Greif Inc (GEF) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Greif, Inc. first-quarter 2008 results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS). This conference is being recorded today, Thursday, February 28, 2008.

I would now like to turn the conference over to Deb Strohmaier, Vice President, Corporate Communications. Please go ahead.

Good morning, everyone. As a reminder, you may follow this presentation on the web at greif.com in the Investor Center under Conference Call. If you don't already have the earnings release, it is also available on our website. We are on slide 2.

The information provided during this morning's 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 2 of this presentation, in the Company's 2007 Form 10-K, and in other Company SEC filings, as well as the accompanying earnings news release.

As noted on slide 3, this presentation uses certain non-GAAP financial measures, including those that exclude special items such as restructuring charges and timberland disposals. Management believes the non-GAAP measures provide a better indication of operational performance and a more stable platform on which to compare the historical platform of the Company and 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 Greif's first-quarter 2008 earnings release.

I will now turn the call over to Chairman and CEO Mike Gasser.

Thank you, Deb. Good morning, everybody. We appreciate your participation in our conference call today. If you're following our presentation on the web, please go to slide 4.

The first-quarter results demonstrate the benefits of geographic diversity and the power of the Greif Business System. Key performance indicators of net sales and net income increased well over our first-quarter 2007 numbers. Strong results in Europe and in emerging markets more than offset sluggish market conditions in North America for our industrial packaging segment, and higher containerboard selling prices benefited paper and packaging.

Now please go to slide 5. We're managing our business portfolio and actively deploying our assets to better serve our customers. During the quarter, we made acquisitions to expand our geographic reach and enhance our product offerings in Brazil and North America.

One goal of managing our portfolio is the reduction of risk. In the quarter, we divested operations that were underperforming and did not fit our business strategy. Most notably, we sold a subsidiary in Australia and a majority interest in a subsidiary in Zimbabwe. We're also focusing on controlling the controllable. We're benchmarking best-in-class manufacturing processes across all plants, creating standards and using the analytics to identify and close gaps at our facilities around the world.

Through the Greif Business System, we're managing inventory levels and taking additional steps to mitigate our exposure to rising costs for raw materials, transportation and energy. We're working to reduce energy consumption at all of our locations and have set a goal to reduce our global energy usage by 10% from 2007 levels by January 2010. Also in response to rising raw material costs, we announced price increases during the quarter.

On slide 6, you can see we remain on track to achieve our key 2009 performance targets. Executive Vice President and Chief Financial Officer Don Huml will now provide you with an update of our financial results.

Thank you, Mike. Good morning, everyone. Please go to slide 7. As you read in our earnings release, net sales increased by 13% or 7% on a constant currency basis. This increase was driven principally by higher sales volumes, particularly in Europe and emerging markets.

Operating profit before special items was up 23% to $75 million for the quarter compared to $61 million last year. This excludes the $30 million pretax net gain on the sale of business units in Australia and Zimbabwe. The year-over-year increase was driven by solid topline growth, modest gross profit margin expansion and a lower SG&A to net sales ratio.

Net income before special items for the quarter increased by 33% to $48 million. This excludes the $21 million after-tax net gain from the divestiture of business units.

Our effective tax rate for the quarter of 23.6% is unchanged sequentially and below the same period last year due to a favorable earnings mix shift. We believe this rate will be sustained.

Now, on slide 8, this puts our first-quarter results in context. Although past is not always prologue, from this slide you can gauge our ability to deliver consistent and predictable results. The Greif Business System is the catalyst for driving the performance improvement trajectory.

Slide 9 shows the results of our industrial packaging segment. Net sales increased 5% on a constant currency basis to $671 million, largely due to higher sales volumes in Europe and emerging markets. Gross profit margin increased to 16.8% from 16.6% last year, reflecting value-added and productivity improvements. Operating profit before special items increased to $48 million, excluding the net gain of $30 million on the divestiture of the previously mentioned business units. Improved net sales and execution of the Greif Business System contributed to the increase.

Now on slide 10, net sales for paper and packaging increased to $169 million from $154 million for the same quarter last year, primarily due to higher containerboard selling prices implemented during the fourth quarter of 2007. Gross profit margin increased 20 basis points, and operating profit before special items increased 19% to $20 million, despite the headwinds of higher input and conversion costs, most notably for old corrugated containers, energy and transportation. Paper and packaging more than offset these increases with higher selling prices and savings generated by the Greif Business System.

