Avery Dennison Corporation (AVY) Earnings Call Transcript & Summary

Okay. We'll go ahead and get started. Thanks, everyone, for joining. My name is Ghansham Panjabi. I'm the packaging and coatings analyst at Baird. I hope everybody is doing well. And again, thank you for your participation. It's a real privilege to host Avery Dennison management today. From the company, we have Chairman and CEO, Mitch Butier. Mitch has been CEO since 2016 and previously was Chief Operating Officer for 2 years prior, and he was CFO prior to that and joined Avery Dennison in the year 2000. The call format, we've done these in the past. We have roughly 80 of you listening in. And each of you will be able to ask questions on the portal online. And those questions will come directly to me, and I will aggregate them and interlace them throughout the -- throughout our conversation. So basically, I'll moderate this virtually. So feel free to send your questions, and I promise I'll prioritize those. I also have a brief disclosure statement to read, which is -- please refer to event confirmation e-mail, published research or Baird's website for important disclosures discussed during this event. So, first off, Mitch, welcome, and thank you for joining us.

Thank you, Ghansham. Thanks for providing the forum to be able to speak to everybody and provide an update.

Absolutely. So Mitch, on the first quarter call, you basically guided towards 15% to 20% type organic sales declines for the second quarter year-over-year. I think you were down 18% in the month of April. And I was hoping you could update us on the LGM segment in particular, that 67% of sales according to your slide deck, which is up in your website. Maybe we could just start there, and you can take us through how things have progressed in the month of May.

Yes. So overall, yes, we guided the company being down 15% to 20%, and that was when we weighed down, particularly from RBIS and Graphics, which is the G in LGM businesses, which were going to be down quite a bit, and LPM was in the early stages of the recession, showing quite a bit of resilience. So we are right now tracking. So quarter to date, we've got 3 weeks left, we are down about 15%, so close to the low end of the decline overall. And within LGM, across the months, we've basically been seeing the declines low single digits consistently throughout all of that, a bit of a moderation of the growth throughout the quarter in LPM, so the label-based material business. As we expected, we saw quite a bit of a surge, as we talked about in the last earnings call in late March and that we were seeing in April, a bit of a moderation as some of the inventory stocking -- levels of inventory stocking reduced and that's being compensated for by the fact that Graphics and RBIS are having sequential improvement coming out of April as we go through the quarter.

Great. Any other trends, Mitch, you can point out to in terms of LGM in particular? You mentioned that there was a bit of a bifurcation with LPM up significantly in the early part of the quarter. Clearly, there was pantry hoarding by consumers during the initial stage of this pandemic, and there was an inventory replenishment cycle, if you will, that unfolded as well. So can you just take us through some of those trends that you're seeing with that segment specifically?

Sure. It's different by region because of the crisis, COVID-19 unfolded in each region at different times. Maybe I'll just talk through a little bit regionally what's happening. So we've seen overwhelming strength in North America and Europe combined. If I look at North America, that business was up LPM, specifically is what I'm referring to, which is the majority of LGM, was up low double digits in April, up mid-single digits in May, and we are expecting that business to be up low single digits or flattish here in June. In Europe, we're double digits, both April and May is what we've seen. So pretty strong demand overall. We -- and that's related to, as we've talked through in the past, we've got inventory building and then also just a move towards consumer packaged goods, if you think about house -- home care products, packaged foods and so forth. So it's too early to tell how much of that is driven by true data on end consumption trends versus the inventory stocking both at the pantry level as well as throughout the supply chain. But we think it's going to be -- as we have said before, we expect it to be -- have been an impact from both of those, and we'll really need the next few weeks to see how it plays out. So that's in North America, Europe. If you look within Asia Pacific, in China, so we've talked about that business had still been down even though it come out of the -- it wasn't down as much as it was in the February time frame when the COVID-19 crisis first hit. If you look in April, that business was flat, low single -- down low single digits again in May and now up here in the first couple of weeks of June. So it seems to have started to hit more of a plateau -- not a plateau, but more of a comping with prior year now despite a significant portion of that market being tied to exports. I don't mean our direct sales, but as far as just the overall economy. So -- and we're starting to see a little bit of positive trends here in June, but that's only a couple of weeks. And then South Asia is the one where -- it hit South Asia and Latin America last, and we were still seeing strength. I'm not sure if we commented on this in the earnings call, but still seeing some strength in pockets of South Asia even through April. And as we expected, that turned out to be a bit of inventory stocking. And we've seen some pretty significant declines in South Asia in May, ASEAN down 15%; India, down 30%. And now seeing a little bit of a stabilization and things being flat to up low single digits here, first couple of weeks of June. So, South Asia, it hit last, China it hit first and North America and Europe, somewhere in between. Overall, we've seen a pretty strong -- relative to our competition, we feel pretty good with our position and our ability to serve customers throughout the crisis, and we're going to need a few more weeks to really see what the normalization of trends here are because there was just so much inventory stocking. And when our lead times got longer, particularly in North America and Europe, and we saw some preordering going on. So we're going to need a few more weeks to see exactly how that works out. But overall, we feel extremely confident with the collection of businesses at LGM and the company at large, but you're specifically asking about LGM, and that will get back to the normal growth trajectory here once all the stores do.

