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November 29, 2016 01:00 AM

Berry works to pay down debt

Jim Johnson
Staff Writer
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    Jim Johnson, Plastics News
    Salmon

    Berry Plastics Group Inc. wants to make one thing perfectly clear: the company's top focus is paying down debt.

    Top officials repeatedly went back to that priority during a Nov. 29 conference call with security analysts to discuss fourth-quarter and full-year earnings for the fiscal year ended Oct. 1.

    The Evansville, Ind.-based plastics company reduced debt by $524 million during the fiscal year, according to Chief Financial Officer Mark Miles.

    That put the company's net debt at 4.5 times adjusted earnings before interest, taxes, depreciation and amortization.

    Berry Plastics has promised Wall Street the company will reduce that ratio to 4 times adjusted EBITDA by this time next year.

    “My No. 1 objective is to achieve the target leverage range on or before the end of fiscal 17,” said Chief Operating Officer Tom Salmon.

    “That's what we're focused on as well making certain that we execute on the AEP acquisition and execute on the synergies relative to Avintiv,” said Salmon, who is set to take over as CEO once current CEO Jon Rich retires in February.

    Berry Plastics is in the middle of gaining regulatory approval for its $765 million purchase of flexible packaging films maker AEP Industries Inc. for $765 million.

    At the time that deal was first announced in August, the company said adding AEP through a 50-50 cash-and-stock purchase will actually help Berry Plastics lower its debt-to-earnings ratio more quickly.

    The company, just about a year ago, also acquired non-wovens maker Avintiv Inc., a move that greatly expanded both sales and markets served, but also pushed the debt-to-earnings ratio to 5.1 at the time.

    Stock analysts on the call asked company officials about how they view the potential for additional acquisitions in light of the very clear debt-reduction goals.

    “We're just continuing to focus on hitting that leverage target,” Miles said. “We want to make sure we get their by the end of the fiscal year, so that's our No. 1 priority.”

    Berry Plastics, for the fiscal year ended Oct. 1, had a profit of $236 million, or $1.89 per diluted share, on sales of $6.49 billion. That compares with a profit of $86 million, or 70 cents per diluted share, on sales of $4.88 billion in the previous fiscal year.

    The sharp rise in year-over-year sales is primarily due to the Avintiv acquisition.

    Profit was $77 million, or 61 cents per diluted share, on sales of $1.62 billion for the fourth quarter. That compares with a profit of $48 million, or 39 cents per diluted share, on sales of $1.2 billion, during last fiscal year's fourth quarter.

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