Greif Inc (NYSE: GEF) Q2 2020 Earnings Call Transcript

Greif Inc (GEF) Q2 2020 earnings call dated Jun. 04, 2020

Corporate Participants:

Matt Eichmann — Vice President, Investor Relations and Corporate Communications

Peter G. Watson — President and Chief Executive Officer

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

David Lloyd — Treasurer

Analysts:

George Staphos — Bank of American Merril Lynch — Analyst

Adam Josephson — Key Banc — Analyst

Ghansham Panjabi — Baird Equity Research — Analyst

Mark Wilde — BMO Capital Markets Corp. — Analyst

Steven Chercover — D.A. Davidson — Analyst

Justin Bergner — GAMCO Research — Analyst

Gabe Hajde — Wells Fargo — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Greif Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Matt Eichmann. Thank you. Please go ahead, sir.

Matt Eichmann — Vice President, Investor Relations and Corporate Communications

Thank you Tacan, and good morning everyone. Welcome to Greif’s second quarter fiscal 2020 earnings conference call. On the call today are Pete Watson, Greif’s President and Chief Executive Officer; and Larry Hilsheimer, Greif’s Chief Financial Officer. Pete and Larry will take questions at the end of today’s call.

In accordance with Regulation Fair Disclosure, we encourage you to ask questions regarding issues you consider material because we are prohibited from discussing significant non-public information with you on an individual basis. Please limit yourself to one question and to one follow-up before returning to the queue.

Please turn to Slide 2. As a reminder, during today’s call, we will make forward-looking statements involving plans, expectations and beliefs related to future events. Actual results could differ materially from those discussed. Additionally, we’ll be referencing certain non-GAAP financial measures and reconciliation to the most directly comparable GAAP metrics can be found in the appendix of today’s presentation.

And now I turn the presentation over to Pete on Slide 3.

Peter G. Watson — President and Chief Executive Officer

Thank you, Matt. Good morning everyone. We really appreciate you joining us today. On behalf of Greif, I’d like to offer our thoughts and best wishes to all of you who have been impacted by COVID-19 pandemic and express our thanks and admiration for the brave healthcare workers and first responders in the front lines to the health crisis. I’d also like to recognize 16,000 global colleagues at Greif and their families for their enduring spirit and perseverance as we’ve been adapting to new ways of working and communicating. And I’m really inspired by the efforts and proud of our performance in the global team that is — we’ve delivered during the crisis. COVID-19 pandemic remains an evolving situation and we continue to monitor the latest updates. Our global and regional pandemic task force are meeting multiple times weekly to ensure we safeguard the health of our colleagues and the continuity of our supply chain to serve our valued customers.

Our purpose at Greif is to safely package and protect critical goods materials that serve the greater needs of communities all around the world. And given our position, Greif has been identified as an essential business as we continue to operate all of our production facilities in more than 40 countries. Our global portfolio is uniquely capable of fulfilling customer needs worldwide and our sourcing and supply chain is well supported with extensive alternate backups in place for all critical products and components.

If you could please turn to Slide 4 for an overview of the quarter. We continue to make really strong progress across all of our strategic priorities. Our second quarter adjusted EBITDA and adjusted free cash flow both improved versus prior year quarter with especially strong performance in our global Rigid Industrial Packaging segment. In addition to improved financial performance, we completed our third annual Gallup colleague engagement survey, scoring in the 89th percentile of all manufacturing companies. We also recorded our best ever trailing fourth quarter customer satisfaction index score. We firmly believe there is a linkage between engaged colleagues and customer service excellence to improve financial performance. We also published our 11th Annual Sustainability Report, which reflects the progress we’ve made to reduce our environmental footprint and build a more circular supply chain as part of our overall business strategy.

Lastly, we completed several portfolio optimization moves aligned with advancing our strategy. First, we acquired a minority stake in Centurion Container, which is an expanding IBC reconditioning capability in North America and we have an optional path to full ownership in the future. Second, we completed the sale of the Consumer Packaging Group to Graphic Packaging for $85 million, subject to customary closing adjustments, enabling us to refocus on our industrial franchise, optimize our capital expenditures, and pay down debt. Third, we announced yesterday the closure of our Mobile, Alabama Uncoated Recycled Board Mill as part of our ongoing network cost optimization initiatives. We also consolidated two Rigid Industrial Packaging operations, one in Brazil and the other in the West Coast of the United States as we examine ongoing our portfolio performance in that business.

I’d like to now review our business performance by segment, and if you could please turn to Slide 5. Rigid Industrial Packaging business delivered a solid second quarter. We generated record global IBC production, with volumes 26% higher versus the prior year quarter. Thanks, primarily to our new IBC investments in Tholu, which is an IBC reconditioner in Europe and our two new IBC plants, one in Houston, Texas and the other in Kaluga, Russia. Global steel drum volumes declined by 70 basis points versus the prior year quarter. Steel drum demand in EMEA, which is our largest steel drum region, grew by roughly 60 basis points and North America increased by 1.6% due to strong first half of the quarter fueled partly by increased customer stocking and new customer growth. Steel drum volumes in APAC were roughly flat versus the prior year, while volumes in Latin America were down nearly 16% due to weak demand for lubricants, as well as the loss of low-margin high volume customer.

RIPS second quarter sales fell roughly $9 million versus the prior year quarter on a currency neutral basis, due to raw material price declines and corresponding contractual pricing adjustments, which was partially offset by strategic pricing actions and better volumes in certain regions. RIPS second quarter adjusted EBITDA rose by roughly $23 million versus the prior year quarter due to favorable product mix, lower raw material costs including roughly $7 million of opportunistic sourcing benefits, and lower segment SG&A expenses, all partially offset by the impact of lower sales. For comparative purpose, RIPS in our second quarter of 2019 adjusted EBITDA was negatively impacted by a $1.5 million customer bankruptcy bad debt write-off that was previously disclosed.

I’d like to now have you turn to Slide 6. Given the extraordinary time we find ourselves in, I want to spend a moment to discuss what we are currently seeing in the market. One of great strengths is our broad end market exposure and our business is not overly dependent on any one customer or any one segment. Broadly speaking, during the quarter, we experienced additional demand for pharmaceuticals, sanitizers, and disinfectants, partly due to the pandemic and volume softness in lubricants, paints, and coatings as economic activity slowed. Looking ahead, we anticipate several of these end markets improving as economies reopen and those currently strong will remain that way.

