Avery Dennison Corporation · NYSE:AVY
Avery Dennison — Investor Day (March 2021)
74 slides from Avery Dennison's investor day presentation, Mar 10, 2021
Slide 1: Investor Day
Investor Day March 2021 1 March 2021 Investor Day
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements contained in this document are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and financial or other business targe
Slide 3: Strategic Overview
Strategic Overview Mitch Butier Chairman, President & CEO 3 March 2021 Investor Day
Slide 4: Creating superior long-term value
OVERVIEW Creating superior long-term value ● Consistent GDP+ growth with top-quartile returns ● #1 player in primary businesses, leveraging strong competitive advantages ● Large, growing, and diverse end markets ● Successfully executing key strategies ○ Drive outsized growth in high-value categories
Slide 5: Avery Dennison at a glance
Avery Dennison at a glance Sales by Segment ● Recognized industry leader ○ More than 32,000 employees LGM ○ Operations in more than 50 countries Label and Graphic Materials ○ Materials manufacturer of branding and information labeling solutions and RBIS functional materials for consumer goods, 23% R
Slide 6: Broad exposure to diverse end markets
Broad exposure to diverse end markets 2020 Sales by Product Category 2020 Sales by End Market, est. Other* Logistics ~6% Food LATAM & Shipping ~15% S. Asia U.S. HPC Non-durable Emerging ~35% Industrial/ Consumer Markets Goods ~31% China Durable Pharma ~20% ~45% Beverage E. Europe & MENA Retail Other
Slide 7: Catalysts for consistent GDP+ top line growth
Catalysts for consistent GDP+ top line growth Portfolio Shift (% of total sales(1)) 2010 2015 2020 • Secular trends drive GDP+ growth High-value Categories • Intelligent Labels, specialty labels, graphics, tapes, apparel ~$2.7B embellishments Emerging • Further penetration of self-adhesive Markets l
Slide 8: GDP+ growth and top-quartile returns drive continued superior value creation
GDP+ growth and top-quartile returns drive continued superior value creation Sales Growth Profitability Return on Total Capital 75th percentile(2) 5-YR 5-YR CAGR CAGR 2019 2020 2025 2016 2020 2025 2016 2020 2025 Target Target Target Global 3.0% -3.7% 3.7% GDP(1) (1) Source: IHS Markit (2) Refers to p
Slide 9: Consistently delivering for all stakeholders
Consistently delivering for all stakeholders Employees Customers Communities Shareholders Employee Engagement Vitality Index Cum. GHG% Reduction Cumulative TSR (5-year) 173% AVY S&P 500 103% Women Manager+ Service Flexibility % Certified Paper Continuing to lead in an environmentally and socially res
Slide 10: Engaged, diverse, and accountable Board of Directors
Engaged, diverse, and accountable Board of Directors Diverse Background From Underrepresented Communities Andres A. Lopez Anthony K. Bradley A. Alford Julia A. Stewart Ken C. Hicks President & CEO, Anderson Retired Chairman & Chair & CEO, Chairman, President & O-I Glass, Inc. Retired Vice Chair & CE
Slide 11: Senior Leadership Team
Senior Leadership Team Diverse Background 7% 7% From Underrepresented Communities Mitch Jeroen Ronaldo Francisco Hassan Anil Deon Butier Diderich Mello Melo Rmaile Sharma Stander CEO LGM LGM Intelligent Labels LGM LGM RBIS North America Latin America EMENA Asia Pacific Born in the U.S. Born in The Bo
Slide 12: Label and Graphic Materials
Label and Graphic Materials Jeroen Diderich VP/GM LGM North America Hassan Rmaile VP/GM LGM EMENA 12 March 2021 Investor Day
Slide 13: LGM delivers growth and high returns
LGM delivers growth and high returns Leader in growing self-adhesive label industry (~2.5X next largest competitor) Clear and sustainable competitive advantages ○ Global scale, materials science, and process technology ○ Operational and commercial excellence ○ Industry leading innovations enabling f
Slide 14: LGM at a glance
LGM at a glance 2020 Sales by Product Product Category Base (Label & Graphics) High-value Specialty/Durables Labels Categories Specialty Graphics ~32% Reflectives 2020 Sales by Geography 2020 Financial Snapshot U.S. & Canada $4.7 bil. End Market Revenue Emerging Western Europe Markets Sales Change Ex
