Berry Global Group Inc. expects to repurchase $1 billion in company shares over the next two or three years, a move that comes after an activist shareholder called for such a move a few months ago.
The Evansville, Ind.-based company, which revealed the new stock repurchase plan Feb. 3 in conjunction with its latest earnings report, already repurchased $50 million in its fiscal year 2022 first quarter that ended Jan. 1.
Expectations are that Berry will spend at least $350 million buying back shares during the current fiscal year.
The $1 billion buyback plan replaces an earlier $400 million stock repurchase authorization by the company's board.
"Our financial performance and balance sheet have strengthened considerably over the past several years," CEO Tom Salmon said during a Feb. 3 conference call with stock analysts. "We are in a solid position to return capital to our shareholders while still maintaining financial flexibility to execute our strategic plan and further strengthen our balance sheet and invest in future growth."
The move by Berry comes after Ancora Holdings Group LLC of Cleveland in November released a letter the investment firm sent Berry calling for changes in how the company handles finances. Ancora, at the time, challenged Berry in several areas and even called for the potential sale of the firm. One of Ancora's demands called for an increase in stock repurchases to $1 billion.
Ancora, which has said it owned about 1 percent of the company's stock, went public in an attempt to push for changes last fall. Berry, at that time, said it does not comment on specific talks with shareholders but indicated there had been discussions with Ancora over the previous year.
Salmon was asked by one analyst during the conference call to describe how the company decided to authorize the higher stock buyback plan vs. instituting a quarterly dividend or even doing both.
"It's a balanced approach. We highlighted three primary objectives for the company — first and foremost invest in organic growth, secondly finding ways inorganically [through acquisition] to complement that, and thirdly returning cash to shareholders in the form of a share repurchase," Salmon said. He did not address the idea of a quarterly dividend in his answer.
"I think it's a very strong statement relative to the confidence that both management and the board have in the growth prospects for our company," Salmon said.
Companies repurchase stock as a way to boost value in the remaining shares of the firm. With the overall value of the company spread across fewer outstanding shares, the approach is based on the premise that the market will consider those shares more valuable and the stock price will increase.
Berry also reported net income of $121 million, or 87 cents per diluted share, on sales of $3.57 billion for the fiscal first quarter. That compares with net income of $130 million, or 97 cents per diluted share, on sales of $3.14 billion for last fiscal year's first quarter.
Berry, during the call, highlighted a recent supply agreement with TotalEnergies to provide resin recycled through chemical recycling, which is sometimes called advanced recycling.
TotalEnergies of Paris will build a recycling plant "on a future, zero crude platform" to handle post-consumer plastic that is otherwise difficult to recycle in Grandpuits, France, to provide resin to the plastics processor, Berry said.
Berry has a goal to greatly expand its use of what the company calls "circular plastics" in its fast-moving consumer goods packaging. The resin from TotalEnergies will help meet that goal of using 30 percent circular plastics, including recycled and renewable resins, in that segment by 2030.
TotalEnergies said the plant will use pyrolysis to create oil that will then be used to make polymers with "identical properties to virgin polymers, making them suitable for use in food-grade applications."