Well known companies most of the time provides a solid return to its customers. But, there are some lesser known companies that are performing well and is poised to grow further. Founded in 1967 and is headquartered in Evansville, Indiana, Berry Plastics Group (BERY, Financial) is one of those lesser known companies.
With a long-standing track record of delivering high-quality customized solutions to its customers, this leading global manufacturer and marketer’s products are designed utilizing proprietary research and unique development and manufacturing technologies. Berry Plastics' products include drink cups, thin-wall containers, bottles, specialty closures, prescription vials, specialty films, adhesives and corrosion protection materials. The company operates in four operating segments: Rigid Open Top and Rigid Closed Top, which sells primarily containers, foodservice items, closures, overcaps, bottles, prescription containers, and tubes; Engineered Materials, which sells pipeline corrosion protection solutions, tapes and adhesives, PE (polyethylene)-based film products and can liners; and Flexible Packaging, which sells high barrier, multilayer film products as well as finished flexible packages such as printed bags and pouches. As per the company website, Berry Plastics has acquired more than 30 businesses since 1988, and serves over 13,000 customers, ranging from large multinational corporations to small local businesses.
Performance check: Impressive figures posted
On Jan. 30, 2015, this global plastic consumer packaging company reported results for its first fiscal 2015 quarter ended on Dec. 27, 2014. In the reported quarter, total revenue was 1.22 billion, up 7% year over year. The year-over-year increase was primarily attributed to revenue from the businesses it acquired in the last twelve months (Rexam Healthcare Containers & Closures business with facilities in Mexico, India, and France) and increased selling prices due to higher material costs and non-resin related cost inflation partially offset by soft customer demand. The company’s recorded net income per diluted share of $0.11 and adjusted net income per diluted share of $0.27 for the December 2014 quarter. Operating EBITDA increased by 6 percent to $182 million for the December 2014 quarter compared to $172 million in the December 2013 quarter.
Berry generated $100 million of cash flow from operations compared with $172 million in the prior-year quarter. Adjusted free cash flow was $36 million for the reported quarter. In November 2014, it made a voluntary $100 million principal payment on its term loan. Cost of sales increased 7.6% to $1,037 million in the first quarter from $964 million in the year-ago quarter. Gross profit went up 4% year over year to $183 million. As of Dec. 27, 2014, long-term debt was $3.8 billion, compared with $3.9 billion as of Sept. 27, 2014. A chart has been provided below to show the company's segmentwise performance.
Positive outlook
Berry Plastics reaffirmed fiscal 2015 adjusted free cash flow guidance of $320 million. The estimate assumes no change in plastic resin costs. This estimate includes $589 million of cash from operating activities and $230 million of additions to property, plant and equipment. The company’s focus is also to reduce its overall debt leverage (one of the four key strategic initiatives) by 0.5x per year. Berry Plastics expects decreasing resin prices to have a favorable impact on cash from operating activities beginning in the March 2015 quarter.
Why Berry?
Berry has a diverse customer base across a broad range of growing, consumer-centric end markets. Berry is an innovation rich company which is focussing on expanding its wings internationally. The company is primarily focussing on Asia and Latin America. Further, it has acquired controlling interest in Qingdao P&B Co., Ltd. located in China. Berry’s real GDP forecast is shown below.
Berry has an unparalleled track record as industry consolidator. Over the past three decades, it has made 38 acquisitions. The company’s disciplined approach drives significant value creation and also has a track record of strong synergy capture. Berry has proven ability to manage resin price volatility, which is shown below.
On a concluding note
Berry’s strength can be seen in multiple areas such as sustainable competitive advantages, long-standing diversified multinational customer base, leading position in many product lines, deep and experienced management team, proven organic growth strategy and consistently strong financial performance. Further, it has attractive cash flow characteristics that are provided below.
Source: Company website
In a strong industry, Berry Plastics will be a decent pick because of its valuation levels, and profit margins are also expanding. Further, the company is also seeing solid estimate revisions. I feel bullish that Berry Plastics will continue its trend and won’t let its valued investors as well as customers down in the long run.
