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DELAWARE, Ohio-Dec 14,2017-- Greif, Inc. (NYSE: GEF, GEF.B), a world leader in industrial packaging products and services, today announced fiscal 2017 and fourth quarter results.

Fiscal Year Highlights Include (all results compared to the fiscal year 2016 unless otherwise noted):

Net sales increased by $314.6 million to $3,638.2 million.
Gross profit increased by $29.8 million to $714.7 million.
Operating profit increased by $46.8 million to $272.4 million, and operating profit before special items1 increased by $26.7 million to $335.0 million. Operating profit before special items was negatively impacted by $5.3 million associated with adverse weather events and $4.6 million of professional advisory fees related to planning and execution of tax strategies not contemplated in our original guidance, which resulted in significant tax risk mitigation and tax savings.
Income tax expense increased by $0.7 million to $67.2 million, but our effective tax rate decreased from 47.1 percent to 33.5 percent despite the fiscal 2016 one time tax benefit achieved during Q3 2016.
Net income of $118.6 million or $2.02 per diluted Class A share compared to net income of $74.9 million or $1.28 per diluted Class A share. Net income, excluding the impact of special items, of $173.1 million or $2.95 per diluted Class A share compared to net income, excluding the impact of special items, of $143.5 million or $2.44 per diluted Class A share.
Cash provided by operating activities increased by $4.0 million to $305.0 million. Free cash flow2 increased by $7.3 to $208.2 million.

“We continued to make Greif a stronger and more profitable business in 2017, with solid earnings and cash generation,” said Pete Watson, Greif’s President and Chief Executive Officer. “Fiscal Year 2017 Class A earnings per share before special items rose by roughly 21 percent year over year; we generated more than $200 million in Free Cash Flow and returned nearly $100 million to shareholders. Our focus on customer service excellence continues to strengthen and we are driving a continuous improvement mindset to create stronger sustainable performance. Our plans for Fiscal 2018 and beyond remain focused on our teams being accountable to execute on our commitments and to deliver superior value to our customers and shareholders.”

Fourth Quarter Highlights Include (all results compared to the fourth quarter 2016 unless otherwise noted):

Net sales increased by $100.5 million to $968.1 million.
Gross profit decreased by $1.0 million to $182.4 million primarily related to adverse weather events.
Operating profit increased by $6.8 million to $60.4 million and operating profit before special items increased by $1.9 million to $88.9 million.
Income tax expense decreased by $23.1 million to $5.2 million.
Net income of $33.3 million or $0.57 per diluted Class A share compared to net income of $8.5 million or $0.14 per diluted Class A share. Net income, excluding the impact of special items, of $57.8 million or $0.98 per diluted Class A share compared to net income, excluding the impact of special items, of $38.5 million or $0.65 per diluted Class A share.
Cash provided by operating activities increased by $56.9 million to $199.9 million. Free cash flow increased by $53.9 million to $168.2 million.

1
A summary of all special items that are excluded from operating profit before special items, from net income before special items, and from earnings per diluted Class A share before special items is set forth in the Selected Financial Highlights table following the Dividend Summary in this release.

2
Free cash flow is defined as net cash provided by operating activities less cash paid for purchases of properties, plants and equipment.

Note: A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. These non-GAAP financial measures are intended to supplement and should be read together with our financial results. They should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on these non-GAAP financial measures.

Notable Business Highlights

Our three strategic priorities are:

1. Invest in our people and teams to foster a strong culture of employee engagement and accountability.

2. Deliver industry leading customer service excellence to achieve superior customer satisfaction and loyalty.

3. Strive for and realize performance excellence, leading to enhanced free cash flow and value creation.

Our goal is to be the best performing customer service company in industrial packaging in the world. We measure and track our customer performance through two metrics: the customer satisfaction index (CSI); and Net Promoter Score (NPS). NPS measures how likely a customer is to recommend Greif as a business partner.

Our consolidated CSI tracks a variety of internal metrics designed to enhance the customer experience in dealing with Greif. Our CSI improved by roughly 2% versus the prior year quarter, with the biggest improvement recorded in the Flexible Products & Services (FPS) segment, which generated a 17% improvement versus the prior year quarter. Our expectation is that each business segment deliver CSI at a 95 score or better. Our Paper Packaging & Services (PPS) segment has consistently performed at that level for many years. Our Rigid Industrial Packaging and Services (RIPS) and FPS segments are nearing that threshold.

