Berry Global Group Inc.'s plans for divestitures could end up being even larger than the company previously discussed.
The Evansville, Ind.-based plastic processor is in the midst of not only spinning off its Health, Hygiene and Specialties division but also working through plans to divest other segments of the business.
Berry previously indicated those other portions could add up to $1 billion in annual sales, but on during an Aug. 2 conference call to discuss quarterly earnings indicated that number ultimately could be higher.
"We're in various stages of discussions with a handful of businesses that kind of add up to actually, if all were executed, would be more than the billion dollars," CEO Kevin Kwilinski said.
"We expect them to be deleveraging. And they, in general, would trade at a similar multiple, perform at a similar multiple to the overall average of the business. What they do have characteristics of is more industrial exposure and lower overall growth rates than the core business that we're focused on moving forward," he said.
The potential divestitures include segments from throughout the company's varied manufacturing operations.
"With respect to portfolio optimization, we continue to make progress. Not only will these divestitures accelerate deleveraging, they will push us toward our goal of increasing our consumer product focus from over 70 percent to over 80 percent of volume," Kwilinski said.
Essentially what the CEO is saying is that the company wants to see an even bigger portion of the company's sales come from manufacturing associated with consumer products. And the money gained from selling off portions of the business will help with Berry's continuing efforts to lower its level of debt.
Berry, along with reducing debt, is working to transform manufacturing operations to cut 2-3 percent in conversion costs annually. The company also sees the ability to grow by 2-3 percent a year without making acquisitions.
During the company's fiscal third quarter ended June 29, Berry had profit of $193 million, or $1.65 per diluted share, on sales of $3.16 billion. That compares with profit of $143 million, or $1.18 per diluted share, on sales of $3.23 billion for the previous year's fiscal third quarter.
Berry, meanwhile, continues to expect the spinoff and combination of the company's Health, Hygiene and Specialties nonwovens and films business with Glatfelter Corp. will be completed by the end of the year.
The combined company will be called Magnera, pronounced "mag-nair-uh," will have 46 manufacturing locations around the world once the transaction is complete.
Berry, which will have about 200 locations after the move, wants to concentrate on consumer packaging. Magnera's varied manufacturing portfolio also will include nonwoven products used for protective apparel, wipes, building and construction, and food and beverage applications.
Magnera will be a $3.6 billion company, with Berry shareholders owning 90 percent of the company and Glatfelter shareholders holding 10 percent. Berry will become a $10.2 billion company.