Deb Strohmaier - APR, Vice President, Communications Mike Gasser - Chairman and CEO Don Huml - Executive Vice President and CFO

Ryan McClain Christopher Chun - Deutsche Bank Securities Chris Manuel - KeyBanc Capital Markets Bob Franklin - Prudential Financial Michael Blassie

At this time I would like to welcome everyone to the Greif first quarter 2009 conference call. (Operator Instructions). Thank you. Ms. Strohmaier, you may begin.

Thank you, [Artevia]. Good morning everyone. As a reminder, you may follow this presentation on the web at greif.com in the investor center under conference calls. If you don't already have the earnings release, it is also available on our website. We are on slide two. The information provided during this mornings call contains forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are on slide two of this presentation in the company's 2008 Form 10-K and in other company SEC filings, as well as company earnings news releases. As noted on slide three, this presentation uses certain non-GAAP financial measures, including those that exclude special items, such as restructuring charges and timberland disposals. Management believes that non-GAAP measures provide a better indication of operational performance and a more stable platform on which to compare the historical performance of the company than the most nearly equivalent GAAP data. All non-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation and in the first quarter 2009 earnings release. I will now turn the call over to Chairman and CEO, Mike Gasser.

Thank you, Deb. Good morning everyone. Thank you for joining our conference call today. If you are following this presentation on the web, we are now on slide four. I will be blunt. This quarter was as challenging as we expected it to be. Seasonal factors have historical reduced demand for drums compounded the impact of the lengthened global downturn throughout the manufacturing sector. We answered the challenges with accelerated, yet disciplined execution of comprehensive great business system initiatives. Further, our management team remains focused on sizing the activities of the organization to the demands of the market. The outstanding character by our hired team is evident as we all work to maintain our footings on this difficult trend. Now to slide five. As I said last quarter, we expect the global economic slowdown to continue through 2009. That is not stopping us however, from making progress on our strategy. In the past few weeks, we have closed on two small tuck-in acquisitions, one in our, industrial packaging business in the southwestern United States and one in our load securement business in packaging accessories. These acquisitions are immediately accretive and all those together, they represent less than 2% of sales. These are the type of acquisitions that create value long-term. A week ago, we announced the closing of our new senior secured credit facilities which were over subscribed. With enhanced financial flexibility and access to capital, we are well positioned to address the challenges in the global economy. With increasing opportunities available to us, and the ability to selectively pursue the right ones, we will emerge from this recession, a stronger company. We will go to slide six, please. We are balancing our strong defense with an agile offense through this economic period. The Greif Business System is a catalyst that enables strong relative performance, increase value as we work through this cyclical trough. Our solid major team is proving to be up to the challenges thrown at us and our balance sheet remains strong. Our activities to date some of which I've mentioned a test to our determination to reearn the premium evaluation, we were achieving before the economic crisis. Executive Vice President and Chief Financial Office, Don Huml, will now provide you with an update of our financial results.

