Avery Dennison Announces Third Quarter 2022 Results

Q3 2022 Results

FOR IMMEDIATE RELEASE

  • 3Q22 Reported EPS of $2.70, up 38%
    • Adjusted EPS (non-GAAP) of $2.46, up 15%
  • 3Q22 Net sales increased 11.8% to $2.3 billion
    • Sales growth ex. currency (non-GAAP) of 19.0%
    • Organic sales growth (non-GAAP) of 15.5%
  • Narrowed FY 2022 EPS guidance
    • Reported EPS of $9.65 to $9.80 (previously $9.60 to $9.90)
    • Adjusted EPS of $9.70 to $9.85 (previously $9.70 to $10.00)

MENTOR, Ohio, October 26, 2022 – Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its third quarter ended October 1, 2022. Non-GAAP financial measures referenced in this document are reconciled from GAAP in the attached financial schedules. Unless otherwise indicated, comparisons are to the same period in the prior year.

 

“We once again delivered strong financial results amidst a dynamic environment,” said Mitch Butier, Avery Dennison chairman and CEO. “LGM and RBIS both delivered impressive top- and bottom-line growth in the quarter, while making great progress in driving further adoption of Intelligent Label solutions.

 

“The strategic foundations we have laid again position us to deliver double-digit EPS growth for the year, despite ongoing inflationary pressures, currency headwinds and increasing economic uncertainty,” said Butier. “We remain confident that the consistent execution of our strategies will enable us to meet our long-term goals for superior value creation through a balance of profitable growth and capital discipline.

 

“Once again, I want to thank our entire team for continuing to raise their game to address the unique challenges at hand and deliver value for all our stakeholders.”

 

Third Quarter 2022 Results by Segment

 

Label and Graphic Materials

  • Reported sales increased 12% to $1.5 billion. Sales were up 20% ex. currency and 20% on an organic basis.
    •  Label and Packaging Materials sales were up more than 20% on an organic basis, with strong growth in both high value and base product categories.
    • Sales increased by mid-to-high single digits organically in the combined Graphics and Reflective Solutions businesses.
    • On an organic basis, sales were up mid-teens in North America, approximately 40% in Western Europe, and high-teens in emerging markets.
  • Reported operating margin increased 60 basis points to 14.3%. Adjusted EBITDA (non-GAAP) increased 10% to $235 million; adjusted EBITDA margin (non-GAAP) remained strong at 15.6%.
  • Inflation continues to be significant in the company’s materials businesses, with it now anticipating more than 20% inflation in 2022 compared to prior year.

Retail Branding and Information Solutions

  • Reported sales increased 17% to $623 million. Sales were up 22% ex. currency and 7% on an organic basis.
    • High value categories sales were up high-teens on an organic basis.
    • Sales decreased by low-single digits organically in base apparel, as customers adjust inventory levels.
    • Enterprise-wide Intelligent Labels sales were up approximately 20% year-to-date on an organic basis.
  • Reported operating margin increased 120 basis points to 12.2%. Adjusted EBITDA increased 19% to $118 million; adjusted EBITDA margin remained strong at 18.9%.

Industrial and Healthcare Materials

  • Reported sales decreased 2% to $192 million, up 5% on an organic basis.
  • Reported operating margin increased 100 basis points to 10.6%. Adjusted EBITDA margin of 14.3% was up sequentially and year-over-year.

Other

 

Balance Sheet and Capital Deployment

During the first three quarters of the year, the company deployed $37 million for acquisitions and returned $497 million in cash to shareholders, up $207 million compared to last year, through a combination of share repurchases and dividends. In the first nine months, the company repurchased 1.8 million shares at an aggregate cost of $319 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down 1.9 million compared to the same time last year.

 

The company’s balance sheet remains strong, with ample capacity to continue executing its long-term capital allocation strategy. Net debt to adjusted EBITDA (non-GAAP) was 2.1 at the end of the third quarter.

 

Income Taxes

The company’s reported third quarter effective tax rate was 18.7%. The adjusted tax rate (non-GAAP) for the quarter was 25.0%, reflecting the company’s expectation for a full-year adjusted tax rate of 25.4%.

 

Cost Reduction Actions

During the first three quarters of the year, the company realized approximately $19 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $9 million.

 

Guidance

 

In its supplemental presentation materials, “Third Quarter 2022 Financial Review and Analysis,” the company provides a list of factors that it believes will contribute to its 2022 financial results. Based on the factors listed and other assumptions, the company has narrowed its guidance range for 2022 reported earnings per share from $9.60 to $9.90 to $9.65 to $9.80.

