Third Quarter Highlights
- GAAP: Net sales of $3.2 billion; Operating income of $267
million; Earnings per share of $1.18
- Non-GAAP: Operating EBITDA of $522 million; Adjusted earnings
per share of $1.90
- Returned $115 million to shareholders in the quarter ($83
million via share repurchases and $32 million in dividends)
- Fiscal 2023 outlook: Guidance within our previous announced
ranges for adjusted EPS and free cash flow
Berry’s Chairman and CEO Tom Salmon shared, “We continue to
prioritize structural cost improvements, enhance operating
efficiencies, and successfully shift our portfolio toward
high-value growth products across all of our businesses. Our cost
actions, including site rationalizations, moving business to more
cost-efficient facilities, and labor cost reductions, have resulted
in significant annualized cost savings of now $140 million.. We
expect to realize $75 million in fiscal 2023, with the majority of
the balance being realized in fiscal 2024. These internal
initiatives have been instrumental in driving 3% growth in adjusted
earnings per share in the face of a 7% volume decline caused by
destocking and overall market softness. Moreover, we are dedicated
to delivering long-term value for our shareholders, as evident by
our repurchases in fiscal 2023 of $416 million, or another 5.6% of
shares outstanding, alongside our quarterly dividend payments.
Furthermore, and in line with this commitment, we expect to
repurchase nearly 3 million shares, or 2.5% of our total shares
outstanding, during our fourth fiscal quarter. Looking ahead, we
expect a transition to a more normal operating environment with the
easing of inflationary pressures on consumers, and we anticipate
sequential volume growth improvement across all four segments in
the fourth fiscal quarter.”
Key Financials (1)
June Quarter
June YTD
GAAP results
2023
2022
2023
2022
Net sales
$
3,229
$
3,726
$
9,577
$
11,074
Operating income
267
336
778
906
EPS (diluted)
1.18
1.58
3.47
3.93
June Quarter
Reported
Comparable
June YTD
Reported
Comparable
Adjusted non-GAAP results
2023
2022
Δ%
Δ%
2023
2022
Δ%
Δ%
Net sales
$
3,229
$
3,726
(13%)
(13%)
$
9,577
$
11,074
(14%)
(11%)
Operating EBITDA
522
550
(5%)
(6%)
1,506
1,562
(4%)
(1%)
Adjusted EPS (diluted)
1.90
2.03
(6%)
(7%)
5.23
5.21
-%
3%
(1)
Adjusted non-GAAP results exclude items
not considered to be ongoing operations. In addition, comparable
change % excludes the impacts of foreign currency, acquisitions,
and recent divestitures. Further details related to non-GAAP
measures and reconciliations can be found under our “Non-GAAP
Financial Measures and Estimates” section or in reconciliation
tables in this release. In millions of USD, except per share
data
Financial Results – Third Quarter
2023
Consolidated Overview
The net sales decline is primarily attributed to decreased
selling prices of $250 million due to the pass-through of lower
resin costs and a 7% volume decline. The volume decline is
primarily attributed to softer demand in our consumer and
industrial markets, including destocking, partially offset by
strong growth in foodservice.
The operating income decrease is primarily attributed to a $44
million unfavorable impact from the volume decline, a $30 million
increase in business integration costs and a $10 million expense
related to a third-party warehouse fire.
Consumer Packaging - International
The net sales decline is primarily attributed to a 5% volume
decline due to softer consumer and industrial market demand in
Europe, including destocking.
The operating income decrease is primarily attributed to a $14
million unfavorable impact from increased business integration
costs and a $10 million unfavorable impact from the volume decline.
These items are partially offset by a favorable impact from price
cost spread.
Consumer Packaging - North America
The net sales decline is primarily attributed to decreased
selling prices of $105 million and a 4% volume decline primarily
attributed to softer industrial and consumer market demand,
including destocking partially offset by strong growth in
foodservice.
The operating income decrease is primarily attributed to a $8
million unfavorable impact from the volume decline and a $6 million
unfavorable impact from increased business integration costs.
