Avery Dennison Corporation announced preliminary, unaudited results for its second quarter ended June 27, 2020, and provided an update related to the impact of the COVID-19 pandemic on the company.
“The team has come together extraordinarily well in navigating what is proving to be one of the most challenging periods we have experienced as a company. The compounding effects of the health, economic and societal crises are having an unprecedented impact on our teams, our markets, and our communities,” said Mitch Butier, chairman, president and CEO. “Our focus continues to be on ensuring the health and welfare of our employees, delivering for our customers, supporting our communities, and minimizing the impact of the recession for our shareholders. I’m pleased to report that we are making solid progress on all fronts.
“Second quarter revenue came in better than we expected,” added Butier. “Following a sharp decline in April, total company sales improved sequentially in May and June. In this environment, a key focus is protecting our profitability for the year, which we reported in the first half, with adjusted EBITDA margin above prior year.
“Our strategic priorities are unchanged. We are protecting our investments to expand in high-value categories, particularly RFID, while driving long-term profitable growth of our base businesses, and we remain confident in our ability to create significant long-term value for all our stakeholders.”
Label and Graphic Materials reported sales declined by 8.7%. Sales were down 4.9% on an organic basis, driven largely by volume/mix. Retail Branding and Information Solutions reported sales declined by 29.5%. Enterprise-wide sales of RFID products were up over 10% ex. currency with the benefit of the Smartrac acquisition, and down 20% organically, as increased penetration of the market was more than offset by a decline in existing programs tied to apparel.
The reported operating margin declined 350 basis points to 8.1%. Adjusted EBITDA margin declined 60 basis points to 14%, while adjusted operating margin declined 140 basis points to 10.7%.
Year-to-date free cash flow was $109 million, down 34%. Free cash flow in the second half of the year is expected to accelerate reflecting normal seasonality as well as higher net income and an increased focus on working capital productivity.