If I’d ask you to turn to Slide 7. Our Flexible Products and Services segment second quarter sales fell roughly 9% versus the prior year quarter on a currency neutral basis. Soft demand, raw material price declines, and corresponding contractual pricing adjustments were the main drivers. Our second quarter adjusted EBITDA fell by roughly $1 million versus the prior year, due to lower sales, which is partially offset by lower segment SG&A expense. We estimate that FPS lost roughly $600,000 in adjusted EBITDA during Q2 due to government mandated operated capacity reductions in Turkey aimed at preventing the spread of COVID-19 in that region. Those restrictions are slowly being lifted and we anticipate operating at full capacity in fiscal — our fiscal third quarter.

I’d please ask you to turn to Slide 8. Our Paper Packaging second quarter sales fell by roughly $16 million versus the prior year quarter, primarily due to lower published containerboard and recycle prices. Volumes were also negatively impacted by 24,000 tons of containerboard economic downtime taken in the second quarter. Paper Packaging second quarter adjusted EBITDA fell by roughly 4% versus the prior year as lower sales were only partially offset by lower segment SG&A expense and by the incremental adjusted EBITDA contribution for 11 more days of Caraustar assets this year. We estimate that PPS experience roughly an $8 million adjusted EBITDA headwind during Q2 from non-essential customer closures. For comparison sake, Paper Packaging second quarter in 2019, the adjusted EBITDA was negatively impacted by $9 million inventory step up charge that was previously disclosed.

During the quarter, we announced a $50 a ton price increase for all grades of uncoated and coated recycled board effective with shipments beginning May 13 of 2020, which we are continue to — continuing to implement. Yesterday, we announced the closure of our URB mill in Mobile, Alabama as part of our ongoing network cost optimization activities and then further enhanced our capital deployment efficiency. The total capacity of this mill was 140,000 tons, which includes the shutdown of our mills number one paper machine that was accomplished in October of 2019. We thank all of our colleagues in Mobile for their hard work and we are committed to supporting them through this transition.

I’d like to ask you to turn to Slide 9. Similar to our Rigid Packaging review, I want to provide a little bit more commentary on what we’re seeing in the Paper Packaging end markets. Our CorrChoice corrugated sheet feeder network consists of six state-of-the-art facilities East of the Mississippi River that service a mix of independent and integrated corrugated box plants. During the quarter, sales to integrated customers were softer as they internalize some of the volumes previously outsourced to us in their own networks. Sales to independent customers were negatively impacted by lower durable goods demand as a result of the slowing economic activity and automobile manufacturing closures.

Similar to our Rigid Industrial Packaging business, our tube and core business serves a diverse mix of end markets. We estimate that roughly 40% of our Top 10 tube and core customer markets were label is non-essential businesses during the health crisis in Q2, which dragged on our results. We are particularly impacted by weak demand in cloth, yarn and carpet segments. Film core volume growth was solid versus the prior year. We expect demand for construction and Protect-A-Board products to moderately improve over the remainder of the year.

I’d like to now turn over the presentation to our Chief Financial Officer, Larry Hilsheimer on Slide 10.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Thank you, Pete. Good morning, everyone. I want to really reiterate Pete’s comments to all of those impacted by COVID-19 and express my thanks to each of our colleagues for their dedication and professionalism during these very challenging times.

Slide 10 highlights our quarterly financial performance. Overall, Greif generated very solid results. Second quarter net sales, excluding the impact of foreign exchange, fell roughly 3% year-over-year. However, adjusted EBITDA rose strongly by roughly 12%. That improvement was driven largely in RIPS, but all segments and the corporate center recorded reductions in SG&A expense. Currency was a modest $2 million headwind to total company results compared to prior year.

Below the operating profit line, interest expense decreased by roughly $4 million and our bottom line adjusted Class A earnings per share rose 17% versus the prior year quarter to $0.95 per share. During the quarter we recorded $38 million loss related to the CPG divestiture. Roughly $36 million of that $38 million relates to a portion of the PPS segments goodwill that we are required to allocate to the transaction. That non-cash charge has no associated tax benefit, which is why our GAAP tax rate was more than 62% during the quarter. Our second quarter non-GAAP tax rate was 32.6% and we continue to expect that rate to range between 27% and 31% for fiscal 2020. Finally, second quarter adjusted free cash flow improved by roughly $33 million versus the prior year quarter to a source of $70 million — $79 million due to increased EBITDA and lower capex.

Please turn to Slide 11. Given the continued uncertainty caused by COVID-19, we are withdrawing our fiscal 2020 adjusted Class A earnings per share and adjusted free cash flow guidance as it is very difficult to estimate projected near term business performance with precision. We are providing the key fiscal 2020 assumptions you see listed on Slide 11 to assist with modeling. In terms of what we saw in May, in RIPS, steel volumes were down roughly 8% on a per day basis versus May 2019 as customers destocked while IBCs were up slightly over 10% per day. In PPS, CorrChoice volumes were down single-digits on a per day basis versus May of 2019, while volumes in our tube and core business were a bit softer than that. Demand for corrugated sheets and tubes and cores improved between April and May this year. So we’re hopeful that we’re beginning to see a positive trend as businesses reopen. We currently believe our fiscal third quarter will be our weakest volume quarter, before overall demand recovers later this year. I think it’s important to point out to you at this point that our quarters obviously differ from most as many companies talk about their second quarter being the weakest, our third quarter will be our weakest.

Please turn to Slide 12. We can’t control how long this pandemic will last or determine what the ultimate impact will be to our global customers. That said, we have taken steps to prepare the portfolio for an economic downturn by identifying variable cost reduction actions, determining potential back office reductions or delays in hiring open positions and optimizing capital spending plans and working capital requirements. In fact, we’ve already implemented actions to generate roughly $40 million of EBITDA benefit over the remainder of fiscal 2020. We believe our business today is significantly better positioned to weather a prolonged economic slowdown than it was in 2008. We’ve optimized our portfolio by closing or divesting 62 underperforming or non-core assets, while replacing and walking away from over $400 million of low margin business and securing new higher margin business of over 400 million via organic growth activities resulting in EBITDA growth of over 65% since fiscal 2015. We’ve expanded in newer and higher margin packaging substrates like the IBC and penetrated less cyclical markets such as food, pharma and agriculture. We’ve also implemented a single ERP platform across the majority of our business, enabling better and faster decision-making, which is critical during a downturn.

