Avery Dennison Corp. (AVY) posted a 57% plunge in second-quarter
profit amid restructuring and other charges, but earnings topped
analysts' expectations.
The office-supply and label manufacturer also slashed its
dividend in half as the company sees demand woes continuing beyond
2009.
Chief Executive Dean A. Scarborough called the payout cut to 20
cents a share a "precautionary action" sparked by the "possibility
of continued poor market conditions beyond 2009, along with
increased pension funding requirements."
The cut also reflects Avery's near-term debt-reduction target
and its slumping earnings. "When our outlook improves, we expect to
raise the dividend in line with this target," said Scarborough.
Office-supply companies have seen demand weaken during the
recession as business customers delay replacing old office-supply
products, leading some companies in the sector to cut costs by
closing underperforming stores and reducing new store openings.
In May, Moody's Investors Service lowered its debt ratings on
Avery closer to junk, citing an expected rise in raw material costs
and declining sales across most of its operations. To deal with the
woes, Avery cut some 10% of its work force.
Its second-quarter earnings fell to $39.8 million, or 38 cents a
share, from $92.4 million, or 93 cents a share, a year earlier.
Excluding restructuring and other costs, earnings fell to 56 cents
from $1.03. Net sales fell 20% to $1.46 billion.
Analysts polled by Thomson Reuters expected earnings of 36 cents
a share on revenue of $1.54 billion.
Gross margin was flat at 26.8%.
The pressure-sensitive materials business, the company's largest
segment that provides Fasson-brand roll labels and reflective
highway safety products, saw profit fall 39% as revenue dipped
19%.
Shares closed Wednesday at $29.81 and were inactive
premarket.
-By Mike Barris, Dow Jones Newswires; 212-416-2330;
mike.barris@dowjones.com;