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Feb. 6, 2020, 7:24 a.m. EST

These companies have the most at stake when the world clamps down on plastic pollution

Investment bank Jefferies highlights potential winners and losers as governments and companies work to clean up the mess

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By Philip van Doorn, MarketWatch


Bloomberg
Pollution dots the shores of Bang Saen Beach in eastern Thailand.

Pollution is a tremendous and complicated problem around the world, requiring a variety of actions by governments, companies and people to clean up waste and reduce harm to the environment.

Analysts at New York-based investment bank Jefferies Group have published a detailed research report describing many approaches to mitigating the plastic-pollution disaster. They highlighted companies that might suffer from narrower profit margins under overlapping pollution-reduction scenarios, as well as those that may benefit from new rules and cleanup programs.

The growth of the plastics industry that led to the disaster illustrated above was summed up in one word a long time ago:

Plastic has been a boon to all of us, making so many things lighter, less expensive and more durable. But the problems of single-use plastics and the incredible amount of plastic waste in the world’s oceans are familiar to most people. It’s only a matter of time before world governments take strong action to reduce pollution and begin the plastic cleanup in earnest. Scores of companies have already signed pledges to reduce their own plastic pollution.

One example is Coca-Cola /zigman2/quotes/209159848/lastsale KO -3.34% , which has pledged to have bottles through which their beverages are distributed be made of at least 50% recycled plastic by 2030, and to recycle at least one bottle for every one the company sells. Another is Kraft Heinz /zigman2/quotes/203625533/lastsale KHC -2.14% , which has pledged to have its ketchup bottles made of 100% recycled plastic by 2022.

Just as innovation has solved other dire threats to humanity, it seems likely that new processes will enable people to clean up the oceans, once the political will is summoned.

Cleanup scenarios

In the research report published Feb. 3, Jefferies analyst Simon Powell wrote: “Recycling rates in many places are low, and in some markets actually falling, while demand for plastic packaging is rising.”

That’s a recipe for even more pollution, but the widespread knowledge of the growing problem is likely to lead to actions that will affect many companies and their shareholders.

“Across the whole plastics value chain, packaging represents the largest and fastest-growing segment,” according to Powell. “Asia-Pacific is the largest market for plastics, accounting for nearly half the volume, and will continue to grow quickly as consumer spending keeps pace with rising income and wealth.”

China stopped importing other countries’ plastic waste in 2017, which means the world’s plastic recycling has actually declined, while incineration and landfill use has increased.

“[A]n integrated approach consisting of better global waste collection, increased recycling, lower reliance on single-use plastics and packaging, energy recovery through incineration, and new technologies will be required,” Powell wrote.

Powell and a team of Jefferies analysts dug deeply into the advantages and disadvantages of approaches to limiting the production of single-use plastics, and disposal and recycling techniques. They also listed companies that would be affected under four scenarios through which the plastic-pollution problem can be mitigated:

Scenario 1 — bans and taxes

This scenario includes proposed or enacted legislation in many countries. An important example is China’s ban on plastic bags in major cities by the end of this year and all cities by the end of 2022. “Plastic resin used in packaging and, specifically, single-use packaging, is most at risk in terms of future demand,” according to Powell.

The companies with high revenue exposure to affected plastics under Scenario 1, relative to peers, according to the Jefferies analysts, include:

Company Ticker Country
Amcor PLC  /zigman2/quotes/212673157/lastsale AMCR United Kingdom
Aptargroup Inc. /zigman2/quotes/201205197/lastsale ATR United States
Berry Global Group Inc. /zigman2/quotes/209214500/lastsale BERY United States
Sealed Air Corp. /zigman2/quotes/208564360/lastsale SEE United States
Sonoco Products Co. /zigman2/quotes/201691559/lastsale SON United States
FP Corporation JP:7947 Japan
Winpak Ltd. /zigman2/quotes/203957147/delayed CA:WPK Canada
Gerresheimer AG /zigman2/quotes/206611352/delayed DE:GXI Germany
Greif Class A /zigman2/quotes/203386038/lastsale GEF United States
Source: Jefferies

You can click on the tickers for more about each company.

/zigman2/quotes/209159848/lastsale
US : U.S.: NYSE
$ 42.81
-1.48 -3.34%
Volume: 23.30M
March 27, 2020 6:30p
P/E Ratio
20.70
Dividend Yield
3.83%
Market Cap
$183.80 billion
Rev. per Employee
$506,342
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/zigman2/quotes/203625533/lastsale
US : U.S.: Nasdaq
$ 24.24
-0.53 -2.14%
Volume: 8.53M
March 27, 2020 4:00p
P/E Ratio
15.33
Dividend Yield
6.60%
Market Cap
$29.61 billion
Rev. per Employee
$673,308
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/zigman2/quotes/212673157/lastsale
US : U.S.: NYSE
$ 7.80
-0.33 -4.06%
Volume: 13.33M
March 27, 2020 6:30p
P/E Ratio
24.86
Dividend Yield
5.98%
Market Cap
$12.51 billion
Rev. per Employee
N/A
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/zigman2/quotes/201205197/lastsale
US : U.S.: NYSE
$ 94.00
-2.20 -2.29%
Volume: 482,017
March 27, 2020 6:30p
P/E Ratio
25.65
Dividend Yield
1.53%
Market Cap
$6.02 billion
Rev. per Employee
$196,082
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/zigman2/quotes/209214500/lastsale
US : U.S.: NYSE
$ 34.35
-1.43 -4.00%
Volume: 3.66M
March 27, 2020 6:30p
P/E Ratio
12.70
Dividend Yield
N/A
Market Cap
$4.55 billion
Rev. per Employee
$336,042
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/zigman2/quotes/208564360/lastsale
US : U.S.: NYSE
$ 24.72
-1.38 -5.29%
Volume: 1.71M
March 27, 2020 6:30p
P/E Ratio
13.07
Dividend Yield
2.59%
Market Cap
$3.82 billion
Rev. per Employee
$305,335
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/zigman2/quotes/201691559/lastsale
US : U.S.: NYSE
$ 42.42
-1.57 -3.57%
Volume: 532,453
March 27, 2020 6:30p
P/E Ratio
14.71
Dividend Yield
4.05%
Market Cap
$4.25 billion
Rev. per Employee
$234,397
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/zigman2/quotes/203957147/delayed
CA : Canada: Toronto
$ 39.45
+0.25 +0.64%
Volume: 62,645
March 27, 2020 4:00p
P/E Ratio
16.83
Dividend Yield
0.30%
Market Cap
$2.56 billion
Rev. per Employee
$480,461
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/zigman2/quotes/206611352/delayed
DE : Germany: Frankfurt
55.30
-0.25 -0.45%
Volume: 154.00
March 27, 2020 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€138,294
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/zigman2/quotes/203386038/lastsale
US : U.S.: NYSE
$ 30.10
-1.31 -4.17%
Volume: 227,736
March 27, 2020 6:30p
P/E Ratio
10.28
Dividend Yield
5.85%
Market Cap
$1.78 billion
Rev. per Employee
$297,315
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