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Avery Dennison profit slips

23
Apr '08
Avery Dennison Corporation reported net income of $68.4 million or $0.69 per share for the first quarter, compared with $79.1 million or $0.80 per share in the prior year. Results included restructuring and asset impairment charges and transition costs associated with the integration of Paxar, totaling $0.11 and $0.02 in the first quarters of 2008 and 2007, respectively.

Net sales from continuing operations for the first quarter were $1.65 billion, up approximately 18 percent from $1.39 billion for the same quarter last year. Sales before the impact of the Paxar acquisition and foreign currency translation were down approximately 2 percent from the prior year.

"Weak retail demand in the U.S. and raw material inflation impacted our sales and profits during the first quarter," said Dean A. Scarborough, president and chief executive officer of Avery Dennison. "While we are disappointed in these results, we stepped up our initiatives to navigate this difficult economic environment and position the Company for a rebound in the economy.

"Our disciplined approach includes clamping down on expenses, accelerating productivity initiatives and reducing capital spending as we intensify our focus on increasing cash flow," he added. "The integration of Paxar into our Retail Information Services Group remains on track and is expected to drive annual cost synergies of roughly $120 million by the end of 2009.

"Meanwhile, we continue to invest in our long-term growth platforms, including RIS, RFID and our materials businesses in the emerging markets," Scarborough said. "These investments included the acquisition of Asia-based DM Label Group, a manufacturer of interior labels for apparel, which enhances RIS' product portfolio and strengthens our presence in Asia.

We also added roll materials capacity in emerging markets, including China and India, where our pressure sensitive materials business continues to achieve double-digit growth. We will continue to actively pursue opportunities to strengthen our position in these businesses and markets in the future."

Additional First Quarter Financial Highlights:

• Operating margin (GAAP basis) was 3.7 percent, compared to 7.1 percent for the same period last year. Excluding interest expense, the effect of transition costs associated with the Paxar integration, and restructuring and asset impairment charges, operating margin was 6.3 percent, compared to 8.3 percent for the previous year.


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