Avery Dennison Corporation (NYSE:AVY) Q3 2018 Earnings Conference Call Transcript

Oct 23, 2018 • 01:00 pm ET

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Avery Dennison Corporation (NYSE:AVY) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) Welcome to Avery Dennison's Earnings Conference Call for the Third Quarter Ended September 29, 2018. This call is being recorded and will be available for replay from 12: 00 p.m. Pacific Time today through midnight Pacific Time October 26. To access the replay, please dial (800) 633-8284 or +1 (402) 977-9140 for international callers. The conference ID number is 21857413.

I would now like to turn the call over to Cindy Guenther, Avery Dennison's VP of IR and Finance. Please go ahead, ma'am.

Executive
Cynthia Guenther

Thanks, Chris. Today we'll discuss our preliminary unaudited third quarter results. Please note that throughout today's discussion we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined qualified and reconciled with GAAP on schedules A4 to A8 of the financial statements accompanying today's earnings release.

(Forward-Looking Cautionary Statements)

On the call today are Mitch Butier, President and CEO; and Greg Lovins, SVP and CFO. And now I will turn the call to Mitch.

Executive
Mitch Butier

Thanks, Cindy, and good day everyone. I'm pleased to report another solid quarter. Adjusted EPS grew 15% in line with our expectations and sales were up 6% organically, with both high-value categories and emerging markets continuing to deliver above-average growth.

Label and Graphics Materials delivered a solid quarter. Sales grew organically by more than 6% driven by both higher prices and volume. Emerging markets and high-value categories where once again up high single-digits. LGM's margin, however, declined more than expected for the quarter, largely reflecting the lag between when we see inflation and when we can adjust pricing.

I'm confident that we will see meaningful margin recovery here in the fourth quarter just as I'm confident in the strength of our competitive position. We again saw evidence of this in the strong attendance and customer engagement at our industry's recent trade show in North America. Much of the energy are focused on two key areas. The first was sustainability, specifically our products that enhance recyclability. And second, our intelligent labels platform, which is generating as much buzz among our converted network as it has among retailers and brand owners, which brings us to Retail Branding and Information Solutions.

The team delivered again another strong quarter with over 8% organic growth and significant margin expansion. The base business of RBIS continued to grow at a healthy clip through ongoing share gain and RFID grew once again by over 20% in the quarter. We continue to see strong engagement among apparel retailers and brands across all stages of the pipeline, as well as promising early-stage developments in other end markets.

Our investments to sustain this growth in the form of capacity additions, R&D and business development resources are all on track. Overall, we're pleased with the progress we made in building out our intelligent label platform as we lean forward to capture this