Okay. That's very helpful. What about some of the other dynamics that were prevalent over the last few weeks? It seemed like a lot of the CPG customers were basically narrowing SKUs doing big runs just to make sure that things were in the stores as people pivoted from on-premise to off-premise, et cetera. Have you seen some of that start to moderate some of the other channels like convenience stores and yes, maybe a market like the U.S., which was impacted disproportionately over the last few weeks. Have you seen any sort of change there?

That wouldn't have impacted us quite as much because the base material is often the same, whether they're using 1 SKU that they're running or multiple. So we have read that and hear that as well from our own interactions with end consumers. I think one of the things that we do see is some of the premium categories are not selling as strong as normal. If you think about premium wines, when people are having a bottle of wine at home, they tend not to have the premium wines as much as when they have out in the restaurant, you're seeing some of that in the personal care side as well. I think that's more to do with the stay-at-home environment than our overall view. It's just our opinion is that the long-term trends around premiumization and so forth will return once we get through this crisis, but those are some of the things that we're seeing specifically in multiple end markets.

Got it. And in terms of new products, Mitch, I mean, just for the segment, are you seeing -- how is customer commercialization activity sort of pivoted during the past couple of months? I assume that very few people were interested in -- a lot of new products were delayed just based on comments out of transcripts from the companies at the customer level that have reported over the past couple of months. Have you seen any change in that dynamic?

No, not meaningfully. But I would say there was no activity at all for a while and very recently. Now people are starting to talk about the need to start thinking about that again. So -- and that's across all of the businesses in general. So there was just a complete kind of standstill on anything to do with new programs, new products for a while. And right now, what we're seeing is people starting to come back to dusting off those plans and reinvigorating plans, but it's still early stages.

Okay. So for LGM, just to kind of summarize, tracking at the low end of that 15% to 20% decline, right, for the second quarter. What about...

Sorry, Ghansham, sorry. The 15% to 20% was for the company, and we're tracking at 15% for the company for LGM quarter-to-date, the business is down 3%.

Got you. Got you. Okay. Got it. And what about if we switch to RBIS, I think you'd assume 40% decline -- a 50% decline in the month of April. How has that progressed through the course of this quarter?

Yes. So quarter-to-date, it's down 40% basically right as we had estimated. It was down a little more than 50% in April, down a little less than 40% in May and down 20% in June, which is pretty much right around where we had predicted it. We don't have much forward visibility, as you know, but it basically is playing out exactly along the lines that we had expected. And again, when you look at -- this is both the retail being shut down, but also the apparel manufacturing elements being shut down. So we're seeing it play out across various regions in different ways over the months. But basically, the apparel manufacturing sector has basically come back, if you will, and now it's going to be really driven by demand side of the equation in RBIS.

