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Berry optimistic about cup, containers business

By: Jim Johnson

February 6, 2014

When it comes to Berry Plastics Group Inc.'s fledgling Versalite business, the company likes where it's at.

Enthusiasm remains high at Berry about the decision to reopen a shuttered plant in Kentucky to launch the line of polypropylene beverage cups and food containers.

CEO Jon Rich, during a call to discuss the company's fiscal year first quarter results, shared his view for how Versalite is progressing.

"Versalite continues to be a very significant opportunity for Berry. And we are more excited today than we have ever been," he said.

"We are currently working with six customers that represent demand of over three billion units annually. Currently, we are restraining the number of customers that we work with to ensure our ability to supply," he said.

To help with that supply, the company already has ordered more manufacturing equipment that will take up the last remaining space at the Versalite plant in Madisonville, Ky., the CEO said.

Berry, based in Evansville, Ind., currently is working with four companies regarding use of Versalite for both hot and cold cups. Another company in the fold represents a new breakfast food that will be sold in the grocery channel and the final firm is working with Berry to use the plastic for hot food in quick service restaurants, the plastics company said.

"Versalite," Rich said, "is a technology that provides thermal management and is not just a drink cup."

"We continue to be limited only by our ability to add equipment and we are working with our machine vendors as they work to scale up and meet our goals for future capacity," the CEO said.

Versalite is a big swing for even for a company the size of Berry. When word of the decision to reopen a former plastics closures facility in Madisonville was released in 2012, the company indicated a $96 million investment.

Rich, during the conference call, also provided some additional insight into the company's recent deal to acquire a 75-percent interest in Qingdao P&B Co. in China.

Asked during the conference call whether P&B represents a launching point for additional acquisitions in China, this is what Rich had to say:

"We're not making any assumptions of further acquisitions. We have a very robust growth plan for that acquisition already, and we are really excited about it."

"You should see us investing and expanding in conjunction with that acquisition, and then we'll see what opportunities lie beyond that," Rich said.

Partnering with an existing business was the way to go with Berry, the CEO said. "I think it was important for Berry to take that step because we felt that greenfielding in China would be difficult for us. So that was really important for us."

P&B uses thermoforming, injection molding and automated assembly manufacturing processes to make packaging for multiple markets, predominately food and personal care, in both China and globally.

Berry also reported swinging to a profit on higher sales during the company's fiscal year first quarter.

The company earned $6 million, or 5 cents per diluted share, on sales of $1.14 billion for the quarter ended Dec. 28. That compares to a loss of $10 million, or 9 cents per diluted share, on sales of $1.07 billion for the previous first quarter.

The company finished the quarter in line with management expectations despite increasing raw material costs and what Rich called subdued consumer and customer demand.