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BERRY GLOBAL

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 BERRY GLOBAL
INDEX
1. COMPANY DESCRIPTION
2. MAIN ECONOMIC MAGNITUDES
3. HISTORY
4. PRODUCT / SERVICE
5. BUSINESS MODEL
6. ECONOMIC MOAT
7. BUSINESS DRIVERS
8. PROPERTY AND MANAGEMENT
9. SECTOR
10. RISKS
11. FINANCIAL STATEMENTS
12. VALUATION
13. CONTRIBUTION
14. INVESTMENT THESIS

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 BERRY GLOBAL
1. COMPANY DESCRIPTION
Berry Global is a leading manufacturer of plastic packaging materials (polyethylene and polypropylene based),
Founded in 1967 and headquartered in Evansville, Indiana. IPO in 2012
• SIZE: $12.6B annual revenues, 293 facilities, 49k employees, 39 countries, 100k+ items manufactured
• PRODUCTS: Manufacturer and supplier of non-woven, flexible and rigid products
• SEGMENTS: Engineered Materials, Health and Consumer Packaging
• INDUSTRIES: Households , healthcare, personal care, food and beverage and industrial
• DEFENSIVE: ~70% of sales are in stable, consumer-oriented end markets
• STRENGHT: Focused on low cost producer in the market across industries
• ACQUISITION CULTURE: 45 acquisrtions in past 30 years
• CUSTOMERS:
• BLUE CHIPS: Top 10% of customers contribute to 20% of net income
• BLUE CHIPS CUSTOMERS: Customers include: P&G, Starbucks, McDonalds, Unilever and Walmart
• BRAND DIVERSIFICATION: Large portfolio of brands diversified across business units

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 BERRY GLOBAL
2. MAIN ECONOMIC MAGNITUDES
Key ratios:
From Morningstar, Key Ratios, Full Key Ratios

Growing revenue. The last purchase of the

RCPcompany is not included, the estimate
for this year the company estimates to be
12.6B

Growing margins

Increase in the number of shares to make

the continuous acquisitions it makes. This
is not bad if they generate shareholder
value, as seen in earnings per share.

Most importantly, the cash. Robust and

growing Operating and Free Cash Flow.

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 BERRY GLOBAL
2. MAIN ECONOMIC MAGNITUDES
Profitability

Margins increase. Which means that the

company is becoming more efficient, due to the
economies of scale that being bigger in this
business means, as they indicate they have a
competitive cost advantage.

The company is capital intensive, as shown by

the low Return on Assets (ROA) and Return on
Investment (ROI), but it is very profitable, as
shown by the Return on Equity (ROE) due in part
to the fact that they use debt to leverage.

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 BERRY GLOBAL
2. MAIN ECONOMIC MAGNITUDES
Growth

The growth of the company is remarkable.

The important thing here is to compare the
growths of the different items:
Net income has grown more than revenue,
which means that the company is increasingly
efficient.

In companies that increase the number of

shares, as in this case, it is key to see the value
per share. To see if shareholder value is being
created or destroyed.
In this case, value is being created as earnings
per share grows, and more than revenue.
-46% in the last year is due to the fact that the
income of the company that has purchased RCP
has not been counted yet.

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 BERRY GLOBAL
2. MAIN ECONOMIC MAGNITUDES
Growth

The company has grown well above the industry average.

The value of the company will come given by the FCF, with what it is
necessary to emphasize that they facilitate us and focus on this
item.

Most of these revenues are defensive (70%), so the cycles will not
affect you as much as other industries.

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 BERRY GLOBAL
2. MAIN ECONOMIC MAGNITUDES
At this point we can answer any questions:

• How do sales evolve? Sales have grown at an average of 18% annually over the past 20 years.
• Are they cyclical, have they fallen into the past or are they now? Because it did not go public in 2012, we do not have data from the 2009 crisis, but looking at
the sectors in which it operates, 70% of its income is defensive.
• Do the margins remain, do they grow decrease? Does net income evolve according to sales? Margins are increasing and are becoming more efficient. Net
income increases more than sales.
• Does the company pay dividends? It does not pay dividends, since it is focused on consolidating the market by acquiring companies.
• How have they evolved? Has the number of shares increased, maintained or decreased? The number of shares has increased, to acquire new companies, but
they have created shareholder value, as earnings per share have increased.
• What happened to the cash flows? The company is focused on cash flows and they have increased in a greater proportion than revenue.
• Does the operating cash flow change according to the free cash flow? They increase to the same extent, although there are years when the Capex increases to
make acquisitions and the FCF is temporarily affected.
• How does Capital Expending (CAPEX) evolve? The company has fully controlled the maintenance capex and the investment capex increases when they make
an acquisition.

