BERY - Berry Plastics Group

[kab60]

Decent set of results. This Company is gushing cash. Think the most important thing is the fact that they are guiding towards volume growth across the business in FY2020 (which they alluded to before) and that RPC doesn't contain any nasty surprises so far. Seems like the market needs to see it before it believes it. Anyway, guidance is for 800m FCF next year which is exclusive of 150m of expected synergies as well as cash costs of 90m towards WC and "other". So Berry should be on a path towards 1000m FCF on a market cap of 5,5b while bonds trade above par.

[BG2008]

Add in the fact that the $800mm will likely be used towards deleveraging which means that it will shave $40mm of debt assuming 5%, maybe less.  But that FCF could look juicier than your assumptions. 

[BG2008]

We live in a very weird world

EVANSVILLE, Ind.--(BUSINESS WIRE)--Dec. 12, 2019-- Berry Global Group, Inc. (NYSE: BERY) (“Berry”) announced today the pricing of the private placement launched December 9, 2019, by its wholly owned subsidiary, Berry Global, Inc. (the “Issuer”). The Issuer will issue €700,000,000 of first priority senior secured notes due 2025 (the “2025 Notes”) and €375,000,000 of first priority senior secured notes due 2027 (the “2027 Notes” and together with the 2025 Notes, the “Notes”).The closing of the private placement offering is expected to occur on or about January 2, 2020.

The 2025 Notes will bear interest at a rate of 1.00%, payable semiannually, in cash in arrears, on January 15 and July 15 of each year, commencing on July 15, 2020. The 2025 Notes will mature on January 15, 2025.

The 2027 Notes will bear interest at a rate of 1.50%, payable semiannually, in cash in arrears, on January 15 and July 15 of each year, commencing on July 15, 2020. The 2027 Notes will mature on January 15, 2027.

[BG2008]

This alone is likely over $30mm of savings in interest expense

[kab60]

Yep, strange indeed. But great for those of us who don't mind an occasional leveraged play. Very large spread/discrepancy between bond yields and some leveraged equities. This is supposed to be a long term holding for me, but I dabbled some in ETM and GTN short term. Some plus 20 pct spread between equity and bond yields before recent rally. Didn't do the math on how much Berry can save on interest, pure gravy if volume growth resumes.

[BG2008]

Earnings out, market doesn't like it.  And then this little nugget... I don't know what to make of it.  Maybe their Health and Hygiene Division will actually show some organic volume growth now. 


Berry Global Increases Production to Aid in Coronavirus Protection

https://www.businesswire.com/news/home/20200131005586/en/Berry-Global-Increases-Production-Aid-Coronavirus-Protection

[Gregmal]

Earnings out, market doesn't like it.  And then this little nugget... I don't know what to make of it.  Maybe their Health and Hygiene Division will actually show some organic volume growth now. 


Berry Global Increases Production to Aid in Coronavirus Protection

https://www.businesswire.com/news/home/20200131005586/en/Berry-Global-Increases-Production-Aid-Coronavirus-Protection

Eh, wishful thinking. I thought last week maybe Dupont would get an intsy weentsy little bit of love for this stuff too.

https://www.envirosafetyproducts.com/coronavirus-protection.html

Of course, not that the bottom line would move, but in the same knee jerk way Lakeland goes apeshit for no good reason once every 5 years or so on a fear/speculation driven rally.

I also thought a few years back Heineken was a nice way to play the CBD/pot rally with their CBD drinks..nope only pos NBEV.

If only we were so lucky...

[Spekulatius]

Earnings out, market doesn't like it.  And then this little nugget... I don't know what to make of it.  Maybe their Health and Hygiene Division will actually show some organic volume growth now. 


Berry Global Increases Production to Aid in Coronavirus Protection

https://www.businesswire.com/news/home/20200131005586/en/Berry-Global-Increases-Production-Aid-Coronavirus-Protection

Probably down at move the needle. For news to move the stock, low float is paramount. I thought Berry’s earnings were OK, but it seems that low resin prices aren't their friend. All the chemicals are hurting and polyethylene prices are in the tank. I don’t think it’s a sell supply glut either - considering that chemical are canaries in the coal mine I don’t think the economy will do that great, at least not the manufacturing sector.

[LC]

Canyon Partners Sends Letter to Berry Global's Board of Directors

https://finance.yahoo.com/news/canyon-partners-sends-letter-berry-230000756.html

As described below, Canyon believes that Berry should immediately take the following steps: (1) publicly announce that it has hired an investment bank or other financial advisor to develop a clear plan of action toward accelerated deleveraging; (2) commit to achieving an investment grade rating (and cease M&A activity other than deleveraging transactions); and (3) get in front of environmental, social and governance ("ESG") trends and correct market misperceptions about sustainability.

Berry management responded with the usual boilerplate.

[thepupil]

I bought a little of this after they announced sales would be up for the quarter. it's only up 13% or so since then and is still quite attractive in my opinion at 15%+ FCF yield and likely going higher over time, should de-leverage rapidly with Covid INCREASE in earnings/volume.

does anything in earnings give anyone pause?

this seems almost too easy and I feel like i'm missing something. I know people don't like levered companies right now, but rapidly de-levering ones with low cost debt and prodigious free cash flow don't seem like the worst of things to buy.

the debt market doesn't seem to see much risk.