On slide 11, timber's results were below last year, but consistent with plan.

Now to slide 12. Capital expenditures for the quarter were $30 million compared to $19 million last year. Capital expenditures for 2008 are expected to be approximately $125 million, which includes expansion capital to support our emerging markets growth strategy. Debt increased during the quarter due to seasonal factors, coupled with the accelerated inventory purchases, the hedge against rising raw material costs, tuck-in acquisition activity and the payment of 2007 performance-based incentives.

We're encouraged by our first-quarter results and positive business momentum as we exited the quarter. As Mike indicated, price increases were announced during the first quarter in response to rising raw material costs, particularly for steel and plastic products, and we are addressing transportation and energy costs through the Greif Business System.

We're reaffirming our 2008 guidance and adjusting it upward to $4.15 to $4.35 per Class A share to reflect the $0.35 impact from the net gain related to the divestiture of businesses in Australia and Zimbabwe. It is our expectation that the full-year results will be at the upper end of the adjusted range.

That concludes my formal remarks. You should now go to slide 13. Mike and I will be pleased to answer your questions.

(OPERATOR INSTRUCTIONS). Jim Lucas, Janney Montgomery Scott.

I've got two questions for you, unrelated. The first is more of a macro question. Clearly, the headlines that we're all reading every day seem to grow more and more bearish as each week passes. The trends in your results seem to be indicative of what's out there, with the slowing domestic and international offsetting.

When looking internationally, Western Europe versus Eastern Europe versus Asia and Middle East, could you just give a little bit of background on what you're seeing in the key geographies and, in particular, have you seen any signs of slowing in Western Europe at all?

Yes, we all read the same articles that you do, and we all see that. We have not seen a slowing in Western Europe to date. We had Ivan Signorelli, who runs Europe, over here this week at our Board meeting, and we talked at length with him, and Western Europe is still quite strong.

Eastern Europe is growing at a very good rate right now, but Western Europe is not slowing. Asia is growing in double-digit rates for us right now, so we are seeing good momentum and good volumes in those regions to date.

Next question, with regards to the price increases and what we're seeing in steel in particular, could you just remind us in terms of contracts that have the pass-through mechanism in place, what percentage of your business that constitutes? And just in terms of pricing in general, you indicated in both segments, price increase is in place -- just where you feel you are in terms of the price versus the inflation mix right now?

You hit on a very key point. Steel has got up quite dramatically in the last four months; it's gone up about $100 to $120 a ton in a very short period of time. That has facilitated that we pass that cost along to our customers, and all contracts that we do have, do have a raw material reopener. So if raw material goes up, then we can pass that cost on in the form of a sales price increase.

It's about 50% of our business, Jim, is in contract. The noncontract, obviously, would be on a spot basis, and so that would go up right away when the costs would go up. But we try to manage that the best we can, but we have had to announce increases in steel drums, which we have done, to offset these higher raw material costs that we're experiencing right now.

In terms of that 50% spot, what type of lag do you generally see from when the increase goes in?

Well, on a contract basis, the spot is pretty much instantaneous, because when we get new costs, we would pass those through. On a contract basis, they vary a little bit. They normally, you have a 30- or 60-day lag, but that varies between contracts.

And Jim, one of the things we have been working on is really more closely synchronizing the buy side and the sell side to really minimize the variability of earnings. I think our sourcing and commercial teams have done a very good job in that regard.

Chris Manuel, KeyBanc Capital Markets.

Congratulations on another nice quarter. A couple questions for you. First, can you -- I want to expand on one of Jim's questions from a minute ago. Can you talk us through typical business cycles? One of the beauties of your business is you have a lot of history. So can you help us with what happened through recessionary periods typically to drum volumes and demand and typically how you have performed in those type of environments?

You are right, Chris, we're celebrating our 131st year this year, so we've been through almost every cycle that you can imagine. Historically, drums have fared well during recessionary periods. Most downturns in production would go into the bulk end of the business, and the drum end of the business has remained fairly consistent. That's not to say they don't have a slight downturn, but it is not in direct relation to the magnitude of the downturn in the economy.

Historically, if you go back and look at our historical results, the drum end has fared fairly well. The paper end of the business is a little bit different. That is a little bit more directly related to the economy. I would tell you it's probably different today. The industry has consolidated a lot more than it has been in the past. The weaker dollar is allowing for export, which is unusual. So we think that will fare better with the sluggish U.S. economy than maybe it has in the past when the economy has gone down.

