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Turning Over a New Leaf. Environmentally and Profitably

Dave Jackson Dave Jackson, Stockhouse
0 Comments| June 8, 2021

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(Click image to play video)

They’re the company that’s delivering “better everyday products from plants, not petroleum.”

And they’re good natured® Products Inc. (TSX-V: GDNP, OTC: SLGBF, Forum) – a plant-based products and packaging company producing and distributing assortments of environmentally-friendly products. The company’s wide variety of packaging products are made with the highest possible percentage of renewable, plant-based materials and no BPAs or other chemicals of concern that are potentially harmful to human health and the environment.

good natured® offers more than 400 products and services which include eco-friendly home and business products, food packaging, restaurant take-out containers, plus medical and industrial supplies.

In this exclusive video podcast, Stockhouse Media’s Dave Jackson was joined, once again, by Good Natured Products’ CEO Paul Antoniadis to get investors completely up-to-date on all things good natured®.

TRANSCRIPT BELOW:

SH: For our Stockhouse investors who may be new to the plant-based packaging and products sector, can you tell us a bit about yourself, the company, and your business model?

PA: I am originally from the States…I'm a dual citizen of Canada and the US and my background is from the retail industry. I pretty much grew up with Best Buy as they were emerging out of the Midwest, and I had a handful of different roles with them. One was Vice President of US Sales Development, and then I was appointed to the International Business Group as a senior executive, and I think it's important to have that context because our strategy at good natured® is framed around the retail consumer products industry. Just for your viewers and listeners, today we sell over 400 plant-based products across five business groups, which include packaging, industrial, consumer products, business, and commercial packing supplies and we have some services that underpin those businesses, and today we're serving 600 customers across the US and Canada. These are our B2B customers, and we also sell our consumer products directly online and in-store and I think we're well on pace to do over 22,000 transactions. So far things are going well, and I’m very excited to be sharing our good natured®story here with you today.

SH: You just announced the acquisition of Ex-Tech Plastics Inc. for US 14.1 million dollars. Can you walk us through this deal?

PA: Yeah, so our growth strategy at good natured® is centered on half of our growth coming from organic initiatives and half of our growth coming from acquisitions. Our latest acquisition, Ex-Tech Plastics, is a US-based company, they're about an hour outside of Chicago in a city called Richmond, Illinois, and they fall in our industrial business group. They extrude rigid plastic sheets that we sell to thermo-formers and then they stamp out packaging. We also use that industrial roll stock inside our packaging facilities to produce our packaging. This is a really strong complement to our IPF acquisition that was completed back in December. When you combine these two acquisitions, good natured®becomes one of North America's largest plant-based sheet extruders with a capacity of somewhere between 80 and 90 million pounds of capacity. This acquisition also adds about a hundred new customers, and collectively we'll be serving over 200 thermoform packaging companies across the US and in Canada. So, this acquisition is a pretty big deal for us.

SH: Can you speak to some of the financial and intangible synergies you hope to glean from the transaction?

PA: We’ve known Ex-Tech for quite a long time. They were our outsource partner and we've been working together for about six years, but really, we've known each other for well over 10 and so that's the very first synergy, we're very familiar with each other. The owners of Ex-Tech, who we are acquiring the company from, are also shareholders of good natured®, I think they own a little under 7 million shares. There's a lot of familiarity, so we've grown this business together and we've executed well together. So that alone is going to help us in the integration, but the hard synergies are approximately a million dollars because we're eliminating our outsource service agreement. So that's a real, tangible, hard number and that we come out and communicate to our owners and potential investors, but there are some soft synergies that we believe are going to contribute over time - there's very little customer overlap between our current industrial customers and Ex-Tech.

We've gained a significant share in the industrial business group with the acquisition of Ex-Tech and it's going to open up our ability to take some of our product offerings from what we're selling out of our IPF facility to the Ex-Tech facility to cross-sell to that customer group. So, we feel there's a lot of really solid cross-selling synergies with this, but again, those will take place over time, but the hard benefit is about a million dollars because the agreement is being eliminated.

SH: This is your third acquisition in just the past year. What can we expect on this front from good natured®for the remainder of 2021 and beyond?

PA: We're going to continue to march to our North Star, which is to become North America's leading earth-friendly product company, and as I've shared before, we're going to do that by creating the largest assortment of plant-based products so that business owners and consumers like yourself can use as an alternative to the petroleum products that you use every day in your home or your business. Now, we're going to stay true to that North Star and we're going to drive that through our growth strategy, which is, we've got a bunch of exciting organic growth initiatives around new products, and we've got a lot of net new customers and inbound customers. We feel really optimistic about our organic growth opportunity and we're going to execute on our acquisition strategy. We have a very active acquisition pipeline between 20 to 30 companies over the next 18 to 24 months that we're very active with. We’ve had a great year, we're off to a great start here in our first quarter, and we're just going to be heads down, executing the strategy that's working very well for us.”

SH: You also posted some very strong Q1 revenue growth – up 160-percent year-over-year – and positive EBITDA for the first time. Can you talk about what are the drivers behind such strong performance?

