Greif Inc (GEF.B) 2025 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Greif Fourth Quarter 2025 Earnings Call.

(Operator Instructions).

Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Bill D'Onofrio, Vice President of Investor Relations and Corporate Development. Please go ahead.

Good morning, everyone, and thank you for joining Greif Fiscal Fourth Quarter 2025 Earnings Conference call. Today, our CEO, Ole Rosgaard, will provide a strategy and market update, followed by our CFO, Larry Hilsheimer, with a review of our financial results and 2026 guidance. Please turn to slide 2.

In accordance with regulation fair disclosure, please ask questions regarding topics you consider important because we are prohibited from discussing material non-public information with you on an individual basis. During today's call, we will make forward-looking statements involving plans, expectations, and beliefs related to future events. Actual results could differ materially from those discussed.

Additionally, we will be referencing certain non-GAAP financial measures and the reconciliation to the most directly comparable GAAP metrics that can be found in the appendix of today's presentation.

Two important reporting clarifications for this quarter. First, our container board business was sold on August 31st. As such, that business is presented as discontinued operations for its one month contribution to the quarter. Unless otherwise noted, all financial results and commentary discussed today will relate to continuing operations only.

Second, due to our fiscal year end change, Q4 reflects a two-month reporting period, August and September. For consistency, all prior year comparatives in today's presentation are also shown on a two-month basis for August and September. I'll now hand the call over to Ole on slide 3. Thanks.

Bill, and thank you all for listening in today and for your interesting drive. With the short 2025 fiscal year, due to our fiscal year change, the 2 months 4th quarter, the sale of our container board business this quarter, and the ongoing cost optimization.

Program, we know there's a significant amount of change and noise for this quarter. This shows up in our tax results, which Larry will be discussing in a moment.

Thank you for bearing with us. We are excited for the long, long-term earnings growth and value creation. Our strategy is unlocking.

We closed fiscal '25 as a more focused, more agile, and more strategically aligned company that at any time in our history. Our transformation is accelerating and the results are beginning to show.

On October 1st we finalized the sale of our land management business, generating $462 million in proceeds. Those funds were used immediately to reduce debt, and our performer leverage ratio is now under 1 times.

We have entered fiscal 2026 with a meaningfully stronger balance sheet with enhanced capital efficiency built for resilience.

Together with the divestiture of our container board business in the 4th quarter, we have reshaped Greif's portfolio to concentrate our efforts where we have the greatest opportunity to grow EBITDA, expand margins, generate cash, reduce cyclability, and deliver durable returns for our shareholders.

We are pleased to report our latest Net Promoter Score survey result of 72, an improvement of 3 points from last year, and further extending our world-class customer service performance. That improvement is a direct reflection of the trust our customers place in us and our ability to deliver for them.

The best companies build stronger relationships when things are difficult, and our NPS reflects our conviction that we will capture significant value when demand returns.

As Larry will touch on in a moment, our full year '26 guidance, despite being low end, reflects continued earnings growth and a free cash flow conversion rate of 50%, demonstrating our progress towards the long-term objectives laid out at Investor Day in December.

We're proud of how we ended fiscal 2025, but even more energized by what lies ahead. Our Build to last strategy is firmly embedded in our organization. We are shaping and sharpening our portfolio, strengthening our balance sheet, and investing for sustainable growth.

Please turn to slide 4.

Our commitment to value creation shows in how we manage cost. In fiscal '25, we achieved $50 million in run rate savings from our cost optimization program, more than double our stated full year '25 commitments. To date, we have achieved approximately $15 million in savings related to network design and operating efficiency.

This is not limited to strategic footprint actions. It also includes deploying AI solutions to reduce scrap and improve OEE, strategic planning actions to minimize freight and maximize on-time deliveries, and structural improvements to our global procurement strategy.

The remaining run rate savings are related to SG&A.

Our updated business model has enabled much more efficient decision making. It has also led to difficult but necessary decisions to eliminate areas of redundant cost in the updated model.