That's helpful. And when you think about -- let me just follow up on another piece of the question. When you talk about some of these -- I mean, it's been pretty dramatic steel price increases, it looks like, oh, from my math, something on the order of 20%, 25% from year end through April. For the piece of your business that's more spot related, you are able to almost move prices up monthly as you need to, to offset the continued increases in steel. Did I hear that correctly?

Yes, you did. And steel has gone up fairly dramatically, and it's getting a little tighter, too. So everyone has to move it up; it's not something that anyone can not do, because trying to get steel is getting difficult. Fortunately, we have arrangements with major producers, so we will get the volume that we need. But prices are going up. And it is so draconian that no one can sit back and not raise prices.

That's helpful. And then last question before I turn it over is, embedded into -- a couple things -- one, embedded into your guidance, it looks like there may be another paper price increase coming here in March. Have you included that in your guidance, number one? And then number two, Don, you alluded to a lower tax rate being sustainable, and it looked like it was about a 21%-ish in the quarter. Is that a level, you think, going forward, or something more kind of in between? What do you think is a reasonable tax rate that you're talking about?

Chris, the effective tax for the quarter was 23.6%. That was the same as the rate for the fourth quarter of 2007, but it's about 1.6 points below the same quarter last year. We do feel that that is sustainable, based on the earnings mix shift. We've had very strong performance from our businesses outside the U.S., and that is very definitely benefiting the tax rate. The non-U.S. rates tend to be about 15 points below the statutory rate here, and so again, the earnings mix shift has a very positive impact on the effective tax rate.

As far as the guidance, we have not included the most recent price increase of $50 per ton that is effective on March 15. We are encouraged by the announcement, and it's an initiative supported by all of the top integrated firms. So we're hopeful that it gets traction. We think it's certainly very justified, but it's not factored into our guidance. So that would be an upside.

You may recall, when we provided guidance for 2008, we did make provision for, we had a step up for the price increase announced during the fourth quarter of 2007. That has been fully implemented, and so we're clearly on track, a little bit ahead of the guidance that we had provided at the beginning of the year.

Walt Liptak, Barrington.

My congratulations, too, on a nice quarter. On the guidance, I would just like to ask you, the guidance looks a little bit conservative to me, taking it up to where you did. I see a number of things, including what Chris mentioned, with the $50 a ton price increase, the lower tax rate. You beat earnings this quarter. Your volumes are holding up. Are you being cautious? Is there a reason that you are being cautious with the numbers?

I think historically, as you know, we have always tried to underpromise and overperform. I think it's justified in this market, because we really don't know where the economy is heading, and with rising raw material costs. We believe that we're well-positioned with our diversity, and we want to keep on coming back to our diversity, our geographic diversity, being in 47 countries today, our products diversity and our customer diversity, that we can weather any sluggishness that may persist in the North American economy. We also believe, through the Greif Business System, that we can obtain raw materials, convert them and pass those costs through.

But we think it's probably prudent to be cautious at this point in time. So we reaffirmed our guidance. We are really directing you to the higher end of that range, which we believe is an indication that we have that optimism. But we don't want to get ahead of ourselves.

Fair enough. And I got onto the call a little bit late The North American organic -- what was that? How does that break out, price versus volume?

If you look at the results overall, basically, the constant currency, same-structure growth would be in the 7% range. 5% would be volume, about 2% in price. When you look at the growth North America versus Europe and Asia-Pacific, clearly we're a little bit below the composite of 5% in North America, and above in Europe, plus or minus 2 points.

So your volumes in North America are positive?

Yes, absolutely.

Despite what's going on in the economy in North America, you're still positive? That's very good.

That is correct. For example, a core product line would be steel drums, and we're still talking basically mid-single-digit growth rates, but stronger in Europe and Asia-Pacific.

Great. I've got one more question, maybe longer term, related to the Greif Business System. What are your feelings at this point? How are things progressing? What does it look like for the timing of some of the cost reduction actions that you have been taking? And I guess I'm thinking more about the back half of your '08 and into 2009 and reaching those long-term targets.

As Mike had stated in his prepared remarks, we remain confident in our ability to deliver the targets. The Greif Business System impact is on track. We have guided you to $30 million to $35 million in impact for 2008, and first-quarter results would be consistent with that. We also are looking for a contribution, really, in the $50 million to $60 million range for 2009. We very definitely have the action plans to support delivery of the impact.

