Avery swings to profit on higher sales abroad
Strong sales in Asia and Latin America helped Avery Dennison Corp. overcome sluggish results in North America and reverse a year-earlier loss in the fourth quarter, the company said Tuesday.
The Pasadena-based maker of product labels and office products also issued surprisingly strong profit guidance for 2007, sparking a rally that pushed its stock to a multiyear high.
But investor enthusiasm waned a bit after Chief Executive Dean A. Scarborough told analysts that the first quarter “is going to be soft.”
Avery reported net income of $101.5 million for the fourth quarter, compared with a loss of $6.9 million in the last three months of 2005. Earnings per share were $1.01, a penny better than Wall Street’s consensus forecast. Revenue rose 3.5% to $1.41 billion.
Sales growth during the quarter was “in the low double digits” in Asia and Latin America, Avery said. Emerging markets account for about 20% of the company’s sales, and Scarborough said products such as clear labels for beer bottles -- a $45-million global business last year -- were helping to drive that growth, particularly in China.
“We continue to expand our presence in emerging markets, where high demand for our products remains the single most important source of growth,” Scarborough said.
Sales rose 2% in Europe and fell 2% in North America, where Scarborough said sales were “very weak” in December. That was partly because customers delayed launches of products that would have used Avery-produced labels.
Avery also continues to see weakness in its business with the troubled auto and housing industries, Scarborough said.
The restructuring that Avery launched in 2005 resulted in net savings of $50 million last year, and the company expects a further $45 million in savings in 2007.
The company expects a new cost-cutting program -- including 140 job cuts announced Tuesday -- to bring an additional $12 million in savings. None of the job losses will be in the company’s local operations.
Avery said it expected 2007 earnings of $3.90 to $4.30 a share. On average, analysts were expecting $4.02, according to a survey by Bloomberg News.
George Staphos, an analyst at Banc of America Securities, raised his 2007 profit estimate to $4.15 a share from $3.90, but he noted that Avery was projecting slower-than-normal sales growth for the year.
Avery’s stock initially jumped more than 4% before falling back to close at $69.67, up $1.20, or 1.8%. It was the stock’s highest close since June 2000.
For all of 2006, the company reported net income of $367.2 million, or $3.66 a share, compared with net income of $226.4 million, or $2.25, in 2005. Sales rose 2% to $5.58 billion.
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