Thank you, Mike. Good morning everyone. Please go to slide seven. The unprecedented global economic crisis impacted our performance year-over-year and sequentially. The comprehensive actions, we previously announced to mitigate these developments, are being aggressively implemented and are gaining traction. Consequently our financial results for the first quarter are consistent with guidance for the full year. Net sales decreased 21% to $666 million or 15% on a constant currency basis, with a 20% decrease in sales volumes and a 5% increase in average selling prices. During this period we adjusted our cost structure to lower our activity levels across all product lines and regions. Operating profit before special items was $46 million for the first quarter, compared to a $105 million last year or $75 million excluding a one-time gain of $30 million from the divestiture of business units. Paper Packaging's operating profit improvement compared to the first quarter of 2008, was more than offset by lower results for Industrial Packaging. We expect operating profit to improve as savings from recently implemented initiatives are realized during the remainder of 2009. Net income before special items was $22 million in the first quarter, compared to $69 million last year, which included the one-time after-tax gain of $21 million for divestiture of business units. Slide eight, shows Industrial Packaging net sales decreased 21% or 13% excluding the impact of foreign currency translation to $530 million, notwithstanding general higher selling prices compared to the same period last year. Operating profit before special items decreased to $22 million from $78 million last year, primarily due to the $30 million non-recurring divestiture of business units in 2008, coupled with lowered net sales and a $5 million lower-of-cost-or-market inventory adjustment. The segment is implementing the accelerated Greif Business System initiatives and contingency actions to mitigate the impact of lower activity levels. Now, on slide nine, Paper Packaging net sales were $130 million in the first quarter, compared to $169 million last year. Operating profits before special items increased to $21 million in the first quarter from $20 million in the first quarter of 2008. The increase was primarily due to higher containerboard selling prices implemented in the fourth quarter of 2008, lower raw material costs, especially old corrugated containers, which more than offset lower sales volumes. This segment too, is implementing incremental and accelerated GBS initiatives and contingency actions to mitigate the lower activity levels. On slide 10, operating profits before special items for the timber segment decreased to $3 million in the first quarter from $6 million last year, due to lower special use property sales consistent with plan. On slide 11, you see our full year 2009 goals. Given the sudden and dramatic changes in the global economy, our current focus is to outperform our peers and to adjust our cost structure consistent with expected activity levels. This requires us to be lean, agile and entrepreneurial throughout the enterprise. Our objective is to fully implement the accelerated GBS initiatives and contingency plans and deliver the expected operating profit impact of at least $100 million. During the first quarter, we eliminated 1,375 positions and closed 10 facilities. The full impact from these actions will be realized during the remainder of 2009. As Mike noted, we were pleased to have successfully completed the syndication of $700 million in credit facilities, including our $500 million revolver and $200 million medium or a term loan. These facilities were priced attractively relative to recent comparable transactions and represent a $250 million increase in credit availability, with an option for an additional $200 million. Our strong balance sheet and increased financial flexibility position us well to execute our disciplined growth strategy. Now turning to slide 12. Capital expenditures were $27 million for the quarter, which includes carry over projects initiated in 2008. For the full year 2009, we anticipate capital expenditures of $85 million, excluding timberland purchases. This amount is below expected annual depreciation expense for 2009. The global economic crisis presents unprecedented challenges and opportunities. Actions we have taken during the past several months provide evidence of our commitment to respond quickly and decisively to them. The accelerated GBS initiatives and contingency actions are on track to deliver at least the expected operating profit impact. As a result, we reaffirm our earnings guidance before special items of $3.25 to $3.75 per Class A share for 2009. That concludes my remarks. You should now go to slide 13. Mike and I will be pleased to answer your questions.

Operator, we are ready to take questions right now.

(Operator Instructions). Your first question comes from the line [Ryan McClain].

Good morning.

Good morning.

I was wondering if, we are all familiar with how pricing was affected on the way up for commodities over the last year and even before that. But now that they are on the way down, I was wondering if you could talk about, maybe the pricing dynamics within each segment, about how it's affecting you with the drop in commodity prices?

Yes, Ryan. The commodity prices obviously, are dropping quite rapidly. Steel for example, has dropped over $500 a ton in a relatively short period of time. The same dynamics that were in play when prices were going up are really in play when they go down. By that I mean we do have a certain amount of customers who are on contracts with the ability to adjust prices up or down, either on a 90 or 120 days cycle. So those dynamics that provide a natural hedge that we had built in that we talked about so much in the past, still is in play as prices go down. The unusual thing that's happened right now is the unprecedented drop in demand in volume. So we had a higher price inventory, which we were not able to sell to our customers because the demand dropped faster than anyone could anticipate. We're working our way through that. We did announce $5 million lower-of-cost-or-market charge in Asia, and so we're working our way through it. But the dynamics are still the same and it applies to all products the same way.

Okay. Within the non-industrial packaging, the other side, the paper packaging, with the OCC cost coming down and you had a pricing initiative last summer. I was wondering if that still might have ratchet it not quite down with OCC cost, if you're gaining additional margin from pricing that; that was previously in there?

Ryan that's a very good point. I mean I think we were very pleased with the results of the paper segment this quarter. You could see with even lower sales volume profitability was equal to or slightly above last year. You would have to attribute a big part of that to lower input costs. OCC has dropped quite significantly. It had stayed down. Our anticipation is that it will continue to remain low. And so that has been a positive for us as we look at that segment, that's a very good point.

