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Executives

Mike Gasser - Chairman & Chief Executive Officer

Don Huml - Executive Vice President & Chief Financial Officer

Deb Strohmaier - APR, Vice President, Communications

Analysts

Christopher Manuel - Keybanc Capital markets

James Lucas - Janney Montgomery Scott LLC

Christopher Chun - Deutsche Bank

Steven Chercover - D. A. Davidson & Companies

Scott Blumenthal - Emerald Advisers

Gregory DiMarzio - Century Capital

Greif Inc. (GEF) F4Q09 Earnings Call December 10, 2009 10:00 AM ET

Operator

Greetings and welcome to the Greif Inc. fourth quarter and fiscal 2009 earnings conference call. (Operator Instructions).

It is now my pleasure to introduce your host, Deb Strohmaier of Greif, Inc., thank you, you may begin.

Deb Strohmaier

Thank you, Diego. Good morning. As a reminder, you may follow this presentation on the web at www.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 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 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 excludes 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 in 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 fourth quarter and fiscal year 2009 earnings release.

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

Mike Gasser

Thank you, Deb. Good morning, everyone, and thank you for joining our conference call today. For those who are following this presentation on the web, we are on slide 4.

I am very happy to report that our fiscal 2009 has ended. I believe our solid defensive measures mitigated much of the unprecedented challenges while at the same time, our reinforced offense allowed us to take advantage of some unparalleled opportunities. At the beginning of 2009 and throughout, I have said that our goal was to end this year better than when we started it. Today, I can confidently say we did that, as difficult as 2009 was, Greif is a better and stronger company forward.

On defense, during fiscal 2009 we adapted to a difficult global market conditions and volatile raw material prices. Through the Greif business system initiatives and other contingency actions, we achieved over $150 million in cost saving, exceeding our target. From these actions, we expect to fully realize permanent benefits of at least a $120 million in fiscal 2010. To fortify our offense, we closed our new senior credit facilities and issued senior notes in 2009, improving our financial position meaningfully.

Our strong cash flow and balance sheet give us a financial flexibility to pursue profitable growth. Speaking of growth, we completed six tuck-in acquisitions and continued to pursue our robust pipeline of consolidation and product line extension opportunities in 2010. Looking at the fourth quarter, we were encouraged by our operating results, which were above the same period last year and significantly higher sequentially. Volumes continued to gradually improve and further cost savings were realized.

slide five outlined some of our key sustainability efforts. Each of these actions is intended to benefit the greater good, while also yielding the return on investment to our business. Two years ago, we challenged all Greif locations to reduce their energy usage by 10% by January 2010. We achieved this goal and will soon announce our new mid-term energy and carbon reduction goals to be realized by the end of 2015 and our aspirational long term goals set for the end of 2020.

We changed the name of our timber segment to land management which reflects the focus of this business now, where before we had been primarily concerned with responsible timber management and harvesting. We have involved to consciously take advantage of the full range of opportunities our forest lands present, including wild life stewardship recreation and development, taking advantage of our product line extension and rainwater management system in two cities, which we hope to eventually scale to other regions of the world. We are also partnering with various organizations to create complementary water purification processes for communities with the lack of access to safe water.

Executive Vice President and Chief Financial Officer, Don Huml will now provide you with an update of our financial results.

Don Huml

Thank you Mike. Good morning everyone. Please go to slide Six. Our net sales for the year decreased 26% due to lowered sales volumes, up 16%. Foreign currency translation of 6% and lower selling prices of 4%. The lower sales volumes resulted from a dramatic decline in the global economy, and lower selling prices were primarily due to the pass through of the lower raw material costs.

Importantly, following a sharp drop in sales volumes in the first quarter, we achieved sequential growth for the reminder of the year, and exited 2009 with positive volume comparisons.

Operating profit before special items was $313 million for 2009, compared to $413 million last year. The decrease was primarily due to lower net sales. The cost reductions achieved under client business system initiatives and specific contingency actions significantly offset these reductions. As these savings are annualized they will provide further contributions in 2010. Interest expense was $54 million for 2009, compared to $50 million in the prior year.