We continue to enhance the Greif Business System. We're celebrating our fifth-year anniversary on the 1st of March of implementing the Greif Business System. We will meet next week with 60 people from around the world, which we do twice a year, and we will go over the Greif Business System and what's happening with our Company. We continue to enhance it. In my prepared remarks, I talk about the best-in-class process that is going on. That's an enhancement to the Greif Business System.

So we're always coming up with new and different ways to extract more value from it. It's an ongoing process, and so I will tell the group next week that, while it's been five years, we're just beginning and we have a lot more to do. And we really do believe that.

I recall that in the last slowdown, back in '03, when you started this process, you kept growing despite the sluggish economy, and you had tremendous earnings growth. There's a lot of earnings power, I think, in the GBS.

Debbie Jones, Deutsche Bank.

Congratulations on a solid quarter. We just have a few quick questions. You already talked about containerboard. Can you, for your '08 guidance simulation to that, can you talk about your OCC price extensions and also your timberland sales gain assumptions?

We can barely hear you. Was your question OCC assumptions and timberland gain assumptions?

Yes, it was.

In terms of OCC, we have seen a little bit of an uptick, and that was anticipated in the guidance that we had provided for 2008. And so we, at this point, are comfortable with the assumptions that we've made.

In terms of timberland gains, those, as you know, we exclude from our pro forma results because it's very difficult to predict the timing. So I really wouldn't be able to provide any guidance on that item.

My next question is Australia and Zimbabwe divestitures -- so why are those special items?

Pardon?

The Australia and Zimbabwe divestitures, why didn't you [offer] those as special items?

We really wanted to be consistent in constructing our pro formas. We have been, I think, very disciplined and transparent. So what we chose to do was remain consistent, but be very clear on what the pretax and after-tax impact is so that you really can call that out. You'll note that during our prepared remarks, all of the deltas that we computed were excluding the net gain.

I'm also curious if you can provide any information on your '09 CapEx outlook, and '10, if possible.

We have not provide any guidance on '09 or '10 at this point.

Gregory Macosko, Lord Abbett.

Tim Burns, Cranial Capital.

I want to doublecheck one thing. The GBS savings for '08 were $30 million to $35 million?

That's correct.

And '09 is going to be $50 million to $60 million?

Right. That's the expected.

And Mike, 130 years anniversary -- impressive! You've been around for, what, 100 of them or so?

Tim, there are days I think have been around for the whole 130.

As I look at the Company, you can fool around with the short-term stuff, but we're in this extraction economy where they've got to put stuff into and then ship it all over God's world. This is definitely not a bad place to be right now, and it appears you continue to benefit from that, even more than companies that make packaging for domestic consumption in those global economies. Is that true, or do you feel the same?

Yes. I think, from a very high level, that's a very good analysis. We tend to think packaging is a good place to be. I believe our diversity, which I've talked about before, of having different products and different regions of the world is really serving us well during this period. As an example, we talked about a couple bolt-on acquisitions, the Brazilian one we did. We were able to buy a leader in new technology, a leader in co-extrusion technology in Brazil that serves the agrochemical and food business.

Brazil, as you know, is rapidly approaching a food center of the world. So this is going to be a growth platform, we believe. So I think as we continue to see those opportunities, we're going to continue to see some fairly good growth if we continue to look at it on a global and a product basis.

And another positive is it appears the domestic paperboard market is more intelligent in terms of its capacity management and pricing. Do you feel like this is something that's going to stick around?

I really can't have any feeling on that. I think in my prepared remarks or in one of the answers to a question, I said there has been a structural change. There has been a consolidation. And I think once a consolidation occurs, it's difficult to un-consolidate. So I think there has been a structure change.

And then I recently read an article that talked about what India and China are doing in Africa. One of the things it talked about was how it was largely extraction based -- minerals, oils, things of that nature. But they mentioned something that caught my eye, and I'm not sure it benefits you, but the tremendous improvement in freight technology, shipping technology, whereby the computer can tell you when a diamond is going to come out of the ground and when it will be located on Madison Avenue in New York City. But I get the sense you don't ship a lot of unfilled containers. Is that true?

Yes, it's very costly. That's one of the reasons we have 212 locations around the world, is it's very costly to ship air, which is effectively what we would be shipping if it would be unfilled. We don't ship a lot of diamonds; I wish we did. We'd probably get more for our containers.