Health, Hygiene, & Specialties
The net sales decline is primarily attributed to decreased
selling prices of $83 million and a 7% volume decline primarily
attributed to weaker demand in specialty markets, such as
filtration and building and construction, including destocking,
partially offset by growth in disinfectant wipes.
The operating income decrease is primarily attributed to a $20
million unfavorable impact from price cost spread, a $9 million
unfavorable impact from increased business integration costs, and
an unfavorable impact from the volume decline.
Engineered Materials
The net sales decline is primarily attributed to an 11% volume
decline attributed to destocking and weakness in European
industrial markets and decreased selling prices of $77 million.
The operating income decrease is primarily attributed to a $18
million unfavorable impact from the volume decline, partially
offset by a favorable impact from price cost spread.
Cash Returns to
Shareholders
Berry generates significant cash flow and is committed to
returning capital to shareholders. This annual cash flow provides
substantial capacity to simultaneously reinvest in the business for
organic growth, pursue bolt-on acquisitions, pay down debt and
return cash to shareholders through a compelling dividend as well
as regular share repurchases. The Company expects to return over
$700 million through share repurchases and dividends in fiscal
2023, subject to market conditions, available cash on hand and cash
needs, overall financial condition, and other factors considered
relevant by our Board of Directors.
Dividend and Share Repurchases
As previously announced, Berry’s Board of Directors declared a
quarterly cash dividend of $0.25 per share payable on September 15,
2023 to stockholders of record as of September 1, 2023. During the
third quarter, Berry repurchased 1.4 million shares (or
approximately 1.2% of shares outstanding) for $83 million, leaving
over $625 million authorized for share repurchases at the end of
the third fiscal quarter. Through the first three quarters of
fiscal 2023, we have repurchased 6.9 million shares (or
approximately 5.6% of shares outstanding) for $416 million. Berry
may repurchase shares through the open market, privately negotiated
transactions or other programs, subject to market conditions. The
Company continues to expect to repurchase at least $600 million of
stock in fiscal 2023, subject to market conditions, available cash
on hand and cash needs, overall financial condition, and other
factors considered relevant by our Board of Directors.
Fiscal Year 2023 Guidance
(based on information available as of August 9, 2023)
- Adjusted earnings per share of $7.30
- Cash flow from operations of $1.45 million; free cash flow of
$800 million
- Anticipate returning at least $700 million of capital to
shareholders through share repurchases and dividends
Investor Conference Call
The Company will host a conference call today, August 9, 2023,
at 10 a.m. U.S. Eastern Time to discuss our third fiscal quarter
2023 results. This call will be webcast live on Berry’s website at
https://ir.berryglobal.com/financials. A new, simplified event
registration and access provides two ways to access the call. A
replay of the webcast will be available via the same link on our
website approximately two hours after the completion of the
call.
By Telephone
Participants may register for the call here now or any time up
to and during the time of the call, and will immediately receive
the dial-in number and a unique pin to access the call. While you
may register at any time up to and during the time of the call, you
are encouraged to join the call 10 minutes prior to the start of
the event.
Via the Internet
The conference call and accompanying webcast slides will also be
broadcast live over the internet. To access the event, click on the
following link: https://ir.berryglobal.com/financials. A replay of
the webcast will be available via the same link on our website
approximately two hours after the completion of the call.
About Berry
At Berry Global Group, Inc. (NYSE:BERY), we create packaging and
engineered products that we believe make life better for people and
the planet. We do this every day by leveraging our unmatched global
capabilities, sustainability leadership, and deep innovation
expertise to serve customers of all sizes around the world.
Harnessing the strength in our diversity and industry leading
talent of 46,000 global employees across more than 250 locations,
we partner with customers to develop, design, and manufacture
innovative products with an eye toward the circular economy. For
more information, visit our website, or connect with us on LinkedIn
or Twitter.