We expect an incremental increase in borrowing cost during 2010, from the 2009 level. Due to the 2009 financing activities and further implementation of our growth strategy, partially offset by expected strong operating cash flows. The effective tax rate for 2009 was 21.7% versus 23.6% a year ago. Based on current expectations and earnings mix projections. A realistic range for 2010 is 20% to 25%.

Diluted earnings per share before special items were $3.32 in 2010, compared to $4.54 per class A share last year. Free cash flow is approximately a $180 million for 2009, which improved sequentially throughout the year. At year end, we were comfortably within our targeted debt to capital range as we strengthened our balance sheet during the second half of the year.

On slide seven, industrial packaging net sales decreased 26% to $2.3 billion for the year, primarily due to lower sales volumes and lower selling prices this year compared to last year. Operating profit before special items was $232 million for the year. The $83 million decrease from last year, was primarily due to lower net sales which was partially offset by lower raw material costs, as compared to the previous year. In addition, cost reduction actions significantly offset the segment’s lower operating net profits.

Now on slide eight, paper packaging net sales decreased 28% to $505 million on fiscal 2009. This was primarily due to lower sales volumes and selling prices. Operating profit before special items was $59 million for the year, compared to $78 million last year due to the lowered net sales. Partially offset by lower raw material costs, especially for OCC. Recent announcements in the industry concerning a $50 to $70 per ton container board increase, as early as next month. If realized would help resolve the price cost squeeze we are currently experiencing.

As shown on slide nine, our land management business formerly known as Timber continues to perform as planned. The segment’s operating profit before special items was $21 million for the year, an increase of $2 million over last year. This amount includes $15 million from the sale of specially used properties compared to $17 million last year.

Now on slide 10, capital expenditures were $125 million for 2009, compared with a $143 million last year. We anticipate that our 2010 1000 capital expenditures will be similar to 2009. For 2010, we are cautiously optimistic due to our expectation of continued improvement in sales volumes and the full realization of 2009 permanent cost reductions. Because of this, we expect that Class A earnings per share before special items will be in the range of $4 to $4.25 for 2010.

That concludes my remarks. You should now go to slide 11. Mike and I will be pleased to answer your questions.

Question-And-Answer Session

Operator

(Operator Instructions) Your first question comes from Chris Manuel - Keybanc Capital Markets.

Christopher Manuel - Keybanc Capital Markets

A couple of questions for you; first let’s start with if I can, couple of special items through the quarter, the asset disposals you had, can you differentiate for us what was within I think you have given some color within Timber and then what was, I am assuming the balances in the industrial business, could you A, differentiate between those and then B, what was the component that was in the industrial business, can we get some color there?

Don Huml

Yes Chris. The asset disposition gains, you know, for the quarter were about $25 million, one third of that would have been the gain on the sale of special used properties, and two-thirds of that represents the sale of facilities and you are likely to see that be a bit elevated as a result of all of the rationalization activities and so, we would anticipate for next year that we would see some increase in asset disposition gains. So, we would really look to a range of $20 million to $30 million perhaps being closer to the upper end of that range for next year.

Christopher Manuel - Keybanc Capital Markets

And then for the full year to $34 or so million was it a similar split?

Don Huml

About, yes, that would be a similar split.

Christopher Manuel - Keybanc Capital Markets

Okay, and so, just so I understand this correctly, and my second question is going to move on to the bridge that you give us for 2010 numbers, the four to four in a quarter, if we could walk through, how we get from 2009 to 2010 some of the components, it sounds like you will have more in the way of asset disposition gains, and if I just heard you correctly that’s something in the $20 to $30 million range; total amount, so that the incremental increase would be approximately what?

Don Huml

Yes, so why don’t we walk through the bridge and the various steps...

Christopher Manuel - Keybanc Capital Markets

Yes.

