Berry Global Group, Inc. (NYSE:BERY) Q1 2023 Earnings Call Transcript

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Tom Salmon: No doubt, George, we’re maturing as a company. We’ve doubled in size in a relatively short amount of time. As Mark mentioned, the robustness of our cash flow gives us an amazing amount of flexibility. And we’re fortunate that the company has grown to the point that scale is not the predominant focus for us. What is the prominent focus on is our €“ how we ultimately can add pieces to the portfolio that accentuate our global growth and then allow us to scale those given our global market presence. That’s the real driver relative to the larger target or the lower leverage range. And again, it also is consistent with some shareholder feedback that we’ve received as well in terms of the driver.

Mark Miles: On the return of capital, George, I mean we’ve €“ our return of capital over the last several years has been around 14% as a company. That’s pretax. As we look for incremental investments, we tend to target something north of that. So, we’re looking to obviously, to grow that number, but I don’t think 14% plus is a bad way to think about it because obviously, that number includes a lot of different things, including acquisitions that were larger in size, and therefore, it just naturally had a little bit lower return on capital on them. So, I think 14% is a good spot overall for the company, but on incremental investments, I think we can drive to 20%.

George Staphos: Thanks to that Mark. And then the other question, kind of near term or more micro, so your other segments, other than HH&S did a real good job on price cost. Again, congratulations to you on that in the quarter. You mentioned HH&S was a lag. But was there anything else going on that made it a more difficult price cost period? And when do you expect HH&S to be positive on price/cost over the course of this year? Thank you and good luck in the quarter.

Mark Miles: Yes. I think on your first part of your question, relative to what impacted the quarter, mix certainly was a factor, as we mentioned, some of our more specialty product categories that carry a little higher margin negatively impacting the results. So, as those markets improve over the course of the year, I would expect that component of the relationship to get better. We’ve also got, as mentioned in the prepared comments, incremental price impacting that business ongoing over the course of the next several quarters. So, I think we’re going to continue to make progress. I think as to when we go to positive outside of something changing relative to inflation, we would expect the back half of 2023 to inflect a positive.

Tom Salmon: And George, the hygiene piece of that business continues to be very stable. Some of those niche spaces that ultimately, there were some discretion areas like dryer sheet, filtration, house wrap. These are all really very solid franchises and any improvement in terms of customer outlook or demand or customer confidence is only going to benefit those businesses. So, as Mark said, we’ll see sequential improvements as contracts are renewed and implanted.

George Staphos: Thank you very much.

Operator: Thank you. One moment for our next question. Will come from the line of Phil Ng with Jefferies. Your line is open.

Phil Ng: Hi Tom, thanks for all the help over the years, and you’ll certainly be missed. So, we really appreciate. I guess, first off, how do you guys see volumes tracking this year by segment? Is flat volume still a realistic goal at this point? And do you kind of see the declines in volumes in 2Q being less bad and potentially inflecting in the back half? Like how should we think about the progression this year?

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