Got it. And some of the retailers that had reported the Targets and the Walmarts of the world, they're talking about apparel down quite a bit during the early part of the quarter and then as stimulus checks, et cetera, started to make their way through the system, they saw an inflection towards the end of April. Is there -- just touch on customer sort of sentiment, obviously, there's many layers of uncertainty as it relates to the outlook. But what is -- what are your commercial guys telling you at this point for that -- on the forward-looking trajectory?

Still early days, but overall, I don't think you can make one statement broadly other than people expect apparel to be a key industry that will continue to grow very low single digits as a market, but there's going to be real winners and losers as far as how those products are delivered to consumers. And so what we're seeing is just a continued reinforcement in a big way around the importance of omnichannel, importance of speed. That is getting all those -- those long-term trends are being accelerated even more. The importance of touchless, which doesn't necessarily mean touch-free, but touchless, retail is an emerging trend. I've been kind of talked about loosely for a while, but it's really accelerating the amount of the discussions that we're having with customers. So those are all trends that we're -- we've been seeing or talking about that are really accelerating right now. And that is something that, particularly when it comes to RFID and our Intelligent Label platform, we continue to see this as being a significant opportunity. And as we've said before, it's not a question of if but when. But I think it's really going to come down to, you got to think about customer by customer, retailer by retailer, brand by brand. They're all positioned differently, and there's going to be -- the strong are going to get stronger, and there's going to be some that are going to have, as we've all seen in the headlines, pretty challenging time coming through this. I think this is a -- everybody is realizing they've got to get more visibility to their inventory throughout the entire system. They've got to be connected with the end consumers even more, particularly when you talk about e-commerce sales. So that's all happening. Last thing I'd say, the other -- in addition to omnichannel, the retailers that are -- sell also essential goods. So if you think about some of the discount chains and so forth that may be selling food categories and so forth, they obviously have fared better than maybe just pure apparel retailers who were not considered a central businesses. So that is the other dynamic that has come through here as well.

Okay. Got it. And then just finally, Mitch, on IHM, before we get into some of the details within each segment. Just maybe touch on what you've seen over the last couple of months there.

Yes. So IHM is down low 20%. Biggest driver being industrial and -- industrial categories and particularly automotive. That business actually -- and we all see what's going on in automotive, it actually was a little bit of lagging the trend, it actually held up relatively well in March and early April, and there was still some inventory building going on what we saw. And so that business has not shown the sequential improvement. It's the only one that hasn't shown the sequential improvement. We expect it, and this is what we saw in the last recession as well, there'd be a little bit of a lagging trend versus a leading trend for what's going on in the end markets such as automotive and building construction and so forth, but overall looking at it as expected but just sequentially a different movement.

Okay. Got you. Clearly, a lot of variability between the segments. Maybe, Mitch, if we can kind of step back, I mean, a lot of people are drawing the parallel between the financial crisis and clearly, the stock market reaction is very different in terms of duration on the way down and on the way up as well, but how has the company evolved since that time line? How is the industry different relative to back then? Maybe we could just start off there.

Yes. So let me start with the company first. The company has evolved tremendously since then. I think about the composition of our portfolio, we had a portion of our portfolio, which at the time was in secular decline around office product labeling, so postage labeling. That was a significant part of our EBIT at the time. We've since divested that. We have dramatically improved our margins over the years. So we're entering into this crisis from a position of health operationally. Our growth rate -- our organic growth rate is higher than it was as we've entered this recession from a position of strength commercially. And financially, we're entering in a position of strength. In the last financial crisis, we were pretty highly levered. And we've -- right now, our debt levels are below our targeted leverage ratios. We've been anticipating there would be, through our various scenario planning, a recession at some point on the horizon. We never anticipated it would come in the form that it did, but we had been anticipating and preparing for it, so we would be in a position [indiscernible].