As of quarter end, we have eliminated approximately 8% of professional roles within the company, or 190 positions.

These changes have been carefully considered over this past year and were acted on in Q4 in a manner which allowed us to communicate to impacted colleagues our heartfelt appreciation for their contributions to grow.

These actions drove the significant acceleration beyond our previous full year '25 commitments.

Due to our progress to date, we are raising our anticipated fiscal '26 cumulative cost saving runway commitments from $50 million to $60 million to $80 million to $90 million. We will also expand our anticipated full year 27 cumulative run rate commitment from $100 million to $120 million.

Our cost optimization program has continued to evolve since the start of the year. What began as a top-down initiative is now being fueled from the ground up. Across the organization. Our colleagues are embracing the challenge, identifying new opportunities, driving local action, and creating meaningful change.

This work is making Greif a more focused and agile organization, better positioned to capture value as demand returns.

Importantly, this isn't just about taking cost out. It's about building an agile next generation growth.

The Greif business system enables repeatable excellence across more than 250 sites in 40 countries, allowing us to do more with fewer resources. We're removing unnecessary layers to empower local leaders and speed up decision making, and we are embedding a mindset of efficiency, responsiveness, and value creation across every function and facility.

This isn't a one-time initiative. It's a structural shift in how we operate, compete, and grow.

Excuse me, please turn to slide 5.

A significant finding from our cost optimization program, which is now realizable as the divestment of container boards, are the clear and meaningful synergies in operating adhesives and recycled fiber as part of sustainable fiber solutions. Therefore, beginning in fiscal '26, those products will be reported within our fiber segment results.

These changes are designed to enhance our go to market approach while also benefiting our cost optimization program.

This leaves the integrated solution segment as primarily closures. Effective October 1st, we are renaming that segment to innovative closure Solutions, which is a highly profitable and critical growth focused force.

Please turn to slide 6.

Our Q4 results reinforce our strategic focus on 4 target end markets.

In customized polymer solutions, volumes were flat year over year. However, small containers continued positive volume momentum driven by the agrochemicals in the markets. This is an area where we have been investing to grow both organically and through M&A.

Mid-single-digit declines in both IBC and large polymer drums driven by softness in industrial markets in a me during the quarter offset the positive growth in small containers.

In durable metals, volumes declined 6.6%, reflecting softness across industrial markets.

Our team remains focused on managing the business for cash flow and optimizing cost while maintaining a strong position that will capitalize on growth as demand returns.

Sustainable fiber volumes declined 7.7%, reflecting approximately 1.7 million tons of URB economic downtime during September.

Converting was also negatively impacted by continued soft fiber demand.

Oh sorry, soft fiber drum demands.

Integrated solutions continue to see volume improvements driven by closures. These products generating 30% plus gross margin continue to win new business through innovation and cross-selling, including on our Bright digital platform.

In wrapping up my section, I'll close by pointing to a few items which clearly demonstrate through the noisiness of full year '25 the value creation occurring under our strategy.

Our polymers and closure business are growing. Our cost optimization is well ahead of plan, and it has expanded to $120 million of anticipated total commitments.

Our free cash conversion was nearly 50% in 2025 and expected to be at 50% in 2026. Our performer leverage is below 1 times.

Price is a strong, durable company, and we are accelerating our value creation.

I'll now turn it over to Larry for the financials on slide 7.

Thank you everyone, thank you. Hello everyone.

As a reminder, our results are presented excluding the container board divestment except for free cash flow, which compares total operations to the prior year. Additionally, due to our fiscal year change, Q4 reflects a two month reporting period, August and September. For consistency, all prior year comparatives in today's presentation are also shown on a two month basis.

Adjusted EBITDA for the quarter was $99 million which was 7.4% above the prior year. EBITDA margins also expanded year over year by 140 basis points due to better price costs across all segments and the building momentum of our cost optimization.

Adjusted free cash flow also improved year over year by over 24.3% due to the increase in EBITDA and our team's strong working capital management to close year. As noted in our presentation, SG&A includes 28 million of operating costs specifically related to the container board divestment, which are excluded from EBITDA.

