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Avery Dennison Announces First Quarter 2021 Results

Press release from the issuing company

Highlights:

  • 1Q21 Reported EPS of $2.50, up 56%Adjusted EPS (non-GAAP) of $2.40, up 45%
  • 1Q21 Net sales increased 19.1% to $2.05 billion
  • Sales growth ex. currency (non-GAAP) of 10.9%
  • Organic sales growth (non-GAAP) of 8.8%
  • Raised FY 2021 EPS guidance ranges
  • Reported EPS range of $8.25 to $8.65 (previously $7.50 to $7.90)
  • Adjusted EPS range of $8.40 to $8.80 (previously $7.65 to $8.05)

Glendale, Calif. – Avery Dennison Corporation today announced preliminary, unaudited results for its first quarter ended April 3, 2021 and provided an update related to the impact of the COVID-19 pandemic on the company. Non-GAAP financial measures referenced in this document are reconciled to GAAP in the attached tables. Unless otherwise indicated, comparisons are to the same period in the prior year.

“We are off to a strong start to the year, with earnings growth well above expectations, driven by higher volume and productivity gains across the portfolio,” said Mitch Butier, Avery Dennison president and CEO.

“All three of our operating segments delivered strong sales growth and significant margin expansion. Our strong performance comes at a time when the global health crisis is resurging in many parts of the world and supply chains are tightening. The current environment further reinforces our determination to remain vigilant in ensuring the health and well-being of our employees, delivering for our customers, supporting our communities, and creating value for our shareholders.

“We have raised our full-year outlook for adjusted earnings per share, reflecting the strong performance in the first quarter, and a higher organic growth assumption for the balance of the year,” said Butier. “We continue to remain confident that the consistent execution of our strategies will enable us to meet our long-term goals for superior value creation for all our stakeholders."

“Once again, I want to thank our entire team for their tireless efforts to keep one another safe while delivering for our customers during this challenging period, bringing a whole new level of agility and dedication to address the unique challenges at hand.”

COVID-19/Operational Update
Uncertainty surrounding the global health crisis remains elevated as many parts of the world are experiencing a resurgence in COVID-19 cases. The safety and well-being of employees has been and will continue to be the company’s top priority. The company has taken steps to ensure employee safety, quickly implementing world-class safety protocols and continuing to adapt guidelines as the pandemic evolves.

As supply chains remain tight, the company continues to actively manage through a dynamic supply and demand environment. The company is leveraging its global scale and working closely with customers and suppliers to deliver industry-leading products and services. The company continues to mitigate risk to keep supply chain disruptions negligible and the team continues to demonstrate agility and preparedness through robust scenario planning.

First Quarter 2021 Results by Segment

Label and Graphic Materials
Reported sales increased 17.3% to $1.38 billion. Sales were up 8.4% ex. currency and 7.6% on an organic basis.
Label and Packaging Materials sales were up approximately 7% from prior year on an organic basis, with strong growth in both the high value product categories and the base business.

Sales increased by approximately 9% organically in the combined Graphics and Reflective Solutions businesses.

On an organic basis, sales were up low-single digits in North America and Western Europe, and up mid-teens in emerging markets.

Reported operating margin increased 170 basis points to 16.4%. Adjusted operating margin increased 150 basis points to 16.3%, as the benefits from higher volume/mix, lower receivables reserves and productivity more than offset higher employee-related costs and the net impact of pricing and raw material costs.

Retail Branding and Information Solutions
Reported sales increased 20.1% to $483 million. Sales were up 15.0% ex. currency and 9.3% on an organic basis, reflecting strong growth in both the high value categories and the base business.

Intelligent Labels were up approximately 40% ex. currency with the benefit of the Smartrac acquisition, and up approximately 20% organically.

Reported operating margin increased 470 basis points to 12.4%. Adjusted operating margin increased 440 basis points to 12.9%, as the benefits from higher volume, lower receivables reserves and productivity more than offset higher employee-related costs and growth investments.

Industrial and Healthcare Materials
Reported sales increased 29.8% to $192 million. Sales were up 18.8% ex. currency and 16.3% on an organic basis, reflecting an approximately 20% increase in industrial categories and a low-single digit decline in healthcare categories.

Reported operating margin increased 220 basis points to 12.3%. Adjusted operating margin increased 190 basis points to 12.3%, as the benefit from higher volume/mix more than offset higher employee-related costs.

Other

Balance Sheet, Liquidity, and Capital Deployment
The company’s balance sheet remains strong, with ample liquidity. The company deployed $31 million for acquisitions and equity investments in the first quarter, including two strategic acquisitions, JDC Solutions, Inc. in the IHM segment and ZippyYum, LLC in the RBIS segment.

The company recently announced it raised its quarterly dividend rate by 10%, following a 7% increase in 2020. Additionally, the company repurchased 0.3 million shares in the first quarter at an aggregate cost of $56 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down by 0.2 million compared to the same time last year. During the first quarter, the company returned $107 million in cash to shareholders through a combination of share repurchases and dividends.

Income Taxes
The company’s first quarter effective tax rate was 21.6%. The adjusted (non-GAAP) tax rate for the quarter was 25.0%, reflecting the company’s current expectation for the full-year adjusted tax rate.

Cost Reduction Actions
In the first quarter, the company realized approximately $19 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $3 million, the vast majority of which represents cash charges.

Outlook
In its supplemental presentation materials, “First Quarter 2021 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2021 financial results. Based on the factors listed and other assumptions, the company has raised its guidance range for 2021 reported earnings per share from a range of $7.50 to $7.90 to a range of $8.25 to $8.65. Excluding an estimated $0.15 per share related to restructuring charges and other items, the company’s guidance for adjusted earnings per share has been raised from a range of $7.65 to $8.05 to a range of $8.40 to $8.80.

For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “First Quarter 2021 Financial Review and Analysis,” posted on the company’s website at www.investors.averydennison.com, and furnished to the SEC on Form 8-K.

Throughout this release and the supplemental presentation materials, amounts on a per share basis reflect fully diluted shares outstanding.

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