The numbers just keep getting better for Berry Global Group Inc. when it comes to the acquisition and integration of AEP Industries Inc.
The Evansville, Ind.-based company boosted expected annual cost savings from the AEP deal for a second time.
Berry now expects to save $80 million annually, up from the $70 million figure the company just revealed about three months ago. And that previous estimate was up from the $50 million the company initially indicated when the AEP transaction was first announced last summer.
“The acquisition of AEP continues to exceed our expectations. And the results, to date, have validated our strategic strengths we outlined when we first announced the acquisition in August of 2016,” CEO Tom Salmon said on an Aug. 3 conference call to discuss quarterly financial results.
“We continue to efficiently integrate the business and cost synergies remain ahead of our initial expectations,” he said.
Berry completed the acquisition of AEP on Jan. 20.
“Berry has a disciplined and systematic approach to integrating acquired businesses that's been developed and proven over the more than 40 acquisitions we have completed over our history,” Salmon said.
Cost savings associated with AEP, a flexible packaging films maker, come from combined purchasing power, operational best practices and elimination of redundant and selling, general and administrative costs.
Chief Financial Officer Mark Miles said about half of the savings will occur during the company's current fiscal year and the remainder will be realized next fiscal year.
Berry reported a profit of $107 million, or 79 cents per diluted share, on sales of $1.906 billion during the company's third fiscal year quarter that ended July 1. That compares with a profit of $96 million, or 76 cents per diluted share, on sales of $1.645 billion for last fiscal year's third quarter.
Sales increased primarily due to acquisitions and a pass through of higher resin prices. That increase was partially offset by volume declines and foreign currency changes, the company said.
Company leaders, on the conference call, were asked about their current view on the merger-and-acquisition market.
“In terms of the opportunities for acquisitions, the pipeline is very robust, not only domestically but internationally,” Salmon said. “We have a proven model in terms of M&A that we will deploy. But, clearly, in North America, there is plenty of opportunity.”
Aside from continuing to digest AEP, the company also recently made a smaller deal for Adchem Corp. of Riverhead, N.Y., a move that adds to its specialty tapes business.
“Our strategy has been to buy businesses that ultimately can add value to the portfolio that use like materials and that we believe we ultimately can properly synergize,” the CEO said about Berry's strategy in North America.
“The model is a little different internationally for us. Those opportunities are going to be more growth oriented as opposed to synergy oriented,” Salmon said.
Berry is a company built on acquisitions.
“As those opportunities make themselves available, we'll consider them because we're a leader in that space. We expect to continue to be a leader in that space, and we'll invest and act like a leader in that space because the growth dynamics are that strong for us right now,” Salmon said.