Got you. Just in terms of that particular time period, I mean, clearly, earnings had a pretty sharp snapback in 2010. But as you pointed out on the last quarter call and just what we've seen so far, this recession is very different. Clearly, pantry loading boosted LPM, in particular, the early part of this phase. Is there a risk of a dislocation lower during the back half of the year as the truer impact of the recession, higher unemployment, et cetera, starts to manifest? How should we think about that dynamic?

Yes. So overall -- yes, just let me comment real quick. So in the last recession, we bounced out pretty quickly than we've traditionally have. And I think the overall statement view we have and what history has proven is the resiliency of the portfolio. And I'd made a comment that if it were to play out in depth and duration, some of the last recession that we would expect 2021 to look similar to 2019 from an earnings perspective, this recession is different as you call out, Ghansham. But the theme there is something that we still very much view as exactly how -- what we expect over the course of the cycle. So the difference from last recession specifically related to LPM, the largest part of LGM, is that we normally see destocking actually a little ahead of a down cycle. And then it's quickly followed when the recession -- when we start to come out of the recession by the restocking compounded by increased end consumption. So that is what we have historically seen for that business. And for the company across the recession, we've generally seen a loss of 1 year's worth of momentum. So a year's worth of growth on the top line as well as the bottom line. But in LPM specifically, what you've been talking about that we've traditionally seen a decline earlier followed by a bounce-back here. We didn't see as much -- really a decline. We saw a little bit of a surge. So we'll have the tough comps. If you think about it in March through May of next year, around not having that inventory build, I don't think in this environment, given what's going on, that we would see significant destocking below normal levels. So we'll see destocking from the high inventory levels, but not below normal inventory levels is our current thinking. But even if we do, again, being the industry leader with the scale advantages, with the best distribution networks. If we move into an environment where speed becomes even more important, that plays to our strength, and we feel extremely well positioned in that.

Great. And how does this current environment, just given the shock to the system, right? I mean does that change your view in terms of terminal balance sheet leverage? And should it?

So does it change our view? Yes. So I think overall, our view here is people go straight to leverage and the ratio, our scenario planning thinks through a wide variety of scenarios. And it's not just how much leverage you have, but making sure that your revolving credit agreements, you don't wait until you just got 6 months left or so to renew. We renew those a couple few years before they expire. So you're always in a position of strength that you can weather any couple of your cycle without needing to tap debt markets and so forth. So that's basically been our approach. So as far as -- we haven't adjusted our thinking about what our leverage target should be, to get to your specific question. We think those are appropriate when we came up with those targets. We actually were thinking about them across economic cycles, and the leverage targets that we have not only give us the right amount of liquidity and leverage in any economic cycle, but it's also around trying to find the lowest cost of capital across economic cycles. And in some cycles, having very low leverage is the lowest cost of capital and other cycles having higher leverage is the lowest cost of capital, but we try to find the sweet spot across cycles for what the right leverage position would be. So we haven't adjusted our thinking, don't expect to right now, and we think we've got the right balance because we've been very thoughtful about this over cycles.

Sure. And there's actually a question from the audience that fits in perfectly with this, which is, what would Avery need to see on the macro or any other variable to take an offensive view on capital allocation specific to M&A?

Yes. So offensive view specific to M&A. So M&A, our pipeline, we're continuing to work at -- we're continuing to engage. And that's something we will continue to do. And for us, it's a key part of our strategy to accelerate our base strategies otherwise. So this is something we're actively continuing to pursue and expect it to be an important part of our strategy. We haven't seen a whole lot other than the Smartrac transaction of late. And valuations were a bit rich for a while. And to be quite honest, we haven't seen some of the dislocation that we would have normally expected in this kind of environment. So we're going to continue to have these courtships with various players in the industries of our space and near adjacencies. We'll continue to work it, but we're going to be -- we're playing the long game here, and we're focused on looking for opportunities where we can really marry up capabilities of other key companies in our industry to make our core proposition even stronger. So we don't have a set -- we must do x acquisitions by [ exit ]. I think that gets into a tricky outcome, but we definitely see it as a key part of our strategy.