 

Excluding an estimated $0.05 per share related to restructuring charges and other items, the company narrowed its guidance range for adjusted earnings per share from $9.70 to $10.00 to $9.70 to $9.85, including an incremental $0.10 currency translation headwind.

 

For more details on the company’s results, see the summary tables accompanying this news release, as well as the supplemental presentation materials, “Third Quarter 2022 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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About Avery Dennison

Avery Dennison Corporation (NYSE: AVY) is a global materials science and digital identification solutions company that provides a wide range of branding and information solutions that optimize labor and supply chain efficiency, reduce waste, advance sustainability, circularity and transparency, and better connect brands and consumers. Our products and solutions include labeling and functional materials, radio frequency identification (RFID) inlays and tags, software applications that connect the physical and digital, and a variety of products and solutions that enhance branded packaging and carry or display information that improves the customer experience. Serving an array of industries worldwide — including home and personal care, apparel, general retail, e-commerce, logistics, food and grocery, pharmaceuticals and automotive — we employ approximately 34,000 employees in more than 50 countries. Our reported sales in 2023 were $8.4 billion. Learn more at www.averydennison.com.

 

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this document are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and financial or other business targets, are subject to certain risks and uncertainties.

 

We believe that the most significant risk factors that could affect our financial performance in the near term include: (i) the impacts to underlying demand for our products from global economic conditions, political uncertainty, and changes in environmental standards and governmental regulations, including as a result of COVID-19; (ii) the cost and availability of raw materials; (iii) competitors' actions, including pricing, expansion in key markets, and product offerings; (iv) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through price increases, without a significant loss of volume; (v) foreign currency fluctuations; and (vi) the execution and integration of acquisitions.

 

Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but are not limited to, risks and uncertainties relating to the following:

  • Our Business – fluctuations in demand affecting sales to customers; fluctuations in the cost and availability of raw materials and energy; changes in our markets due to competitive conditions, technological developments, environmental standards, laws and regulations, and customer preferences; the impact of competitive products and pricing; execution and integration of acquisitions; selling prices; customer and supplier concentrations or consolidations; financial condition of distributors; outsourced manufacturers; product and service quality; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; successful implementation of new manufacturing technologies and installation of manufacturing equipment; our ability to generate sustained productivity improvement; our ability to achieve and sustain targeted cost reductions; and collection of receivables from customers
  • International Operations – worldwide and local economic and market conditions; changes in political conditions, including those related to the Russian invasion of Ukraine; and fluctuations in foreign currency exchange rates and other risks associated with foreign operations, including in emerging markets
  • COVID-19
  • Income Taxes – fluctuations in tax rates; changes in tax laws and regulations, and uncertainties associate with interpretations of such laws and regulations; retention of tax incentives; outcome of tax audits; and the realization of deferred tax assets
  • Information Technology – disruptions in information technology systems or data security breaches, including cyber-attacks or other intrusions to network security; and successful installation of new or upgraded information technology systems
  • Human Capital – recruitment and retention of employees; and collective labor arrangements
  • Our Indebtedness – credit risks; our ability to obtain adequate financing arrangements and maintain access to capital; fluctuations in interest rates; volatility of financial markets; and compliance with our debt covenants
  • Ownership of Our Stock – potential significant variability of our stock price and amounts of future dividends and share repurchases
  • Legal and Regulatory Matters – protection and infringement of intellectual property; impact of legal and regulatory proceedings, including with respect to environmental, anti-corruption, health and safety, and trade compliance
  • Other Financial Matters – fluctuations in pension costs and goodwill impairment

For a more detailed discussion of these factors, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K, filed with the Securities and Exchange Commission on February 23, 2022, and subsequent quarterly reports on Form 10-Q.

 

The forward-looking statements included in this document are made only as of the date of this document, and we undertake no obligation to update these statements to reflect subsequent events or circumstances, other than as may be required by law.

 

For more information and to listen to a live broadcast or an audio replay of the quarterly conference call with analysts, visit the Avery Dennison website at www.investors.averydennison.com

Media Contacts

MEDIA RELATIONS

Kristin Robinson

Vice President, Global Communications

kristin.robinson@averydennison.com

 

INVESTOR RELATIONS

John Eble

Vice President, Finance and Investor Relations

john.eble@averydennison.com

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