Author Topic: BERY - Berry Plastics Group  (Read 18181 times)

BG2008

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Re: BERY - Berry Plastics Group
« Reply #90 on: July 29, 2020, 08:48:29 AM »
Just want to bump this thread as I think Berry is still quite interesting here.  I don't think I have seen such a "bond like" company

Also, just want to highlight IPL plastic which Berry could buy in a couple years.  Right now, they are simply in deleveraging mode.  There are rumors that three PE firms are after IPL plastics.  I think a 80/20 allocation between Berry/IPL makes a lot of sense.  I have also noticed that Berry has been one the forefront of issuing press release on recycling and more sustainable collaborations between Berry and their customers.  If Berry can convince people that they are sustainable in the long run, I don't see how this company doesn't trade at a 15x P/FCF at 3x debt to EBITDA or 11x EV/EBITDA.  Unlike most consumer brand companies, Berry has a long run way to consolidate smaller mom and pops.  The synergies are real.  Large consumer stables are losing shares to smaller and nimbler startups. But Berry outcompetes the smaller guys due to their scale advantage. 

This will be controversial.  Before Google, Instagram and Twitter, brand reduces search cost.  Now brand is a bit of a liability as people (or assholes like me) associate them with lower quality (fillers, additives, preservatives, etc).  Because plastics packaging carries no brand, the scale advantage persists.  I'll say something else that is also controversial.  In the new age of Amazon and tech disruption, the companies that have the most moat maybe those that have lower gross margin and very large scale advantage.  I doubt any tech start wants to muscle their way into the packaging business.   Getting customers will likely be very costly.  Increasingly, I want to own companies that are either fast tech with the brightest people or companies with moats such as rock pits, plastic packaging with large scale, distribution businesses with route density, and multi-family housing in NIMBYist markets.

Haha, I was looking over this thread to see if I mentioned anything about IPL.  80/20 Berry/IPL allocation this year.  IPL is up about 145% since I bought it.  Lots of props to Grizzly Rock's research on this company.  In hindsight, should have sized it bigger than 2%.  But that is the drawback of small cap investing.  Without a deal, they can linger in purgatory for years (which it did for a long time).  But when they work, they work very well and very quickly and in very meaningful ways.   

 


BG2008

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Re: BERY - Berry Plastics Group
« Reply #91 on: July 29, 2020, 08:57:08 AM »
Nice call, BG. Appreciate your thoughts on Berry and the space.

Happy to have added value (if any given the share prices here).  One other comment is that Silgan reported crazy high volume increases for Metal Cans and Plastic.  Perhaps there were a ton of hording by consumer during Q2 that Berry may benefit from as well.  Berry's biggest weakness is their volume figures.  If they report +2-3% for the quarter, market may react really well to it. 

Metal Containers
Net sales of the metal container business were a record $597.2 million for the second quarter of 2020, an increase of $21.6 million, or 3.8 percent, as
compared to the previous record of $575.6 million in the second quarter of 2019. This increase was primarily the result of higher unit volumes of
approximately 15 percent

Plastic Containers
Net sales of the plastic container business were a record $168.8 million in the second quarter of 2020, an increase of $14.6 million, or 9.5 percent, as
compared to $154.2 million in the second quarter of 2019. This increase was principally due to higher volumes of approximately 14 percent, partially
offset by a less favorable mix of products sold,

kab60

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Re: BERY - Berry Plastics Group
« Reply #92 on: July 31, 2020, 04:39:43 AM »
Results are out, looking good. Guidance raised to 830m FCF this year. Another 65m in synergies to come next year thus crossing 900m in FCF. Add expected volume growth, lower interest costs etc. and they should be on their way to do 1b FCF. on a 6,3b market cap. Looks more interesting than a bond to me...

kab60

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Re: BERY - Berry Plastics Group
« Reply #93 on: July 31, 2020, 10:31:19 PM »
Management could be better at addressing capital allocation which analysts also asked a bit about on the call. Long winded and fluffy answers. Why not just say their stock is dirt cheap, and they'd love to buy it hand over first, but first they want to get below 4xleverage? Either way, I think the most value enhancing move they could do was to lever up, sink the stock price, and make a large buyback. They borrow at 1-3 pct, equity FCF yield is around 15 pct. Not gonna happen, obviously, but their model really works best privately. Or they'd have to spread the gospel ala Transdigm and get public investors fall in love with leverage...