Excluding these costs, SG&A was slightly above the prior year quarter due primarily to the two month quarter, including certain annual or quarterly costs which were occurred over a shorter year.

Adjusted EPS for the quarter was $0.01 relative to $0.59 in the prior year quarter. Our Q4 tax expense was impacted by non-recurring items affecting pre-tax income and the residual nature of continuing operations after removing discontinued operations.

Tax expense also includes various taxes either not based on income or not directly correlated to current period income. The impact of which is magnified due to the lower income reported in this two month period.

Finally, the tax expense was also influenced by the mix of earnings across the jurisdictions in which we do business. Please turn to slide 8.

In polymers, growth was led by small containers consistent with our long-term strategic focus on less cyclical margin accretive and markets. Sales and gross profit were both up year over year, with margin tailwinds from mixed pricing and operational discipline.

In metals, results reflected volume softness in industrial and markets. Sales and volume declined, but we continued to generate healthy cash flow and remain focused on cost reduction and enhancing agility to react as demand recovered.

In fiber, the decline in sales was tied to volume with URB mill downtime late in the quarter. Despite that, gross profit dollars and margin improved year over year due to continued benefits from price/cost and tight cost management.

Integrated solutions, sales, and gross profit dollars declined year over year primarily due to lower published OCC prices in our recycled fiber group. Volumes in recycled fiber enclosures were both solid, and the product's impact of closures led to higher gross margins year over year.

Please turn to slide 9.

Given the continued demand environment we are operating in, we believe it is prudent to present low-end guidance to begin fiscal '26. Our low-end scenario assumes flat to low single-digit volume declines in metals and fiber.

It also assumes low single-digit volume improvement in polymers and closures from growth in our target end markets. The net impact of these volumes assumptions is flat volume related EBITDA performance to prior years.

Transportation and manufacturing costs were also assumed flat, representing cost savings on our cost optimization, offsetting normal inflationary cost increases.

The two major positive drivers in our bridge are SG&A and price costs, both of which reflect the accelerated progress on our cost optimization program.

SG&A of $45 million reflects $39 million of incremental cost optimization, of which $17 million is within the fiscal year '25 run rate and $19 million is within the fiscal '26 run rate, both of which are expected to benefit fiscal '26. The additional $9 million represents lower variable costs including incentives.

Price/cost reflects $12 million of incremental cost optimization. This is primarily in the form of sourcing benefits in polymers and closures, while metals cost base is assumed flat. Price/cost also reflects an $18 million incremental benefit of URB pricing recognized in fiscal '25 and lower expected OCC costs.

Lastly, to round out our bridge, a $10 million even a headwind from the lack of land management and a benefit of a $7 million positive effect driven by the weakening of the US dollar.

Our free cash flow low end guidance is $315 million, a 50% conversion ratio demonstrating our progress towards our long-term objectives. We expect to expect to spend approximately $155 million on CapEx this year. Our lower cash interest cost reflects our strong balance sheet, and our other cash use includes approximately $40 million of cash restructuring related to the cost optimization as well as pension costs. Working capital assumes a source of $50 million driven by both low-end volume assumptions and optimization gains. Please turn to slide 10.

With our pro forma leverage below 1.00 and strong cash flow guidance of $315 million we anticipate minimal cash needs for debt service costs in the year ahead. Similarly, after divesting our most capital-intensive business earlier this year, our maintenance CapEx needs are approximately $25 million lower.

Given the strength of our balance sheet and strong and durable free cash flow generation, our capital allocation outlook demonstrates the value creation driven by our business model.

As a result of our fiscal year end change, our scheduled board of directors meeting is now one month following each quarterly earnings release, still aligned to the previous fiscal calendar. As such, our dividend payments will be considered as usual by the board on that same cadence with the next meeting occurring on December 9th.