Non-GAAP Financial Measures and
Estimates
This press release includes non-GAAP financial measures such as
operating EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted
earnings per share, free cash flow, and comparable basis net sales,
adjusted EPS and operating EBITDA. A reconciliation of these
non-GAAP financial measures to comparable measures determined in
accordance with accounting principles generally accepted in the
United States of America (GAAP) is set forth at the end of this
press release. Information reconciling forward-looking operating
EBITDA is not provided because such information is not available
without unreasonable effort due to the high variability,
complexity, and low visibility with respect to certain items,
including debt refinancing activity or other non-comparable items.
These items are uncertain, depend on various factors, and could be
material to our results computed in accordance with U.S. GAAP.
Forward Looking Statements
Statements in this release that are not historical, including
statements relating to the expected future performance of the
Company, are considered “forward looking” within the meaning of the
federal securities laws and are presented pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. You can identify forward-looking statements because they
contain words such as “believes,” “expects,” “may,” “will,”
“should,” “would,” “could,” “seeks,” “approximately,” “intends,”
“plans,” “estimates,” “projects,” “outlook,” “anticipates” or
“looking forward,” or similar expressions that relate to our
strategy, plans, intentions, or expectations. All statements we
make relating to our estimated and projected earnings, margins,
costs, expenditures, cash flows, growth rates, and financial
results or to our expectations regarding future industry trends are
forward-looking statements. In addition, we, through our senior
management, from time to time make forward-looking public
statements concerning our expected future operations and
performance and other developments.
Our actual results may differ materially from those that we
expected due to a variety of factors, including without limitation:
(1) risks associated with our substantial indebtedness and debt
service; (2) changes in prices and availability of resin and other
raw materials and our ability to pass on changes in raw material
prices to our customers on a timely basis; (3) risks related to
acquisitions or divestitures and integration of acquired businesses
and their operations, and realization of anticipated cost savings
and synergies; (4) risks related to international business,
including transactional and translational foreign currency exchange
rate risk and the risks of compliance with applicable export
controls, sanctions, anti-corruption laws and regulations; (5)
increases in the cost of compliance with laws and regulations,
including environmental, safety, and climate change laws and
regulations; (6) labor issues, including the potential labor
shortages, shutdowns or strikes, or the failure to renew effective
bargaining agreements; (7) risks related to disruptions in the
overall global economy, persistent inflation, supply chain
disruptions, and the financial markets that may adversely impact
our business, including as a result of the Russia-Ukraine conflict;
(8) risk of catastrophic loss of one of our key manufacturing
facilities, natural disasters, and other unplanned business
interruptions; (9) risks related to weather-related events and
longer-term climate change patterns; (10) risks related to the
failure of, inadequacy of, or attacks on our information technology
systems and infrastructure; (11) risks that our restructuring
programs may entail greater implementation costs or result in lower
cost savings than anticipated; (12) risks related to future
write-offs of substantial goodwill; (13) risks of competition,
including foreign competition, in our existing and future markets;
(14) risks related to market conditions associated with our share
repurchase program; (15) risks related to market disruptions and
increased market volatility as a result of Russia’s invasion of
Ukraine; and (16) the other factors and uncertainties discussed in
the section titled “Risk Factors” in our Annual Report on Form 10-K
and subsequent filings with the Securities and Exchange Commission.
We caution you that the foregoing list of important factors may not
contain all of the material factors that are important to you. New
factors may emerge from time to time, and it is not possible for us
to predict new factors, nor can we assess the potential effect of
any new factors on us. Accordingly, readers should not place undue
reliance on those statements. All forward-looking statements are
based upon information available to us on the date hereof. All
forward-looking statements are made only as of the date hereof and
we undertake no obligation to update or revise any forward-looking
statement as a result of new information, future events or
otherwise, except as otherwise required by law.
Berry Global Group,
Inc.