Don Huml

So, if we start with that operating profit of $313 million for 2009, the first step in the bridge would be the higher volumes, and basically the assumption is they will improve by about 9% at our - as the contribution margin that we have been experiencing that would contribute about $75 million.

Christopher Manuel - Keybanc Capital Markets

So you just said 9% of volume increase?

Don Huml

Yes, now Chris as you know in the first half of the year for 2009, our volumes were down 20%.

Christopher Manuel - Keybanc Capital Markets

Yes.

Don Huml

We have excited the year basically the fourth quarter was down 9%, and so we are definitely going to, if you just assume a steady stage, and no further improvement, you are basically going to see about a 7.5% increase based on the volumes being down 20% during the first half of 2009, the third quarter was down 18%, then the fourth quarter down 9%. So, again you basically have, assuming no change in the run-rate about a 7.5% improvement, and we are assuming a gradual recovery in the global economy and that would contribute organic growth of about 2% to 3% above that.

Christopher Manuel - Keybanc Capital Markets

Okay, we are starting at 313, 9% volume growth?

Don Huml

That’s right. The next step in the bridge would be step down, we are taking a cautious approach with respect to paper packaging and the price cost squeeze. As China is a large buyer of OCC, there is strong economic activity, there is some concern about a possible spike in a recycled fiber, we think it’s prudent to include a provision for that, so we are basically saying OCC could increase $30 to $40 per ton, so we have a step down of $15 million.

We have the expectation of a carryover of cost savings, basically the full year benefit of $60 million, and we are assuming a return of the non permanent items of $30 million, so that would be a $30 million contribution. The pension expense will be increasing by about $10 million due to lower discount rates.

Christopher Manuel - Keybanc Capital Markets

Yes.

Don Huml

And, then we are assuming that acquisitions, and we basically completed one subsequent to the end of the year that acquisitions would contribute $10 million.

And then below the operating profit line just annualizing the increase in financing cost related to the new note offering that would be an increase in interest expense of about $15 million. So, that basically would get you to the guidance.

Christopher Manuel - Keybanc Capital Markets

And that’s helpful, and then the last question, and I will turn it over is Mike, could you - Don started to do this, could you give maybe give us a sense of what the volume trajectory has looked like, I know looking at it and the quarter can be somewhat misleading, because you had, August that you were lapping difficult, in October you were starting to lap more easy, maybe could you give us a sense of what October or November look like, in the industrial business in the drum side?

Mike Gasser

Yes Chris, what we did last quarter and I’m going to give you a bunch of numbers, I think because I think it’ll put it in perspective of how volume has been gradually improving towards the tail-end of this year, and then I will get you specific question right at the end.

If you could just bear with me here, and I’m going to compare the fourth quarter this year to the third quarter this year, so a sequential change, and I will give it to you by region Chris, so Europe was down flat to 5% down, and that really is because of the seasonality of the business the third quarter is always stronger than the fourth quarter in Europe.

Asia was up 15% to 20%, North America was up 5% to 10%, and Latin America was flat. If we compare fourth quarter to fourth quarter, and again, we are comparing a strong fourth quarter last year to this fourth quarter, Europe was flat. Asia was up 25% to 30%, North America was down 5% to 10%, so that was a good improvement over what it was in third quarter, and Latin America was down 5% to 10%.

And if we look at just October to October, in total, this was up 6% over last year, and if we look at November to November, just in total November this year to November last year we were up 9%. So that shows you that gradually throughout the year volumes have started to improve in the industrial segment.

Christopher Manuel - Keybanc Capital Markets

Okay, so the trajectory does continue, and that supports your plus nine for the year as exit rate November to November.

Mike Gasser

Yes, we are actually hitting that right now, that’s correct.

Operator

Your next question comes from Jim Lucas - Janney Montgomery Scott LLC.

