Avery Dennison’s Earnings Climb 41%

Avery Dennison Corp. said Tuesday that its earnings jumped 41% in the fourth quarter, aided by an extra week of sales and a buying binge by customers eager to beat a Jan. 1 price increase.

The Pasadena label-making company topped analysts’ expectations, posting net income of $83.6 million, or 83 cents a share, compared with $59.3 million, or 59 cents, a year earlier.

Analysts had forecast a per-share profit of 77 cents, according to Thomson First Call.

Sales rose 17% to $1.4 billion.

Avery began raising prices at many of its divisions last year to help cover cost increases for raw materials, including paper and oil-based products, which totaled about $30 million in 2004 and are expected to rise an estimated $60 million this year.

One analyst said the company’s fourth-quarter earnings appeared to ease investors’ concerns about Avery’s cost increases, which have hampered the company’s stock in recent weeks.

Avery “came in better than the street expected despite raw material concerns/headwinds that have pulled the stock down over 10% in the last four weeks,” John P. McNulty, an analyst with Credit Suisse First Boston, wrote in a research note Tuesday.

Avery’s shares jumped $4.92, or 8.8%, to $61.02 on the New York Stock Exchange.

“Our sales growth was better than expected and our gross profit improved,” said Dan O’Bryant, Avery’s chief financial officer. “The result was improved earnings per share, which drove the stock higher.”

The company also has benefited from its decade-long investment in China, according to O’Bryant, where it has sustained an annual sales growth rate of 40% to 50% during the last several years.

For the full year, the company’s profit rose 4.4% to $279.7 million, or $2.78 a share, from $267.9 million, or $2.68, a year earlier. Revenue grew 12% to $5.34 billion.

The company forecast earnings of 71 cents to 78 cents a share in the first quarter of 2005 and $3.15 to $3.50 a share for the year.

Avery executives said Tuesday that they did not know how much European regulators might fine the company for what they described in a filing with the Securities and Exchange Commission last November as “instances of improper conduct” by employees in Avery’s European operations.

“We expect them to investigate for at least a year before we find out what the fine might be,” O’Bryant said.