Daniel R. O’Bryant, executive VP and CFO of Avery Dennison, announced in mid-September that the company’s sales in July and August were “well below expectations”, and that a continuation of the trend would result in 2007 earnings below what the company had anticipated. He attributed the shortfall to weak market conditions for the roll materials business in the US and Western Europe, combined with more aggressive competitive activity in those markets, as well as a soft retail environment impacting sales for the company’s office products and retail information services segments.
O’Bryant made his remarks to securities analysts and institutional investors at the Wachovia Global Transportation and Packaging Conference in New York City.
“Customer sentiment and external indicators have us feeling cautious about near-term demand,” said O’Bryant. “We are taking actions to reduce costs in light of the weaker sales environment, but we will not be able to fully offset the sales shortfall.” O’Bryant expressed optimism about the company’s ability to drive value over the medium-to-longer term, citing as catalysts the integration of recently acquired Paxar, as well as improvement in the company’s RFID business.
“The long-term fundamentals of our core businesses remain strong,” O’Bryant said. “We have a solid position in rapidly growing emerging markets, where we currently generate more than 25 percent of our sales. We have leading market share positions in all of our major businesses, supported by powerful brands and other sources of competitive advantage, including economies of scale.”
Commenting on the RFID business, O’Bryant indicated that Avery Dennison anticipates significant long-term growth for this new technology, but is paring expenses to match near-term demand expectations. Through both revenue growth and cost reduction, the company expects to cut the annual loss from RFID in half in 2008. The company announced a couple of agreements earlier this year that represent solid steps forward, including one with Motorola to supply a portion of their inlays, he said.