James Lucas - Janney Montgomery Scott LLC

Two questions here unrelated, first is, could you give a little more color what you are seeing, what’s in the acquisition environment, you said one more close subsequent, I believe that you look at the nine that you closed last year, you have talked about the pipeline in the past, maybe give us an update of what you are seeing out there, not only in terms of maybe the types of properties as well as what you are seeing from evaluation stand point.

Secondly, as a beginning that it was somewhat curious mentioning the rainwater management system and the purification, and could you talk a little bit more about what exactly you are doing there, and is this potentially a new growth market for you?

Mike Gasser

Yes Jim, I will start with your first question the acquisition, and give you an update on where we are at in the front, and really start with where we left off last quarter, if you recall, we mentioned that 11 deals in a pipeline at the end of the third quarter, during the fourth quarter we actually closed on two of those deals, and to put it in perspective the multiples were from 4.1 to 6.2 so that gives you the range of the deal close for those two deals, the purchase price between the two was less than $55 million, so they weren’t really large deals, and the sales were about 1.5 times, the sales about 1.5 times the purchase price, so those were the two deals that closed in the fourth quarter.

As we mentioned in our opening remarks, we did close six deals totaled in 2009, but generally, they were one plant small type acquisitions. Also there in the fourth quarter there were two deals that were in the pipeline that actually got canceled, because they didn’t meet our expectations from a profitability standpoint, but quite honestly, they were quite small deals anyways. And there was one new deal added to the pipeline.

So right now as of the end of October, we had eight deals in the pipeline, and the really split 50/50 between in consolidations and new product extension, our product line extensions, so it would be 50/50 between those two. The deal range Jim is between five and seven times EBITDA, so that would be the multiple range to give you an idea. The cumulative purchase price if we would consummate all eight of them would be a little south of $450 million, and corresponding sales that would come with that, would be a little bit less than two times the purchase price.

So that gives you an idea of what’s in there, it’s still quite robust, I think activity is still quite good out there for us. Some of these are further long than others and by the end of the second quarter we would either expect to close these or not even or get out of them entirely, so we would expect to close these within the next six months or we would exit them entirely.

As far as the comments about the rainwater purification, that’s an indication we have industrial equipment, blow moulding equipment that we are actually making [rain bells] that are an ideal for equipment, we have test in place right now with a couple of cities, the preliminary results are very encouraging, we think that this would be a great product line extension for that equipment, and quite frankly it’s a great thing for the environment to be able to capture rainwater to use non-portable rainwater to be able to use to water plants.

So we are looking at, at that as a product line extension and if that takes off, we will be letting you know how that goes in the subsequent quarters.

James Lucas - Janney Montgomery Scott LLC

And are you selling directly to the municipality here?

Mike Gasser

We are going to go through a variety of ways to sell this, and that hasn’t been fully vented out yet and so we will comment on that as we get closer to that.

James Lucas - Janney Montgomery Scott LLC

And in your prepared remarks after the rainwater management you had also made a reference to purification.

Mike Gasser

Right.

James Lucas - Janney Montgomery Scott LLC

Is that separate or?

Mike Gasser

Yes. That is separate that is in its preliminary stages, we are having conversations with groups of people who have interest in this and what we are looking at is our distribution network, which was quite phenomenal in 220 locations around the world.

Our manufacturing equipment, is there a way to for us to develop products that could run on our machines and other people have filtration systems that we could actually make a difference as far as a portable water for people who don’t have safe drinking water, and these are in preliminary stages, but we do have a commitment to sustainability, and water is one of the points of sustainability so and if we can actually make it a business that is a profitable for our company, it seems to be a win for everyone.

Operator

Your next question comes from Christopher Chun - Deutsche Bank.

Christopher Chun - Deutsche Bank

First of all I just wanted to ask about or queue, the quarter benefited from more than expected earnings in the land segment as well as a fairly low tax rate. So if you back those two items out, I mean it looks to me like somewhat of a mess. I was just wondering if there was anything that developed in 4Q, there was a negative surprise relative to what you anticipated back on the 3Q call.