Further, based on our strong conviction and our own ability to meet our long-term commitments and our belief that our stock currently presents compelling value, we plan to execute as quickly as possible on an approximately $150 million open market repurchase plan utilizing our available authorization of approximately 2.5 million shares.

Additionally, we intend to seek board approval of a new stock purchase authorization that will enable continued repurchases as part of our go forward capital allocation strategy, which we expect to include regular stock repurchases of up to 2% per year of our outstanding equity value.

While that leaves ample capacity for growth capital, you're going to be prudent in allocating it while maintaining our strong balance sheet. Where we do deploy growth capital, we will prioritize thoughtful and focused organic investments which drive high returns on capital. Please turn to slide 11 for a closing from Ole.

Thank you again for your interesting Greif. We acknowledged that the last 11 months have been bumpy given all the change occurring, and that showed up in this quarter in our tax results. As always, my commitment to you is transparency and candor.

We are proud of how we finished fiscal 2025, more focused, more efficient, and more aligned with our long-term strategy. We're also excited for a cleanup outlook in full year '26 and we'll continue to communicate progress on our strategy with as much clarity as possible.

The divestments of container board and land management have meaningfully reshaped our business. We're now positioned with a sharper portfolio, lower capital intensity, and stronger financial flexibility than ever before.

Our cost optimization program is ahead of plan and with an expanded $120 million commitment by the end of 2027.

We are building a stronger business, one that creates value in any environment and delivers accelerating performance as volumes return.

Thank you for your continued support. Operator, please open the lines for questions.

Certainly.

(Operator Instructions)

One moment for our first question, which will be coming from Ghansham Panjabi of Baird. Your line is open.

Hey guys, good morning. So, I guess first off on, polymers and your comments about growth in some of the target, markets that you've realigned towards, can you just give us some more color on that, Ole? I mean, many of these end markets you referenced, ag, and, flavors, etc. Are still quite challenged just based on what's happening, at the CPG level, etc. So what is driving that improvement? Is it share gains? Is it just commercial, success?

What, what's going on there?

Yeah, let me first give you some sort of general comments. So our macro environment is, as in a prolonged down cycle, and that's amplified by trade and tariffs uncertainties.

Demand softness remains a major driver for our customers' demands.

And for example, weekend markets in construction and manufacturing are hurting volumes in terms of the ag sector. We decided as part of our build to last strategy to go into the or invest in segments that grows faster than GDP.

One of them was the agrochemicals market that is serviced by small containers and jerrycans. And we consolidated that market to become a global leader, and that has really paid off and it's in that market particularly we have seen significant growth, but when you look at these factors, our operational excellence, cost discipline, cost our program, and all the actions we just mentioned, that means that that portfolio has become even more valuable valuable to us in the near term.

Got it. And then in terms.

Of fiscal year '26 guidance, specific to EBITDA, how should we think about the sequencing of that, on a year to year basis? Is it sort of flatted down in the first half and then an improvement in the back half? What, what's your baseline, assumption at this point.

Benjamin? It's, as usual, the first quarter will be the weakest, and let's talk about it roughly 20% of the year, and then the rest of the quarters will be 25% to 30% each, sort of modeled the same way after, prior year.

Got it. And then just one final one, Larry, as it relates to the low end, if you will, guidance, characterization, is it just purely volumes that would be the determined as it relates to maybe the upper end bandwidth? Is that how we should think about that?

I think volumes would be the big driver for certain, but also, we have found acceleration in our cost optimization program, as Ole mentioned in his prepared remarks.

This is really catching fire among our colleagues, and we have a program of identifying ideas from the ground up. So we also think there's upside in in our cost optimization numbers for the year as well.

Yeah, thanks so much.

And our next question We'll be coming from Michael Roxland of Truist Securities. Your line is open.

Thank you, Ole, Larry, Bill Don, for taking my questions and congrats on all the progress.

Thanks, Michael. Just wanted to follow-up on Gam's question in terms of the '26 guide. So, Larry, if volumes come in weaker because I certainly we've heard about weaker volumes from a majority of our companies this earnings season thus far, is the, is cost the leverage that you have available to pull to offset incremental volume weakness to meet your guide for 2026?