PA: We’ve positioned ourselves as a growth company within the plant-based sector. I think that quarter represents our leadership team's ability to execute the strategy. If you think about the drivers, first is our organic initiatives. We announced our to-go container, which is a compostable and fully microwaveable takeout container that is targeted to replace some of the takeout containers that are going to be abandoned by the end of the year here in Canada. That's a big component of our growth, but also the IPF and Shepherd acquisitions played a big role in contributing to that growth. It's the strategy, and the execution of the strategy that is really what underpins that growth, but we think the best is yet to come because if you look at the Ex-Tech acquisition, you're looking at about $33 million on a TTM basis from Ex-Tech. If you layer on that $33 million with a strong quarter we're going to start recognizing. I think this quarter sets the stage. What's driving it is our strategy and our execution of our strategy, both organically and through acquisition and now you layer on Ex-Tech on a TTM basis, we're looking at about $65 million on a TTM basis at good-natured®. We just reported our audited statements for last year. We did 16.7 in five months; we've grown the company just under 300%. It's on a TTM basis, and it is a significant increase in our company's revenue profile and that's our commitment to our owners or potential investors who are considering becoming owners. We've committed to growth and the team delivered it. We feel really good about what we've done so far, but I think the best is yet to come. I think the strategy is taking home really nicely in the market, and we're quite optimistic about the future.

SH: Beyond the numbers, what are some of the recent updates as it relates to new customers or products and corporate developments?

PA: The one that I'm excited about is Ex-Tech from a corporate development standpoint it is a big one because it brings in $33 million on an annual TTM basis but the to-go microwaveable container is another really big development. We're the only ones out there with a compostable fully microwaveable container here in Canada and it provides restauranteurs and supermarket owners and operators an alternative to these take-out containers that are going to be banned. So, I feel that innovation spend is a big deal for customers and good natured®. Our announcement of our plant-based PET is another really good item representing our innovation. We're the only ones out there offering it in food packaging containers, and in industrial roll stock.

That is an example of choice. If you're a thermo-former, or if you're a consumer food producer we can give you a choice of materials, whether it's biodegradable or whether it's bio-PET or fiber. I think one of the reasons why we're successful is because we provide that choice. We provide that one-stop-shop of options to meet your business needs. Those are some key developments that have taken place probably in the last 60, 90 days and help set the stage for some pretty strong growth in the back half of the year here.

SH: What do you think separates good natured®as an investment opportunity from other public companies in your space?

PA: That's a great question. First, we pride ourselves in our say/do ratio, we position to our owners that we're a growth company and whether you look at our year-end numbers or you look at our first-quarter numbers, or you add in Ex-Tech, we're very focused on leveraging our first to market position with our business model and the plant-based product space. I think if you look at our execution, that should illustrate our say/do ratio. It's a clear separation from other potential investments. Now also, I would say we're very unique in that we're the only ones out there with this range of products. I think our business model is very unique in that we service B2B customers, and we service consumers directly through our retail channels.

We have five business groups and we have over 400 products. This retail model, which centers on the more products we put into it and the more diverse customers we put into it, the more profitable we become as a competitor in the market and the more delightful we are to customers because they can get all their plant-based product needs with good natured®. If I'm a business owner, I can get packaging, I can get pallet stretch wrap. If I'm a retailer, I can get packaging, pallet stretch wrap, consumer products. So, we offer that range and it's growing, we're not stopping at 400 products. I think that's a big deal. We're not a one product/one customer business model. What that means for your listeners is that it minimizes the downside risk. For example, during COVID when hospitality and food services got completely decapitated, our other products took off. Our medical packaging took off, our food packaging took off, our e-commerce products took off. That protects the downside but sets the upside growth potential quite nicely. I think those are the reasons that sets us apart.

SH: In terms of the outlook for 2021, can you give us a sense at a high level of what you’re seeing and how the acquisition of Ex-Tech will impact your performance.

PA: I would say at a high level just to anchor back, it's adding $33 million of top-line TTM revenue, and it's going to increase our profitability profile by adding about $2.6 million in EBITDA. We feel it strengthens our growth, strengthens our profitability profile, but it also strategically positions us as one of the largest plant-based sheet extruders or general feed extruders in North America and there are strategic benefits to that, both in the supply chain and in how we service our customers and the difference in the range of products that we can offer our customers downstream. We're excited about the back half of the year and onwards, because I think for your listeners the best way to predict the future of good natured®is to look at our past: three acquisitions in less than one year, and 160% growth before adding the Ex-Tech acquisition. We're very committed to our strategy and being a leader in the plant-based sector as a growth company.

SH: And lastly, Paul, are there any final key messages you’d like to share with our investor audience to consider.

PA: I would want to wrap up by saying that the Ex-Tech acquisition is building off a fantastic first quarter. You can go to our website to listen to our recorded Q1 financial results, a recording that we had earlier this morning and Ex-Tech is going to build on that momentum. It was a tremendous performance on the top line, but also it was the first time we were EBITDA positive in the history of the company and our gross margins. We are committed to our owners to deliver high growth with stable gross margins, and we did that. I think the back half of the year is going to just continue to build off this first-quarter momentum. I just want to wrap up by saying, I appreciate you taking the time. I always enjoy my time with you and look forward to speaking with you again here in the near future.


For more information, visit goodnaturedproducts.ca.


FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.


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