Berry Global expects supply chain improvement, inflation moderation: CFO

Plastics packaging manufacturer Berry Global expects supply chain problems to improve and inflation to moderate through 2022 as the company raises prices to cover higher input costs, CFO Mark Miles said Feb. 3.

"As we have demonstrated historically, and will again throughout fiscal '22, we remain committed to passing through cost inflation," he said during the company's fiscal Q1 2022 earnings call.

Inflation and supply chain challenges worldwide, along with the impact of the omicron COVID-19 variant, had a negative impact on the company's fiscal Q1 earnings, CEO Thomas Salmon said during the earnings call.

The strongest effects were felt in December, he added.

Berry Global reported a net income of $121 million, down 7.4% from the year ago quarter. However, the company's ability to pass through inflation was demonstration by selling prices increasing more than $700 million year over year, with a pass-through percentage of approximately 95%, Miles said.

Berry Global is a major buyer of polyethylene and polypropylene resins, which the company converts into food packaging, trash bags, non-woven fabrics for medical and other uses, tapes and adhesives, among other products.

Since 2020, the company has faced significant resin cost increases in addition to other more costly raw materials, higher freight and labor costs and ongoing supply chain challenges, Miles said.

Those supply chain issues include a lack of enough truck drivers and trucks to move enough products to keep up with demand that has surged since coronavirus-related shutdowns ended by mid-2020.

Salmon said Feb. 3 that overall demand finished the quarter in line with company expectations, "but could have been stronger had we seen improvements in supply chains."

Looking ahead, Salmon said Berry Global will keep investing in manufacturing targeted to growth-oriented end markets, such as e-commerce and health care pharmaceuticals.

Demand for the company's recyclable polypropylene drink cup, as well as other beverage and spirits products, also was strong and expected to keep growing, Salmon said, having prompted a $110 million an expansion of its clear sustainable food service packaging business.

The company also spent $70 million to add a manufacturing line for hard-surface disinfectant wipes in early 2021. While pandemic-related demand for these wipes may change, Salmon said the company is still confident in their future growth potential.

"The penetration since the pandemic, when you contrast the demand levels versus the pre-pandemic period, have grown exponentially," Salmon said regarding disinfectant wipes.