Yeah, I would say two things. The bottom-line answer to your question is yes, we can always pull back further on shifts and, temporary furloughs and those kinds of things. However, this is what we said. It's low-end guidance. This is pretty pessimistic on the volume assumptions already. So, we don't anticipate that being an item, Michael, but yes, we still could pull incremental levels on a variable cost basis if if we needed to.

Hey Michael, just to remind you that you know throughout the year pricing has been under pressure, and that's due to oversupply and weak demand. And despite of that, we have increased our margins and performed solidly, and you know I don't think that will change.

Going into 2026.

Got it, very helpful. In terms of the cost optimization programs, you guys raised that for 27 by $20 million. As you've gone through the portfolio, do you, can you comment on whether there's even more upside to be had or additional cost opportunities that you've come across that maybe you haven't, specified right now, but you've really scrutinized and you think that even there is a, an additional amount above and beyond the incremental $20 million.

Obviously, our sites are, much further and much higher, but we use the word commitment here and at the moment we are very comfortable committing to the $120 million we talked about, but obviously as Larry just alluded to, that number could go up as we go. The year, but we want to get a little bit closer before we would be able to increase our commitments. But we are very bullish about that, and.

Mike, we have a stage gate process to where there's a lot of discipline before we get to something we classify in Stage gate 3 and 4, which is where we're more certain. But yeah, we believe there's potential upside.

Got it. And then final questions before turning it over, last quarter you mentioned a few times on the call that some of your larger chemical chemicals companies, or customers, excuse me, are, we're not doing so well. We see that through even, in earnings, your IBC volumes declined mid-single dig this quarter.

They were down in single-digits last quarter and have been weak for some time now. Now, realizing the chemicals are a cyclical business. Have any of those costs indicated to you that they intend to like maybe close capacity permanently or right size their businesses and if so, what does that ultimately mean for your IBC business longer-term?

I mean, as I said, the demand softness is out there a major driver for our customers, and they have adjusted their business, and they are, a lot of them are relying in terms of chemicals on construction and manufacturing as in markets. I don't think that it'll get any worse.

That's my personal opinion when I speak to customers and see the numbers, but the big question is when will it get better? And we're not sitting here waiting for it to get better, just to, as you've seen, we are acting, we are highly focused on organic growth. We're deploying capital for organic growth in the specific segments that we have alluded to, we are taking costs out of our business and our business is generating a lot of cash, and we're doing our share buyback of $150 million. So, we're helping ourselves.

We're controlling what we can control, and we're not in a waiting position. Of course when volumes return, that would be nice, and we will take that as an extra benefit.

Yeah.

Michael.

I would supplement all these comments if this makes sense. We're hearing less bad comments.

Less bad than they were, and the other thing that's somewhat encouraging is the trending down of mortgage rates, as most, housing industry analysts, investors believe that if you get with a 5.

Something interest rate pent up demand in existing homes, sales will take off. That's a big driver for the chemical companies and therefore for us.

We're encouraged by the 2 times rate cuts we've seen, but it's not going to change anything overnight. But if we see more rate cuts, it will have a positive effect on demand, we believe.

Got it, very clear. Appreciate the color and good luck in fiscal '26.

Thank you, Michael. Thanks.

And our next question will be coming from Matthew Roberts of Raymond James. Matt, your line is open.

Hey, Ole, Larry, good morning. I appreciate all the color.

Can you hear me okay?

Yes, okay, great.

Yeah, thanks for all the color. It's good to see the cost coming through and all your color on capital allocation and, on capital allocation. So, balance sheets in a great spot. You initiated the open market repurchase for $150 million. So given that low leverage and that and now newly discussed long-term repurchasing intentions of, I believe it's 2% per year.

Does that change how much capacity remains for M&A or has the hurdle rate for M&A changed versus your view of, I think what you said stock offering compelling value, and all those things considered, where do you expect leverage to shake out by year end '26?