We are finalizing the most recent NPS survey results, which will be shared as part of our first quarter 2018 earnings release. The NPS survey being finalized will be our fifth conducted since the beginning of the Transformation initiative.

From an operational standpoint, the business delivered a solid quarter despite weather related headwinds. Our third quarter earnings call was several days after Hurricane Harvey made landfall and at that time, we had estimated a $2.5 million adverse weather impact; in actuality, the impact was $5.3 million. RIPS - our largest business segment by revenue and operating profit - bore the brunt of these headwinds, but still generated higher year-over-year sales. RIPS gross profit margin was impacted by roughly $4 million related to Hurricane Harvey, rising raw material prices and the timing of contractual pass through mechanisms that will recover in the coming quarters. PPS - which consists of two paper mills and one of the newest corrugator networks in the containerboard industry - delivered strong volumes, higher specialty sales and realized previous containerboard price increases, which all helped to offset the impact of year-over-year old corrugated container inflation. FPS - the world’s largest producer of industrial flexible intermediate bulk containers - continues to demonstrate improvement, but was impacted by a $2.7 million expense during the quarter related to legacy claims.

Fourth quarter Class A earnings per share before special items was $0.98 per share versus $0.65 per share in the prior year quarter. Earnings benefited from higher year over year sales, lower SG&A expense, lower interest expense and a significantly reduced tax rate versus the prior year quarter. For fiscal 2017, we delivered Class A earnings per share before special items of $2.95 per share, which is at the high end our guidance range. Fiscal 2017 earnings benefited from a significant reduction in the company’s anticipated annual tax expense in the fourth quarter as a result of a reduction in anticipated pretax income, the realization of tax benefits from global tax initiatives in fiscal 2017, and certain one-time tax benefits realized in the fourth quarter of 2017. Fiscal 2017 Free Cash Flow totaled $208.2 million which exceeded our guidance. Fiscal 2018 guidance is included in this press release.

The end of Fiscal 2017 concludes our three year Transformation initiative. That initiative helped to refocus Greif on the importance of customer service excellence and re-oriented our business strategy towards delivering value improvements over purely volume gains. We have emerged from the Transformation with a stronger portfolio, one that is optimized for future growth if opportunities arise that generate appropriate returns. While the Transformation may have officially concluded, optimization activities identified during the initiative will continue into 2018. Furthermore, the financial discipline underlying our Transformation will continue and full year benefits of fiscal 2017 initiatives will be realized in 2018.

Company Outlook

Highlights of fiscal 2018 guidance are set forth below.
Class A Earnings Per Share before Special Items

$3.25 - $3.55
Free Cash Flow

$200.0 million - $220.0 million

Note: 2018 Class A Earnings per Share guidance is not provided in this release due to the potential for one or more of the following, the timing and magnitude of which we are unable to reliably forecast: gains or losses on the disposal of businesses, timberland or properties, plants and equipment, net, non-cash asset impairment charges due to unanticipated changes in the business, restructuring-related activities, non-cash pension settlement charges or acquisition costs, and the income tax effects of these items and other income tax-related events. No reconciliation of the fiscal year 2018 Class A earnings per share guidance, a non-GAAP financial measure which excludes gains and losses on the disposal of businesses, timberland and properties, plants and equipment, non-cash pension settlement charges, acquisition costs and restructuring and impairment charges is included in this release because, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, we are unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts. A reconciliation of 2018 free cash flow guidance to forecasted net cash provided by operating activities, the most directly comparable GAAP financial measure, is included in this release.

Segment Results (all results compared to the fourth quarter of 2017 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products3 sold, selling prices, product mix and the impact of changes in foreign currencies against the U.S. Dollar. The tables below show the percentage impact of each of these items on net sales for our primary products, both including and excluding the impact of divestitures, for the fourth quarter of 2017 as compared to the fourth quarter of 2016 for the business segments with manufacturing operations:

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