Please turn to Slide 13. Our balance sheet is solid with substantial access to liquidity and a well structured debt maturity profile. We currently have $690 million of available liquidity undrawn on our revolver and another $72 million of cash and equivalents. Our only near-term debt maturity, our senior notes due midway through 2021 with the principle of EUR200 million. At quarter end, our compliance leverage ratio stood at 3.6 [Phonetic] — well below our stated covenant of 4.75. Given current market uncertainty to be prudent, we are reducing or postponing non-critical expenses including capital investments. We now anticipate spending between $120 million and $140 million on capex in fiscal 2020. Roughly $10 million of the capex reduction relates to the sale of CPG. Roughly 24% of our remaining forecasted capex is earmarked for various growth projects and could be reduced further if needed.

Lastly, our largest pension program, which resides in the US, is fully funded and [Indecipherable] standpoint with no required contributions for the next three years to four years. Although, we currently intend to continue making contributions. While our financial position is strong, we will continue to evaluate our liquidity needs and options to reinforce our balance sheet as needed.

Please turn to Slide 14. We’ve used this slide for a numbers of — number of quarters and point — and the point is that our capital allocation priorities are firm. They are funding organic capex, delivering our balance sheet, maintaining steady dividends, and pursuing our strategic growth priorities in IBCs, IBC reconditioning and containerboard integration. Consistent and predictable capital allocation we believe is critical to value creation. So what you see here is what you’re going to get.

With that, I’ll turn the call back to Pete for his closing comments before our Q&A.

Peter G. Watson — President and Chief Executive Officer

Okay. Thank you, Larry. And if everyone could please turn to Slide 15. In closing, I want to thank all of our 16,000 global colleagues again for their commitment to growth and to our customers. While a lot is behind this, there will be more uncertainty ahead as countries and communities reopen their economies. That said, I’m extremely confident in Greif’s ability to navigate these uncertain times. We have a highly engaged and motivated team focusing on providing differentiated service to our customers. We’re well positioned to serve a variety of end markets through our industry leading product portfolio and our commitment to customer service excellence. We are successfully advancing our strategic priorities and our balance sheet is strong. Thank you for participating this morning and we appreciate your interest in growth and we look forward to taking your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of George Staphos of Bank of America. Your line is open.

George Staphos — Bank of American Merril Lynch — Analyst

Thank you. Hi guys, good morning.

Peter G. Watson — President and Chief Executive Officer

Hey, good morning George.

George Staphos — Bank of American Merril Lynch — Analyst

Thank you for taking my questions. Thanks for what you are doing on COVID and congratulations on the quarter. My two questions, first in terms of the May volume trends, Pete, can you talk a little bit about the geographic trends you might be seeing? And kind of a parenthetical here, there was a comment about trend getting better between April and May and I wasn’t sure what that was referring to. The second question just on SG&A cost reductions, you did a great job there, I think the year-on-year number was down roughly $20 million, how much of that is sustainable going forward. Was there any kind of one-off that may be dissipates over the course of the year? And what do you think you can do from some of these additional cost reduction efforts that you talked about generally? Thank you.

Peter G. Watson — President and Chief Executive Officer

Yeah, George. Let me talk about some of the volume trends from April to May for your question and then I’ll ask Larry to comment on the SG&A. So when you look at volumes overall, I think you first have to look and over the last four months, the global health crisis, I think we’ve done a really excellent job in demonstrating we have a really resilient and battle tested supply chain. So our sourcing and materials are regional by design and we’ve had no disruptions at all, been very stable. And our operational footprint is very diversified as we’ve talked about and I think we’ve done an excellent job at demonstrating to our customers that we can deliver in very challenging times is both reliable and dependable and our value propositions we always talked about security of supply and customer intimacy. So there’s been some challenges, but if you look at our volumes from April to May transition, I’ll talk about it on a per day basis because May compared to a year ago is two less days.

So if I could let me just walk through RIPS and then talk to about paper because they are slightly different and transitions on volumes from April to May. In our Rigid business, in large steel drums on a global volume basis per day, our large steel drum business globally is down about 5% and that evolution really is aligned to the geographies around the world that are consistent with how economies are recovering, the COVID-19 cases. So in China for example in May the PMI was above 50%, which is a significant change in the last two months or three months and the large steel drum volume in APAC was up 1% on a per day basis compared to April. And if you look at EMEA, EMEA’s volume on large steel drums were down 7% on a per day basis compared to April and North America was down double-digits. Now that’s really reflective as economies reopen and businesses are transgressing across this health crisis. In IBC and reconditioning, it is a much stronger basis. It’s not as high as the breakneck pace that we had in Q1, but we’re still up 10% versus prior year. And again, that’s with two less days. So while we are challenged April to May in steel drums around the world, we still see positive growth in our IBC and IBC reconditioning. And again that’s talking about a transition April to May. As we talked about in our comments earlier in prepared remarks, I think we’re going to have more challenged volumes outlook in steel in our third quarter, which is May through July and IBCs we still expect to see double-digit growth of 10% plus in that range for our third quarter.

If you look at Paper Packaging those trends are slightly different. So we had a little more challenging volumes in Paper Packaging particularly converting. If you look at our volumes in our mill system, we expect on a per day basis to be up 3% in May compared to April on a per day basis. May backlogs and into June, it’s early June the backlogs at our mill system are very steady with four weeks to five weeks of backlog. URB volume is improving in May compared to April, up 1% versus May on a per day basis and our CRB volume continues to be very steady, particular in Tama, Iowa and Sweetwater, Georgia facilities. For full disclosure, we did take 5,000 tons of economic downtime in containerboard on the West Coast only, that’s really reflection not a market demand, just a delay in ag orders in that market.

If you look at our volumes in April to May in our converting operations paper in CorrChoice, which is really tied into our containerboard system. On a per day basis, May versus April were up 6% and what we saw in the last eight days of May, really strong volume out of CorrChoice. And I think that’s reflective of the durable manufacturing businesses such as the automotive plants starting to reopen and full up their supply chain needs and again this is a business, as you know, that has backlogs and visibility of less than 24 hours. So we don’t have tremendous visibility past tomorrow, but again there is more positive signs that our May volumes on a per day basis are much improved versus April.

In tube and cores, our May volumes were flat to April on a per day basis. And again, we have some high exposure in that business to our non-essential businesses that are starting to gradually open without disruption, and in that business through Q3, we expect gradual improvement from May into June and in July.

