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Avery's Profit Rises After Cost Cuts

July 26, 2006|Martin Zimmerman | Times Staff Writer

Label maker Avery Dennison Corp. reported higher second-quarter earnings Tuesday despite flat sales as it reaped bigger savings from its recent restructuring.

The Pasadena-based company said net income rose to $112 million, or $1.12 a share, in the three months ended July 1 from $89.4 million, or 89 cents, in the second quarter of 2005. The 2006 results included an after-tax gain of $15.6 million from the sale of the company's pavement marker business.

Sales totaled $1.41 billion, down 0.1% from the year before.

Avery Dennison has been cutting jobs, closing and consolidating plants and streamlining corporate operations to cut costs. The company Tuesday raised its estimated range of the annualized savings from the restructuring to $85 million to $100 million, up from $80 million to $90 million.

The company also increased the lower end of its full-year profit forecast, which is now $3.65 to $3.80 a share from continuing operations, not including restructuring charges. The previously forecast range was $3.55 to $3.80 a share.

Not including charges related to the restructuring and other items, Avery earned 99 cents a share in the second quarter. That was a penny better than the consensus forecast of Wall Street analysts.

However, sales were below analysts' expectations. The company's stock slipped 49 cents to $57.31.

The company blamed the flat year-over-year sales comparison on several factors, including earlier back-to-school orders in 2005 that pushed more sales into that year's second quarter, the sale or termination of low-profit product lines and a strike at a European competitor last year that boosted results.

Sales at the company's core labeling division rose 1%. Profitability at the unit was better than expected, said analyst George Staphos of Banc of America Securities, who described the quarter as "relatively solid" overall.

Chief Executive Dean A. Scarborough said price increases offset rising energy and raw material costs during the quarter.

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