Okay. Thank you. And within the industrial packaging segments and as it related to that the two-thirds of your business that chemical, paints and coatings those end markets that you sell in to. I'm wondering if you're still experiencing the sharp decline sequentially and there were if there is any sort of sense of stabilization occurring, what you're seeing out there, basically?

Yeah, volume is obviously, there is a big unknown right now and it appears Ryan that it's bottoming, indications are that demand has bottom. We do have limited visibility. We are getting some positive data points and these are only data points, so they're not a trend yet. But we have some positive data points coming this week from China, as far as demand pickup there. We have positive demand points from southwestern United States. We have some positive demand points from Latin America. And again, these are data points and not a trend yet. But there are some positive data points out there today.

Okay. Looking forward, I imagine that a lot of your competitors are under stress. I'm wondering kind of where you would emphasize making acquisitions in terms of substrates or geographies I mean you announced the two tuck-in's. But I was wondering if you could give us a little bit more color there as to what it is that you're looking at?

One of the things that we have I think over the last five to six years proven that we're pretty good at, and that is consolidation. So if we find opportunities in our main product lines to either have a geographic consolidation or a product enhancement, we would definitely look at those. No one likes going through times like we're going through right now. But we do believe that there are opportunities out there, and they are great opportunities for us right now. The longer this lasts the more opportunities there will be for us. So we're going to be opportunistic and use this opportunity to grow our company to the best we can.

Okay. Finally, for the credit facility first of, congratulations on getting that done. But I was wondering LIBOR really can't go much lower than that. So have you given any thought into fixing it now for the next few years, fixing your rate?

We look at that all the time. What we typically have is between 50% to 75% of our variable cost that swaps to fixed and so that's the cost. We normally basically remain neutral with respect to interest rate trends, but hedging in that range is something that we consistently do.

Okay. Thank you very much.

Your next question comes from the line of Christopher Chun. Your line is open. Christopher Chun - Deutsche Bank Securities: Thanks. Good morning guys.

Morning, Chris. Christopher Chun - Deutsche Bank Securities: Just following up on the volume question. I was wondering if you could give us a little more color on what the year-over-year volume comps were like in 1Q in both the industrial and the paper businesses, and what you're expecting for the rest of the year?

I'll give you a geographic comparison, Chris I think that will probably answer your question. The paper business was down 10% to 15% and I will give you a range for all these, IPS North America was down 15% to 20%, Latin America about the same, 15% to 20%, Europe was down, 25% to 30% and Asia, including China, was down 35% to 40%. So total for the company, we were down, 15% to 20%. As I've said a few seconds ago, it appears this is bottoming out. We had guided in the 15% to 20% range, is where we thought it would be for the year. Cautiously, optimistic, that volumes will start to improve and we are seeing a few data points that the trend is improving, but again these are only data points right now. Christopher Chun - Deutsche Bank Securities: Right. Have your expectations of what volumes will look like for the full year, changed any in terms of your last call?

The volumes were a little bit lower than we thought they would be during the last call, so we accelerated there some of our GBS initiatives. Our profitability is in line with where we thought it would be and in line with our guidance as Don said. We don't have any more visibility that most people do. We are comfortable. We have a plan in place, so Chris that, if volumes don't get to a level we thought they were, then we'll have other contingency plans to be able to effectuate. If volumes do improve to the where we are, then, we should have some significant upside, because of our cost structure has changed here. Christopher Chun - Deutsche Bank Securities: Right. Speaking of your initiatives, you are still targeting a $100 million of benefits in '09. Can you talk about, how you are expecting those benefits to flow through on a quarterly basis?

Yes, Christopher. They would be a little bit backend loaded. But the one thing that we're very pleased to what is that, for the Greif Business System acceleration, we calculated impact of approximately $15 million for the quarter. So we're basically on a run rate to exceed the $15 million target that we had set. We would expect really to delivering impact consistent with that for the remainder of the year. What's going to be a little bit more backend loaded, will be the contingency actions that are being taken by our strategic business units. We're very pleased with the progress, that's been made. Those benefits are really going to start falling through the P&L in the second quarter with even stronger impact in the back half on the year. Christopher Chun - Deutsche Bank Securities: Okay. Did you say that there was $15 million benefit just in 1Q?

