Berry Plastics Group Inc.'s acquisition of Avintiv Inc. last year is paying off in both higher earnings and additional savings.
For the second time in as many quarters, the Evansville, Ind.-based company is increasing the amount of money it expects to save by combining the two companies.
Berry Plastics now says savings from the acquisition are now expected to reach $80 million, up from an initial estimate of $50 million, and a revised estimate of $65 million issued just in February. The company also is not ruling out the possibility of saving even more down the road.
“We have quickly integrated the business. Synergies are exceeding our initial forecast. And our new operating structure is executing at a high level,” CEO John Rich said on a May 10 conference call to discuss fiscal year second quarter earnings.
Berry, with the Avintiv deal, reorganized itself into three operating segments: consumer packaging; health, hygiene and specialties; and engineered materials.
Avintiv brought a portfolio of flexible nonwoven products to Berry in a $2.45 billion deal. Those nonwovens are then used by others to make a wide variety of consumer and industrial products, including diapers, wipes, wraps and agricultural products.
Rich told stock analysts he was pleased with the performance of all of the segments during the second quarter.
“We had a very strong quarterly performance. By far the best we ever had in the history of the company,” he said.
The company's “strong results,” Rich said, are allowing Berry also to pay down debt at an accelerated pace. During the first half of the fiscal year, the company prepaid $200 million in debt.
Berry's debt-to-earnings ratio stood at 4.8-to-1 at the end of the second quarter, down from 5.1-to-1 at the beginning of the fiscal year and right after the Avintiv deal. The company ultimately wants that ratio to be between 3-to-1 and 4-to-1.
Net debt stood at $5.775 billion at the end of the quarter, and Berry wants to reach a 4.6-to-1 ratio by the end of the current fiscal year.
“The acquisition of Avintiv continues to exceed our expectations. While it's still only been two quarters since we acquired Avintiv, the results today have validated the strategic rationale we outlined when we first announced the deal,” Rich said.
Berry Plastics posted a profit of $59 million, or 47 cents per diluted share, on sales of $1.61 billion for the second quarter. That compares with a profit of $38 million, or 31 cents per diluted share, on sales of $1.22 billion for the previous fiscal second quarter.
