Babies continue to be a challenge for Berry Global Group Inc. as the plastics processing company looks to move away from that market to more lucrative areas.
Declining sales for company products in the North American baby care market caused second quarter sales in the company's Health, Hygiene and Specialties division to fall to $646 million. That compares with $726 million during last year's second quarter.
"Without question, the decline in the North American baby demand has been a challenge. By pivoting our resources in a more attractive market such as adult incontinence, feminine care, biopharmaceutical and specialty applications, we expect to reverse the negative demand trend," CEO Tom Salmon said on a conference call to discuss financial results.
With the refocus, Berry expects improvements in volumes ultimately resulting in year-over-year growth in the second half of fiscal 2020.
"We remain focused on leveraging our scale and low-cost position to secure incremental demand. We have worked hard to foster great relationships with the leading end users in the hygiene category," Chief Financial Officer Mark Miles said.
Miles pointed to the company's "know-how and low-cost global platform" as reasons brands will migrate toward Berry.
Reshaping the HHS segment of Berry's business has been an ongoing effort, the CEO said.
"Inside of HHS, we have spoken over the last several quarters the need for the business to pivot to the higher growth regions as well as product lines and categories to deliver more consistent growth. We committed that over the last several quarters," he said. "It's coming to fruition."
Berry, on the conference call, also updated stock analysts on the company's recent acquisition of RPC Group, a move that greatly expanded Berry's European manufacturing base and took it into new market segments.
"I will say the integration is progressing better than planned. We are very impressed with the team inside of RPC," Salmon said. "One of the great opportunities for this combined packaging powerhouse is that it really has created now one of the world's largest dispensing solution providers to support health care and pharma businesses — everything from dispensers, inhalers, dosage control, pumps.
Berry reported a profit of $13 million, or 10 cents per diluted share, on sales of $1.9 billion for the company's fiscal third quarter ended June 30. That compares with a profit of $110 million, or 81 cents per diluted share, on sales of nearly $2.1 billion for the previous fiscal third quarter.
The $135 million decrease in sales is primarily due to $94 million in lower resin pass-through costs and a 3 percent volume decline, the company said. Foreign currency changes had a $16 million negative impact, but net sales from acquisitions added $38 million to that top number.