That's correct. Christopher Chun - Deutsche Bank Securities: So in actuality, you are already on a $60 million annualized run rate?

That's correct. Christopher Chun - Deutsche Bank Securities: Okay. I guess I'm trying to square it out with your statement that benefits are going to be somewhat back end loaded.

For the contingency plan. You will recall that we basically targeted $100 million. Christopher Chun - Deutsche Bank Securities: Right.

We have two buckets, the accelerated GBS initiatives and the contingency plans, that were primarily driven by portfolio optimization. Those will be a bit more back end loaded the later. Christopher Chun - Deutsche Bank Securities: Okay. So if that is the case, can you give us some indication of to what extent 2010 might see greater benefit than 2009 if 2009 is not going to see the full benefits or the full year's benefits of those initiatives?

Well clearly there will be a significant benefit in 2010. I think one way of illustrating the point in terms of our lower cost structure and improved earnings power as a result of that. If you look at their volume declines year-over-year from the first quarter of 2008 to 2009 and you look at the actions that have been taken to mitigate those and to reduce costs. I mean, we basically -- if we have the same activity levels as 2008, would have improved operating profit. We would basically double our operating profits in improvement of 30% year-over-year. So that we think powerfully illustrates the impact of adjusting our cost structure and a lot of that has been in our fixed costs. When you look at our total operating costs, basically, our cost of sales and operating expenses they are down 20% in line with the lower volume. That is even before some of the impact of initiatives that were taken during the quarter. So the team has done I think a remarkable job of flexing cost based on lower activity levels and we're really going to be improving our results once volumes are restored because, again our fixed costs have been reduced. So we think that's going to be very positive for 2010. Christopher Chun - Deutsche Bank Securities: Okay. Thanks for all that color, Don. My final question has to deal with containerboard prices. I was just wondering what you guys are seeing in the market right now, and what you are expecting over the next few months?

We're seeing that containerboard prices have dropped a little bit as you know, as that has been published in the market. We're seeing volumes about the same level and we're adjusting our volumes be at the same level, as we do right now. Hopefully, prices will stay at this level and not deteriorate any further. We think there is a balancing effect going on right now and hopefully that will continue further for the next three to six months anyway. Christopher Chun - Deutsche Bank Securities: Right, but are you assuming any further price declines in your guidance?

We're not assuming any further price declines at this point. Christopher Chun - Deutsche Bank Securities: Okay. Thanks for your help.

Your next question comes from the line of Chris Manuel. Your line is open. Chris Manuel - KeyBanc Capital Markets: Good morning, gentlemen and congratulations on very, very strong operating performance in such a challenging environment.

Thank you, Chris. Chris Manuel - KeyBanc Capital Markets: If you could help a little bit with and you talked about some of the volume trajectory as you saw it by region, and I guess what I'm scratching my head over is when we extrapolate out what your operating performance was by looking at the industrial packaging North America, Europe and then in Asia Latin America etcetera. You are able to by our calculation over triple the operating profit in North America on what was a 15% to 20% decline in volume. I mean, it's amazing. So help us understand what were the [swing] factors for such a large change?

Yes, we probably would have to go offline to work on those numbers, tripling might be a little high. But there definitely was a big improvement in North America period-over-period. Chris, the difference really between what's happened in North America and what's happened in the rest of the world is, is our ability in North America to immediately flux cost versus making the same decisions on the rest of the world, but having a delay in getting that impact. What the work councils and other regulatory environment outside the United States, where we have fluxed them and we have made the same decisions, the impact it gets is later incoming. So in North America, we can get that immediately. So that's one positive. Both with Dave Fischer's leadership and Mike Patton, and Ivan Signorelli's implementation, we have looked at best practices and implemented the same procedures. The second point I would tell you that makes a difference between North America and the rest of the world is the diversity, we have here in products. We've always talked about diversity as being one of our strengths. But we have many more products that we manufacture here and so our ability to spread those product costs over lower overhead is more impactful in the United States. So as Don said, we have closed some facilities, we have been able to get that impact and that has immediate impact. We in this time, we do believe there's optimism, and when volumes do come back, we're going to have some significant upside potential. So this excites us as we go forward.

