Avery Scotches Unprofitable Tape Business, to Pare Work Force by 8%

November 10, 1987|DENISE GELLENE | Times Staff Writer

Avery International, a leading adhesive tape and label manufacturer based in Pasadena, said Monday that it is closing its transparent tape business, reducing its work force by 8% and selling other businesses to improve profits.

An Avery spokeswoman said 1,000 employees will be affected, 350 of them in Southern California, by the company's restructuring effort. The company employs 12,000 worldwide.

The Southern California workers are employed by the Avery Note operation in Rancho Cucamonga and a distribution center in Brea, both of which are being closed, and 20th Century Products in Los Angeles, which is for sale.

Avery said the restructuring will result in a loss in its fiscal fourth quarter and that as a result, profit for the year that ends on Nov. 30 will be lower than expected, or around $36 million.

But Avery said earnings next year would improve by between $5 million to $6 million as a result of the restructuring.

Avery makes a wide range of industrial adhesives, from tapes for aircraft design to disposable diaper tabs. The company is probably better known to consumers for its self-stick address labels. It had earnings of $48.6 million on sales of $1.13 billion in fiscal 1986.

Avery's shares fell 50 cents on Monday, closing at $16.375 in composite trading on the New York Stock Exchange.

Avery said it is closing its unprofitable transparent tape and adhesive note pads business after failing to make significant inroads against industry leader Minnesota Mining & Manufacturing. Avery started these lines on the West Coast two years ago, with plans--never fulfilled--to go national.

Besides plans to sell 20th Century Products, a direct mail marketer of binders and other plastic office supplies, Avery is selling its Permacel Tape unit, a manufacturer of tapes for industrial use, including masking tape and strapping tape. The company said it lost money at its Permacel unit in the third quarter because of a strike.

Mary O'Neill, an analyst with Duff & Phelps investment firm in Chicago, viewed Avery's restructuring as a "positive step." She said the company's adhesive note pads were viewed as inferior to 3M's Post-it-Notes. "They didn't stick to as many things," she said.

O'Neill noted that Avery acquired several businesses last year, including two label manufacturing businesses in France and Kingsbacker-Murphy, a Torrance-based manufacturer of plastic office supplies that are sold under the K&M brand. She said the company "had a lot of projects" as a result and "probably needed to slim down."

Avery said it is consolidating its French label operations and closing a total of six facilities in the United States. The company said the businesses to be closed or sold accounted for $90 million in sales last year, or less than 10% of its sales.

The company said it would take an after-tax charge of $25 million in the fourth quarter related to the restructuring.

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