Berry Global Group Inc. has spent hundreds of millions of dollars to buy back the company's own stock in recent months and is signaling to the market that more of the same could come in the months ahead.
The Evansville, Ind.-based plastic packaging company told stock analysts March 5 the firm spent $300 million during the most recent fiscal quarter to repurchase stock. That equals 4 percent of the company's total outstanding shares, CEO Tom Salmon said.
"We are committed to repurchasing at least $350 million [in] fiscal '22, and we already achieved that threshold during the first two quarters," Salmon said. "Given our top priority of driving shareholder value, we were fortunate to be able to repurchase our shares and take advantage of the attractive return opportunity at prevailing prices," Salmon said during a conference call to discuss quarterly earnings with stock analysts.
"If current valuations persist, we would expect to continue repurchasing shares at a similar pace in the back half of the fiscal year," he said.
A majority of the company's free cash flow is generated during the second half of the fiscal year, meaning the firm will have access to more capital to repurchase shares.
Berry's board of directors previously authorized the company to spend up to $1 billion on stock buybacks after receiving pressure from investor Ancora Holdings Group LLC of Cleveland to make such a move.
Berry's stock price has fallen from $73.78 at the end of last year to $59.76 at the close May 4, the day before quarterly earnings were released.
The company, in February, told the market to expect the repurchase of $1 billion in company shares over the next two to three years. Berry also indicated it repurchased $50 million during the fiscal year 2022 first quarter that ended Jan. 1. Now comes news the firm repurchased $300 million during the second fiscal quarter that ended April 2.
At one point during the conference call with investors, Salmon was asked why the company is not being more aggressive with its stock repurchase now considering share value is down about 20 percent in 2022.
"A lot of it has to do with just the cash generation of our company. The majority of our cash is generated in the back half of the year. We realize this is a dynamic marketplace right now with all the variables that play into these valuations, and we want to expose ourselves to as much opportunity throughout the course of the year should the circumstance present itself to take advantage of the repurchase," he said.
Buying back stock is considered one way to provide shareholder return because the overall value of a company is then spread out over fewer shares.
If the company continues to see shares trading at lower prices during the second half of the year, Berry will buy back more shares, the CEO said. "We believe it is a unique opportunity for us and one of the best investments that we can make in our company right now."