Berry (US:BERY)2019-11-21 20:36Financial Data and Key Metrics Changes - The company reported record net sales of $3 billion and operating EBITDA of $497 million for the quarter, representing a 47% and 44% increase respectively compared to the prior year [11][18][19] - Adjusted earnings per share remained consistent at $0.90, while free cash flow reached $480 million for the quarter, contributing to an annual record of $764 million [12][30][31] Business Line Data and Key Metrics Changes - The Consumer Packaging North American division saw a 15% increase in sales to $744 million, driven by a 1% organic volume growth [23][24] - The Health, Hygiene & Specialties division reported sales of $570 million, a decrease from $680 million in the prior year, primarily due to lower organic volumes and unfavorable currency impacts [25][26] - The Engineered Materials division's sales were $628 million, down from $673 million, attributed to lower organic volumes and resin price pass-throughs [27][28] Market Data and Key Metrics Changes - The legacy RPC business reported an 8% increase in operating EBITDA on a constant currency basis, with growth in food and personal care markets, although there was softness in European industrial markets [9][18] - The company anticipates $150 million in annual cost synergies from the RPC acquisition, with approximately half expected to be realized in fiscal 2020 [9][36] Company Strategy and Development Direction - The company is focused on driving profitable and sustainable organic growth, with a commitment to maintaining a strong balance sheet and increasing free cash flow [17][32] - The integration of RPC is seen as transformational, providing opportunities for growth in higher value-added markets such as health care packaging and dispensing solutions [35][36] - Sustainability initiatives are a key focus, with the company becoming a founding member of the Alliance To End Plastics Waste and committing to innovative recycling solutions [16][44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive sales volumes across all segments in the latter half of 2020, with expectations of volume recovery in Engineered Materials and Health, Hygiene & Specialties divisions [17][43] - The company is optimistic about the growth potential in emerging markets and the synergies from the RPC acquisition, which are expected to enhance overall performance [35][36] Other Important Information - The company generated a quarterly record of $630 million in cash flow from operations, with net capital expenditures of $128 million [30][31] - The company is targeting fiscal 2020 free cash flow of $800 million, which includes significant cash flow from operations and capital expenditures [33] Q&A Session Summary Question: Update on volume recovery in Engineered Materials - Management indicated that about 30% of the pipeline has been qualified, with expectations for further onboarding in the latter half of 2020 [55] Question: Details on RPC volume growth - Management noted that 70% of RPC's portfolio consists of consumer non-discretionary products, with expectations for low single-digit growth in the RPC business [59] Question: Drivers of negative price mix in Health, Hygiene & Specialties - Management attributed the negative price mix to technology changes and ongoing efforts to increase share of wallet with existing customers [64] Question: EBITDA cadence for fiscal year 2020 - Management confirmed that the December quarter is typically the weakest, with expectations for sequential improvement as synergies are realized [91] Question: Inquiries from customers post-RPC acquisition - Management confirmed increased interest from customers looking to source internationally due to enhanced global capabilities [93]