Slide 15: Solid sales growth and margin expansion over the past five years
Solid sales growth and margin expansion over the past five years Sales Growth Profitability (1) 5-YR CAGR 2019 2020 2021 2016 2019 2020 2021 Outlook Outlook (1) Reflects the impact of closed acquisitions as of 3/10/2021 15 March 2021 Investor Day
Slide 16: Pressure-sensitive label market consistently delivering GDP+ growth
Pressure-sensitive (PS) label market consistently delivering GDP+ growth Label Industry by Technology ● PS labels provide greater shelf appeal and enhance the premiumization of packaging ‘15-’19 CAGR ● PS labels can be applied to almost every packaging type (boxes, plastic, glass, cans, PS Label ~4%
Slide 17: LGM serves attractive, diverse end-user applications, supported by secular trends
LGM serves attractive, diverse end-user applications, supported by secular trends LGM Market Key Trends Segments Size ● Decoration: premium look & shelf-appeal PS Label End Segments ● E-commerce & logistics Logistics 20% ● Hygiene & freshness requirements Reflectives ~$1B ● Information requirements/l
Slide 18: Leading through operational excellence, scale and sustainable innovation
Leading through operational excellence, scale and sustainable innovation Operational Excellence Innovation Sustainability Expansion of Greenfield, IN plant Product innovation at NL R&D lab New rPE facestock, first in the industry ● Industry leading quality & service ● Broad ecosystem engagement ● Broa
Slide 19: Clear Intent portfolio
Lead the industry in solutions that advance the circular economy Focus Areas Enablers Our Target Reduce Clear Intent portfolio (Coatweight, Liner, next-gen MDO) Sustainable solutions become the Rebalance resources to standard Enable recycling . (Cleanflake) drive sustainability ■ 100% of our Core Fil
Slide 20: Leading the industry in sustainability
Leading the industry in sustainability Widest range of sustainable product ...and leading circular innovation with solutions... solutions like Clean-Flake* 4 Clean bottle flakes for reuse 1 Bottles ground into flakes 2 Flakes washed in bath; labels separated from flakes 3 Clean flakes sink & labels float
Slide 21: Growth Catalyst #1: outsized growth in high-value categories
Growth Catalyst #1: outsized growth in high-value categories Specialty Labels Graphics & Reflective Solutions ● Wine, Spirits & Craft Beer: Premium look, shelf appeal ● GDP+ with favorable secular trends ● Pharma: Cold chain Logistics, aging populations, health care ● Driven by personalization, brand
Slide 22: Deep applications expertise delivering highly differentiated solutions
Deep applications expertise delivering highly differentiated solutions Anticipating Customer Needs ● Origin traceability Unmet ● Deep freeze capability Needs ● Authenticity in pharmaceuticals ● Battery flame/heat resistance World Class Solutions Materials Science ● Automotive aftermarket Graphics ● C
Slide 23: Growth Catalyst #2: emerging markets offer unique growth attributes
Growth Catalyst #2: emerging markets offer unique growth attributes 2010 2015 2020 Emerging Markets Profitable Growth Driven by: ● GDP & population growth ● Consumption trends ● Lower PSL penetration ● Decoration transfer from glue ● Operational excellence, scale & innovation 23 March 2021 Investor D
Slide 24: Industrial and Healthcare Materials
Industrial and Healthcare Materials Greg Lovins SVP and CFO 24 March 2021 Investor Day
Slide 25: IHM at a glance
IHM at a glance Product Category 2020 Sales by Product High-value Automotive Categories Other Industrial ~74% Healthcare Retail 2020 Sales by Geography 2020 Financial Snapshot Estimated End Market U.S. & Canada Revenue $626 mil. Europe Sales Change Ex. Currency Asia Pacific 5-YR CAGR 5.4% Latin Ameri
Slide 26: Continuing to position IHM businesses for long-term value creation
Continuing to position IHM businesses for long-term value creation ● End markets are attractive, with strong growth opportunities ○ Markets, while more cyclical, are growing above GDP with favorable secular trends (e.g., light-weighting & noise/vibration dampening) ○ AVY’s leadership in coating, adh
Slide 27: More cyclical end markets impacted recent results; underlying margin profile improving