Again overall, I think in our Paper Packaging we’re cautiously optimistic that as health crisis continue to recovers, we can see improvement sequentially from May through the end of the third quarter in our paper business. So I’ll pause and then ask Larry to comment on SG&A.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Great, thank you, Pete. And George, with respect to the SG&A, when you really break it down year-over-year, the second quarter you had about $12.3 million of salary and benefit reductions $2.5 million in travel and entertainment, professional fees were down about $3.2 million. Depreciation of our IT LN system, caused depreciation to actually be up about $2.5 million and other miscellaneous things across the board, local taxes, bad debt, those kind of things were down about $3.5 million. So, overall about $19 million. When you look at it, is that sustainable. We’ve been focused on reducing our SG&A cost for some time as you know committing to get down below 10% by 2022. So some of the reductions are just part of that effort. We obviously have put in a lot of actions as I mentioned to reduce costs. We did adjust incentives in the second quarter, which pumped the number up a bit, but the long — if I cut to the chase, we do expect that our SG&A will continue to run at substantially lower levels than last year.

George Staphos — Bank of American Merril Lynch — Analyst

Thank you very much.

Peter G. Watson — President and Chief Executive Officer

Thanks, George.

Operator

Your next question comes from the line of Adam Josephson of Key Banc. Your line is open.

Adam Josephson — Key Banc — Analyst

Pete and Larry, good morning. I hope you and your families are well.

Peter G. Watson — President and Chief Executive Officer

Yeah, thanks Adam.

Adam Josephson — Key Banc — Analyst

My two questions, one on, Pete, if I may, I’ll start with Rigid margins, obviously you had phenomenal margin quarter, you mentioned many things, obviously the SG&A reductions, you also talked about opportunistic sourcing, you had a timing benefit, can you just talk about what exactly drove that Rigid margin in the quarter, how much was opportunistic sourcing, what exactly that was and how much were timing benefits of raws falling and price is not catching up, etc. And then what your expectations are in terms of margins in that segment normalizing thereafter?

Peter G. Watson — President and Chief Executive Officer

Yeah, I’ll make a few comments and Larry can get into the specific financial impacts of each of those categories, Adam. But we were really pleased with the RIPS performance and when you look at that business we consolidated that into a global organization nine months ago, Ole Rosgaard leads that and he is really a leading a trans — organizational transformation and longer term, we continue to expect to get benefits from a lower cost structure and more efficient manufacturing footprint and also a continued push to growing our higher margin products. So we really feel good about the improvement trend in that business. The details really as we talked about we had favorable price and product mix, meaning we had higher margin growth products. We talked about the IBC and reconditioning results we had lower raw materials, and advantageous cost raw material sourcing. And we did a really cost — aggressive cost reduction activities. We consolidated two plants one in Brazil and one in the US. Larry talked about organizational SG&A reductions, we have a lot of discretionary spending reductions. And I’ll let Larry walk through the bridge and what those dollars meant in each of those categories.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Thanks, Pete. So Adam on a value add percentage, we went from 45.8% to 50% in RIPS. So, really nice improvement, about 1% of that was some the sourcing opportunities and most companies would not need a sourcing group, if you’re going to be able to buy at index prices. What you have them therefore is to work the market and see if you can find opportunities. In a dislocated market like we’re in currently, those opportunities surface more often. And so our team did a great job of sourcing about $7 million of raw material cost benefits relative to index prices. Some of that benefit got offset by currencies, in terms of how that translates over to US dollars. We lost part of that benefit, but then also timing. We talked in recent years about the timing of our PAM adjustments being a drag on us. It actually turn around for us a bit in this quarter that was a — sourcing was about 1%, the timing was about 1%, and then the other 2.2% was just really good activities around managing pricing for non-raw materials. We’ve been talking about how that’s been ongoing for the last year or two and some of that started to flow through in our quarter.

If I go to overall adjusted EBITDA and you look down through those. The others are the pick-up in SG&A, some change in just allocations because the PPS business getting bigger, they get a bigger relative share of our corporate allocations, which is just obviously a shift. Depreciation actually was a drag as we implement ERP system and other things and there is a few other negative things that are offsetting that get us to that 4.4% increase in our EBITDA margin.

Adam Josephson — Key Banc — Analyst

I really appreciate that. And just on the OCC situation. Obviously, it’s been a roller coaster ride this year, and defied I think everyone’s expectations both on the way up and now I think on the way down. So price — June prices are coming out tomorrow, I think most people are expecting a decline, the question is how big of a decline. So can you talk about how much of a drop you’re expecting in OCC in June and perhaps thereafter as well? And how that’s influencing your thinking about the URB price increase considering that URB demand has been really challenging. So the increase appears to be tied to OCC, which is about to drop. I think by at least 20 bucks a time. So can you walk us through your thinking there and your OCC expectations for the balance of the fiscal year? Thanks very much.

Peter G. Watson — President and Chief Executive Officer

Yeah, Adam, we’re expecting $30 a ton decline based on our exposure to OCC markets in our Recovered Fiber Group, but we’ll wait and see definitively tomorrow. I know people have different opinions. Regarding our price increase, really predicated on cost inflation, as well as market demand as I indicated. Our volumes were up in our boxboard mills over 4% versus prior year. And again in May versus April going into May, our volumes continue to be steady. We have steady backlogs four weeks to five weeks. So when you look at cost inflation though at OCC, there is a $90 a ton increase from January to present and $30 a ton decline in price occurred in February on boxboard products, URB and CRB, which created a $120 price cost squeeze. So, we are moving forward on the price increase from mid-May and we need to maintain acceptable margins for our shareholders, and that’s our position.

Adam Josephson — Key Banc — Analyst

Thanks, Pete.

Peter G. Watson — President and Chief Executive Officer

Yeah. Thank you, Adam.

Operator

Your next question comes from the line of Ghansham Panjabi of Baird. Please go ahead, your line is open.

Ghansham Panjabi — Baird Equity Research — Analyst

Hey guys, good morning. How are you?

Peter G. Watson — President and Chief Executive Officer

Hey Ghansham, how are you doing?

Ghansham Panjabi — Baird Equity Research — Analyst

Yeah, good thank you. I guess you know can you, Pete give us some more details on the end market verticals for RIPS that you have outlined in the pie chart on Slide 6. You know, a lot of companies in the chemical spectrum and industrial that are downstream from you have talked about 20% plus declines in April, obviously bulk of the world will shut down in a month [Phonetic] and your volumes were actually up in North America and EMEA region during the quarter. So can you help us reconcile that outperformance, did share gains play — where those part of that as well?