Don Huml

Yes. That’s a very good question Chris, and let me address the effective tax rate first, and then the acetous position gains, and then also some of the headwinds that we’re perhaps a bit stronger than we had originally anticipated.

As far as the effective tax rate, as you know on a full year basis it is down 1.9 points, you could really point to the black liquor credit we benefited very modestly, but there was about a $3.9 that translated to about two points, so you could say that on a full year basis that contributed to the lower, but what I would quickly add is that we are really quite confident that their rate is sustainable based on an expected shift in the earnings mix that would be favorable based on the very strong improvement and profitability outside of the U.S.

So, we gave a fairly broad range for effective tax rate for next year, but there is no step down in our guidance bridge, so it really implies that we should be able to sustain the rate for 2010, and so that was really the first point I wanted to make, as far as the acetous position gain as you know those are a recurring component of our earnings albeit a lumpy ones, but we would definitely don’t want that to mask what was a fundamentally strong operating performance before acetous position gains, the fourth quarter we achieved a record operating profit before the disposition gains of 13.5% sequential earnings improvement of 35%.

And that was really not withstanding the challenges within our paper packaging business that were a bit greater than we anticipated, the price cost squeeze as a result of lower container water pricing and higher recycled fiber cost, and so Yes that was worse than expected, fortunately there have been some recent developments that are encouraging, and could address that.

Then finally, we did have some meaningful disruptions to our supply chain as a result of steel availability issues, really both in North America and Europe. The one thing we’ve been managing about extreme volatility, and we just as we liquidated our high cost inventories and had them at low levels based on the lower activity, we had an uptick and unfortunately, the steel industry was severely curtailed and it took time to respond.

As a result we experienced stock outs we were incurring additional costs to transfer steel to other facilities, we were using different gauges in some cases, but we did incur some rather meaningful costs, that really if you were to combine the impact of the paper packaging price cost squeeze and the supply, steel supply chain disruptions, it’s really an amount that would substantially offset that non-timber related component of the disposition gains.

Christopher Chun - Deutsche Bank

Okay thanks for all that color on that, that’s very helpful, and for the record I would agree with you that relative to your comps, the quarter was still fine it’s just that relative to what we expected based on what you said, it just seems we flush you back out that the land of attack, that’s all.

Don Huml

Well I really appreciate you mentioning the comparison to comps, I don’t mean to throw our paper packaging segment under the bus, because there is a fairly comparable company that we highly admire and that is, a very strong performer and we were able to deliver an operating profit margin 2X of that company. So, I really do think that not withstanding the challenges that it was really a solid performance.

Christopher Chun - Deutsche Bank

Okay. And then I just wanted to drill down a little more, in terms of the on the assumptions underlying your 2010 guidance. On the paper packaging business, you mentioned that you were baking in, a negative $15 million on price comp squeeze. So, does that mean that you are not in accounting for any benefits from the $50 ton price cycle initiative that’s currently in the marketing board?

Don Huml

No, we basically had assumed as part of our budgeting process that there would be an increase, but that it would occur at mid year and really, based on our fiscal year we would benefit perhaps by one quarter. So, there is definitely upside potential if the price increase gets traction, much earlier than had been assumed in our budget.

Christopher Chun - Deutsche Bank

And then in terms of the bridge that you described earlier, I don’t recall that you are mentioning any further benefits from any of these deals that Mike outlined?

Don Huml

Yes, we basically have $10 million for acquisitions, and conservative number, I would also say that the initial year that the company has acquired and integrated is really one where we are embedding the Greif business system and we tend to shrink before we grow, and so yes, there will be some accretion, I think there is some upside potential, but we are providing $10 million as our assumption for the bridge.

Christopher Chun - Deutsche Bank

Okay, fair enough, then maybe this is more appropriate in terms of looking out towards in 2011, Mike mentioned that there were eight deals in the pipeline that Mike totaled $450 million, and I understand that there is still some issues about whether or not they all get completed, but in trying to think about what the order of magnitude impact might be let’s say, if 2/3rds of those deals gets done, what would be the impact on 2011?

