Avery Dennison Reports 2Q 2023 Results

Avery Dennison Corporation announced preliminary, unaudited results for its second quarter ended July 1, 2023. Second quarter 2023 net sales were $2.1 billion, with sales change ex. currency (non-GAAP) down 10% and organic sales change (non-GAAP) down 10%.

“Earnings per share increased sequentially in the second quarter, a trend we expect to continue in coming quarters,” said Mitch Butier, chairman and CEO. “Volumes in our Materials businesses continue to recover from slow market conditions, largely destocking, while our Intelligent Labels platform accelerates adoption into new categories.

“While it’s good to see the continuing sequential improvements in our Materials businesses and the building momentum in Intelligent Labels, the pace of our recovery is slower than anticipated,” added Butier. “Our results for the quarter were below our expectation due to lower revenue, something the team was able to largely offset through cost reduction actions.”

“We remain confident this period of challenging results will soon pass. Our leadership positions in large diverse growing markets, the strategic foundations we have laid, and the dedication and expertise of our team positions us well to continue to deliver GDP+ growth and top-quartile returns over the long-run,” said Deon Stander, president and COO.

Second Quarter 2023 Results by Segment

Materials Group

• Reported sales decreased 13% to $1.5 billion. Sales were down 12% ex. currency and on an organic basis. Label materials sales were down mid-teens on an organic basis. Lower volume was driven primarily by inventory destocking. Sales increased by high-single digits organically in the Graphics and Reflective Solutions businesses.
• Reported operating margin decreased 150 basis points to 13.1%. Adjusted EBITDA margin (non-GAAP) was strong, increasing 150 basis points sequentially to 15.7%. Adjusted EBITDA margin decreased 100 basis points compared to prior year, as productivity initiatives and temporary cost-saving actions largely offset lower volume/mix.
• The company anticipates adjusted EBITDA margin will improve sequentially.

Solutions Group

• Reported sales decreased 7% to $615 million. Sales were down 4% ex. currency and 7% on an organic basis. Sales in high-value categories were up low-single digits on an organic basis. Sales were down high-teens organically in base solutions as retailer and brand sentiment remains muted.
• Reported operating margin decreased approximately 14 points to (1.2%) with an increased accrual for a legacy legal matter, which the company is preparing for appeal. Adjusted EBITDA margin decreased 320 basis points to 15.8% driven by lower volume and growth investments, partially offset by productivity initiatives and temporary cost-saving actions.
• The company anticipates adjusted EBITDA margin will improve sequentially.
Other

Balance Sheet and Capital Deployment

During the first half of the year, the company deployed $194 million for acquisitions and returned $216 million in cash to shareholders through a combination of dividends and share repurchases. The company’s balance sheet remains strong. Net debt to adjusted EBITDA (non-GAAP) was 2.75x at the end of the second quarter.