Let me just answer the first one, and let's deal with the leverage one.

So on M&A, I mean, first of all, our focus is on growing much faster organically, and we are deploying CapEx for that.

We have a number of areas we have invested in for organic growth in terms of M&A, we've said many times we have a very solid pipeline. We keep working on the pipeline. We don't expect any, transformational M&A to happen.

We have our focus on what we call target M&A to complement what we're doing organically, and our criteria, they remain the same. We are looking at M&A with EBITDA margins, in the 20s, 50% free cash flow conversion and primarily within polymers and primarily within the closure segments.

Yeah, you might want to supplement that or maybe talk to him about, talk to the group about hunters and farmers and also about Iron craft.

Yeah, so we have reorganized our entire commercial organization globally and from being, we've been farmers in the past. And taking really good care of our existing customers, but we've changed that to become more hunters now. We've changed the incentive program. We've changed the way we operate commercially, and we are targeting around 8% organic growth.

That's part of, that part is securing additional volume, extra shale wallet, but it's also deploying CapEx in terms of new capacity where we see that we have also invested in a new, it started off as a startup out of a university in Germany.

We created a partnership with this startup and we're now investing in that and we're deploying. A very unique proprietary form of barrier technology that only we have, and we're just ramping that up right now. We have 3 lines on order, and we are negotiating further lines, and this is something that's exclusive to us and we will see that start to come through towards the end of '26 and really ramping up in '27.

Yeah, and Matt, purpose that obviously the focus that we are really driving a different growth pattern than we have in the past, but relative to our leverage ratio we're obviously in a really good place and with the free cash flow generation that we're talking about, I think it, it's very highly likely we'll even with our stock repurchase and things we do very highly likely we'll remain under 1.5 times in, by the end of next year.

It's possible if some things came up that were attractive, we'd be higher than that, but I don't see any scenario where we'd be over 2 at any chance so really, we'll remain in that in that range for the for the foreseeable future.

Very helpful.

Thank you both for all the color there. Secondly, on the closures, so isolating that as a standalone segment. I know you did touch on this the prepared remarks, so I apologize if I missed any of that, but are there operational changes here or more of a symbolic shift as closures have been a growth focus and.

Now with the lower recycled fiber has been a drag on the margins and integrated solutions, how should we think about the margin profile and growth of that segment going forward?

Thank you again for taking the questions.

I mean closure has always been very attractive for us. It's a unique part of our business that comes with very high and attractive margins. There's a lot of growth opportunities out in the market for closures. And for example, with the 3 acquisitions we made in Polymers, most of them were using closures from other companies that are owned, so there was a big synergy that we'll be executing on.

Closures, we've separated that out now in a separate segment really to put extreme focus on this segment.

We have a new leader in that business as well, and his focus will be growth, M&A growth, but importantly also organic growth, and we'll deploy capexs accordingly to that. So you you hopefully you will see us in the many quarters to come, growing that segment significantly.

Excellent.

Thank you all again.

And our next question will be coming from George Staphos of Bank of America Securities Inc. Your line is open, George.

Thanks so much. Hi everyone, good morning. Thanks for your help, guys. Hey, I also just, I just want to give you some credit here, buy, sell or hold, the company has really done a wonderful job transforming itself over the last 10 years and, moving to a more, if you will, common fiscal quarter end, I think really helps everybody on the street.

So, we thank you for that, guys. We know it wasn't an easy undertaking. So thanks so much for that. I guess. My first question.

Can you talk about Larry and Ole, the growth rates that you saw relative to your guidance entering fiscal '26? I assume your assumptions are consistent with what the exit rates are, but were there any exit rates that were maybe trending below what's embedded in your guidance, recognizing you've got a lot of leverage to pull, etc. As was talked about earlier on the call.

Yeah, I mean when you look across our portfolio within the fiber segment, probably one of the weakest, lines that we had is our fiber drums, so fiber drums were down double-digits which was more than we expected them to be down we expected them to be down, less than that high single-digits, so that was a trend that was worse.