Don Huml

Yes, Chris, I want to go back to 2010, we really haven’t factored much in for those eight deals, so we will just start with that, the 10 million is really the annualized deals we closed last year, plus, we closed the first quarter of this year, and maybe a little bit at the end of this year. I think, as we get to 2011, we will wait until later until we close the deals, and I think we will be a better shape to speculate, because I think right now to try to speculate until we closes is probably a little premature on that.

Operator

Your next question comes from Steven Chercover - D. A. Davidson.

Steven Chercover - D. A. Davidson & Companies

Your color on the assumptions that you are baking in are very helpful, just a little bit more on the volume, you have indicated that you have seen some sequential growth, but you get 7.5% just like basically maintaining status quo, is there anything that you have seen around your operations globally, that give you pause to make you fear, perhaps the double debt?

Don Huml

Steve, we haven’t seen that yet, I mean, we are cautious in that statement because everyone is concerned that potentially that could happen, but we have not seen that yet, customer attitudes from what we talked to and what we read about them is fairly confident in light of what we have all gone through from 2009.

So I think we have a cautious approach by the 9% volume increase, and I think we will continue to update everyone, each quarter as we go forward, as we look at volumes, because that is obviously a very important part of our story and everyone’s story, the only thing that we can report on is that over the last four months we have seen sequential improvements, and that gives us some confidence that the 9% is at least a good number sitting here right now.

Steven Chercover - D. A. Davidson & Companies

And the volumes certainly in the first half of your fiscal year were impacted by, I would assume destocking throughout the economy in general, do you believe that there could be some stage some restocking that would actually boost volumes beyond kind of the general takeaway demands?

Don Huml

Yes, that possibility exists, I think people us included are probably much more cautious on working capital and inventory build, and so because of the situation we all went through in 2009, so yes I think that possibility exist we don’t see it yet, but I think it will be much more of a cautious approach before people actually build inventories, if there are anything like us because we are much more cautious than we had been in the past.

Steven Chercover - D. A. Davidson & Companies

Sure, and two more quick ones if I could, first of all, there are some residual benefits from the price business initiatives, that will trickle down in 2010, is there a new round of initiatives that you are contemplating or you are basically cut to the bone within your existing operations?

Mike Gasser

Well, I will start with, then Don can jump in, but you know, we had talked last year before the crisis hit we went into a contingency plan mode that, we really have a new round that we are starting which is our best in class round, which is really looking at every operation, and find out who does each process the best in trying to implement that in each location and so that is a new round that we have started last year, really sort of that stopped a little bit as we went into the contingency plan mode, and quite frankly, I think delivered quite admirably on that contingency plan.

So, I assume that the economy is better which we assume you will see us talking more a more about the best in class mode which we think could be a significant contributor a long term to the results at Greif.

Steven Chercover - D. A. Davidson & Companies

But that was not explicitly mentioned in your bridge though?

Mike Gasser

It was not, because we have not factored that in, anything the value that.

Steven Chercover - D. A. Davidson & Companies

Okay. Final question, just between your mix of kind of petrochemical pharmaceutical and agriculture, are there any trends within those factors that are worth noting?

Mike Gasser

No, I think we have comment in those in the past, and I think those have remained the same, I think the mix that we had with is about the same and so there is nothing to be done, there is nothing today that we would want to comment on that.

Operator

Your next question comes from Scott Blumenthal - Emerald Advisers.

Scott Blumenthal - Emerald Advisers

Don, just a couple of clean up questions, following your comments; can you give us your expectations for ForEx, and what you are factoring in the guidance?

Don Huml

Scott, for 2009, just as a for level setting purposes, the Euro was 1.37, and we do not have a step in the bridge for currency since it’s very difficult to predict, if there were no change from today, with the Euro at 1.47, that would translate to about a $10 million benefit. So, that would be one of the hard spots in the bridge.