Peter G. Watson — President and Chief Executive Officer

Yes. So it’s a — good question and really it’s a case of haves and have nots on the end market exposures in our global RIPS business. And as you can imagine, we saw really strong March sequentially in our quarter. So February was fairly consistent. March was very, very strong and in the second half of April, we saw a fairly strong volumes and it started tailing off at the end of April, as I indicated in my comments to George’s questions in May. But if you look at the end markets, where we saw a really strong volumes on a global basis were exposures to pharma and personal care, we had a lot of customers transition some of their manufacturing capabilities to alcohol-based disinfectants as I indicated in March we had really strong restocking in the middle of the quarter and it continued into early April. The offset of that was lower demand in lubricants, paints, and coatings. And as you can imagine, when the economy shutdown mid-March through April, lubricant business is really negatively impacted by the reduced amount of commercial and industrial vehicle traffic as well as some lower manufacturing activities in non-essential businesses. So the exposures to our IBC and reconditioning business were much more positive because they are more geared to some of those products that we are having stronger end market growth and our steel drum while we are flat year-over-year, I think that’s reflected more of the commodity in — lubricants in bulk and commodity chemicals. But I think we benefited just from overstocking in March and in April.

Our large plastic drum business was up 2.5% in the quarter and that exposure again was to pharma and personal care. We had a little bit lower ag chem demand, mainly because of access to labor and some delayed seasons. We also had a little bit of addition because we added new capacity in the US and we’re doing well in that markets, but again in the IBC and reconditioning that demand exposure food, disinfectants, and detergents really were beneficial to us in the quarter. We expect some of those markets to maintain their strength, but it’s very clear that destocking is occurring at the end of April into May, and we expect through our third quarter that destocking is normalized.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

To your other part of your question Ghansham on share pickup, we feel very confident and know that we’ve gained share of wallet and new customer business, and we attributed directly to our focus on customer service. At the same time Pete mentioned in his comments, we walked away from another very low margin high volume customer in Latin America. And we’ve also walked away from some other low margin business in other parts of the world, but net-net, we feel comfortable that we’re gaining market share in the places we’re targeting.

Peter G. Watson — President and Chief Executive Officer

So I think what’s really –.

Ghansham Panjabi — Baird Equity Research — Analyst

And then my second question in terms of — sorry, go ahead.

Peter G. Watson — President and Chief Executive Officer

The other comment was we — our growth initiatives, strategic growth initiatives, IBCs but also in Jubail, Saudi Arabia that business really continues to go very well and their exposures are outside of the Middle East. So we’re real pleased with the investments we’ve made, and they’re starting to show up in some of our growth and the profit assumptions.

Ghansham Panjabi — Baird Equity Research — Analyst

Okay. And then for my second question in terms of the opportunistic sourcing you benefited in 2Q, is there — should we assume that there is a positive component for the third quarter as well? And then just in terms of your base — raw material basket for the cost structure for RIPS, will the paths continue to be favorable in 3Q, as well — to the same extent?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Ghansham, I would — those things tend to be opportunistic. I think it’s hard to build those into your model and count on them recurring. As I mentioned, we do charge our team in sourcing to achieve some of those. We budget in them achieving benefit to index spread, but we do think there will be some in Q3. Thus far, I would not say it would be at the level of Q2.

Ghansham Panjabi — Baird Equity Research — Analyst

Okay, terrific. Thanks so much and stay safe.

Peter G. Watson — President and Chief Executive Officer

Yeah, thanks Ghansham.

Operator

Your next question comes from the line of Mark Wilde of Bank of Montreal. Your line is open.

Mark Wilde — BMO Capital Markets Corp. — Analyst

Thank you. Good morning Pete, good morning Larry.

Peter G. Watson — President and Chief Executive Officer

Hey, Mark.

Mark Wilde — BMO Capital Markets Corp. — Analyst

I wondered, just going back to Adam’s question around OCC, is it possible to get a sense of what your OCC cost look like in the second quarter? And then best as you can estimate now based on May and what you’re seeing in June, where you might end up in the third quarter?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah, we basically — Mark if you go back, we saw OCC about $82 a ton in April and it rose up to $119 in May. So really steep jump up. Our view is we think things will continue to trend down, but the challenge we’re trying to project out much is one — one of the reasons we withdrew guidance is if opening the country back up creates another spike in severe hospitalizations and things, you know, who knows where this thing goes because clearly the drawdown shutdown of retail and restaurant trades impacted the source of OCC dramatically and then you combined that with really strong demand in the entire paper space. So we have our view that it is going to be at least $30 tomorrow. We do think that it should trend down, if we don’t run into a spike because you have those businesses opening up and that source should be coming on and we think the demand side is probably a little weaker, just particularly if you look at export and that kind of thing. So we think there is a path down, but we haven’t really tried to forecast exactly where we think that ends up beyond the next reduction tomorrow, Mark.

Mark Wilde — BMO Capital Markets Corp. — Analyst

And do you have a sense, Larry, can you give us any kind of a ballpark number for what you might have averaged during the second quarter. So it is a little hard for the outside kind of know how that rolls through your inventories and we know that quite happen during the quarter.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah. Do you remember what the average number was Matt?

Matt Eichmann — Vice President, Investor Relations and Corporate Communications

Yeah. So let’s see February, March and April, we just ran those numbers $37 in February, $47 in March, roughly $82 in April. And that we’ll get to average cost for the quarter.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Thanks Matt.

Mark Wilde — BMO Capital Markets Corp. — Analyst

Okay, that’s, that’s really helpful. And then I wondered just on downtime, you mentioned 24,000 in containerboard in the second quarter is all — the only amount that you’ve taken in May, the 5,000 on the West Coast that Pete mentioned?

Peter G. Watson — President and Chief Executive Officer

Yes it was really isolated Mark to a specific delay in some customer orders and it wasn’t really reflective of the demand pattern we’re seeing in our containerboard system.

Mark Wilde — BMO Capital Markets Corp. — Analyst

Yeah, okay. The last one from me is just kind of related to that, one of your bigger competitors flagged walking away from some sheet business last month when they reported. I wondered if you can just give us some more general color about what you’re seeing in both pricing and volume in that sheet market?

