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BERRY GLOBAL GROUP, INC. (BERY)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered organic volume growth of 2% and strong non-GAAP performance: Operating EBITDA $546M (+5% YoY) and adjusted EPS $2.18 (+16% YoY), while GAAP net sales were $3.161B (-2% YoY) and GAAP diluted EPS was $1.65 (+40% YoY) .
  • Operating EBITDA margins expanded by 110 bps YoY, driven by cost reduction initiatives and mix improvements; all four segments posted low single-digit volume growth .
  • FY2024 guidance updated: adjusted EPS targeted at $7.60, cash flow from operations $1.4–$1.5B, free cash flow $800–$900M, Q4 EBITDA of ~$560M with low single-digit volume growth; leverage targeted at ≤3.5x exiting FY2024 .
  • Portfolio optimization advancing: HHNF spin-merger with Glatfelter on track; management expects >$2B in divestiture proceeds over the next year and >$3B cash generation over the next four quarters, accelerating deleveraging and focusing BERY further on consumer products .

What Went Well and What Went Wrong

What Went Well

  • Broad-based operational execution: adjusted EPS +16% YoY to $2.18 and operating EBITDA +5% to $546M; “we achieved a 2% increase in overall organic volumes… operating EBITDA margins were 110 bps higher than the previous year” .
  • Cost actions and lean progress: management highlighted structural cost reductions, asset consolidation, and a first lean transformation site (Franklin, IN) with >20% throughput improvement and targeted 2%–3% annual conversion cost reduction capability .
  • Guidance confidence and cash generation: reiterated low single-digit volume growth in Q4 and targeted FY EPS $7.60; expecting $800–$900M FCF and exiting FY2024 at ≤3.5x leverage .

What Went Wrong

  • Resin lag headwinds: timing of polymer pass-through remains a headwind; Q4 embeds a modest resin cost headwind and interest expense step-up vs earlier quarters .
  • Macro softness in select end-markets: continued weaker demand in certain foodservice and industrial categories (Europe lagging U.S.); Flexibles mix benefits offset by unfavorable mix and higher D&A .
  • Free cash flow seasonality: YTD FCF negative (-$176M) given working capital seasonality and capex; management expects normal Q4 seasonality to deliver targeted FCF .

Financial Results

Consolidated P&L by Quarter (oldest → newest)

MetricQ1 2024Q2 2024Q3 2024
Net Sales ($USD Millions)$2,853 $3,076 $3,161
Operating Income ($USD Millions)$157 $208 $303
Operating EBITDA ($USD Millions)$431 $522 $546
GAAP Diluted EPS ($USD)$0.50 $0.98 $1.65
Adjusted Diluted EPS ($USD)$1.22 $1.95 $2.18

YoY Comparison by Quarter

MetricQ1 YoYQ2 YoYQ3 YoY
Net Sales YoY %-7% -6% -2%
Operating Income YoY %-25% (210→157) -31% (301→208) +13% (267→303)
Operating EBITDA YoY %-3% (443→431) -4% (541→522) +5% (522→546)
GAAP Diluted EPS YoY %-41% (0.85→0.50) -31% (1.42→0.98) +40% (1.18→1.65)
Adjusted Diluted EPS YoY %-6% (1.30→1.22) -1% (1.96→1.95) +16% (1.90→2.18)

Consensus vs Actuals

S&P Global Wall Street consensus estimates could not be retrieved for BERY; comparisons to estimates are unavailable. Values retrieved from S&P Global were unavailable due to mapping constraints.

Segment Breakdown – Net Sales, Operating Income, Operating EBITDA

SegmentQ1 2024 Net SalesQ2 2024 Net SalesQ3 2024 Net Sales
Consumer Packaging – International$917 $968 $959
Consumer Packaging – North America$699 $751 $831
Health, Hygiene & Specialties$603 $646 $647
Flexibles$634 $711 $724
Total$2,853 $3,076 $3,161
SegmentQ1 2024 Op IncQ2 2024 Op IncQ3 2024 Op Inc
CPI$31 $3 $79
CPNA$63 $77 $103
HHS-$3 $33 $34
Flexibles$66 $95 $87
Total$157 $208 $303
SegmentQ1 2024 Op EBITDAQ2 2024 Op EBITDAQ3 2024 Op EBITDA
CPI$123 $166 $171
CPNA$130 $144 $168
HHS$75 $85 $85
Flexibles$103 $127 $122
Total$431 $522 $546

KPIs – Volume Trends by Segment

KPIQ1 2024Q2 2024Q3 2024
Total Organic Volume Growth-3% (consolidated volume decline) -2% (consolidated) +2% (consolidated)
CPI Volume-3% ~-1% +1%
CPNA Volume-4% -3% +2%
Flexibles Volume-3% -4% +2%
HHS Volume-2% -2% +2%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2024$7.35–$7.85 $7.60 Narrowed to midpoint
Cash Flow from OperationsFY 2024$1.35–$1.45B $1.4–$1.5B Raised range midpoint
Free Cash FlowFY 2024$800–$900M $800–$900M Maintained
EBITDA (Q4)Q4 2024Not specified~$560M New specific Q4 target
VolumeQ4 2024Low single-digit (2H outlook) Low single-digit Maintained
LeverageFY 2024 Exit≤3.5x target ≤3.5x exit target; low 3s next 12–15 months Maintained near term; path lower
DividendNext payout$0.275/sh declared (Sep. 17, 2024) $0.275/sh No change
Share RepurchasesFY 2024Authorization remaining $354M at Q2 Authorization remaining $324M at Q3; 2.0M shares repurchased YTD for $117M Continued buybacks