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 BERRY GLOBAL
3. HISTORY
Prior to its IPO in October 2012, Berry Global was majority-owned by Private ACQUISITION HISTORY
Equity firms Apollo Capital Management and Graham Partners, who had bought
the business in 2006 (valued $2.25 billion at the time).

New York (June 28, 2006) - BPC Holding Corporation (parent of Berry Plastics Corporation)
and the private equity firms Apollo Management, L.P and announced today that they have
signed a definitive agreement to acquire BPC Holding Corporation from Goldman Sachs
Capital Parlners and JPMorgan Partners for an enterprise value of $2.25 billion in
aggregate consideration.

As a manufacturer of resin-based packaging solutions, organic growth is

typically moderate at “GDP+”, i.e. generally in line with GDP growth in the
respective region (so in developed economies, 2-4% per annum), but may be
slightly higher in case of new product introductions (such as stand-up pouches
a few years ago).
Accordingly, Berry Global’s growth strategy was heavily focused on
acquisitions. In fact, Berry Global has successfully executed 44 acquisitions
over the last 30 years, which allowed the company to materially grow in size,
geographic reach, and capabilities, ultimately to become the largest plastic
packaging manufacturer in the world.
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 BERRY GLOBAL
3. HISTORY
The growth of the company has been realized through acquisitions. Getting into debt to get back into debt quickly due to the large amount of cash they generate.

What can be seen in the results for 20 years:

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 BERRY GLOBAL
4. PRODUCT / SERVICE
Berry products are:
• Commodity
• Defensive and stable
• Diversified
• Substitutes are glass or metal base plates, but due to sustainability, it represents a market opportunity for Berry.
• The company is focused on innovation.
• Low risk of disruption
• The most important drivers:
• Cost: Berry has a cost advantage due to its scale.
• Price of raw material, which is 70% pass trough

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 BERRY GLOBAL
5. BUSINESS MODEL
CANVAS MODEL
HOW:
- Key partners: Resin suppliers and blue chip customers
- Key activities: Manufacturer and supplier of plastic packaging materials
- Key resources: Resin (55% polyethylene and 40% polypropylene), plants

WHAT:
- Value propositions: Leading innovator flexible one-stop shop with the lowest price - Partner with customers to provide value-added, customized protection solutions

WHO:
- Customers relationship: Longstanding relationships with diverse mix of leading multi-national, regional & local customers, to be able to offer customized products
- Channels: Custom, value added partners
- Customer segments: Households , healthcare, personal care, food and beverage and industrial

HOW MUCH:
- Cost structure: Scale economics - resin comprises approximately 50% of COGS, ~70% of resin pounds sold are on contractual pass through
- Revenue streams: Sale of products ~70% of theportfolio is consumer non-discretionary
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 BERRY GLOBAL
5. BUSINESS MODEL
The Business Model will allow us to answer:

1. What is the purpose of the business? Manufacturer and supplier of plastic packaging materials adapted to the needs of each customer.
2. How does the business make money? Selling products for a higher price than manufacturing. Seeking to reduce costs with economies of scale.
3. How well is the business really doing? The company is doing really well as it grows substantially more than the market and margins increase.
4. How well is the business positioned in relation to its competitors? Berry has a very strong position, because it is a very divided market.

The object will be:

• Understand the value creation of the company: The company seeks to generate value by adapting to customer needs.
• Identify the strategy: Seeking the lowest prices, which it tries to achieve by increasing its size, with M&A.
• Identify possible competitive advantages: Increase its size with M&A, seeking economies of scale and customer proximity.

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 BERRY GLOBAL
6. ECONOMIC MOAT
LOW COST PRODUCER

Berry has a strong competitive cost advantage.

This is achieved by its size, which allows it to have economies of scale in a very divided sector.
With the acquisition of RPC they have a global presence, to better serve the growing customer needs.

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 BERRY GLOBAL
7. BUSINESS DRIVERS
COST

Due to the type of commodity of the product, the main driver of this business is the price. Therefore the cost is decisive.

Also close to the customer will be to be able to offer the products that best fit their needs.

All this improves with the size of the company, since it presents clear economies of scale.

