04.30.20
Avery Dennison announced preliminary, unaudited results for its first quarter ended March 28, 2020.
“The coronavirus is having a substantial impact on our teams, our markets and customers, our communities, and, of course, our shareholders,” said Mitch Butier, chairman, president and CEO. “The situation has been evolving in unpredictable ways, and the team is doing a tremendous job adapting to the new reality, anticipating and planning for various scenarios.
“Our first priority in this crisis has been and will continue to be protecting the health and welfare of our teams, followed immediately by continuing to deliver industry-leading product quality and service for our customers,” added Butier. “I am proud of the actions we are taking to protect our team of 30,000 plus employees while meeting our customers’ needs in this challenging environment.
“While earnings exceeded our expectations in the first quarter, the early stages of this downturn are playing out differently than past recessions. Label and Packaging Materials, our largest business, serves essential categories that are experiencing higher demand during the pandemic. In contrast, RBIS, which primarily serves apparel markets, is seeing a significant decline in demand, reflecting widespread retail store and apparel manufacturing closures.
“As a result, we anticipate a decline in organic growth and earnings for the year, as strong volume in essential label categories is more than offset by declines in categories serving apparel and industrial end markets,” Butier concluded. “Our strategic priorities remain unchanged. We are protecting our investments to expand in high value categories, including RFID, while driving long-term profitable growth of our base businesses, and remain confident in our ability to create significant long-term value for all our stakeholders.”
The company’s net debt to adjusted EBITDA ratio (non-GAAP) was 2.0 as of the end of the first quarter, below its long-term target of 2.3 to 2.6.
Net sales were $1.72 billion, down 1%. Sales were up 1.0% ex. currency. On an organic basis, sales grew 0.3%. Reported operating margin increased 120 basis points to 11.6%. Adjusted operating margin increased 90 basis points to 11.8%.
In terms of segments, Label and Graphic Materials reported sales increased 0.2%. Sales were up 2.5% ex. currency. On an organic basis, sales grew 1.8%, as volume/mix more than offset raw material-related price reductions.
Retail Branding and Information Solutions sales declined 0.9%. Sales were up 0.1% ex. currency. On an organic basis, sales declined 1.1%, reflecting a mid-to-high digit decline in the base business driven by apparel manufacturing site closures, as well as lower apparel demand late in the quarter.
High value categories were up mid-teens on an organic basis, with RFID solutions up low double-digits, below expectations due to lower apparel demand. The company completed its acquisition of Smartrac’s transponder business and integration is proceeding well.
Industrial and Healthcare Materials reported sales declined 9.7%. On an organic basis, sales fell 7.8%, reflecting a mid-single digit decline in industrial categories driven by automotive, which was down over 10%, and a low-single digit decline in healthcare categories.
“The coronavirus is having a substantial impact on our teams, our markets and customers, our communities, and, of course, our shareholders,” said Mitch Butier, chairman, president and CEO. “The situation has been evolving in unpredictable ways, and the team is doing a tremendous job adapting to the new reality, anticipating and planning for various scenarios.
“Our first priority in this crisis has been and will continue to be protecting the health and welfare of our teams, followed immediately by continuing to deliver industry-leading product quality and service for our customers,” added Butier. “I am proud of the actions we are taking to protect our team of 30,000 plus employees while meeting our customers’ needs in this challenging environment.
“While earnings exceeded our expectations in the first quarter, the early stages of this downturn are playing out differently than past recessions. Label and Packaging Materials, our largest business, serves essential categories that are experiencing higher demand during the pandemic. In contrast, RBIS, which primarily serves apparel markets, is seeing a significant decline in demand, reflecting widespread retail store and apparel manufacturing closures.
“As a result, we anticipate a decline in organic growth and earnings for the year, as strong volume in essential label categories is more than offset by declines in categories serving apparel and industrial end markets,” Butier concluded. “Our strategic priorities remain unchanged. We are protecting our investments to expand in high value categories, including RFID, while driving long-term profitable growth of our base businesses, and remain confident in our ability to create significant long-term value for all our stakeholders.”
The company’s net debt to adjusted EBITDA ratio (non-GAAP) was 2.0 as of the end of the first quarter, below its long-term target of 2.3 to 2.6.
Net sales were $1.72 billion, down 1%. Sales were up 1.0% ex. currency. On an organic basis, sales grew 0.3%. Reported operating margin increased 120 basis points to 11.6%. Adjusted operating margin increased 90 basis points to 11.8%.
In terms of segments, Label and Graphic Materials reported sales increased 0.2%. Sales were up 2.5% ex. currency. On an organic basis, sales grew 1.8%, as volume/mix more than offset raw material-related price reductions.
Retail Branding and Information Solutions sales declined 0.9%. Sales were up 0.1% ex. currency. On an organic basis, sales declined 1.1%, reflecting a mid-to-high digit decline in the base business driven by apparel manufacturing site closures, as well as lower apparel demand late in the quarter.
High value categories were up mid-teens on an organic basis, with RFID solutions up low double-digits, below expectations due to lower apparel demand. The company completed its acquisition of Smartrac’s transponder business and integration is proceeding well.
Industrial and Healthcare Materials reported sales declined 9.7%. On an organic basis, sales fell 7.8%, reflecting a mid-single digit decline in industrial categories driven by automotive, which was down over 10%, and a low-single digit decline in healthcare categories.