Peter G. Watson — President and Chief Executive Officer

Yeah, you know our exposure in our CorrChoice business because we sell predominantly to independent box makers and we also sell to integrated box plants, it’s really two worlds. Most of our exposure, not most, but a large percentage is to durable markets and the automotive plant exposures with them going down really put a challenge in our volume. So, anytime you have a market in — the sheet market is very consistent with ours with others, when it gets volume sensitive the market can get a little chippy. And I think there is experience of that throughout the quarter. It depends on what we back up, you have some integrated box plants that will decide because their volumes might not be really strong, they will get in the sheet market for a short-term and their methodology might be different than a true sheet feeder so that attributes to the chippiness, but we try to stay fairly core to what we do which is real high product complexity low — high turnover of orders low, low MSF order quantities and try to take a value approach. So there is chippiness, but that is pretty common in this type of environment. So it’s nothing new or unusual Mark in our view.

Mark Wilde — BMO Capital Markets Corp. — Analyst

Okay, that’s helpful. Thanks Pete. Good luck in the quarter.

Peter G. Watson — President and Chief Executive Officer

Thank you, Mark.

Operator

And your next question comes from the line of Steve Chercover of Davidson. Your line is open.

Steven Chercover — D.A. Davidson — Analyst

Thank you. Good morning, everyone.

Peter G. Watson — President and Chief Executive Officer

Hey, Steve.

Steven Chercover — D.A. Davidson — Analyst

So just to clarify, was there about a $4 million transfer from RIPS to Paper Packaging in terms of overhead in the quarter? And is that the run rate?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

That’s about it. Steve. Yeah.

Steven Chercover — D.A. Davidson — Analyst

Okay, that’s fair. It’s kind of late in the session as well. And then, Pete said the fiscal Q3 will be the weakest from a demand standpoint. And looking back over many years, Greif has been very much a second half story. So guess I’m wondering if that’s still the case?

Peter G. Watson — President and Chief Executive Officer

Yeah, from a demand standpoint the reason we pulled guidance is — it is uncertain, but our best guess today is that as economies reopen, the pace of our volume will be dictated on how disrupted supply chains are and the velocity of destocking in our RIPS business. And so that will determine how we evolve in our Q3 on volumes. We do know that in our RIPS business, the conical season which is ag related, we are optimistic that, that will be a positive position. We believe in the West Coast of the US that will be positive volume for us in our fiber business and steel drum business. Our Latin America, [Indecipherable] season, ag season been delayed. So, that’s some potential upside, but it’s just too uncertain with what we see in the RIPS business. I’ll tell you in Paper, we’re a little more optimistic. I think our volume trough was in April in our Paper business, in our converting business and our margin trough will be May, because as we’ve talked about the OCC squeeze. But I think you’ll see sequential improvement in that business in Q3 because the exposure to durables and the economies are reopening. All that said, if you don’t, if you have a controlled reopening of economies without any real significance of supply disruption and you don’t have a severe second wave of COVID cases, we see an evolution in Q3 towards the end of Q3 and improving in Q4.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yes, Steve, I’d supplement what Steve — what Pete said. I mean, Pete and I tend to be pretty optimistic people generally. I have to put up my CFO hat sometimes to be pessimistic by profession, but you know when we try to go through our normal forecasting process our business unit leaders are doing everything they can to talk to all of our customers. Our customers aren’t able to tell them much out more than 15 days or 30 days, and most of what we hear tends to be a bit pessimistic. But then, every time we get the weekly results they seem to be still going fine obviously May trail down a lot and as Pete mentioned, we think that’s tied to destocking, but we tend to be a GDP industrial production type of business and all of the predictions of the economist, I mean are showing the second calendar quarter of the year just diving down the 30 plus percent down. Well if that happens, that should have a negative impact on our business and so those disparities between how Pete and I are feeling about things and some of the optimistic things we see measured against what we’re seeing is all the economists telling us it’s going to be Armageddon have us at a point where we just decided we need to pull guidance.

Steven Chercover — D.A. Davidson — Analyst

Yeah. Did you say, Larry that you had $40 million in EBITDA benefits in the second half of the year? From the cost cutting initiatives.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Actions initiatives that we’ve taken, which also plays into the answer to the question from George about do we believe will be able to continue seeing SG&A down low, some of those, there is some revenue items there, some cost items, those kind of things. But yes, $40 million for the second half of the year.

Steven Chercover — D.A. Davidson — Analyst

Well, that’s good. All right, so despite the volume from an earnings standpoint, could still be a push or even skewed a bit towards the second half, is obviously the worst was in Q1, I’m sorry in the quarter just — I’ll just leave it there. Okay, one other oddball question. Since I have been watching too much TV, just recently I’ve seen ads for these Baxter bags from waste management that carry 3300 pounds, and it looks exactly like one of your flexibles, are you familiar with those? Is that an opportunity? You know what I’m talking about?

Peter G. Watson — President and Chief Executive Officer

You know, I have not been watching much TV, Steve, but I have seen picture that, but I would be lying to you, if I could intelligently talk about if that’s an opportunity or not, but I will ask Hari Kumar and I promise you he’ll have a response to me by tomorrow.

Steven Chercover — D.A. Davidson — Analyst

[Speech Overlap] It is a flexible dumps — it’s a flexible dumpster is what it is. Okay.

Peter G. Watson — President and Chief Executive Officer

[Speech Overlap] Thanks, Steve.

Operator

Your next question comes from the line of Justin Bergner of GAMCO Research. Your line is open.

Justin Bergner — GAMCO Research — Analyst

Hi, good morning Pete, good morning Larry.

Peter G. Watson — President and Chief Executive Officer

Justin, how are you?

Justin Bergner — GAMCO Research — Analyst

Good, thanks. Hope you guys are well, in addition. I guess to start the sourcing benefit that you characterized at $7 million in the second quarter with some carryover benefit in the third quarter, if we were to look back prior to the second quarter, what type of levels would the sourcing benefits have run that sort of quarter-to-quarter, was it material or is it sort of de minimis prior to the second quarter?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

It was slightly less in the first quarter Justin. And if you go back further and actually, if you went back in our transcripts a couple of years — a number of years ago we were almost regularly talking about strategic sourcing benefits. They faded away in ’18 and ’19 and we virtually had none. And you look at the year-over-year comparisons and we would talk about that. But like I said when you get to dislocated markets where things are being disheveled and customers, — businesses and industries are shutting down, suppliers end up having to apply that they don’t know where to place and you have those opportunities if you’re sourcing groups out doing a good job.

Justin Bergner — GAMCO Research — Analyst

Great, that’s helpful. So it is sort of like a — I mean it’s sort of like a trading type profit when the opportunity presents itself I guess so.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

That’s right.