Scott Blumenthal - Emerald Advisers

Okay, that’s helpful from a measure of degree here, and in the asset disposal area, do you have any more that you are still marketing at this point?

Don Huml

Well, we basically have 15 that are part of our assets held for sale and so those transactions will occur really over the next 18 to 24 months.

Mike Gasser

And Scott out of that that number could grow because as we continue to do acquisitions consolidate there is always new ones that come on, so it would be an ongoing process for those facilities.

Scott Blumenthal - Emerald Advisers

Okay, understood, and do we have any facilities for sale out of those 15 that are a result of the most recent acquisitions?

Don Huml

Not to-date, there maybe in the future not todate.

Scott Blumenthal - Emerald Advisers

Okay. And just two more if I might, Mike, is blending and filling considered to be a consolidation opportunity or a product extension?

Mike Gasser

We had considered that as an adjacency. So, well that’s a different word but we had used that, but that was an adjacency.

Scott Blumenthal - Emerald Advisers

Okay. And then therefore in your deal acquisition funnel, when you talked about consolidation opportunities and new product extensions, blending and filling then as an adjacency is out or it is one of those two?

Mike Gasser

No, it’s just that we don’t have a deal, current mix that would be in the blending filling arena.

Scott Blumenthal - Emerald Advisers

Okay, that’s really helpful. And I guess the last one for Don please, Don you talked about the steel supply issues, and that there were meaningful cost during the quarter, you might have mentioned this and I might have missed it, but you did, did you say that they more than offset the earnings from the facilities disposals?

Don Huml

What I basically said was that for the quarter the $25 million and disposal gains

Scott Blumenthal - Emerald Advisers

Yes.

Don Huml

The 2/3rds that was related to facility dispositions were substantially offset by the price cost squeeze combined with the supply chains disruptions.

Scott Blumenthal - Emerald Advisers

Okay. Substantially, but not completely?

Don Huml

Right, that’s correct.

Scott Blumenthal - Emerald Advisers

Okay, and then at this point, are we suffering from the same type of field supply issues, or has that cleared up a little bit?

Mike Gasser

That has definitely cleared up and I appreciate you asking that question, because it was really a result of the industry ramping up and really starting up blast furnaces and unfortunately that takes 30 to 60 day period, and so when we reached that inflexion point volumes increased, there was a difficulty in terms of availability, but those issues have been since resolved.

Scott Blumenthal - Emerald Advisers

Okay. Do you have any spots at all in supply chain, where you are struggling types of issues that you mentioned?

Don Huml

No.

Operator

Your next question comes from Gregory DiMarzio - Century Capital.

Gregory DiMarzio - Century Capital

So I have got kind of a big picture question. Last year, you guys at 325 to 375, and it seems like a wide end of the range for most of the year, we are talking about the fact that that upper half of the range was sort of aspirational, this time around you had too much narrower range, and it seems like that total of the call is that there is a lot of conservatism around it, if you could describe to us, any did the way the last year’s guidance get perceived have any effect when you are thinking of this year or any thought process we should be aware of?

Don Huml

Well, I think Greg is that I think we all lived through a challenging year end in 2009, and I think conservatism is probably the better part of dollar right now as you go forward, I think our conservatism has really stemmed from the uncertainty of what 2010 is actually going to bring.

The way we see it now this would probably be viewed as conservative, but we were surprised that during the last year, and hopefully we won’t have that surprise and, we have no problem going through the quarter if we see better results to increase our guidance for the year, which we have done in 2007 and 2008, but we felt that we just need to give you our conservative view right now, and we will update it as each quarter as we go forward.

Operator

Thank you, ladies and gentleman. I will now turn the conference back over to Deb Strohmaier for closing remarks.

Deb Strohmaier

Thanks Diego, and thank you all again for joining us this morning. A digital replay of the conference call will be available in approximately less than one hour on the company’s website at www.greif.com. Have a great day.

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Source: Greif Inc. F4Q09 (Qtr End 10/31/09) Earnings Call Transcript
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