Avery Dennison Earnings Rise 15% in 3rd Quarter
Label maker Avery Dennison Corp. on Tuesday reported a 15% gain in fiscal third-quarter net income and said it hoped to save $70 million in the next two years in a restructuring that could cut 500 jobs worldwide.
Pasadena-based Avery also disclosed that it was under investigation in Australia regarding its label stock business and that it could face fines or other penalties after it reported potential violations of the U.S. Foreign Corrupt Practices Act regarding its business in China.
For the quarter ended Oct. 1, Avery reported net income of $86.2 million, or 86 cents a share, up from $75 million, or 75 cents, a year earlier. The company credited better pricing, tight cost controls and a more favorable tax rate. Sales rose 1.5% to $1.36 billion.
Avery raised its fiscal 2005 earnings outlook by as much as 11% to $3.28 to $3.43 a share.
The job cuts amount to 2.3% of its global workforce. Avery’s stock rose $3 to $55.36.
In a filing with the Securities and Exchange Commission, Avery said the Australian Competition and Consumer Commission was investigating two company subsidiaries.
The news follows a disclosure in November that Avery found improper anti-competitive conduct by employees in its European operations that could lead to “material” fines.
In addition to a resulting antitrust investigation in Europe, Avery faces similar probes in the United States and Canada. Investigations into those matters continue, a spokesman said.
Chief Executive Dean A. Scarborough said during a conference call with analysts that the issues in China -- described in the SEC filing as improper payments or attempted improper payments -- were discovered in an internal investigation arising from renewed attention to ethics. That focus, he said, could uncover other violations.
“You naturally take more risk when you’re involved in emerging markets in some of these areas,” Scarborough said. “We are putting an enormous amount of energy and effort in educating our employees all over the world on how we need to behave.”
Avery said the issues it discovered involved a “small number” of employees of the company’s Chinese business, which had sales last year of $5 million, about 0.1% of total revenue.
“It’s kind of messy because the noise from the news flow adds more volatility to the stock,” said Ghansham Panjabi, an analyst with Wachovia Securities in New York. “The fact that they seem to be investigating internally is a step in the right direction.”