Justin Bergner — GAMCO Research — Analyst

I’ll move on to a second question which is I noticed interest expense came down $4 million to $5 million is that mainly because of the proceeds from the sale? And if so, should I read into the sort of the similar interest expense as sort of a harbinger that while you’re withdrawing the free cash flow guide one might not expect it to be too dissimilar from your prior guide or what might expected number that you’re –?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Justin, I feel comfortable answering your question, but I’ll actually have David Lloyd our Treasurer answer it’s because he is sitting right here, and he will be much more articulate and accurate than me.

David Lloyd — Treasurer

Yeah so the interest expense decline is really driven off of a couple of things. So obviously we had a fairly heavy pace of debt repayment during the quarter at least part of which was driven by proceeds from the CPG divestiture. Obviously variable interest rates were at significant lows. And so we benefited from that significantly as well. And then we’ve done some things in the portfolio as well to drive some lower interest costs also.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

And then, continue–.

David Lloyd — Treasurer

Yeah, so I think the — what we have forecasted in the past is not going to change a whole heck of a lot from an interest rate standpoint. So most of our rates are fixed at this point. And yeah.

Justin Bergner — GAMCO Research — Analyst

And then I guess for the second part of that question, I mean is it presumptuous to sort of assume based on the interest expense not changing too much that the free cash flow, do you — while sort of pulled is there is no reason to expect it to be too dissimilar from the prior view?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Well, yeah, I mean from the impact of interest expense that’s true. I mean obviously with us pulling back on providing guidance. I mean the main driver of cash flows is obviously operations. And yeah, so that’s why we are not giving free cash flow guidance for the remainder of the year either Justin. But we do feel very confident about how well our treasury groups managing cash around the world and how well our business is doing focusing on working capital. So we feel very good about what our cash flow for this year will be, but it’s all going to be, relative to results. And obviously, as we said there is just too many variables out there right now for us to give any kind of guidance range around that.

Justin Bergner — GAMCO Research — Analyst

Okay, thank you for answering that question. All the best.

Peter G. Watson — President and Chief Executive Officer

Thank you, Justin.

Operator

Your next question comes from the line of Gabe Hajde of Wells Fargo Securities. Your line is open.

Gabe Hajde — Wells Fargo — Analyst

Good morning, Pete. Larry, Matt, I hope you and your families are doing well.

Peter G. Watson — President and Chief Executive Officer

Thank you Gabe.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Same for you Gabe.

Gabe Hajde — Wells Fargo — Analyst

Thank you. I guess I’ll try to take a stab again at the guidance question. Just trying to tie in Pete to your comments about volume trajectory. Can you I guess maybe any sense of directionally if the volume environment plays out as you expect that EBITDA would be down on a sequential basis from fiscal Q2, is that what I’m hearing?

Peter G. Watson — President and Chief Executive Officer

Well, I mean it’s hard to predict that, but again we expect our volumes in the Rigid business to be much lower in Q3. Some caveats is how fast supply chains recover and weather disruptions determines the evolution of that within the quarter into Q4. I think it also depends as economies are recovering from the health crisis and you look at the case rate improvements, do you have any disruptions or negative events on the medical side that could hamper that recovery. I think there’s just a lot of unknowns that could be variable — that could impact, but as what we know today, we think we’re going to have a tougher volume months in RIPS in Q3 worse in May and slowly improve in June and July, better view in Q4 in Paper. I think you’re going to see an improving scenario in volumes, although I mentioned April was a lower point for our converted products in April, but again the variables on how fast the durable market opens. How fast the automobile manufacturing plants open, what’s the demand of consumers, is there a disruption during the health crisis, is really challenging to predict. We’re trying to give you our best view of the volume scenario is across both RIPS and Paper.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah, and Gabe you think about it, auto like Pete explained earlier had has a big impact on our CorrChoice volumes and they peaked up towards the end of May as some of the auto came back online, but and — nice articles in the Wall Street Journal today about consumer demand and some of the dealers, not having enough inventory on F-150s and other kind of vehicles. But then you have the challenges they have because their supply chain is so complex and so some of them are having struggles, because they can’t get parts from Mexico or whatever. So that it just makes it really, really hard to give you a solid answer of where do we think things are going.

Gabe Hajde — Wells Fargo — Analyst

Understand. Not a problem. All right. Maybe this will be — hopefully this one is easier, with I guess closing the second machine at Mobile, Alabama, I’m assuming the residual of that business would be kind of redistributed to other facilities, but can you give us a sense of what fixed cost savings might look like. And is that — I’m assuming, is that part of the $40 million that you talked about or is that above and beyond or something separate?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Gabe there is about a $1.5 million just shy of that for the remainder of the year related to closure. That’s a $5 million on an annual basis. And just to put this in context, you recall before we ever got any COVID, we’ve been talking since last June about being in an industrial recession. So we kicked off a process last fall of going through and reviewing every single one of our plants, across all of our businesses. That has led already to closures of the two RIPS plants that Pete mentioned and that was also the genesis of the closure of this plant. It’s just not an efficient one and you’re right, we shifted all the business to — we will shift all that business to other facilities, it just wasn’t a cost-effective operation unfortunately.

Peter G. Watson — President and Chief Executive Officer

And Gabe, just from a customer transition, it’s a little easier for us because over 95% of our customers in that facility are all consumed internally with our own tube and core facilities.

Gabe Hajde — Wells Fargo — Analyst

Interesting, okay. And I guess maybe the last question, you I think Larry had made comment of alternate — sourcing of alternative products within RIPS outside of materials, which I think is maybe 60% or so of the cost of goods sold — so that sounds like it’s a sustainable go-forward benefit. Any way to put a number on that or quantify for us?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah, it wasn’t. Maybe I misstated something there. We have — it was pricing and other actions that added to that margin value add, if that’s the comment you’re relating to. You might remember us talking about as we re-initiated our contracts on renewals, we put in for openers for other price areas, other than just the standard raws. So yeah, we do think and expect that those things should continue in our business, but what you won’t see is the year-over-year because obviously as you go through that — but we do think a lot of that will be sustainable in our margin.

Gabe Hajde — Wells Fargo — Analyst

Understood. Thank you guys, good luck.

Peter G. Watson — President and Chief Executive Officer

Thanks, Gabe.

Operator

And your last question comes from the line of Adam Josephson of KeyBanc. Your line is open.

