Berry Global Group Inc. is taking a look at divestitures as the company sees an opportunity to use potential proceeds to help fund growth in other portions of the business.
Berry CEO Tom Salmon, in an Aug. 3 conference call to discuss fiscal year third-quarter earnings, talked about how stock repurchases, organic growth and divestitures relate to one another these days for the Evansville, Ind.-based company.
"It's really intentional; the focus in terms of how we are going to disperse our cash flow from operations is prioritized around, first and foremost, organic growth. And given the fact that we have unique opportunities that we've executed pretty aggressively against that [stock] repurchase authorization, we'll continue to do that. Especially at current [price] levels," he said.
"The third piece clearly is divestitures. We are a broad and extensive portfolio. I will tell you it's an active process that we engage in on a regular basis," he said, about evaluating potential sale opportunities. "But it is a specific intent for us to look at the portfolio, examine opportunities to potentially reprioritize one piece of the business in exchange for another."
Berry sold its rotational molding business to a new company, Rotavia, in June. Berry also sold Synergy Packaging Pty. Ltd. to Pact Group Holdings Ltd. Synergy, based in Tullamarine, Australia, makes PET and recycled PET packaging for the beauty, cosmetics, nutraceutical and food markets, Pact said in June.
Berry spent nearly $300 million repurchasing 4 percent of the company's shares during its most recent quarter, pushing the total for the company's fiscal year to 8 percent so far.
Berry has repurchased about 11 million shares for the company's current fiscal year for a total cost of $637 million, according to numbers as of July 2 when the fiscal third quarter ended. That includes $286 million in the most recent quarter.
Berry has about $400 million remaining in the firm's current repurchase program previously authorized by its board. The company expects to buy back at least $700 million worth of stock by the time the current fiscal year ends in a couple of months.
"From a shareholder value creation perspective, the opportunity to repurchase our own shares right now we think is an exceptional value. We think investing in the organic growth of our business is similarly a huge priority. And if we can leverage divestitures to facilitate that, we'll do it," Salmon told stock analysts on the call.
Berry shares were trading at $54.82 at one point just as the market opened Aug. 3. The stock has been trading in a range of $50.10 to $74.73 during the past 52 weeks, according to Yahoo! Finance.
The company reported a profit of $207 million, or $1.58 per diluted share, on sales of $3.73 billion for the fiscal third quarter. That compares with a profit of $194 million, or $1.40 per diluted share, on sales of $3.68 billion during the previous fiscal third quarter. Adjusted net income per diluted share was $2.03 for the most recent quarter, up from $1.89 for the last fiscal third quarter.
Berry indicated net sales growth was primarily due to higher selling prices of $301 million driven by inflation. Organic volume declined by 2 percent during the most recent quarter, primarily due to "general market softness in industrial markets and the moderation of advantaged products related to the easing of the COVID-19 pandemic," the company said. On a two-year basis, organic volumes are up by 3 percent in total, Berry said.
Berry provided some additional perspective regarding divestitures while releasing third-quarter results prior to Salmon's comments on the conference call.
"Over the past several years, we have divested several small businesses. As we continue to focus on driving maximum shareholder value and alongside our commitment to drive sustainable organic growth, we will continue to optimize our portfolio and believe we have more opportunities, over the next few years, to further elevate and strengthen our portfolio," the company said.
"Given our consistent and dependable free cash flow along with strategic divestiture opportunities we expect to continue to provide capital back to our shareholders along with lowering our leverage," Berry officials said. "So far this year we have completed three divestitures delivering proceeds of approximately $150 million."