Consolidated Statements of
Income (Unaudited)
Quarterly Period Ended
Three Quarterly Periods
Ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
Net sales
$
3,229
$
3,726
$
9,577
$
11,074
Costs and expenses:
Cost of goods sold
2,649
3,105
7,873
9,297
Selling, general and administrative
215
215
671
657
Amortization of intangibles
61
63
181
196
Restructuring and transaction
activities
37
7
74
18
Operating income
267
336
778
906
Other expense
11
7
13
13
Interest expense, net
78
70
228
212
Income before income taxes
178
259
537
681
Income tax expense
35
52
114
148
Net income
$
143
$
207
$
423
$
533
Basic net income per share
$
1.20
$
1.61
$
3.50
$
4.02
Diluted net income per share
1.18
1.58
3.47
3.93
Outstanding weighted average shares
(in millions)
Basic
118.7
128.6
121.0
132.6
Diluted
121.1
130.7
121.9
135.6
Condensed Consolidated Balance
Sheets (Unaudited)
(in millions of USD)
July 1, 2023
October 1, 2022
Cash and cash equivalents
$
633
$
1,410
Accounts receivable
1,748
1,777
Inventories
1,730
1,802
Other current assets
229
175
Property, plant, and equipment
4,651
4,342
Goodwill, intangible assets, and other
long-term assets
7,558
7,450
Total assets
$
16,549
$
16,956
Current liabilities, excluding current
debt
2,313
2,831
Current and long-term debt
9,212
9,255
Other long-term liabilities
1,637
1,674
Stockholders’ equity
3,387
3,196
Total liabilities and stockholders'
equity
$
16,549
$
16,956
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(in millions of USD)
July 1, 2023
July 2, 2022
Cash flows from operating
activities:
Net income
$
423
$
533
Depreciation
425
424
Amortization of intangibles
181
196
Non-cash interest, net
(45
)
11
Settlement of derivatives
36
69
Deferred income tax
(94
)
(66
)
Share-based compensation expense
36
34
Other non-cash operating activities,
net
18
(2
)
Changes in working capital
(490
)
(854
)
Net cash from operating
activities
490
345
Cash flows from investing
activities:
Additions to property, plant, and
equipment, net
(560
)
(556
)
Divestiture (acquisition) of businesses
and other
(88
)
131
Net cash from investing
activities
(648
)
(425
)
Cash flows from financing
activities:
Repayments on long-term borrowings
(687
)
(16
)
Proceeds from long-term borrowings
500
170
Repurchase of common stock
(415
)
(637
)
Proceeds from issuance of common stock
26
24
Dividends paid
(97
)
-
Other, net
6
-
Net cash from financing
activities
(666
)
(459
)
Effect of currency translation on cash
47
(25
)
Net change in cash and cash
equivalents
(777
)
(564
)
Cash and cash equivalents at beginning of
period
1,410
1,091
Cash and cash equivalents at end of
period
$
633
$
527
Non-U.S. GAAP Free Cash Flow:
Cash flow from operating activities
$
490
$
345
Additions to property, plant, and
equipment (net)
(560
)
(556
)
Non-U.S. GAAP Free Cash Flow
$
(70
)
$
(211
)
Segment and Supplemental
Comparable Basis Information (Unaudited)
Quarterly Period Ended July 1,
2023
(in millions of USD)
Consumer
Packaging -
International
Consumer
Packaging-
North
America
Health,
Hygiene &
Specialties
Engineered
Materials
Total
Net sales
$
1,036
$
798
$
657
$
738
$
3,229
Operating income
$
68
$
89
$
22
$
88
$
267
Depreciation and amortization
79
54
45
29
207
Restructuring and transaction
activities
17
6
12
2
37
Other non-cash charges
6
2
2
1
11
Operating EBITDA
$
170
$
151
$
81
$
120
$
522
Quarterly Period Ended July 2,
2022
Reported net sales
$
1,096
$
927
$
788
$
915
$
3,726
Foreign currency and divestitures
(20
)
13
7
1
1
Comparable net sales (1)
$
1,076
$
940
$
795
$
916
$
3,727
Operating income
$
82
$
104
$
56
$
94
$
336
Depreciation and amortization
78
53
44
28
203
Restructuring and transaction
activities
3
1
3
—
7
Other non-cash charges
—
1
2
1
4
Foreign currency and divestitures
(2
)
5
(4
)
(2
)
(21
)
Comparable operating EBITDA (1)
$
161
$
164
$
105
$
123
$
553
(1)
The prior year comparable basis change
excludes the impacts of foreign currency, acquisitions, and
divestitures. Further details related to non-GAAP measures and
reconciliations can be found under our “Non-GAAP Financial Measures
and Estimates” section or in reconciliation tables in this
release.
