other usage for our shareholders and it didn't seem that taking it down to add with that big tax we had to pay; very low interest rate debt made a lot of sense..

Yes. I just, you know, striking, Larry. Even if you assume a big tax played and I think that on a lot of these timber sales people use kind of tax deferred note structure, but even if you assumed enormous leakage like 30% or 40% leakage, you still probably selling it at kind of 25 times versus stock to trade at quarter of that multiple..

Yes. And it goes back to our need for a capital again, Mark. But we'll keep exploring those things. We look at them periodically and try to make the judgment of what's best for our shareholders. We have a lot of shareholders, investors, and our lenders, who very much like the fact we have it on our balance sheet..

Okay. And then just like -- just one more follow-up on portfolio. Pete, you made some comments when you were talking about the paper business that made it sound like you had decided that that was going to remain a portion of the portfolio.

Did I hear that correctly?.

Yes, Sir,.

Okay, alright. Thanks, Pete. I'll turn it over..

Yes, Sir. Thank you..

Your next question comes from the line of George Staphos from Bank of America/Merrill Lynch. Please go ahead..

Hi, good morning. It's actually Alex Wong sitting in for George. Thanks for all the details. Just wanted to follow-up on an earlier question on flexibles. You mentioned volumes in North America have been maybe challenging and underperforming.

Can you flush that out in terms of maybe what the variance is and if there are any path improving that, I believe we'll still continue to take some pricing initiatives to rationalize lower margin products in the segment if you could update on that as well?.

That's fair, Alex. And so, in regard to North America, that's not the volume is a combination of margin management product mix but it's also an issue of we're just under performing commercially in that region just to be quite frank with you.

The balance of the FPS volume to margin our conscious efforts to upsell our product mix and to achieve margins that we believe are representative of the value we can bring to our customers in markets.

I hope that answers your question, Alex?.

It does, thank you. And just as a follow-up, sticking with flexibles, I believe in the webcast comments you mentioned that the segment was at a breakeven run rate exiting the quarter, I think which is consistent with your expectations.

But can you discuss maybe quantify for us what the short-term mile markers we should be watching for? You also mentioned improving operations in Turkey as maybe a component of that. If you could provide any specifics there, it would be helpful..

Now, thank you. And so as we said and we mentioned this in our fourth quarter call, that was our intent to come out of Q1 at break-even levels. We did that, but we are still not satisfied where the business stands. As you reference in any portfolio player transformation, we have milestones or evaluate the performance of the business.

And our goal is to deliver higher value to both Greif and our JV partner, but to highlight some of the key elements on that turnaround, is driving higher gross margins through some of those comments I made earlier about higher selling prices upselling our product mix and driving improvements in our operations.

We have seen an improvement in our gross margins, sequentially. We still have a lot more work to go in that. A big part of that is some of the operational cost improvements that are required in our Central European and Eastern European footprint which includes Turkey.

We are making progress but we have a lot more opportunity that we have to generate and have to complete this year. And then finally our SG&A costs are doing quite well, they are much lower sequentially and that's the result of some of the network consolidation efforts and cost containment efforts we've done in the past year and would be ongoing..

Thanks for that..

Your next question comes from the line of Adam Josephson from KeyBanc Capital Markets. Please go ahead..

Hi Pete, Larry, and hi good morning. Thanks for taking my two questions. Pete, first on container board.

What were your price down from a year ago on a per ton basis? And then related to Marks question, it sounds like you are going to keep this business, why not consider spending or selling it when we're arguably at the peak of the container board cycle as evidenced by the recent start of these price declines?.

Yes. Now, thanks for the question, Adam. So, the first question about our container, where prices, we don't divulge specific per-ton changes. But I will tell you that the changes are slightly less than published index prices through the first quarter.

Second, in regard to our portfolio, we certainly could sell the business and will provide short-term gain for our shareholders. But we're looking more from a long-term perspective. We think that we performed well in this space. We think we're positioned well in this space long-term.

And our view is that we can provide better shareholder value in the long-term by keeping the business and improving the business as per our plan..

Okay. Thanks, Pete. And just one, just on the -- I think some of the issues that Justin asked about earlier, you mentioned you couldn't disclose the raw material benefit in the quarter. You couldn't disclose your precise FX assumptions or that you can save the size what rate you're using.

I mean, if the business is sufficiently complicated that you can't disclose these things, I mean at what point do you expect the company to be simple enough, such that you can disclose these items in the future? Just, you know, most companies we cover or are able to disclose their raw material benefits or drags in the given quarter?.

Yes. Adam, obviously the variety of businesses that we are in combined with the geographic footprint and in different products and raw materials were used. We just don't think its value to run through a list of items. I understand you would find it valuable but we just don't.

On FX, we are trying to provide as much guidance as we think would be helpful in clarifying by providing the impact directly to the guidance that we provide in earnings per share. And then trying to provide something that allows you to understand at least the impact of the topline.

But we'd be happy to explore with you further and I know you've talked to Matt some about things that we might be able to do add more clarity on that..

Yes. I'd just add one more comment on that. We can, we understand what our inputs are on raw materials by discreet business. But again when you bring it to a higher level with the broad portfolio, with the complexities of working in different countries and the FX to bring it to a higher level, doesn't necessarily tell to a great story.

And we just choose not to disclose that whether that's right or wrong. That's our current position..