There's a new market for you.

I hope so.

And then last question. Is it true that Vladimir Putin is going to join your Board? I was just curious.

We can't confirm or deny that.

Well, guys, keep at it, and I wish you well.

Scott Blumenthal, Emerald Advisers.

Since Walt congratulated just Mike, Don, congratulations on this.

Thank you very much. I appreciate that.

Done was feeling bad here. Thank you.

And I figured, let me make some clarification for Tim. Diamonds are not on Madison Avenue; you've got to go to 47th Street for those.

Mike, I guess in line with some of the previous questions, I think Jim asked a question about raising prices. Contractually, how often are you able to do that? I guess theoretically, you can turn your contract into spot, if you were able to raise prices every week.

The contracts allow us to raise prices when raw materials go up. So there is not a set number. It's not like once a quarter we can raise it, or once every six months. The contracts stipulate that when raw materials go up, we have the ability to pass that through. There is normally, as I mentioned, a lag of 30 to 60 days. But it really is dependent upon the raw material change.

So, then, as a company, how comfortable are you in going back to your customers? How often do you think, if steel prices continue to trend up -- hopefully, they won't continue at the rate that they have been going, but how comfortable are you, and how often do you think you can go back and do that?

We have a good relationship with our customers, and we provide them with a lot of the information. So when we come to them and mention that we need to go up, they are not hearing it for the first time. So they are very aware of the dynamics of the raw material, and the example that you used was steel. So they would be very aware of that. And we try to work with them to see if there's other ways that we can mitigate some of the increase. But I think it all boils down to the relationship we have with them, and they know that if we can't absorb it, it's got to be passed through. They understand that.

And we could really look to 2004, which was a period of rapidly rising steel costs. One of the things that we were quite pleased with is that when steel costs increased from about $350 per ton all the way up to $800 per ton and then the next year they fell by $400 per ton, throughout that period we were able to manage about the volatility and protect our margins.

So I think we have demonstrated an ability to deal with some of the challenges that we're facing. And, to Mike's point, I think we have really partnered with our customers, looked for ways to mitigate the increases. We've also, I think, gotten pretty good in our tactical and value pricing so that we're able to explain the rationale for the increases.

That's really helpful, Don. And how about in the other direction? You talked about a 30-, 60-day lag in price increases. Certainly, your customers are watching the steel prices as closely, maybe these days even more closely, than you are. How long before they start to tug at your coattails to bring those prices down if steel prices begin to drop? Is that the same --

It's the same scenario. When steel drops -- and it's a cyclical commodity, so if it goes up it probably will go down -- we would have the same price mechanism change with the same time lag that will be going up or going down. So they mirror each other.

And Don, looking at the inventories at the end of the quarter, it looks like you have about -- the value of the inventory is 18% or so of the quarter's sales. Can you talk about -- we can see the dollar value there on the balance sheet, but the volumes, I guess, of the material that you have in inventory compared to what you had last year -- I'm not trying to imply that you're not managing it well; we know that you do that very well, but how much of production days does that represent?

In terms of our inventory at the end of the quarter, we had 34 days of inventory. That is actually down on a year-over-year basis. It was 38 days in the same quarter last year, but a very different mix. We did, particularly in North America, purchase raw materials, particularly steel, in anticipation of the price increases and to ensure availability of product. So there was a bit of a mix shift, but we do focus intensely on working capital. So the days overall have declined. So we've had offsets, but we clearly have higher stocks of steel and, to a lesser extent, resin, just because of some of the storage limitations. But we definitely have had a change in mix.

That's really helpful. Thanks, Don. And Mike, you talked about the diversity of your product mix and geographic mix. If we were to take, let me say, maybe like a bingo card and you put geography on one axis and product type on the other axis, how full do you think that card would be? How much fill-in do you have of product types and geographies in order to completely fill up that card?

I think I'm not playing bingo, so I really don't know what the card looks like, but I have a general idea of what you're talking about. I think from a geographic standpoint, we still have some headroom, although with being in 47 countries, we're starting to run out of countries here. That's not to say we don't have a lot of expansion capability in some of these countries. So I think from a product growth within the countries, when you get outside of North America and Europe, we've still got a lot of headroom that we can capitalize on. So we believe that there's still some fairly significant growth.

I would anticipate we would add two to three more countries in the next year or so. But I couldn't tell you, in good conscience, we're going to add 20 more countries, because I just don't think that will be out there in the short term. But I think we still are very optimistic from a growth standpoint.