Reconciliation of Non-GAAP
Measures
Reconciliation of adjusted earnings
before interest, tax, depreciation and amortization (EBITDA), Net
income, and earnings per share (EPS)
(in millions of USD, except per share data
amounts)
Quarterly Period Ended
Three Quarterly Periods
Ended
July 1,
2023
July 2,
2022
July 1,
2023
July 2,
2022
Net income
$
143
$
207
$
423
$
533
Add: other expense
11
7
13
13
Add: interest expense
78
70
228
212
Add: income tax expense
35
52
114
148
Operating income
$
267
$
336
$
778
$
906
Add: restructuring and transaction
activities
37
7
74
18
Add: other non-cash charges
11
4
48
18
Adjusted operating income (2)
$
315
$
347
$
900
$
942
Add: depreciation
146
140
425
424
Add: amortization of intangibles
61
63
181
196
Operating EBITDA (2)
$
522
$
550
$
1,506
$
1,562
Net income per diluted share
$
1.18
$
1.58
$
3.47
$
3.93
Other expense, net
0.09
0.05
0.11
0.10
Restructuring and transaction
activities
0.31
0.06
0.61
0.13
Amortization of intangibles from
acquisitions (1)
0.50
0.48
1.48
1.45
Income tax impact on items above
(0.18
)
(0.14
)
(0.44
)
(0.40
)
Foreign currency, acquisitions, and
divestitures
—
0.01
—
(0.12
)
Adjusted net income per diluted
share (2)
$
1.90
$
2.04
$
5.23
$
5.09
Estimated Fiscal 2023
Cash flow from operating activities
$
1,450
Net additions to property, plant, and
equipment
(650
)
Free cash flow (2)
$
800
(1)
Amortization of intangibles from
acquisition are added back to better align our calculation of
adjusted EPS with peers.
(2)
Supplemental financial measures that are
not required by, or presented in accordance with, accounting
principles generally accepted in the United States (“GAAP”). These
non-GAAP financial measures should not be considered as
alternatives to operating or net income or cash flows from
operating activities, in each case determined in accordance with
GAAP. Organic sales growth and comparable basis measures exclude
the impact of currency translation effects and acquisitions. These
non-GAAP financial measures may be calculated differently by other
companies, including other companies in our industry, limiting
their usefulness as comparative measures. Berry’s management
believes that adjusted net income and other non-GAAP financial
measures are useful to our investors because they allow for a
better period-over-period comparison of operating results by
removing the impact of items that, in management’s view, do not
reflect our core operating performance.
We define “free cash flow” as cash flow
from operating activities, less net additions to property, plant,
and equipment. We believe free cash flow is useful to an investor
in evaluating our liquidity because free cash flow and similar
measures are widely used by investors, securities analysts, and
other interested parties in our industry to measure a company’s
liquidity. We also believe free cash flow is useful to an investor
in evaluating our liquidity as it can assist in assessing a
company’s ability to fund its growth through its generation of
cash.
Adjusted EBITDA is used by our lenders for
debt covenant compliance purposes. We also use Adjusted EBITDA,
Operating EBITDA, and comparable basis measures, among other
measures, to evaluate management performance and in determining
performance-based compensation. Operating EBITDA is a measure
widely used by investors, securities analysts, and other interested
parties in our industry to measure a company’s performance. We also
believe EBITDA and Adjusted net income are useful to an investor in
evaluating our performance without regard to revenue and expense
recognition, which can vary depending upon accounting methods.
(BERY-F)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809102435/en/
Company Contact Information Dustin Stilwell VP, Investor
Relations +1 (812) 306 2964 ir@berryglobal.com
Berry Global (NYSE:BERY)
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