More cyclical end markets impacted recent results; underlying margin profile improving, with more to come Sales Growth Profitability (1) 2017 2018 2019 2020 2021 2018 2018 2019 2020 2021 Outlook Outlook (1) Reflects the impact of closed acquisitions as of 3/10/2021 27 March 2021 Investor Day
Slide 28: Retail Branding and Information Solutions
Retail Branding and Information Solutions Deon Stander VP/GM RBIS 28 March 2021 Investor Day
Slide 29: RBIS is delivering on its promise
RBIS is delivering on its promise ● Leading global player in branding and information solutions for apparel ● Clear and sustainable competitive advantages addressing industry trends ○ Innovation and solutions capability help lead customers through shift from physical to e-commerce / IoT / Omni-chann
Slide 30: RBIS at a glance
RBIS at a glance 2020 Sales by Product Product Category Base Tags & Labels High-value Categories Intelligent Labels/RFID ~37% Ext. Embellishments AIDC(1) Solutions Estimated End Market 2020 Financial Snapshot 2020 Sales by Geography U.S. & Canada Sales $1.6 bil. Europe Sales Change Ex. Currency Asia
Slide 31: Business model transformation and growth in high-value categories has driven value creation
Business model transformation and growth in high-value categories has driven significant value creation Sales Growth Profitability (1) 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Outlook Outlook Simpler, faster, more competitive strategy in base has transformed cost structure, enabling
Slide 32: Evolving portfolio: high-value categories progress & end market diversification
Evolving portfolio: high-value categories progress & end market diversification High-value category evolution 5% 7% Competitive advantages 10% support accelerated high- value category growth 2010 2015 30% 2020 Base 97% 85% 63% Intelligent Labels/RFID Ext. Embellishments End market segment evolution E
Slide 33: RBIS has competitive advantages as trends accelerate in apparel, food and logistics
RBIS has competitive advantages as trends accelerate in large, growing apparel, food and logistics markets Key industry trends RBIS competitive advantages Sustainability, transparency and safe practices Industry-leading sustainable products and solutions and products become table stakes and ethical
Slide 34: Key Strategies
Key Strategies ● Deliver outsized growth in high-value categories (IL & EE) ● Unlock growth and value in food and logistics segment ● Leverage business model transformation; continue profitable share growth in base ● Strengthen organizational digital capability and solutions 34 March 2021 Investor Da
Slide 35: Progress in external embellishments; significant opportunity for future growth
Progress in external embellishments; significant opportunity for future growth Delivering on the EE promise... ~17% Org. Sales CAGR 2016 2017 2018 2019 2020 ...and positioned for outsized growth Key Strategies ● Accelerate share wins from increased pace Apparel Segment ~ $1.4B TAM of innovation for p
Slide 36: Intelligent Labels
Intelligent Labels Francisco Melo VP/GM Intelligent Labels 36 March 2021 Investor Day
Slide 37: Digital ID technologies to bridge the physical and digital worlds
Digital ID technologies to bridge the physical and digital worlds to create a more sustainable and intelligent life. 37 March 2021 Investor Day
Slide 38: Intelligent Labels drive improved efficiencies and increased inventory visibility
Intelligent Labels drive improved efficiencies and increased inventory visibility, enabling higher sales, reduced waste and fewer markdowns Omnichannel New delivery models Consumer experience Customer safety Sustainability Speed Supply chain Touchless Brand protection Waste & automation transparency
Slide 39: Supply chain needs continue to drive use case evolution
Supply chain needs continue to drive use case evolution Manufacturing Distribution / Retail / Home and Logistics Fulfilment Omnichannel – Authenticity – Proof of delivery – Proof of delivery – On shelf availability – Transparency – Traceability – Inventory visibility – Alternative fulfillment – Consum
Slide 40: Leading in a high growth segment
