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Avery Dennison reports 11 percent sales decline for 2009

April 5, 2010

Sales in its large pressure sensitive segment dropped 9 percent.

The economic crisis that bottomed in 2009 affected most suppliers in the narrow web marketplace, and industry leader Avery Dennison (NYSE:AVY) was one among many. The company has reported net sales of $6 billion for 2009, a decline of 11 percent from $6.7 billion in 2008. Net sales in the company’s pressure sensitive materials segment, which comprises 56 percent of its business, decreased 9 percent last year after a 4 percent gain in 2008.

The company’s newly published annual report indicates a loss in net income of $746.7 million company-wide. Dividend per common share in 2009 was $1.22, for a total of $134.9 million returned to shareholders.

“Sales volumes dropped during the first half of the year as customers substantially reduced inventories and recovered only modestly later in the year,” reports Dean Scarborough, president and CEO, and Kent Kresa, chairman of the board. “We focused on three strategic imperatives: reducing our fixed costs, accelerating free cash flow, and continuing to invest in growth so we will be stronger when recovery comes. As expected, the decline in volumes reduced our sales and profits for the year, but in certain key measures our results were strong. Rigorous cost controls, disciplined pricing, and our restructuring and productivity improvements helped us generate record free cash flow and expand gross profit margins. We improved working capital to the most efficient level in several years. We made a difficult decision to reduce the dividend and pay down debt to ensure that we could survive a protracted downturn. In short, we played excellent defense.

At the same time, we played strong offense. We maintained share leadership in our key markets. We earned new business, directly and through our partners, from leading companies including Wal-Mart, Procter & Gamble, Korean food producer Pulmuone, Mexico’s Novamex, and auto makers including Ford, BMW and China’s Great Wall Motor Company.”

In the pressure sensitive materials segment, the decrease in reported sales for 2009 “reflected lower sales on an organic basis and the unfavorable impact of foreign currency translation (approximately $186 million), partially offset by the estimated impact of the extra week in the first quarter of 2009,” writes Scarborough and Kresa in the report. “On an organic basis, sales declined 6 percent in 2009 primarily due to declines in volume, partially offset by the effect of changes in pricing to offset the cumulative impact of inflation experienced in 2008.

On an organic basis, sales in our roll materials business in 2009 declined at a high single-digit rate in Europe, a mid single-digit rate (excluding intercompany sales) in North America, and a low single-digit rate in Latin America, reflecting continued weakness in end markets. These declines were partially offset by mid-single digit growth in Asia. On an organic basis, sales in our emerging markets (Asia, Latin America, and Eastern Europe) remained flat in 2009 compared to 2008.”

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