Avery Dennison(US:AVY)2026-02-25 16:32Financial Performance - In fiscal year 2025, Avery Dennison's total net sales were comprised of approximately 69% from the Materials Group and 31% from the Solutions Group[17]. - Net sales for 2025 reached $8,855.5 million, a 1.1% increase from $8,755.7 million in 2024, and a 5.9% increase from $8,364.3 million in 2023[171]. - Net income for 2025 was $688.0 million, a decrease from $704.9 million in 2024, with net income per share at $8.81[181]. - The effective tax rate for 2025 was 25.6%, down from 26.1% in 2024, attributed to benefits from a foreign restructuring transaction[182]. - Reported net sales change for 2025 was 1%, compared to 5% in 2024, with organic sales change remaining flat at 0% in 2025, reflecting higher volume offset by raw material deflation-related price reductions[156]. - Net cash provided by operating activities in 2025 was $881.4 million, a decrease from $938.8 million in 2024, primarily due to higher incentive compensation and tax payments[168]. - Adjusted free cash flow increased to $707.1 million in 2025, compared to $699.5 million in 2024, driven by lower purchases of property, plant, and equipment[168]. Acquisitions and Investments - The acquisition of W.F. Taylor Holdings, Inc. was completed in 2025 for an aggregate purchase consideration of approximately $390 million[29]. - In 2025, the company acquired Taylor Adhesives for approximately $390 million, with ongoing evaluations for additional acquisition targets[71]. - The aggregate purchase consideration for the 2023 acquisitions was approximately $231 million, funded through cash and commercial paper borrowings[165]. - The company expended approximately $47 million on restructuring actions in 2025, with incremental savings of over $60 million from these actions[79]. - Capital expenditures were approximately $200 million in 2025, including investments in fixed assets and IT infrastructure[81]. - The company paid approximately $401.8 million for acquisitions, net of cash acquired, significantly higher than $3.8 million in 2024 and $224.9 million in 2023[210]. Market and Sales Dynamics - International operations accounted for approximately 69% of total net sales in 2025, with over 200 manufacturing and distribution facilities in more than 50 countries[17]. - Approximately 40% of the company's net sales in 2025 originated in emerging markets, which are critical for long-term growth strategy[59]. - The indirect impact of tariffs resulted in an aggregate low single-digit rate decrease in sales in the overall apparel categories over the second, third, and fourth quarters of 2025[52]. - Sales in the overall apparel categories declined in 2025 as a result of tariff-related uncertainty[64]. - The company anticipates that tariff-related uncertainty will persist, with an indirect impact resulting in a low single-digit rate decrease in sales in overall apparel categories during the latter half of 2025[169]. Sustainability and Corporate Responsibility - The company has made substantial investments in sustainability-driven products, focusing on advancing the circular economy and increasing recyclability of packaging[66]. - Research and development efforts are directed towards sustainability, circular economy, and advanced technologies, with a focus on RFID and digital solutions[28]. - The company achieved a 60% absolute cumulative reduction in GHG emissions from its 2015 baseline, exceeding its 2025 sustainability goal of a 26% reduction[70]. - By 2030, the company aims to reduce Scope 1 and 2 GHG emissions by 70% compared to the 2015 baseline and work with its supply chain to reduce Scope 3 emissions[70]. - The company is facing increasing demands from stakeholders regarding sustainability and governance practices, which could impact its market valuation[83]. Workforce and Employee Engagement - The global workforce consisted of approximately 35,000 employees, with 83% located outside the U.S. and 67% in emerging markets[31]. - Approximately 98% of employees were paid above the applicable legal minimum wage at year-end 2025[35]. - Avery Dennison's commitment to employee engagement is reflected in annual surveys, which aim to improve workplace culture and retention[37]. - The company faces challenges in recruiting and retaining high-caliber talent, which is critical for its competitive position[95]. Financial Risks and Liabilities - The company had approximately $3.73 billion of debt as of December 31, 2025, which significantly impacts its ability to obtain financing on favorable terms[100]. - Average variable-rate borrowings were approximately $739 million in 2025, making the company sensitive to fluctuations in interest rates[101]. - Changes in foreign currency exchange rates, particularly unfavorable impacts from the Indian rupee and Brazilian real, may result in lower net sales and increased costs[56]. - The company is exposed to risks from geopolitical, social, and economic instability, which could materially adversely affect its business[53]. - The company is subject to ongoing compliance requirements and audits by various tax authorities, which could materially affect its effective tax rate[93]. - Changes in corporate tax policies and enforcement activities could have a material adverse effect on the company's business due to its international operations[92]. Cybersecurity and IT Risks - Cybersecurity risks persist, with potential threats from AI-driven attacks and the need for ongoing monitoring and updates to security measures[86]. - The company has implemented measures to mitigate risks related to information technology disruptions, but vulnerabilities remain due to reliance on third-party vendors[84]. - The company’s cybersecurity risk management program includes a comprehensive incident response plan and is overseen by the Board, with updates provided to the Audit Committee[127]. - Cybersecurity risks, including ransomware attacks, continue to increase, necessitating ongoing improvements in the company's security measures[90]. Legal and Compliance Issues - The company is involved in litigation regarding intellectual property rights, which could result in significant costs and impact its competitive position[109]. - The company has accrued liabilities for environmental clean-up at ten sites designated by U.S. governmental agencies, with potential costs exceeding the accrued amounts due to uncertainties in remediation[115]. - The company is subject to evolving environmental, health, and safety laws, which could significantly increase compliance costs and impact production capabilities[114]. - Export control laws may impact the company's ability to compete in international markets, with potential penalties for non-compliance[116]. Shareholder Returns - The company repurchased 3.2 million shares of its common stock at an aggregate cost of $575.6 million in 2025, with $526.3 million remaining authorized for repurchase[106]. - A quarterly dividend rate increase of approximately 7% was implemented in April 2025, although future increases are not guaranteed[107]. - Dividends paid amounted to $288.4 million in 2025, slightly higher than $277.5 million in 2024[212]. - Share repurchases totaled $572.3 million in 2025, compared to $247.5 million in 2024[212].