Leading in a high growth segment ● Historical growth UHF/RAIN RFID growth Intelligent Labels driven by Apparel (Billions of units) enterprise sales ($ mil.) ● Industry leading UHF/ RAIN RFID share position: 20 50%+ globally and 15–20% $1B+ higher in Apparel ~24% Org. CAGR CAGR ● New non-apparel 15 s
Slide 41: RFID technology — key capabilities
RFID technology — key capabilities Fast, accurate No line of Connecting No Low automated sight the physical maintenance cost data capture requirement and digital Battery-free Tens of Billions Up to 30 ft Item level of items already 1000 items/sec read-range serialization/ tagged to-date identificatio
Slide 42: Large, untapped addressable opportunities
Large, untapped addressable opportunities Retail ● Largest penetration in Apparel, 33% of addressable opportunity ● Significant opportunity in adjacent retail segments Apparel Beauty & Food General Retail ● Leverages existing 40 billion units Personal Care 200 billion units 5 billion units 10 billion
Slide 43: Use case in key segments: solving critical business needs
Use case in key segments: solving critical business needs General Pharma/ Apparel Beauty Food Logistics Auto Retail Healthcare SKU complexity ✓ ✓ ✓ ✓ ✓ Characteristics Product density ✓ ✓ ✓ ✓ ✓ ✓ Omnichannel growth ✓ ✓ ✓ ✓ ✓ Perishability/shrink ✓ ✓ ✓ ✓ ✓ ✓ Labor cost/constraints ✓ ✓ ✓ ✓ ✓ ✓ ✓ Incre
Slide 44: Our competitive advantage — uniquely positioned to win
Our competitive advantage — uniquely positioned to win Innovation Broadest RF Largest IP Open innovation: Most Digital ID product portfolio portfolio with Investments in experienced platform to with unparalleled 1500+ patents new tech R&D team in accelerate the materials science and applications the
Slide 45: UHF RFID ecosystem
UHF RFID ecosystem Base Media Service Readers / Software / Services / Chips Inlays Printers materials conversion bureau infra. SaaS solutions Chip Base Inlay Service Printer Digital ID suppliers materials mfg. bureau mfg platform Other converters and Hardware providers Solution providers service bur
Slide 46: The future enabled by Connected Products
The future enabled by Connected Products Connected supply chain Circularity and end of life Digital ID Digital Life 46 March 2021 Investor Day
Slide 47: Financial Review
Financial Review Greg Lovins SVP and CFO 47 March 2021 Investor Day
Slide 48: Delivering on objectives to drive GDP+ growth and top-quartile returns
Delivering on objectives to drive GDP+ growth and top-quartile returns 2017–2021 2017–2020 TARGETS RESULTS 5%+ Ex. Currency(1) 4% Ex. Currency(2) Sales Growth 4%+ Organic(1) 2% Organic(2) Operating Margin 11%+ in 2021 12% in 2020 (vs. 10% in 2016) Adjusted EPS Growth 10%+(1) 15%(2) Return on Total C
Slide 49: Achievement of long-term financial targets expected to drive continued superior value creation
Achievement of long-term financial targets expected to drive continued superior value creation 2017–2020 2021–2025 RESULTS TARGETS Sales Growth 4% Ex. Currency 5%+ Ex. Currency(1,2) 4-YR CAGR (4%+ Org. ‘22-’25)(3) 16%+ Adjusted EBITDA Margin 15% in 2020 in 2025 15% Adjusted EPS Growth 10%(1) 4-YR CAG
Slide 50: Catalysts for continued sales growth
Catalysts for continued sales growth 5%+ ~0.2% CAGR 1.5%-2.0% ~$9B ~2% Emerging Markets ~1.5% Emerging Markets $7B 2020 Base High Value Intelligent Closed 2025 (excl. IL) Labels M&A 50 March 2021 Investor Day
Slide 51: Balanced strategy creating value for shareholders
Balanced strategy creating value for shareholders Sales Growth Ex. Currency Adj. EBITDA Margin 2016 2018 2020 2021 2016 2018 2020 2021 Outlook Outlook Fixed Asset Turnover(2) EVA(1) (2-YR cumulative) 75th percentile(3) 2016 2018 2020 2021 2016 2018 2020 Outlook (1) Economic Value Added (EVA) is calc
Slide 52: Disciplined approach to capital allocation
Disciplined approach to capital allocation Capital Sources (2021-2025 cumulative) Capital Uses ~$0.7B (% of total cap. avail.) 25-30% 2017-2020 2021-2025 ~$1B Current Leverage Capacity Capex/Restructuring 33% 25%-30% $6.2B-$6.7B Add'l Leverage Capacity (total capital (Est. EBITDA Growth) available)
Slide 53: Creating superior long-term value
