Berry Global Group Inc., in the midst of a transformation under a newly installed CEO, could divest another $1 billion in businesses in the next year.
The Evansville, Ind.-based plastics processor and packaging maker now believes the moves, including sale of its health, hygiene and specialties division, could now "exceed $2 billion in cash from strategic divestitures over the next year."
This includes $1 billion from a plan to merge a majority of Berry's HH&S division with Glatfelter Corp., a move announced in February. Described as a tax-free spinoff and merger, which includes the company's nonwovens and films business, the transaction will result in Berry shareholders owning about 90 percent of the combined company.
CEO Kevin Kwilinski, during a conference call to discuss quarterly earnings May 9, indicated Berry now sees the potential to add another $1 billion in cash from "future portfolio optimization."
"With respect to portfolio optimization, we are making substantial progress. We completed two additional divestitures in the quarter, and we have line of sight to much more," he said.
"This includes $1 billion from the already announced spinoff merger, and another $1 billion from future portfolio optimization opportunities. Not only will these divestitures accelerate deleveraging, they will push us toward our goal of increasing our consumer products focus from over 70 percent to over 80 percent of volume," he said.
Kwilinski, who has been on the job for about six months, talked with stock analysts about transforming Berry into a company serving fewer markets.
Berry largely built itself into a multi-billion dollar international firm over the years through a series of transactions, including significant deals in the last 10 years that dramatically increased the size and scope of the firm. Now the company wants to narrow the focus.
"I have a bias for action. I am positively committed to getting the portfolio right as fast as we can," the CEO said.
Kwilinski said that beyond the HH&S spinoff, the company also has a group of companies that are not in the company's core business. These businesses are both "excellent" and "profitable" and would make fine editions to other companies, he said.
"We are confident we will be able to monetize those," he said.
"With respect to portfolio optimization, we are making substantial progress. We completed two additional divestitures in the quarter, and we have line of sight to much more," he said. The completed sales involved businesses with about $150 million in annual sales.
Chief Financial Officer Mark Miles said the two divestitures were a United Kingdom-based home and garden business and a European industrial vehicles business that both were part of the company's international consumer packaging segment. They both had "profit margins well below the company average," he said.
Berry has made 10 divestitures since the company's purchase of RPC Group in 2019, a move that brought substantial European business to the company that had historically been focused on North America.
"These divestitures are in direct alignment with our long-term strategy of simplifying the portfolio and enhancing the stability of earnings and improving long-term growth," Miles said.
Kwilinski said his company's "strategic priorities remain steadfast. Optimize the portfolio, implement lean transformation, and accelerate growth."