Adam Josephson — Key Banc — Analyst

Pete and Larry thanks so much for taking my two follow-up questions. One is, just going back to what Gabe was getting at, just in terms of the timing of EBITDA, so when you went into the year you were thinking 3Q would be the high point and that second half EBITDA would be higher than the first half and obviously that was pre-COVID. So a great deal has changed since then. Is it still reasonable to assume that 2H would be better than 1H or you just, you have no way of knowing no one really has much visibility and so that statements probably out the window. And there’s really no way to know. What do you feel about that?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Adam, I think — well, first of all, I didn’t have a chance to say, I hope you and your family is doing is well. Second, third quarter is clearly not going to be what it normally is that’s painfully obvious to us. And like I said, if the economist are right about where the calendar second quarter is, we should see negative impact in June, but again Pete and I keep having optimism about it. So it’s just all over to place about where we think it could be. But we do not think 3Q is going to be what we thought it would be. We do expect that we’ll start to see recovery in July and then through our 4th quarter, but trying to predict how strong that’s going to be. I mean I listen to more economist calls than I ever have in my life and I always listen to a lot and the range is all over the place. So we just can get a handle on it to feel confident to give you real true guidance.

Adam Josephson — Key Banc — Analyst

Yeah, no, understood. And just one last one on Paper volumes. So I think Pete you said CorrChoice are down single-digits in May and that tubes and cores are down a little more than that. Could you be a little more precise about the extent to which the CorrChoice and tubes and cores were down year-on-year in May? And then just more broadly, we’ve looked at containerboard volumes and past recessions and they’ve averaged down about 6% in the months in which the US was technically in recession and usually URB is a bit more economically sensitive than even containerboard so who knows how long this recession will last, but just based on the economic conditions you see, do you think containerboard and/or URB volumes are more likely to be up or down for the balance of the year, on a year-over-year basis?

Peter G. Watson — President and Chief Executive Officer

Yes, so let me — let me just reiterate what I mentioned about CorrChoice, tubes and core volumes. So my comments were about transitions from April to May. What it wasn’t referencing was our quarter volumes. So in CorrChoice from May, April to May on a per day basis, they are up 6% and if you remember, in May we have two less working days than a year ago. So that’s why I’m referencing sequential evolvement of corrugated. So the 6% up from April to May and the volume in the last eight days at CorrChoice has been incredibly strong and I reference as durable manufacturing businesses that were closed and deemed non-essential during the shutdown that included automotive, they’re starting to fill up, open up and starting to fill up their supply chain needs. In that business CorrChoice has a lot of exposure to durables and automotive. So that was my comment on April to May transition. We don’t really have any backlog on 24 days so other than telling you what I know today. I’d be throwing a dart at the dartboard trying to think beyond that.

In tube and core, relative to May volumes versus April, sequentially they’re flat. And again, going forward we have a high exposure and non-essential businesses that are gradually reopening in based on how they come up, whether demand is positive or there is disruptions in their supply chain would dictate what our trajectory is on volume in that business in Q3.

In regard to your second question of trying to project what our volumes may be in boxboard and containerboard. That’s a hypothetical question, it’s because the uncertainty we have right now. I’m just not going to go there and try to predict what those two big ones will do beyond what we know today.

Adam Josephson — Key Banc — Analyst

Just on the year-over-year again in CorrChoice and tubes and cores pete, I did hear you correctly down single — down single-digits –.

Peter G. Watson — President and Chief Executive Officer

Yeah, so if you are talking about Q2 volumes. Our Q2 volumes in CorrChoice were flat versus prior year. And our tube and core volumes Q2 this year versus Q2 prior year is down 5%.

Adam Josephson — Key Banc — Analyst

That was in Q2 and then in May. I’m sorry, go ahead Larry. Sorry.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah, in May, I said that the CorrChoice was down 8, high single-digits in tube and core slightly more than that.

Peter G. Watson — President and Chief Executive Officer

And that’s because in May there is two less working days. So it is a tough comp over quarter it equals out, but on a May to May comparison it does not equal, that’s why I referenced on a per day basis April to May.

Adam Josephson — Key Banc — Analyst

So down 8 is not on a per day, it is total.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

It is as well Adam on a year-over-year basis, but, so, yeah, CorrChoice and tube and core were down one high-single digits, one low double digits.

Adam Josephson — Key Banc — Analyst

Got it. Thanks so much and best of luck in the quarter. Pete, Larry.

Peter G. Watson — President and Chief Executive Officer

Thanks, Adam.

Operator

There is another question from George Staphos of Bank of America. Your line is open.

George Staphos — Bank of American Merril Lynch — Analyst

Hey, guys. I’m sorry about that. Somehow I got dropped from the queue, just I was curious, just if you can put 30 seconds of comments on the CSI scores that you’re seeing in RIPS we saw some nice improvement there? Thanks guys, good luck in the quarter.

Peter G. Watson — President and Chief Executive Officer

Yeah, thanks, George. We are seeing increased CSI scores across the whole portfolio. North America and APAC now are at a 95% level. So really pleased with that. A big part of the improvement though in EMEA. EMEA is driving towards that low 90% range. So I think again having one global organization with very singular focus is making a significant impact. And as Larry mentioned earlier, I think that’s driving some of the opportunities we’re seeing with new customers or expanded wallet share and some of our Rigid packaging customer base. So thanks for the question.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Yeah, thank you. We will take the rest offline. Have a great day.

Operator

And your last question comes from the line of Justin Bergner of GAMCO Research. Your line is open.

Justin Bergner — GAMCO Research — Analyst

Thanks for the follow-up. Just quickly the $40 million of cost actions that you are targeting for the second half, just to verify, none of the benefit there was in the second quarter and then how much of that $40 million is sort of structural versus temporary as we look beyond the second half of fiscal year?

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Justin the vast majority of it is variable and not structural. The structural stuff was already built into our budget and processed for the year. So we’re not counting that, because we had already planned it towards our focus of getting down below 10% by 2022.

Justin Bergner — GAMCO Research — Analyst

Great, thank you.

Larry A. Hilsheimer — Executive Vice President and Chief Financial Officer

Thank you.

Operator

There are no further questions at this time. I turn the call back over to the presenters.

Matt Eichmann — Vice President, Investor Relations and Corporate Communications

Thanks very much Tacan. And thank you very much for joining us today. We appreciate your interest in Greif and hope that you have a nice weekend ahead. Take care.

Operator

[Operator Closing Remarks]