RECAP Creating superior long-term value ● Consistent GDP+ growth with top-quartile returns ● #1 player in primary businesses, leveraging strong competitive advantages ● Large, growing, and diverse end markets ● Successfully executing key strategies ○ Drive outsized growth in high-value categories ○
Slide 54: Panel Q&A
Panel Q&A 54 March 2021 Investor Day
Slide 55: To learn more about Avery Dennison, contact the Investor Relations Team
To learn more about Avery Dennison, contact the Investor Relations Team John Eble Sr. Director, Investor Relations john.eble@averydennison.com Dion de Boer Manager, FP&A and IR dion.deboer@averydennison.com 55 March 2021 Investor Day
Slide 56: Appendix A
Appendix A 2030 Sustainability Goals 2021 EPS Guidance Supplemental Sales Information 56 March 2021 Investor Day
Slide 57: Our Sustainability Goals
Our Sustainability Goals 2030 Goals 2030 Targets Satisfy the recycling, composting or reuse requirements of all single-use consumer packaging and apparel with our products and solutions. RBIS: 100% of core product categories will meet ClearIntent Standard Deliver innovations that LGM: 100% of our st
Slide 58: 2021 EPS Guidance (as of February 3, 2021)
2021 EPS Guidance (as of February 3, 2021) Reported EPS $7.50 – $7.90 Add Back: Est. restructuring costs and other items ~$0.15 Adjusted EPS (non-GAAP) $7.65 – $8.05 Contributing Factors to 2021 Results ● Reported sales growth of 5% to 9%, including a ~2% tailwind from currency translation at recent
Slide 59: Sales by Geography: diversified geographic exposure
Sales by Geography: diversified geographic exposure 2020 Sales by Manufacturing Location 2020 Sales by End Market, est. Other* Other* LATAM ~5% ~6% U.S. LATAM ~24% S. Asia U.S. Emerging S. Asia Emerging ~35% Markets Markets ~48% ~31% China Western E. Europe China Europe & MENA ~23% Western E. Europe
Slide 60: Appendix B
Appendix B Reconciliation of GAAP to Non-GAAP Financial Measures 60 March 2021 Investor Day
Slide 61: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation contains certain non-GAAP financial measures as defined by SEC rules. We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using cert
Slide 62: Organic Sales Change — Avery Dennison
Organic Sales Change — Avery Dennison (1) Totals may not sum due to rounding 62 March 2021 Investor Day
Slide 63: Organic Sales Change by Segment
Organic Sales Change by Segment (1) Totals may not sum due to rounding 63 March 2021 Investor Day
Slide 64: Organic Sales Change by Segment (cont.)
Organic Sales Change by Segment (cont.) (1) Totals may not sum due to rounding 64 March 2021 Investor Day
Slide 65: Adjusted Operating Margin and EBITDA — Avery Dennison
Adjusted Operating Margin and EBITDA — Avery Dennison 65 March 2021 Investor Day
Slide 66: Adjusted Operating Margin and EBITDA — LGM
Adjusted Operating Margin and EBITDA — LGM 66 March 2021 Investor Day
Slide 67: Adjusted Operating Margin and EBITDA — RBIS
Adjusted Operating Margin and EBITDA — RBIS 67 March 2021 Investor Day
Slide 68: Adjusted Operating Margin and EBITDA — IHM
Adjusted Operating Margin and EBITDA — IHM 68 March 2021 Investor Day
Slide 69: Adjusted Net Income
Adjusted Net Income The adjusted tax rate was 24.1%, 24.6%, 25%, and 28% for 2020, 2019, 2018, and 2017, respectively. (1) Includes restructuring and related charges, Argentine peso remeasurement transition loss, transaction and related costs, reversal of acquisition-related contingent consideration
Slide 70: Adjusted EPS
Adjusted EPS The adjusted tax rate was 24.1%, 24.6%, 25%, and 28% for 2020, 2019, 2018, and 2017, respectively. (1) Includes restructuring and related charges, Argentine peso remeasurement transition loss, transaction and related costs, reversal of acquisition-related contingent consideration, net g
Slide 71: Free Cash Flow
Free Cash Flow 71 March 2021 Investor Day
Slide 72: Return on Total Capital (ROTC)
Return on Total Capital (ROTC) (1) "Provision for income taxes" for the fourth quarter of 2017 includes the estimated impact of TCJA enacted in the U.S. on December 22, 2017. In the fourth quarter of 2018, we finalized our provisional amounts as defined under SEC Staff Accounting Bulletin No. 118 rela
Slide 73: Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA 73 March 2021 Investor Day
Slide 74: March 2021 Investor Day
74 March 2021 Investor Day