Berry Plastics Group Inc., which spends plenty of money to buy resin to make its products, is on board with the lower oil prices.
Cheaper oil means lower resin costs for the Evansville, Ind.-based firm.
But while the company's Versalite expanded polypropylene cup business continues to see growth, there is a bit of a wrinkle.
“Volumes on Versalite on a year-over-year basis are up substantially,” CEO Jon Rich said, before adding some cost context.
“While generally there's almost nothing about low oil prices that we don't like, in the case of Versalite, where we have to compete against [expanded polystyrene] specifically, low oil prices have driven a delta there and has created a headwind,” he said on an Aug. 9 conference call to discuss quarterly earnings.
“We focused in the near term on aggressively reducing our cost structure and are seeing the benefit of that and we continue to work cooperatively with our material suppliers to try to optimize the cost structure of Versalite,” he said.
Versalite is aimed squarely at the EPS business. Berry touts the wider opportunities for PP recycling in its marketing, pushing Versalite as an alternative to EPS packaging.
Despite the cost challenges of Versalite vs. EPS, the CEO said Berry continues “to optimistically look for new volume opportunities there.
“Year-over-year, the growth is nice, but certainly that's one of the few areas where low oil prices create a headwind for us,” Rich said.
Resin is Berry's primary raw material, accounting for about 50 percent of the cost of the goods it sells, the company reports.
About 55 percent of the company's resin buy is PP, while the remaining 45 percent is polyethylene.
For the company's fiscal year third quarter, which ended July 2, Berry posted net income of $96 million, or 76 cents per diluted share, on revenue of $1.645 billion. That compares with a loss of $13 million, or 11 cents per diluted share, on revenue of $1.241 billion for last fiscal year's third quarter.
Revenue was sharply higher thanks to the company's purchase of Avintiv Inc., a flexible nonwoven products maker, last year.