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Lean transformationHired lean leader; building daily management, maintenance, OEE and FPY pipeline Franklin site >20% throughput improvement; target 2–3% annual conversion cost reduction Accelerating execution
Portfolio optimization/divestituresTwo divestitures closed; >$2B proceeds expected over next year HHNF/Glatfelter spin-merger on track; Magnera brand formed; >$2B proceeds expected (incl. ~$1B spin cash) Advancing toward close
Polymer pass-through & price-costResin lag headwind in 1H; expected inversion in 2H Q4 embeds modest resin headwind; timing lag managed; cost reductions offset Residual headwinds; offset by cost actions
Volume & promotionsExpect low single-digit 2H volume growth; April strong Low single-digit Q4 growth; promotions driving near-term volume uptick Improving sequentially
Europe/regulatoryEuropean volumes stabilizing; CPI mix upgrade Tethered caps and reusable cups driving growth; Europe showing first positive growth Regulatory tailwinds
FoodservicePrior decline vs strong comps; clear PP cup share gains Competitive but maintaining margins; share gains continue Positive share momentum
Capital allocation/leverageReduce net debt; within 2.5–3.5x range by FY-end Exit ≤3.5x; potential low 3s in FY2025; buybacks continue Deleveraging path intact

Management Commentary

  • “We achieved a 2% increase in overall organic volumes… operating EBITDA margins were 110 basis points higher than the previous year.” — CEO Kevin Kwilinski .
  • “We are now targeting $7.60 earnings per share for fiscal 2024… fiscal Q4 assumes EBITDA of $560 million and low single-digit volume growth.” — CEO Kevin Kwilinski .
  • “Our first lean transformation site… we have seen north of 20% improvement in throughput… targeting this 2% to 3% continual conversion cost improvement.” — CEO Kevin Kwilinski .
  • “We expect to deliver over $3 billion of cash over the next 4 quarters… proceeds could exceed $2 billion from strategic divestitures alone within the next year.” — CEO Kevin Kwilinski .
  • “Adjusted EPS increased 16% to $2.18… Operating EBITDA increased 6% versus prior year; all 4 segments delivered organic volume growth.” — CFO Mark Miles .

Q&A Highlights

  • Interest expense: Q4 interest expense guided higher vs average of first three quarters due to non-cash interest income falling off; embedded in FY outlook .
  • Promotions and volumes: Management seeing “notable improvement” in recent weeks; Q4 volume growth assumption not dependent on macro improvement (upsides if demand strengthens) .
  • Leverage and capital deployment: Exit FY2024 ≤3.5x; potential “very low 3s” in FY2025; continued share buybacks with opportunistic bolt-ons .
  • Resin dynamics: Modest July resin headwind embedded; cost reductions expected to more than offset lag .
  • Divestitures: In discussions across multiple businesses totaling >$1B proceeds; targets more industrial, lower growth vs core; spread across segments .
  • Facility rationalization: Additional consolidations anticipated as part of cost program and lean footprint optimization .

Estimates Context

  • S&P Global consensus for revenue/EPS/EBITDA was unavailable due to mapping constraints; as a result, formal beat/miss versus Wall Street is not provided. Management’s performance commentary and FY guidance underpin near-term estimate fine-tuning: resin lag headwinds and interest expense step-up in Q4, offset by cost reductions and promotional-driven volume improvements . Values retrieved from S&P Global were unavailable.

Key Takeaways for Investors

  • Margin and EPS momentum: Q3 delivered broad-based volume and margin expansion, with adjusted EPS +16% YoY and EBITDA +5% YoY; cost programs and lean execution are visible in results .
  • Q4 setup: Modest resin lag headwind and higher interest expense are embedded, but cost reductions and promotional activity support low single-digit volume growth and ~$560M EBITDA in Q4 .
  • Deleveraging catalysts: HHNF spin-merger cash (~$1B) plus other divestitures (> $1B) position leverage for low-3s in FY2025, supporting valuation multiple re-rating and capital returns .
  • Portfolio focus: Shift toward consumer-facing products (target >80% of volumes) and substrate conversions to plastics in foodservice (clear PP cup) sustain share gains at attractive margins .
  • Europe tailwinds: Regulatory changes (tethered caps, reusable cups) and differentiated mono-material/lightweight dispensing solutions support momentum .
  • Execution edge: Lean transformation (throughput, OEE, predictive maintenance) and commercial excellence pipeline are likely to drive 2%–3% annual conversion cost reductions and organic growth acceleration .
  • Risk watch: Polymer volatility and competitive intensity in select categories remain; estimate models should reflect resin timing lags and Q4 interest expense dynamics .