Berry (US:BERY)2023-02-02 18:38Financial Data and Key Metrics Changes - The company reported a 3% growth in operating EBITDA and an 11% increase in adjusted earnings per share for the first fiscal quarter of 2023 [10][20] - There was a 6% decline in volume, attributed to short-term softer market demand, which aligned with reports from global customers [13][23] - The company returned $211 million to shareholders through share repurchases and dividends in the quarter [14][32] Business Line Data and Key Metrics Changes - Consumer Packaging International division experienced lower revenue due to softer demand, but higher pricing helped offset this decline [16] - Engineered Materials division saw a 15% revenue decrease primarily due to volume declines and lower selling prices [18] - Health, Hygiene, and Specialties division reported a 17% revenue decline, with operating EBITDA down 21% due to volume declines and lower selling prices [27][28] Market Data and Key Metrics Changes - Demand remained stable in consumer-facing categories like retail food and beverage, but discretionary markets such as automotive faced weaker demand [23] - The company noted that the outbreak of COVID in China negatively impacted volumes and earnings during the quarter [23] Company Strategy and Development Direction - The company is focused on pivoting its portfolio into higher growth markets, particularly in food service, healthcare dispensing, and pharmaceutical markets [10][11] - The long-term strategy includes increasing the presence in emerging markets, aiming for these markets to represent 25% or more of total revenues [15] - The company has lowered its long-term leverage target to 2.5x to 3.5x net debt to adjusted EBITDA [19][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining earnings growth despite a challenging demand environment, emphasizing cost reduction and inflation recovery efforts [19][37] - The company anticipates that industrial markets will remain sluggish throughout much of fiscal 2023 [37] - Management noted some signs of demand improvement in January, suggesting a potential easing of inventory destocking [60][61] Other Important Information - The company plans to repurchase at least $600 million of shares in fiscal 2023 [12] - A new international Center of Excellence and Circular Innovation Hub will be established in Barcelona, Spain, to support sustainability and innovation efforts [44][45] Q&A Session Summary Question: Inventory destocking cycle across core end markets - Management indicated that consumer markets are reducing inventory due to uncertainty, with expectations for gradual improvement as demand stabilizes [60][61] Question: EBITDA guidance and price cost benefits - Management revised the price cost benefit estimate for fiscal 2023 to approximately $125 million, driven by cost reduction activities [63] Question: Capital allocation priorities for 2023 - The company plans to prioritize share repurchases while balancing debt repayment and dividends, with a focus on maintaining a lower leverage range [73][74] Question: M&A strategy and focus areas - Management emphasized a focus on bolt-on acquisitions to complement organic growth, particularly in healthcare and sustainability solutions [80] Question: Outlook for China and its impact on volumes - Management noted that while China is a small part of the portfolio, normalization post-COVID is expected to provide a steady growth path [82] Question: Return on capital and long-term targets - Management indicated a historical return on capital around 14%, with expectations to drive that higher through incremental investments [88]