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So Far, Avery’s Adaptability Wins Over Investors

Avery Dennison Corp. is having a soft year in sales of its self-adhesive labels, apparel tags and medical products. But according to Mitch Butier, chief executive of the Glendale manufacturer, the company is showing its ability to swiftly adapt to changing market conditions. “This agility is enabling us to sustain our earnings growth trajectory and maintain the midpoint of our (earnings per share) guidance for the year,” Butier said in a conference call last month to discuss second-quarter earnings with analysts. For the quarter ending June 29, Avery Dennison reported adjusted net income of nearly $147 million ($1.72 a share) compared to adjusted net income of $148 million ($1.66) in the same period a year earlier. Revenue decreased by 3 percent to $1.8 billion. Avery’s shares closed on July 31 at $114.87. Avery Dennison employed about 30,000 workers as of the end of last year. The company develops and manufactures products in three divisions – label and graphic materials, retail branding and information solutions and industrial and health care materials. In the second quarter the company attributed the slow growth in the label and graphic material line to lower sales volume, while the industrial and health care materials segment had flat sales that were attributed to a decline in global auto production as automotive applications globally represent about a third of the segment’s sales. Greg Lovins, chief financial officer, said that outside of automotive, the industrial categories were up in mid-single digits of organic growth. “Health care categories likewise grew at a mid-single digit pace with better than 20 percent growth in medical applications,” Lovins said during the conference call. The one bright spot in the company’s financials were retail branding and information solutions, which posted more robust organic growth driven by increased sales of radio frequency identification labels. Ghansham Panjabi, senior research analyst with R.W. Baird & Co. Inc., in Milwaukee, and John McNulty, an analyst with BMO Capital Markets, in their respective research reports put out after the quarterly earnings commented on the strong sales of RFID product. “Management noted that their fast-growing RFID business is cannibalizing some of their slower/low-margin business, which while not ideal is a good problem to have,” McNulty wrote in his report. “Within RFID, growth was driven primarily by apparel, though management commented that the company is seeing early stage traction in other arenas, including food, beauty and aviation,” Panjabi wrote in his research note. Panjabi was referring to comments made by Butier during the conference call with analysts about the 20 percent RFID growth during the quarter and the segment’s product pipeline. As a leader in producing ultra-high frequency RFID tags, the company is well positioned to capture new opportunities with its manufacturing capabilities and experienced team in the market, Butier said. “We continue to increase our investments in business development and other resources to drive this growth, as we build out our Intelligent Labels platform to enable a future where every item can have a digital twin and a digital life,” Butier explained during the conference call. In January, Avery Dennison was among a group of investors that put money into an Israeli company that has developed a sticker-sized tag that can track a product from manufacture to purchase to the home of the consumer. The company joined an investment group that includes Amazon Web Services and Samsung Venture Investment Corp. to put $30 million into Wiliot, an Israeli semiconductor company with business development headquarters in San Diego. Its tags operate through a Bluetooth connection available on any smartphone, do not need batteries and are maintenance free. Avery Dennison already offers RFID tags, used in the aviation industry to track luggage and in the health, beauty and food industries to track products to improve inventory accuracy and aid in loss prevention. However, RFID requires expensive and bulky machines to read the tags on products – technology that is unavailable to consumers. The Wiliot solution opens up new possibilities because it can perform the same functions with consumer-facing products including smartphones and virtual assistants such as Amazon Alexa and Google Home.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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