DOW JONES NEWSWIRES
Avery Dennison Corp.'s (AVY) fourth-quarter net income declined
46%, as sales and margins slipped and higher raw-material costs
offset price increases and restructuring efforts.
The office-supply and label manufacturer forecast 2009 earnings
below Wall Street's view.
Avery said that at the end of 2008 the gap between its prices
and materials costs "was still significant," adding that it raised
prices further this month.
President and Chief Executive Dean A. Scarborough said Avery is
continuing its cost-cutting efforts amid a sharp dropoff in the
retail sector, where the company provides clothing labels, as well
as downturn in the broader economy.
Net income totaled $42.6 million, or 43 cents a share, down from
$79.4 million, or 81 cents a share, a year earlier. The latest
period includes $12.3 million of restructuring and other charges,
while the year-earlier included $16.2 million.
Sales fell 12% to $1.51 billion.
Analysts polled by Thomson Reuters had expected per-share
earnings of 43 cents on revenue falling 7% to $1.6 billion.
Gross margin fell to 25% from 28.1%.
Profit fell 47% as sales slumped 9.2%, primarily due to
continued weakness in the retail apparel market in the U.S. and
Europe, in the pressure-sensitive materials business, its largest
segment, which provides Fasson-brand pressure-sensitive roll labels
for most major markets, as well as graphic materials and reflective
highway safety products. Results were hurt by raw-material
inflation, which offset price increases and restructuring.
Profit in Avery's office and consumer products business, which
manufactures binders, dividers, notebooks and pens and markers,
slumped 25% as revenue fell 17%, hurt by weak demand and tight
inventory control by customers.
For 2009, Avery projected per-share earnings of about $2, if the
2008 revenue trend continues, or $1 if fourth-quarter trends
continue. Analysts' latest expectations called for earnings of
$2.66.
Avery's restructuring plan, which began in December and will cut
its work force by 10%, aims for $150 million in annualized savings
over the next two years. The effort will result in about $120
million in charges, the majority to be incurred in 2009.
Office-supply companies have seen demand weaken amid the
recession as business customers delay replacing old office-supply
products, leading some in the sector to embrace cost-cuts,
including closing underperforming stores and distribution centers,
and reducing new store openings.
Shares closed Monday's session at $27.84 and weren't active
before the bell. The stock has fallen 49% since reaching a 52-week
high in September.
-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310;
shirleen.dorman@dowjones.com
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