Okay. And you talked on the last call about $500-plus million of free cash flow both for 2020 and 2021. Obviously, there's levers that you pulled in terms of CapEx for this year. And I assume working capital would be a directional benefit as well. But can you just give us a visibility on free cash flow going out to next year? Why do you have that kind of confidence in 2021, just given the unpredictability at this point?

Well, I'm not going to get into details on next year, but overall, our free cash flow has proven resilient across economic cycles. We look at our strategic pillars, one of our key strategic pillars of being disciplined steward of capital, and that includes not just where we invest, but how we manage our capital base. And so free cash flow is a key metric of ours internally, how we look at the business, how we incentivize management, and that's proven to be resilient over time and something that we are committed to as well. And specifically for this year, yes, we're on track for the $500-plus million that we've talked through in the last earnings call.

Got it. There's a question from the audience on the raw material cost curve, pricing discipline across the industry. Just update us on what you're seeing first off on raw materials. And then just comment generally on how the industry is managing from a disciplined standpoint pricing-wise.

Yes. So we saw some deflation sequentially. We talked about things have stabilized, been a bit -- I shouldn't say, stabilize. We're not seeing as much deflation anymore. Prices are kind of bouncing around in a couple of categories, and we're seeing -- seem to have found bottom, and we're starting to see a little bit of inflationary pressure, and I'm talking extremely modestly here. So in paper as well as in -- look at oil where it was just, I guess, a month or 2 ago and where it is today. So not a huge story there and as far as from an end -- from a pricing standpoint, in this period, as I've said, the focus has been getting product out the door. We've seen a surge in demand. The entire industry, we've had some increased cost to serve and to be able to deliver on that, whether it be premiums paid to employees through the depths of the COVID-19 crisis. Just general cost to serve elements. So it kind of balances itself out, if you will. So we're not seeing any significant big dynamics on the pricing front overall. And that's -- we're the industry leader, and we know that show -- means demonstrating leadership on multiple fronts, and that includes, from a pricing standpoint, a discipline throughout.

Great. And I'm just going to -- in the last few minutes that we have, Mitch, I'm just going to run through the Q&A that's come in. And thanks for everybody for sending in these questions and please keep them coming. So first off, within RBIS, the question is on the customer base, how are they thinking about the back half of the year? Maybe you could just take that more broadly in terms of the lessons maybe from 2008, 2009 in terms of how the customers of yours are sort of anticipating demand patterns evolving over the next couple of quarters. The best way you can, Mitch.

Yes. No, I appreciate it. So we don't know, is what I'll share, but I'll share my thinking on it. And I don't think the last recession is probably a very good proxy because this is a situation where retailers and their office -- they were just shut retailers and brands. And the entire apparel manufacturing industry was shut for a period of time. Some places, just a few weeks or a month; in other places, a bit longer. So -- and it was shut during the -- what was the peak period for back-to-school and early fall, that usually happens March through May. So that's exactly when things were shut down. So we're starting to see now retailers beginning to realize trying to accelerate things to have more offering for the back-to-school and fall time frame. And also at the same time, thinking about holiday, and how to work through place orders and think about what the right balance is for holiday sales. So that's what we're working through. Big focus right now is really just on thinking through a lot of discussions that we've heard historically, how do we -- how do customers improve their speed, shorten the overall cycle time of the supply chain. Those conversations are happening a lot more again. And if you look at the last recession, the inventory level of apparel goods at retailers here in the U.S. dropped quite significantly, and that was one of the big reasons for the decline in our own revenue in the last recession. But then inventory stayed low. The retail industry in general got much more disciplined as a result of that. And that was one of the big drivers towards adopting new technologies and techniques, including RFID. And so I think you could see another -- this being a significant catalyst for change for how to get more contactless retail, how to further speed up supply chains, get more visibility to the inventory, and we're going to continue to partner with all of our customers, current and perspective on doing just that. I do think that the question on our mind beyond back-to-school and fall, I'm not clear on how just the -- even if the consumer demand, the consumer wants to come back, if how much product will actually be available, just given what's already happened, if we look at holiday, I think the question will be -- that's still just a very much open question. I can foresee that we might need to get through the entire holiday season at the consumer level for retailers to really have a clear idea in footing about where the consumer [indiscernible] best going forward.

