“The team has come together extraordinarily well in navigating what is proving to be one of the most challenging periods we have experienced as a company. The compounding effects of the health, economic and societal crises are having an unprecedented impact on our teams, our markets, and our communities,” says Mitch Butier, chairman, president and CEO. “Our focus continues to be on ensuring the health and welfare of our employees, delivering for our customers, supporting our communities, and minimizing the impact of the recession for our shareholders. I’m pleased to report that we are making solid progress on all fronts.
“Second-quarter revenue came in better than we expected. Following a sharp decline in April, total company sales improved sequentially in May and June. In this environment, a key focus is protecting our profitability for the year, which we reported in the first half, with adjusted EBITDA margin above prior year.
“Our strategic priorities are unchanged. We are protecting our investments to expand in high-value categories, particularly RFID, while driving long-term profitable growth of our base businesses, and we remain confident in our ability to create significant long-term value for all our stakeholders."
Market / Operations Update
The company’s Label and Packaging Materials (LPM) business, which serves a critical role in supply chains globally, remained substantially open to serve customers as the COVID-19 pandemic unfolded across the world, with the exception of sites in India, which are now operational. The company’s operations in Europe and North America experienced significant demand surges in mid-March through April, resulting in backlogs that carried into early June, driven by food, hygiene, and pharmaceutical product labeling, as well as variable information labeling related to e-commerce. Demand for these categories slowed later in June in both Europe and North America, as overall supply chain destocking began to impact demand for labels. Demand in emerging markets weakened through the months of April and May, with improvement in June.
In contrast, late in the first quarter, the company began to experience a significant decline in demand for Retail Branding and Information Solutions (RBIS) tickets, tags, and labels for apparel, reflecting the widespread closure of retail stores and apparel manufacturing hubs, as well as a decline in demand for graphics and products serving durable and industrial end markets. These trends continued through April, followed by sequential improvement in May and June, as lockdowns were eased and demand improved.
All manufacturing sites impacted by government-mandated closures are now open.
Second Quarter 2020 Results
Net sales were $1.53 billion, down 14.9 percent. Sales were down 12.0 percent ex. currency, and down 13.7% on an organic basis.
Reported operating margin declined 350 basis points to 8.1 percent. Adjusted EBITDA margin declined 60 basis points to 14.0 percent, while adjusted operating margin declined 140 basis points to 10.7 percent.
Reported net income was $0.95 per share, compared to $1.69 per share in the prior year second quarter.
Adjusted net income was $1.27 per share, down 26 percent, above the company’s expectations, reflecting a sales decline below the low end of its outlook range in April.