I guess my question was kind of, we don't have every product in every country?

That's correct.

So I guess if we had all the products lined up on one axis and all the countries, there's probably still a lot of white space in there.

If you put it that way, if that's the direction of your question, you're absolutely right. There would be a whole lot of white space there.

(OPERATOR INSTRUCTIONS). Chris Manuel, KeyBanc Capital Markets.

Just a couple more quick follow-ups. And first, for the record, I don't play bingo, either.

But one, Don, for you is that I was thinking back when you established the full-year guidance, the $3.80 to $4. I was thinking you had told us embedded in there was about $15 million of sales of SBU timber. Did I maybe mishear you or misunderstand that or--?

My recollection is that we had $15 million for organic growth, but we actually added an additional $15 million based on the improving fundamentals within our paper and packaging business. Then it was the Greif Business System impact, and then there were some other items below the operating profit line.

So maybe I misheard. Okay, that's helpful. So there is no -- for example, I think this quarter, there was $6 million or so was some special-purpose sales. That is not included in the $3.80 to $4 range? Is that correct?

Well, that would be included, because that is part of our core business, and it is a recurring source. In fact, I think I may recall the discussion that we had, because we had indicated that, basically, the contribution from timber on a year-over-year basis is going to be fairly comparable in 2008 compared to 2007.

And I apologize. I just looked back; it was $3.8 million in this first quarter from surplus higher/better use. And I was thinking that was the number you told us might be $15 million-ish this year.

I think what I said -- it was comparable to last year, Chris. So I can't recall the number, but $15 million might be the number we had last year. So that may be where you got your number. So you may be right.

That's helpful. Moving over to a different topic, acquisitions and divestitures, you guys mentioned you did a few -- you provided a little more color about what you did in Brazil. Could you provide us a little more color on what you did here in North America as well as -- and maybe a few characteristics around these acquisitions and divestitures, revenue size, multiples paid, multiples received, et cetera?

Yes. We'll start with the acquisitions; I mentioned a little bit about the one in Brazil. We believe it's a very good growth platform. It's a new technology, a leader in agrochemical, a food business. So I think that's a very powerful tool. The United States was consistent with what we've done in the mature markets; it was more of a consolidation play. So that one will be an integration that we just really announced towards the end of the quarter. So we really got very little benefit in the first quarter. But we'll see something as we go forward. But that will really be more of an integration play that we're working on right now.

Multiples for those -- they are small enough that we don't really disclose them individually. But we continue to be very disciplined in our buying, and if you would say between 5.5 and 6 times, that's the range we would pay on a multiple basis. We continue to be disciplined, so those would fit in that range.

Can you give us a sense of how big they are? Has this been -- maybe a revenue number or something of that nature, so we get a sense of scale?

Yes, let me do the divestitures, and I'll tell you some numbers there, then I'll give you a relative relationship to the divestitures. I think that will help you get what you need.

The divestitures, as we mentioned, was Australia and Zimbabwe. Basically, in Australia was our key customers were migrating off the island and going to Asia. We were seeing trends of that happening and actually seeing it happen. And a couple of the facilities were underperforming. So we had an opportunity to divest that, which we have done. And in Zimbabwe, you know, there's the political turmoil there, so it made sense for us to go forward.

In our 10-Q that we will release next week, we will state that the combined sales in those two operations was around $45 million in sales and had income of about $2 million. Zimbabwe was pretty much breakeven, to give you a relative scale.

The acquisitions, the two acquisitions we talked about, will be close to two times that sales number, and the earnings will be substantially higher than what I told you. Hopefully, that gives you some color on what we were doing.

That's very helpful, and exactly what I was looking for. That was it for me. Thank you much, gentlemen, and good luck in the upcoming quarter.

There are no further questions at this time. I'll turn it back to management for any closing remarks.

Thank you again for joining us this morning. As a reminder, this called will be available for replay from noon today and ending at 11.59PM Eastern Time on Monday, March 3. Playback telephone numbers are 800-405-2236 for domestic callers and 303-590-3000 for international callers. Passcode is 11108573#. A digital replay of the conference call will also be available in approximately one hour on the Company's website, www.greif.com. We appreciate you joining us this morning.

Ladies and gentlemen, this concludes the Greif, Inc. first-quarter 2008 results conference call. You may now disconnect.