Berry (US:BERY)2020-11-19 19:59Financial Data and Key Metrics Changes - In Q4 2020, Berry Global reported operating EBIT increased by 18% to $586 million, with full-year operating EBITDA reaching a record $2,157 million, up 41% year-over-year [14][17] - Adjusted earnings per diluted share grew 42% to $4.85 for the full year, with Q4 adjusted EPS increasing by 77% to $1.59 [15][16] - The company achieved $11.7 billion in net sales for the fiscal year, surpassing previous records [17] Business Line Data and Key Metrics Changes - Consumer Packaging International division delivered sales of just under $1.1 billion with EBITDA of $202 million, showing a 1% volume increase [20] - Consumer Packaging North America division reported net sales of $746 million, with a 6% increase in organic volumes, and EBITDA increased to $160 million [21][22] - Health, Hygiene and Specialty division achieved sales of $604 million, with a 12% organic volume growth, while EBITDA increased by 42% [23][24] - Engineered Materials division saw sales of $587 million, with a modest 1% decline in volume, but EBITDA grew 5% [25] Market Data and Key Metrics Changes - The company noted strong performance in consumer-centric end markets, while industrial markets faced COVID-19-related headwinds [20] - The health, hygiene, and specialty segment experienced growth across all four global regions, driven by increased demand for healthcare products [23] Company Strategy and Development Direction - Berry Global's strategic priorities for fiscal 2020 included generating profitable organic growth, integrating the RPC acquisition, and strengthening the balance sheet, all of which were reported as successful [9][10] - The company is focusing on faster-growing end markets and global mega trends, with significant investments in healthcare and sustainability initiatives [34][35] - The company aims to maintain a strong balance sheet, targeting a leverage ratio of 3.8 to 3.9 times by the end of fiscal 2021 [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver sustainable, profitable growth despite challenges posed by COVID-19 [32] - The company anticipates continued organic volume growth of 2% in fiscal 2021, supported by a robust pipeline and increased capital expenditures [30][48] Other Important Information - Berry Global generated a record free cash flow of $947 million, a 24% increase compared to fiscal 2019, which was used to reduce outstanding debt by over $1 billion [18][26] - The company divested its U.S. flexible packaging converting business, which generated approximately $25 million of operating EBITDA in fiscal 2020, to eliminate channel conflicts and focus on core growth areas [99][100] Q&A Session Summary Question: What drove the significant upside in free cash flow in fiscal 2020? - Management indicated that multiple factors contributed, including volumes, earnings, capital expenditure timing, lower interest expenses, and improved working capital efficiency [51] Question: How much of the 2% core volume growth came from new products versus COVID benefits? - Management noted that the majority of growth was driven by investments in health and wellness, food safety, and e-commerce, with COVID having a flat to slightly positive impact [56][57] Question: What is the most important sustainability attribute to consumers? - Management highlighted that consumers value the optimization of material weight without compromising functionality, and emphasized ongoing investments in mechanical and advanced recycling [60][62] Question: What is the rationale behind the divestiture of the flexible converting business? - The divestiture was aimed at removing channel conflicts and focusing on core growth areas, with the flexible packaging film portfolio showing high single-digit growth [99][100] Question: Are acquisitions still part of the company's strategy? - Management confirmed that while acquisitions remain an option, the current focus is on organic growth and balance sheet improvement [102][113]