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, Ind., 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: Mixed figures posted
On July 31, this global plastic consumer packaging company reported results for its third fiscal 2015 quarter. In the reported quarter, net sales were $1,241 million compared to $1,298 million in the same prior year quarter. The year-over-year decline in revenue was due to decrease in selling prices as a result of the pass-through of lower raw material costs, the negative impact of foreign currency changes and low customer demand partially offset by sales growth from acquisitions and volume gains in certain product categories. For the June 2015 quarter, the company reported net loss per diluted share of $0.11 and adjusted net income per diluted share of $0.51. Operating EBITDA increased to $219 million (17.6 percent margin) for the June 2015 quarter compared to $212 million (16.3 percent margin) in the same prior year quarter. Berry generated adjusted free cash flow of $378 million and adjusted EBITDA of $830 million for the four quarters ended June 2015.
The company’s cost of sales decreased to $1 billion in the third quarter from $1.09 billion in the year-ago quarter. Selling, general and administrative expenses increased to $92 million from $85 million in the year-ago quarter. At the end of the quarter, Berry cash and cash equivalents of $62 million compared to $129 million as of Sept. 27, 2014. Further, it generated $392 million in cash from operating activities for the period of nine months ended June 27 compared with $370 million as of June 28, 2014. Berry’s long-term debt was $3.7 billion as of June 27, compared with $3.9 billion as of Sept. 27, 2014. A chart has been provided below to show the company's segment's performance.
Projections for 2015
Berry Plastics raised fiscal 2015 adjusted free cash flow guidance to $400 million from the prior guidance of $350 million which includes:
- Cash interest expense of $190 million
- Capital expenditures of $180 million
- Source of cash from working capital of $25 million
- Tax receivable agreement payment of $39 million
- Other cash costs of $36 million
The company expects fourth-quarter fiscal 2015 sales volumes to be consistent with the past several quarters, and it will benefit from expected positive growth in several products.
Expanding its wings
Berry has a diverse customer base across a broad range of growing, consumer-centric end markets. Berry is an innovation-rich company which is focusing on expanding its wings internationally. The company has an unparalleled track record as industry consolidator, and it has made 38 acquisitions over the past three decades. Now, on July 31, Berry has entered into a definitive agreement with AVINTIV Specialty Materials Inc. to acquire the same.
About AVINTIV
AVINTIV, formerly known as Polymer Group Inc. or PGI, is a leading global innovator and manufacturer of specialty materials for use in a broad range of products that make the world safer, cleaner, and healthier. The company operates in three segments: personal care, infection prevention, and high performance solutions. With 22 manufacturing and converting facilities in 14 countries, and more than 4,000 people, AVINTIV has one of the largest global platforms in the nonwovens industry, an industry that is estimated to be worth in excess of $30 billion globally in 2014. It operates in North America, South America, Europe and Asia, which is a competitive advantage in serving its multi-national, blue-chip customers. AVINTIV’s average relationship with its customers are over 15 years.
AVINTIV has a differentiated technology base comprised of leading technology capabilities and a portfolio of state-of-the-art assets. Further, it comprises of an experienced global management team with a proven track record of successful acquisition integrations. AVINTIV’s leading multinational consumer-oriented customers are provided below.
The deal
Berry will acquire AVINTIV from private equity funds managed by The Blackstone Group LP for approximately $2.45 billion in cash on a debt-free, cash-free basis. This deal will help Berry to achieve low-risk synergies of $50m on a run-rate basis. For the twelve-month period ended March 2015, AVINTIV generated pro forma revenues and adjusted EBITDA of $2.1 billion and $303 million, respectively. Additionally, Berry expects to realize approximately $50 million in annual cost synergies. After this deal, Berry expects its net sales will increase to $7.2 billion. Adjusted EBITDA will increase to $1.184 billion, including $50 million of synergies. Adjusted EBITDA margin will be 16.5%.
On a concluding note
Despite of posting mixed results, Berry has enough room for its future growth. The AVINTIV deal has already leveraged its balance sheet and will provide strong quarters in the coming years. The combination of Berry Plastics and AVINTIV creates a global leader in plastics packaging and engineered specialty materials with enhanced technology, material, and commercial capabilities to more broadly serve its customers.
Berry has a long-term vision to maximize shareholder value which includes sustainable competitive advantages, proven organic growth strategy, proven acquisition growth strategy, deep and experienced management team, leading position in many product lines, and long-standing diversified multinational customer base. In a strong industry, Berry Plastics will be a decent pick because of its valuation levels and 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.
Source: Company website