On the other hand, small polymers did better than we expected. So those were the two primary ones that were different than our expectations going into the quarter, George.

And our guidance, our guidance going forward is essentially aligned to what we started to see. So, and in our low-end guidance as we said, we've got low single-digit up on polymers and on closures, with more in the small polymers than in the large polymers. And then within metals and fiber we've got slow, low single-digit declines just as a low end guidance assumption.

Understood. Okay, I thanks for that. And you're saying drums at this juncture, fiber drums, those have gotten back to kind of your guidance range or even though they started pretty weak, would that be fair?

No, they're just really off right now and it's all tied to the whole chemical industry, sector. So, yeah, our, we, we're not bullish on any kind of significant growth in that one right now.

Okay, thanks for that, Larry. I was hoping you could. Go a little bit further into the SG&A, pickup that you're expecting for this year again. Thanks, thank you for the bridge, and the discussion on the $45 million.

Can you talk about what's in sort of the activity that you took in from fiscal '25 into fiscal 26? What, if anything, is different about what's in for this year on the fiscal '26 actions and just any other color on the $45 million would be great.

Yeah, the predominance of our SG&A takeouts are, related to the head count numbers that only gave on the 8% of our overall professional head count, and the majority of those actions were taken in the 4th quarter. So, they play out into the entire year going forward. We also have a lot of things where we've moved more things to low cost countries.

We've also taken in where we've had contractors in our IT organization that you think are temporary and then all of a sudden they're around 8 years. Well, you're better off to hire them as employees and then you're better off to offshore things. Our IT group has also done a fabulous job of rationalizing our IT licenses. Which is a significant cost.

We've restructured how we're doing, our AI activities and going to a model that's basically pay for what you eat instead of a basic, core per person license. So, there's a whole bunch of elements that go into, those cost saves, but those are the predominant ones that are driving the major numbers.

Okay. And on that point, Larry and Ole, you talk about.

Changing the incentives and the approach to organic growth in the organization and that sounds exciting and at the same time, for understandable reasons, and to benefit because you're getting savings from it, you're cutting headcount.

Are there any areas where you're maybe a little bit more, maybe word's not the right term, but you've got to stretch a little bit further to get everything done. On the front end of the business while you're reengineering the back end, any tension points there.

Not really, George. I mean, we decided not to do the SG&A. It's like 1,000 needles. That's why we took the axis in Q4 to get most of that behind us.

We, in terms of the commercial organization.

We have by and large protected that because we're really focusing on organic growth, although we have, been rearranging that as you say with the incentive program, but we're doing a lot of other things there as well in terms of how we manage performance in in sales.

And we have a, I mean, Tim Bergwall, who's our Chief Commercial Officer, he's just doing a fantastic job with his team to do that, and it doesn't happen overnight, and we've still got a long way to go in that area.

Okay, my last question, a couple parts, and I'll turn it over out of courtesy. I'm sorry I've gone along here. One, I assume the pricing change in integrated slash closure is just the effect of OCC, but can you talk about what the pricing change was actually within closures?

Given you've done a lot of other things to simplify the organization, any thought perhaps at some point to simplifying the share structure, between the Class A and Class B, and then lastly, with great resources and everything you've done to have the balance sheet where it is, comes great responsibility.

Where are your customers telling you they'd like you to most sort of grow inorganically from an end market standpoint so that you get the highest return going forward? Thanks guys. Good luck in the quarter. Appreciate all the details again.

That was a lot of questions.

Yeah, we've been doing this a while.

I don't. Yeah, so I think the first one was.

The price impacts.

On the integrated segment between RG and closures.

Yeah, so first of all, the reason for why we put the recycled fiber group and adhesives into the fiber solutions group.

Was that they they're serving that group it's the same customer and it's the adhesives is going into fiber also amongst customers and to have that managed by the same leader made sense and that was part of that, as part of that we could take out a leadership level and that left sort of integrated as a standalone closure business.