Sure. Just a comment that if your gross margins were up 250 bps, right, and it's just hard for us to know how much of that was underlying operational improvements versus raw material benefits which is why you got to ask the question in several different ways. It's just it's hard for us to access your performance without knowing that information.

That's all..

Yes. No, I understand that and I can appreciate it.

The one thing I will mention and I think I made in the first question that we believe these margins are very sustainable and we believe we can improve the margins based on all the four key levers that we are operating in to drive value through gross margins and it has to do with margin management and upselling product mix has to do with our sourcing and supply chain initiatives to get lower total cost.

It has to do with productivity efficiencies in our operations and another big element is our footprint consolidation network consolidation overdriving a lower overall operating cost structure across our business. So, it's all of those elements and there is probably 15 to 20 levers in each of those four categories that drives value.

So, we're working very diligently. We have very specific plans in each of those four categories and what we're doing to improve gross margins and again I feel and the business leaders feel very comfortable and confident that those margins on the long haul can be sustainable and quite frankly be improved.

But it's not a layup, its hard work every single day in the business but that's the operating discipline we are instilling to make sure we do that..

Thanks, Larry..

But Adam, we hear you. And we'll go back and explore what whether we can put together some type of index that we could say okay here is what we have got in our plastics businesses worldwide, here's what we got in our steel businesses worldwide. Pleased to be able to break it down between raw materials and other margin management activities.

So, we'll take it back..

Sure. Thanks, Larry. Thanks, Pete. Best of luck..

Yes. Thank you, Adam..

Your next question comes from the line of Ghansham Panjabi from Robert W. Baird. Please go ahead..

Hi. This is actually Matt Krueger sitting in for Ghansham.

How are you doing?.

Hi, Matt..

Hi, Matt..

Hi.

Can you guys describe the current competitive environment, especially given the lower raw material cost that you are seeing across the industry? Have there been any changes recently?.

Would you like to reference rigid industrial packaging or the entire portfolio, Matt?.

Yes. If you could go through by segment, I think that would be helpful..

So, a general comment. I think when you have deflationary raw material environment, typically that generates more competitive environment from everybody because the revenue shrink and people inherently get more aggressive to generate higher revenue. That's the general comment in most packaging businesses.

I think the other balance has to do with capacities and structure in each operating environment for example in the rigid packaging the competitive balance and competitive environment, all four of those regions are slightly different. And that drives competitive pressures.

For example, in Brazil it is highly competitive because of the economy and industrial demand is lower. And in other regions in our rigid business it's not quite as cut throat or volatile as some of those regions.

I think in the paper packaging segment I think it's pretty highly publicized and documented that today the container board markets specifically around the open market segment which represents approximately 15% of the North American container board volume is quite competitive because of the new competitive entrance who do not have any integration downstream.

So, that creates a very highly competitive situation there. And I think in the flexible products business, it's a highly fragmented business that depending on structure in each of those discreet markets because it's more local and regional and global, it's a different story in each of those flexible product regions and local markets.

I hope that answers sufficiently what you need, Matt..

No, that's really helpful; thank you.

And then given substantial declines in plastic resin prices, have you guys seen any customer or industry shift towards plastics as a preferred substrate and that's also in the context of the potential increase in steel prices that you guys noted in the back half of the year?.

Yes. The one major migration shift on products and it's the reason why it's one of our growth platforms, is products going from steel drums or fiber drums or even plastic drums and IBCs, you look at the three major growth regions; North America, AMEA and China or APAC that has the highest growth rates by far in industrial packaging.

So, I think that's the one clear trend that we see is migration to higher growth rates in IBCs and that's why we are positioned ourselves to take advantage of that today and in the future..

Okay, thanks. That's it from me..

Thank you..

Your last question comes from the line of Howard Bryerman from PENN Capital. Please go ahead..

Yes, thank you for taking my question.

Can I shift to your capital structure? Just curious to know how can we look at how should we look at some of the short dated paper, you have your six and three quarters of '17 they are coming due in February and just wanted to know how we should look at your thoughts on refinancing particularly given the way the credit markets have been little volatile lately?.

Yes. Howard, thank you for your question. We've been actively engaged with our banking group in exploring those options. Heretofore we had no one raise any concerns about our ability to refinance. We are exploring various options in terms of how we might structure that replacement, but at this point we have no concerns about those maturities..

Just to dive a little bit deeper.

Would one of those options be perhaps accessing the term loan market and receiving maybe lower cost of capital?.

Yes. We're exploring all options including that one..

Okay. And then just finally I would just add there was a question about a $500 million of land value. I would suggest as a creditor of the company that it gives us great comfort that you have that sort of liquidity on the balance sheet and probably both is well for you when you access the capital markets and for to a lower cost of capital.

I would think that that would be a benefit for your equity holders as well..

Thank you, Howard, for reinforcing prior requirement..

Okay. Thank you, for your time..

I turn the call back over to the presenters for closing remarks..

Thank you, Jessa. That concludes our presentation today. I just want to remind you that we plan to host an Investor Day on June 24th, 2016. Details about the event are posted on our website; and please consider attending. The replay of this question-and-answer session will be available later today on our website at www.greif.com.

We appreciate your interest in participation this morning. Thank you, and have a good remainder to your day..

This concludes today's conference call. You may now disconnect..