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 BERRY GLOBAL
8. PROPERTY AND MANAGEMENT
OWNERSHIP
From money.cnn

Berry's first shareholder is EdgePoint Investment Group and Eminence Capital, long
term value investors with an excellent track record.

This does not ensure that it is a good investment, but it is good that other large long-
term investors are in the company.

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 BERRY GLOBAL
8. PROPERTY AND MANAGEMENT
MANAGEMENT

Berry Global Management

Thomas Salmon was named Chief Executive Officer of Berry Global Group, Inc. and appointed to the Company’s Board of Directors in February 2017. Mr. Salmon
most recently served as the Company’s President and Chief Operating Officer.

Mark W. Miles has been Chief Financial Officer since January 2014. Mr. Miles previously served as Berry’s Executive Vice President, Controller and Treasurer
from August 2005 to January 2014. Mr. Miles started with the Company as Corporate Controller in 1997.

Management is aligned with the interests of investors:

Management detail

- Most of the salary is dependent on the future of the company in the form of bonuses and options.
- They have a significant amount of shares in their possession.

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 BERRY GLOBAL
9. SECTOR
CHARACTERISTICS

Influx of private capital into the packaging industry has resulted in fewer publicly traded companies and intense competition for platform assets.

• $514 billion industry globally; next five years at 2.5% growth

• Large demand coming from Asian markets
• Environmental concerns has increased market worries
• Stable economic outlooks in emerging markets are beneficial
• Recycled product markets are increasingly accessible and valuable
• Mature stage industry; M&A consolidation occurring
• Stable revenues from blue chip customers
• Consolidation

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 BERRY GLOBAL
9. SECTOR
BERRY POSITIONING

Revenues:

• Largest resin buyer with ~7 billion lbs procured annually

• Leadership position across the majority of our product portfolio
• The most expansive product offering and global footprint

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 BERRY GLOBAL
10. RISKS
DEBT
• Berry is in high debt due to the acquisition of RCP

• Mitigation:
• They had $906 million of cash at the end of last qtr, $850 of AB revolver credit line. No near term maturities and no maintenance covenants on the debt.
• The company has maintained the FCF guidance of $800 for 2020
• De-leveraging history

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 BERRY GLOBAL
11. FINANCIAL STATEMENTS
BALANCE
• The balance shows what the company has, the asset, and what it owes, the
liability.
• It can be seen that the company has been growing strongly and the balance has
more than doubled in the last 4 years.
• The increase in the debt of the last year is as previously mentioned, cash has
also increased.

From Yahoo Finance

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 BERRY GLOBAL
11. FINANCIAL STATEMENTS
NET INCOME
• Net income represents the company's income and its
costs.
• Very strong growth is shown.

From Yahoo Finance

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 BERRY GLOBAL
11. FINANCIAL STATEMENTS
CASH FLOW
• Cash flow represents cash inflows and outflows.
• Unlike Net Income, which are accounting notes, here are the cash movements. In other
words, if the company sells a product in 2020 but charges it in 2021, net income will
account for it in 2020 while cash flow will do so in 2021.
• Here are several interesting things: A controlled capex, a robust and growing free cash
flow.

From Yahoo Finance

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 BERRY GLOBAL
11. FINANCIAL STATEMENTS
RATIOS

We remember the ratios seen at the beginning.

• Increasing margins.
• Stable ROA
• Robust ROE

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 BERRY GLOBAL
12. VALUATION
The model shows that Berry Global is worth more than
double the price at which it is listed.

Its current price is 52.59 USD per share

Its value is 111 USD per share.

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 BERRY GLOBAL
13. CONTRIBUTION
Berry Global is cheap because of the debt it has.

The market punishes companies that take on debt.

But the company, coming from privet equity, has a proven experience in getting out of debt, it has been doing so since it was
founded since it is their culture to acquire companies.

Our vision is that Berry will again be able to get out of debt due to the huge amount of cash it generates.

Furthermore, this cash flow is diversified in clients and stable and defensive in industries.

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 BERRY GLOBAL
14. INVESTMENT THESIS
Berry Global is a stable, growing and predictable company, with management that has proven to generate shareholder value.
Proof of this is the growth of the FCF over 15% over the years.

Figures well above the industry average.

The market has punished her for debt, but management has proven to overcome similar situations in the past, relying on the
enormous amount of cash the company generates.

A sign of the strength of its cash flows is that during the last virus crisis, Berry has maintained his guidance of FCF because his
products are mostly essential.

The margin of safety is very wide, showing an intrinsic value of more than 100 USD per share.

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