Chris, I would like to just add briefly because really everything that Mike has mentioned in terms of the reduced cost, productivity improvement and those we're really the key drivers. In the interest of full disclosure also North America is primarily on LIFO and the rest of the world is on FIFO. So, they do get a little bit of a benefit because they are fully into the costs of sales; the more recent lower costs as opposed to the challenges that are faced in the rest of the world. So that would represent perhaps a quarter of that favorable delta. Chris Manuel - KeyBanc Capital Markets: Okay. That's helpful, I'll circle back with you offline to go through some more detail. But that's one bucket that helped, but it's still a big, big, big swing. When you referenced in your bank lines, the piece there that you were excited about having to put back into place. I realize it's such a challenging environment to get them in. You referred to I believe continuing to execute on your growth strategy. While were seeing such a retrench spread in volumes, help us understand what you're talking about, when you're talking about growth strategy. What you're seeing on a specific product areas, specific geographies, or what is it that you are referring to that?

I think we spelt out the growth strategy a couple of quarters ago. Our strategic plan and our growth strategy really very simplistically continue looking at making tuck-in acquisitions in the industrial packaging business. We have not disclosed publicly what geography that we're looking at, but there are geographic areas that we believe we can make some tuck-in acquisitions today. We also look at some product enhancement in the industrial packaging business. So that's part of our growth strategy. We believe there is some adding acquisitions that could come into our paper business, that would further enhance the integration level that we have, that's so strong in that business. With the values that are out there right now, we will continue to look at some limited adjacencies that would broaden our portfolio. So, when we talk about continuing our growth strategy, it would be the strategy that we spelled out previously. Chris Manuel - KeyBanc Capital Markets: Okay. So I guess, very well interested and you've answered it for me. It's not just limited to the IPS component it is in both IPS and PPS?

Yes sir, that's right. Chris Manuel - KeyBanc Capital Markets: Okay. Let's see here last question that I had was a couple of clarification points. If I remember right when you had given us your earnings guidance before 325 to 375, I was thinking you had referenced a global volume numbers down, 10% to 15%. I thought I heard earlier when you refer to that, potentially in our global volumes for full year down 15 to 20. Did I hear something incorrectly, what's embedded into there today?

No, I would tell you, you recalled correctly. We were basing it on 10-Q of 15% as Mike has mentioned the first quarter was a little bit softer than we had anticipated, which triggered additional contingency actions. So our results are in line, but volumes are down a bit. So we would say that conservatively if these trends continue for the remainder of the year, we need to step up the cost reduction and productivity improvement initiatives to offset and just as we did in the first quarter we think that would be possible in the second quarter. But we do think that there is a little bit of upside a potential, if indeed we see improvement in the back half of the year. Chris Manuel - KeyBanc Capital Markets: Okay. So, let me help me clarify that a bit. So not down your guidance doesn't embeddedness really mean 10 to 15% down for volumes or is it maybe something worse than that. But you've implemented additional hence the $100 million plus of savings your referenced to still get to that range is that?

That is correct. Chris Manuel - KeyBanc Capital Markets: That's correct. Okay, that's helpful. Thank you, gentlemen.

Your next question comes from the line of Bob Franklin.. Bob Franklin - Prudential Financial: Hi. Is your revolver drawn it all right now did you say?

Yes. The revolver as of the end of the quarter because the new refinancing was a subsequent event, there were borrowings of 338 million, so there was availability of a little over $100 million, plus cash items? Bob Franklin - Prudential Financial: I guess what you're saying is that the balance sheet that you report doesn't reflect the new facility?

That is correct. Bob Franklin - Prudential Financial: Okay. In that case sort of irrelevant. Well as of today then is the $200 million outstanding then as of today term loan?

Yes. It is. Bob Franklin - Prudential Financial: Okay.

Yes. The transaction closed and funded on Thursday of last week. Bob Franklin - Prudential Financial: Yes, I sure realized that. Can you tell us anything about the covenants on it?

The covenants are consistent with the previous credit agreement and there we did do an 8-K filing, so you can go into the detail or are some [subtle] shifts, but not materially different. Bob Franklin - Prudential Financial: Okay. Thank you.

(Operator Instructions). Your next question comes from the line of [Michael Blassie]. Your line is open.