Yeah, Ole, what was the price change in closure is really what I'm asking.

Well, yeah, the price change in closures, George, was basically $12 million of benefit from procurement activities, and that was in the polymers enclosure. That's the segment. It's not the OCC side of it.

Okay, thank you.

And then with respect to share structure I mean you know that's something that we continue to dialogue and look at and but nothing on the in the near term or anything like that and then what was the third question.

Where are your costs telling you to.

Yeah you know I'm non-organic you know basically I mean our customers you know like us to serve them in any of their needs that they have so us getting broader enclosures where we might be able to serve more of their needs clearly they've enjoyed us getting more into like the small plastics that we didn't used to serve on a global basis that's been a positive.

But there's nothing else that they're out there asking us to get into right now other than the one only went over on Iron craft, which is just a brand-new technology that is more highly recyclable, very favorable environmentally, and we just had UN approval on the first container with this stuff in. It's a very unique opportunity for us.

Remind that our NPS of 72 is just unheard of in our industry, and that gives you an idea of how close we are to our customers.

I'll mention an unnamed customer who has been establishing new plants in several countries, and every time they do that, and this is a multinational, they come to us and ask if we could provide capacity on that particular location.

And we go in, we do a long-term agreement, and then we add lines or build a plan to service them and that's an example of what costs ask us for and how close we are to them.

Thank you, guys. See you next quarter.

Thank you.

And as a reminder to ask a question, please press 11 on your phone and wait for your name to be announced. Our next question will be coming from Gabe Hady of Wells Fargo. Your line is open, Gabe.

Thank you. Good morning, gentlemen.

I had a, I had a question about the durable metals business which is now going to be your largest and I, if memory serves, I don't know, 40% to 45% of that sits in Europe.

And not to put you guys on the spot but looking at a decent list of.

Chemical plant closures, across continental Europe, Eastern Europe, etc. I know you're talking about volumes being down, I think flat to down low single-digits.

Can you talk about just maybe, I know by region, historically kind of gave us performance in the legacy segments. Things have been changed around a little bit, but, I think you mentioned your prepared remarks, you have slowed down and so maybe just by region, sort of what your expectations are.

It's interesting if you, it, it's actually been a little bit of astounding to us, so for example, the North American steel business has been down similar levels to, the, to EA, quarter by quarter, but on a two-year stack.

And North American Steel was actually up every quarter this year. Every single quarter they've consistently performed better than North America.

And then we have also as and when customers reduce capacity, we do the same I mean plants where we have been operating two shifts, we now have gone down to 1 shift as an example, and we do that because we're managing that business for cash basically.

So the closures that have happened, they have already been factored into our production capacity.

Okay, I guess the second question is kind of revisiting a little bit on the M&A front.

Is there a scenario where maybe there are just kind of some tuck-in's along the way, and I think Larry you said you don't really envision a situation where you're above 2 times levered, and so between now and 2027 I didn't see the billion dollars reiterated and again I know it's tough when you're moving assets around, but, is that still explicitly sort of a target. Given sort of what you know about the M&A environment right now.

Yeah, I mean for us, on that Gabe, I mean it's still our, objective to get there, but we're not going to solely deploy capital to get there, but if you just walk through, we gave low-end guidance, so obviously our hope is to that we do better than our low-end guidance.

So, if you take the 6:30 and you then look at our 120 commitment that's a net another 45 so you're already up to 675 you know we're hoping you see industrial volume recovery obviously we're you know that's a big component it's been a component of our original stack was 140.

I mean those things get you up to 815. We do some tuck in acquisitions we. Invest in in organic CapEx and Iron craft and other opportunities we still think there's a path to get there, but it's not like, okay, we're going to go chase them and a to get there and risk doing bad deals we're just not going to do that.

But the 140 are largely intact in terms of going back to the 2022 volumes.

Yes.

All right, thank you.

All right, Gabe, thank you.

And this concludes our Q&A session. I would now like to turn the call back over to Ole Rosgaard for closing remarks.

Thank you.

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