Berry Global Group Inc., known as a company that has expanded through acquisitions since its very beginning, is now turning more inward with plans to emphasis organic growth.
The Evansville, Ind.-based plastics packaging and product maker has grown to a $14.5 billion company, and much of that growth has been in recent years thanks to a handful of major transactions.
While money was once spent on a series of megadeals for companies like RPC Group plc, AEP Industries Inc. and Avintiv Inc., the company is now emphasizing a desire to return cash to shareholders and fund opportunities for existing operations to grow on their own.
Berry has made about four dozen acquisitions since its 1967 founding, and the company still will consider so-called bolt-on acquisitions that would strengthen segments of existing operations.
"Berry is in a unique spot right now. There's no large-scale acquisitions that we have to do to create scale. The real focus is on how we ultimately utilize bolt-on acquisitions as a means to accentuate organic growth," CEO Tom Salmon said in a recent conference call to discuss first-quarter fiscal year 2023 earnings.
Salmon, who announced plans to retire at the end of 2023, has continually said he believes shares of Berry are trading lower than their true value. So the company is funneling boatloads of cash to repurchase shares at a perceived discounted price.
While dividends directly pay cash to shareholders — Berry's quarterly dividend right now is 25 cents per share — stock repurchase programs are designed to boost stock value by lowering the total number of outstanding shares in the market. Fewer shares to represent the total value of the firm theoretically increases the value of each share.
The practice, which is extremely popular right now, is not without controversy. Critics of stock repurchases claim the practice concentrates wealth with shareholders at the expense of other company constituents such as customers and employees.
Berry spent $178 million during the fiscal first quarter to repurchase nearly 3 million shares representing 2.4 percent of the total shares outstanding. The company also revealed expectations to spend at least $600 million during the current fiscal year on stock buybacks.
Berry also is telling the stock market that the company wants to limit the amount of debt being carried to a range of between 2.5 and 3.5 times adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). That's a debt ratio lower than the company has carried in recent years, especially after making deals that, at times, temporarily pushed debt levels higher.
"It's a balanced approach. We really believe we can operate the company at a lower leverage range. We can continue our balanced capital allocation between buybacks and dividends. And we continue to invest in organic growth to reaffirm our commitment as growth as a priority for us," Salmon said.