For Immediate Release
- 1Q22 Reported EPS of $2.39
- Adjusted EPS (non-GAAP) of $2.40
- 1Q22 Net sales increased 14.5% to $2.3 billion
- Sales growth ex. currency (non-GAAP) of 18.0%
- Organic sales growth (non-GAAP) of 12.7%
- Raised FY 2022 EPS guidance
- Reported EPS of $9.35 to $9.75 (previously $9.25 to $9.65)
- Adjusted EPS of $9.45 to $9.85 (previously $9.35 to $9.75)
MENTOR, Ohio, April 26, 2022 – Avery Dennison Corporation (NYSE:AVY) today announced preliminary, unaudited results for its first quarter ended April 2, 2022. Non-GAAP financial measures referenced in this document are reconciled to 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 challenging environment, with earnings ahead of expectations,” said Mitch Butier, Avery Dennison chairman and CEO.
“Our strong performance comes at a difficult time as COVID-19 continues, supply chains remain tight and inflationary pressures persist. Despite these challenges, we have raised our outlook and we continue to expect strong top- and bottom-line growth for the year,” 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 their tireless efforts to keep one another safe while continuing to deliver for our customers during this challenging period. The team continues to raise their game each quarter, to address the unique challenges at hand.”
First Quarter 2022 Results by Segment
Label and Graphic Materials
- Reported sales increased 8% to $1.5 billion. Sales were up 12% ex. currency and 12% on an organic basis.
- Label and Packaging Materials sales were up low-double digits on an organic basis, with strong growth in both high value product categories and the base business.
- Sales increased by high-single digits organically in the combined Graphics and Reflective Solutions businesses.
- On an organic basis, sales were up high teens in North America and Western Europe and low-to-mid single digits in emerging markets.
- Reported operating margin decreased 240 basis points to 14.0%. Adjusted EBITDA margin (non-GAAP) decreased 280 basis points to 15.6%, largely driven by the net impact of pricing, freight, and raw material costs. Adjusted EBITDA margin increased 110 basis points sequentially.
- The higher revenue base from price increases alone, with no corresponding incremental EBITDA as they offset inflation, reduced margin by ~210 basis points.
- Inflation remains persistent in our materials businesses; we are anticipating roughly 20% inflation in 2022 compared to prior year.
Retail Branding and Information Solutions
- Reported sales increased 41% to $679 million. Sales were up 43% ex. currency and 20% on an organic basis, reflecting strong growth in both the high value product categories and the base business.
- Intelligent Labels was up over 20% organically.
- Reported operating margin increased 90 basis points to 13.3%. Adjusted EBITDA margin increased 240 basis points to 19.1%, as the benefits from higher organic volume and acquisitions were partially offset by growth investments and higher employee-related costs.
- The Vestcom business is achieving our acquisition objectives.
Industrial and Healthcare Materials
- Reported sales decreased 1% to $190 million. Sales were up 1% ex. currency and 1% on an organic basis, reflecting a low-single digit decrease in industrial categories and a low-double digits increase in healthcare categories.
- Reported operating margin decreased 410 basis points to 8.2%. Adjusted EBITDA margin decreased 410 basis points to 11.8% driven by lower volume/mix and the net impact of pricing, freight, and raw material costs.
- The higher revenue base from price increases alone, with no corresponding incremental EBITDA as they offset inflation, reduced margin by ~120 basis points.
Balance Sheet and Capital Deployment
During the first quarter of the year, the company deployed $33 million for acquisitions and returned $208 million in cash to shareholders through a combination of share repurchases and dividends, up from $107 million compared to last year. The company repurchased 0.8 million shares at an aggregate cost of $152 million. Net of dilution from long-term incentive awards, the company’s share count at the end of the quarter was down 1.2 million compared to the same time last year.
The company’s balance sheet remains strong, with ample capacity to continue executing our long-term capital allocation strategy. Net debt to adjusted EBITDA (non-GAAP) was 2.35 at the end of the first quarter.
The company’s reported first quarter effective tax rate was 26.5%. The adjusted tax rate (non-GAAP) for the quarter was 25.6%, which is also the company’s current expectation for its full-year adjusted tax rate.
Cost Reduction Actions
In the first quarter, the company realized approximately $9 million in pre-tax savings from restructuring, net of transition costs, and incurred pre-tax restructuring charges of approximately $1 million.
In its supplemental presentation materials, “First 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 raised its guidance range for 2022 reported earnings per share from $9.25 to $9.65 to $9.35 to $9.75.
Excluding an estimated $0.10 per share related to restructuring charges and other items, the company’s guidance range for adjusted earnings per share has been raised from $9.35 to $9.75 to $9.45 to $9.85.
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 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.