GEF
#A couple things.
You'll recall that in the past, I've said that when we kicked off transformation, at the time I had stated I thought the attainment of our margin objectives was going to be the more difficult.
Then as time has passed and we've had the significant impacts of currency shifts as well as divestitures ---+ more revenue than we probably contemplated at that time as we analyzed our unit, I've shifted to say that the SG&A commitment is the more difficult one.
That said, we still do believe that we will achieve our transformation commitment on a run rate basis coming out of this year.
It's going to be really difficult.
We've got a lot of plans.
It's going to take really strong execution and we can't have surprises occur.
Some of that may happen.
But, I feel comfortable that we have a good plan to achieve that objective coming out of this year.
If we should fall short of some ---+ we have more opportunity going forward as I've indicated in the past related to things that we will be able to capitalize on, relative to our ERP system implementation that will be completed in the latter half of 2018.
Leveraging that will give us more opportunity and I hope over the longer period of time 2018, 2019, that we would be able to challenge ourselves to get more in the 9.5% range over time.
We will try to put more color and more specifics around that in June.
I feel good and commenting on this quarter, we had a couple of things in there.
We have some ---+ we true-up our incentives beginning second quarter.
Used to be even the third, but we are trying to get to the point where we can accelerate that and adjust every quarter.
So we are little high on incentive accruals and some of that had to do with the special payout related to better things than we accrued for at year-end but nothing material.
So, it influenced things a little bit in this quarter and we also had some professional fees related to remediation of our material weaknesses that trailed in and caused a little bit of bump in expenses.
But, we expect all of that to mitigate over the year and get us back to where we expect it to be for SG&A for this year.
And then as I've said, we do have plans to have us coming out of the year on a run rate basis a that 10% below commitment, but it's going to take a lot of work.
I'm sorry.
What we've basically got built-in right now, just on pure OCC, is about $145 a ton across all of our space.
<UNK>, we continue to make progress on that goal.
We are not as far along as I would expect us to be relative to our first quarter results for the reasons I already mentioned.
We remain confident in our ability to achieve the objectives that we laid out last spring.
In terms of electronic fund transfers, and the movement of accounts, we are making good progress.
I'd like to see that be accelerated from where we are and that's one of the focus areas that we have to help us achieve the flat or better for the year.
I'll take the second one, first comment on it and I think <UNK> will add a few things, maybe on both, but particularly on FPS.
With respect to the administration's proposals, <UNK>, it still is pretty much still too early to tell on specific benefits.
I think as we indicated previously, anything that would result in a reduction in the US corporate tax rate is a positive factor for us.
So, we look forward to seeing that happen.
If it does, that would be beneficial to us.
Relative to FPS, we believe that we will achieve the transformation run rate commitments coming out of 2017.
We are pleased, very pleased, I'd say, with the job that Hari and his team are doing on executing more rapidly the plan that we laid out at the beginning of their transformation process.
And, in terms of it being and investable business, as with everything, we always are assessing our portfolios.
I would say, clearly, it's improving performance has us viewing that in a more favorable light.
Yes, we will talk more specifically about it in June and what its longer-term opportunities are.
But, they are obviously showing significant improvement on their margin mix management and we talked in the past that by 2020 timeframe, we would expect their margins to be north of 20% and they're making really nice progress on that.
We want to see that continue and also improving their operating cost.
Good progress, still monitoring it closely but encouraged by the progress.
<UNK>, do you have anything.
No.
We're very pleased with the pace of change going on and from a growth standpoint, <UNK>, we have pretty significant upside just in organic growth with our existing footprint.
We have to demonstrate we have the ability to do that, first.
Then just to reference to some of the potential policies in the administration, one big one is the border tax and does that have an impact on supply chain.
We have very minimal exposure in our supply chain that would not be material risk to our Company if some of those policies play out.
I'm sorry, it was not clear enough.
What I was really speaking to is gross margin on product sales, where we expect it to be north of 20%.
But, there is obviously, also opportunities to drive up further SG&A cost and drive that bottom line operating profit, which not any different than our other businesses.
We expect that to be 10% or above when they get to that 2020 timeframe.
Thanks a lot, Suzanne.
That concludes our call for today.
The replay of this question-and-answer session will be available later on, on our website and www.investor.Greif.com.
We really appreciate your interest and participation this morning.
Thanks a lot and have a good remainder to your day.
