Greif (NYSE: GEF, GEF.B), a world leader in industrial packaging products and services, today announced that its financial results for the three months ended April 30, 2014, will include the negative financial impact of items related to the illegal occupation of the flexible products manufacturing facility in Hadimkoy, Turkey, and adverse weather-related conditions. The financial impact of these items for the second quarter of 2014 will represent approximately $20 million or $0.14 per Class A share.
On February 10, 2014, a group of protesters led by non-Greif personnel with a broad social agenda staged an illegal occupation at the company’s facility in Hadimkoy, Turkey. The company incurred incremental security costs for Hadimkoy and other facilities, labor-related expenses and additional costs to service customers. The occupation lasted 60 days and the production downtime at Hadimkoy was 98 days which disrupted the company’s supply chain, although products were shipped to customers from locations within the global network. The financial impact of these actions totalled approximately $13 million for the second quarter of 2014, which included indirect costs estimated to be approximately $7 million in lost sales and the increased cost of alternative supply sources plus approximately $3 million of direct costs. In addition, there were approximately $3 million of restructuring charges related to this facility for the second quarter 2014. It is anticipated that there will be additional costs related to this situation during the second half of fiscal 2014, and management believes that appropriate measures have been implemented to prevent similar incidents at Greif facilities, and additional actions will be assessed on an ongoing basis.
Additionally, during the second quarter of 2014, adverse weather-related conditions continued to impact the company’s Paper Packaging and Rigid Industrial Packaging segments. There were approximately $4 million of higher energy and additional input and logistics costs in the Paper Packaging segment. In the Rigid Industrial Packaging segment, there were approximately $2 million of higher energy costs and higher labor expenses due to shift reductions. These and other weather-related items totalled approximately $7 million for the second quarter of 2014.
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