Berry Global is Team Player in Bio-plastics Game

This series on investment opportunities in the development of bio-polymers has ping ponged from a large petroleum-based polymer producer to a small-fry in the container and packaging industry.  This fourth and final addition to the series considers a company that is using partnerships to gain a foothold in the nascent bio-polymers market.

Berry Global Group (BERY:  NYSE) offers a diverse portfolio of rigid and flexible packaging.  The company earned $642 million in net income on $12.1 billion in total revenue for a twelve-month period ending January 2021.  The company converted 13.6% of each sales dollar to operating cash flow in the time period.  The cash stream paid for investments in maintenance capital as well as repayment of debt.  At the end of January 2021, the company had $11.4 billion in debt on its balance sheet, while cash resources were $847 million. 

The plump bank balance gives Berry investment capital for new products.  In September 2020, Berry announced a new partnership with Bhoomi to launch a sugar cane-based bottle to carry Bhoomi’s cold-pressed cane water elixir.  The 12-ounce bio-HDPE container replaces the conventional petroleum-based polyethylene bottle that Bhoomi had been using.  Berry is sourcing raw material for the bottle from Braskem, which produces a bio-HDPE from sugar cane feedstock.  Bhoomi is selling its cane water elixir through Whole Foods.   

Berry seems serious about sustainable production and the circular supply chain.  The company is a founding member of the global Alliance to End Plastic Waste (AEPW) in the environment.  In three years, Berry and its allies have won over eighty new members, all of which have pledged to invest in sustainable supply chains and environmentally friendly production.  Exemplary of the nature of AEPW’s efforts is a recent request for proposals related to chemical recycling technology to convert used plastic products to new plastic or liquid fuels.

Action is worth a thousand words and that is especially important when it comes to the environment.  Besides improving its own product line by sourcing renewable raw materials, Berry has also taken action to capture its own wastes in a circular supply chain.  In September 2020, Berry Global announced is working relationship with AZEK Company (AZEK:  NYSE), a producer of materials for residential and commercial buildings.  AZEK specializes in substitutes for wood materials.  Berry has agreed to supply waste plastics for AZEK to recycle and reuse as building materials.

Investors must pay 11.7 times expected earnings in 2021 to buy BERY.  This is a bit dearer than its critical supplier bio-polymers, Braskem, which is priced at 10.0 times forward earnings.  Berry’s most recent Impact Report published in 2020, could help investors figure out if BERY provides a more a friend to the environment.

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.