Hi. Good morning guys. Thanks for taking my questions. Could you just give me a little bit more color on the inventory balance with the decline in sales, I think I would have expected to be a little bit lower than Q1 '08. Do you have anything you can tell me there?

Yes, now that is a good question. The lower than expected volumes did prove that a bit of a challenge. So our inventory days which last year were 34 increased to 47 days. So we would expect, really within the next few months to be back to more normal levels.

Okay. I noticed, there were some lower-of-cost-or-market adjustments in Asia and just based on which is said about North America, I wondered if there was a potential for some of that there as well?

There were no lower-of-cost-or-market issues anywhere else in the world.

Okay and just a final question. I was looking for the operating cash flow number, if you had that?

That will be included with the 10-Q.

Okay.

Okay?

Perfect. Thanks, guys.

Great. Thank you

Your next question comes from the line of Chris Manuel. Your line is open. Chris Manuel - KeyBanc Capital Markets: Just a follow-up or two here if I could. Couple of questions on, you had indicated there will be some tuck-in transactions or you did some tuck-in transactions in February. You gave us a little information on this which I partially missed.. Could you repeat to us, what you bought there potentially, what the revenue might look like, from that kind of, a little more color on it would be helpful?

We haven't really disclosed anything. But what we said in our prepared remarks, Chris is that, the combined revenue between the two businesses; there was a drum business in southwestern United States and a low timber business in the southeast. That combined revenue was less than 2% of our consolidated sales. So we combined them both together; they're really tuck-in acquisitions. Just to give you an idea, the values where the multiples are significantly lower today than what they were six months, nine months ago. We believe these to be good transactions, even in these times. In a tuck-in, we're very confident; we can generate great value from both of those. Chris Manuel - KeyBanc Capital Markets: That makes sense. And when we think about, something else I'm curious about, it gets tough to disseminate from volume models, it's the blending of filling business. When you think about it; have you seen similar type of levels for throughput, whether its gallon filled or blended or harbor you look at metrics there. So what you are seeing for drum volumes is that been a little better, a little worse. I get a sense of how defensive that business is in relation to just outright?

It's very similar to the drum business, Chris right now. I forget to mention there is a few data points that, that business maybe having some -- a little bit of upturn right now, so there is optimism. We've done a good job over the last year of really reinventing that organization. So we've taken a lot of cost out of that business. Chris Manuel - KeyBanc Capital Markets: Yeah.

Even with reduced volumes like there are in the drum business, there the profitability of that business is better today, than it has been. Chris Manuel - KeyBanc Capital Markets: Okay. That's helpful. As you look forward at opportunities there with overall industrial production down so much, it makes a lot more sense I would think for companies that want to continue to outsource that type of business particularly if you can combine it with other folks operations for efficiency purposes in such. Does that make sense both for here North America and globally as well, or are you seeing incremental opportunities for that type of line of work?

We are having much more serious conversations, I think you are very studious with the analysis that you did. In a downturn like this people will turn to outsourcing, because they don't run their facilities to full. If you want to come and help to sell, the best for us Chris we can do that, we can cheese up that very well.

Wall-Street's a tough place these days. Chris Manuel - KeyBanc Capital Markets: Last question I asked for you was just the small one. In the paper side of the business can you tell us what your mill utilization rates were in the quarter and where they are today as well?

In other words there was a bit of slow back notwithstanding our full integration. So we did operate at a little bit over 85% of capacity. Chris Manuel - KeyBanc Capital Markets: In 1Q and are you still kind of running on that level today.

Yes. Chris Manuel - KeyBanc Capital Markets: Okay. That's very good. Thank you very much gentlemen. Good luck in the quarter.

All right. Thank you.

At this time we have no questions in queue. I will now turn the call over to Deb Strohmaier.

Thank you. And thank you all again for joining us this morning. As a reminder this call will be available for replay from noon today and ending at 11:59 pm Eastern Time on Tuesday, March 3rd. The playback telephone numbers are 800-642-1687, for domestic callers and +1-706-645-9291 for international callers. The conference ID is #85890635. Digital replay of the conference call will also be available in approximately one hour on the company's website at www.greif.com. We appreciate your joining us this morning.

This concludes today's conference call.