Avery Dennison Reports 2Q Results, International Markets Slowing
Press release from the issuing company
PASADENA, Calif.-July 24, 2001--Avery Dennison Corp. today announced second-quarter diluted earnings per share of $.61 compared with $.73 per share for the second quarter a year ago, consistent with the company's previously announced adjustment to second-quarter earnings expectations.
Avery Dennison had revised its second-quarter projections as a result of inventory reductions at certain major office products customers, the continued economic slowdown in North America, and expanded weakness in international markets.
For the first half of 2001, diluted earnings per share were $1.25 compared with $1.42 for the same period last year.
Key results for the second quarter of 2001 include:
* Net income was $59.8 million, compared with $72.8 million in the second quarter of 2000. The impact of currency exchange rates reduced net income by $900,000, or approximately $.01 per share, for the quarter.
* Reported sales declined 3.3 percent to $960.8 million, from $993.4 million in the second quarter a year ago. Excluding the impact of currency exchange rates, sales were 1.2 percent less than the second quarter a year ago. Acquisitions, net of divestitures, contributed 1.2 percent to sales in the second quarter.
* Unit volume was essentially flat, excluding the impact from acquisitions and divestitures, compared with the same period a year ago.
"As we announced last month, continuing inventory reduction efforts at office products superstores and softer back-to-school orders reduced second-quarter results,'' said Philip M. Neal, chairman and chief executive officer of Avery Dennison. "The sluggish economic conditions impacting the industrial parts of our business earlier in the year are now affecting apparel retail markets. In addition, as widely reported, the weakness in the U.S. economy has extended to international markets.
"However, in the midst of this challenging climate, we are maintaining or gaining share in our core markets,'' said Neal. "Furthermore, our aggressive cost-reduction efforts and productivity improvement programs have partially offset the earnings impact of weakened market conditions.
"Combined, these results drive an improved competitive position globally for the company, providing us with an opportunity to emerge better positioned when economic conditions improve and our markets return to their historical growth rates.''
Key results for the first six months of 2001 include:
* Net income was $123.4 million, down from $143 million during the same period a year ago. The impact of currency exchange rates reduced net income by $2.7 million, or approximately $.03 per share, for the first six months of 2001.
* Reported sales were $1,924 million, compared with $1,958.7 million during the same period in 2000. Excluding the impact of currency, sales increased 0.9 percent.
* Unit volume in the first half of 2001 was essentially flat, excluding the impact from acquisitions and divestitures, from the same period a year ago.
Although rates of growth have slowed, the Pressure-sensitive Adhesives and Materials sector reported increased unit volume over the year-ago second quarter. Compared with the first quarter of 2001, unit volume growth improved in North America while it slowed internationally.
Excluding the impact of currency exchange rates, sector sales grew 3.4 percent to $544.9 million, including the contribution from the acquisition of Dunsirn Industries. Operating margin for the sector was up 30 basis points compared with the first quarter of 2001; however, compared with the second quarter a year ago, operating margin declined 210 basis points.
The company's core North American pressure-sensitive roll materials business reported sales improvement in the second quarter, continuing a trend that began late last quarter. In addition, Avery Dennison's North American pressure-sensitive materials operation will benefit from the closure of a materials coating facility operated by Spinnaker Industries.
Separately, the company announced a new long-term supply agreement to provide all pressure-sensitive materials requirements for Nashua Corp., a manufacturer and marketer of premium labels, thermal specialty papers and imaging products.
Avery Dennison expects to gain approximately $50 million to $60 million in annual sales as a result of the plant closing and the long-term supply agreement.
The Consumer and Converted Products sector reported a decline in unit volume over the second quarter of 2000. Sales for the sector, excluding the impact of currency exchange rates, decreased 4.5 percent to $449.5 million. Operating margin for the sector decreased by 130 basis points over the second quarter a year ago.
The company attributed the declines to several factors, including previously announced inventory reduction efforts at office products superstores and reduced back-to-school orders, as well as general economic weakness affecting Avery Dennison converting businesses serving both retail and industrial markets in the United States and overseas.
"Consistent with our announcement last month, our outlook for the second half of the year remains cautious,'' said Neal. "Our current projections assume continued global economic weakness and unfavorable currency exchange rates, with some improvement in our North American pressure-sensitive business.''
Avery Dennison said that it is maintaining previously announced guidance for the second half of 2001. Earnings expectations for the third quarter are in the range of $.62 to $.68 per fully diluted share, including a projected negative impact from currency exchange rates of approximately $.02 per share. Currency exchange rates are expected to reduce fourth-quarter earnings by approximately $.01 per share.
"Our core business fundamentals remain strong, and we are seeing a number of positive developments in our operations, despite the current weakness in economic conditions around the world,'' said Neal. "We have an excellent record of sustaining and even increasing our market share position in businesses that continue to have excellent long-term growth potential.
"We continue to invest in the long-term expansion of our businesses, including research and development efforts to produce a constant flow of innovative new products and applications for our proprietary technologies, as well as a variety of new venture activities.''
Avery Dennison is a global leader in pressure-sensitive technology and innovative self-adhesive solutions for consumer products and label materials. Based in Pasadena, the company had 2000 sales of $3.9 billion.
Avery Dennison develops, manufactures and markets a wide range of products for consumer and industrial markets, including Avery-brand office products, Fasson-brand self-adhesive materials, peel-and-stick postage stamps, battery labels, reflective highway safety products, automated retail tag and labeling systems, and specialty tapes and chemicals.
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