Got it. And then on a related question on what you just said, the question is on -- do you have any insight between branded apparel and unbranded, I guess, private label in terms of trends? Are you seeing any out-of-pattern moves across those categories?

No, we're not seeing that significantly because we're coming off where there was a significant decline in volume and what's ramping up right now is just pushing through orders that were basically already there and weren't canceled. So we don't have visibility to the actual sell-through because a lot of the activity was country-based based on manufacturing location. The trends we're seeing have more to do with that than anything else. So I don't have any specific insights about branded versus [indiscernible]. Overall, we'd expect the trends that we've seen around some premium brands really doing well and discount brands doing well. We would expect the extremes continue on both ends, if you will, of the spectrum, doing well in the longer term.

Got it. And just in terms of RFID, maybe we can spend a few minutes there. Does this current environment, how does it sort of change the pace of adoption of RFID? I mean one of the things that stands out is there seems to be an accelerated push towards automation just to reduce labor content, but also reduce the risk of absenteeism as we've seen in terms of the risk parameters of having a lot of labor across your system. But just open-ended question on that, how do you see this sort of changing the adoption curve, if you will?

I think overall, it will be an accelerator. I think that it will also create, in a couple of specific places, a few stutter steps as well. So some examples, within apparel, that's already got a strong foothold and -- but some discussions with some retailers, brands, they've talked about how they just need to double down and move even quicker, and they're already in the pipeline, when we talk about our pipeline overall and they're talking about how do they go to full adoption even quicker as an example. So I think it can pull forward some of the growth of what was already in our pipeline in some areas. Others such as food. So, one, we've very recently just won an important new pilot for the -- in the food category. But clearly, a lot of pilots, if you're talking about quick-service restaurants and so forth, were put on hold during this crisis when they were just focused on how to get product out the door and dealing with a significant decline in revenue. But again, these -- we see this environment as being an accelerator of all of the trends that we have seen. And it's automation, it's contactless interactions in retail or food for that -- for those reasons around just the human health crisis that we have, automation to reduce labor content. And this inventory visibility is still a key driver whether you're talking apparel, whether you're talking food, just being able to track where products are real-time is a significant driver, and all these other elements are -- just help further improve the payback, the ROI for the investment in RFID. So we feel good with where we are. The acquisition of Smartrac, the integration is going well. We're just engaging with that team again this morning. Yes, going well in a challenging time. Obviously, not as easy when you can't physically get together the global teams and everything else. But really getting strong cultural affinity between the 2 organizations and the teams rightfully, so extremely excited by our position and our prospects.

Got you. Actually, there's a follow-up question from the audience on Smartrac in terms of what dimension does it add to your RFID capability skill set.

Yes. So one, if you look at it, there's product capability, and then there's also just channel access to the markets that we focused on. So our business was legacy RFID business is about 90% apparel and retail and roughly 10% was food and industrial and so forth. So we were 90% in apparel. If you look at Smartrac, they were 50-50, 50% in apparel and retail and 50% in automotive and logistics labeling and so forth. So one, they had just a broader spread outside of apparel. So two, from a channel access standpoint, they had better leverage within system integrators and a number of other customer channels accessing those various end markets. And from a product capability standpoint, we were the market leader in UHF, ultra high-frequency RFID, and their business was spread across multiple technologies, ultra high frequency, high frequency and various other form factors for actually in a more specialty inlays and so forth. So that was one, then they bring some R&D capabilities, which further enhances our R&D capabilities, and then just physical footprint. So we were investing significantly to expand our footprint and we wanted to, not just as far as capacity, but also geographic reach, and they brought a good complementary set of geographic region of footprint. So complementary on a number of fronts.

Okay. And then kind of going back to your longer-term growth algorithm for the last decade. I mean the company has really differentiated itself in the sense that organic growth has been very consistent and well above the peer group, certainly the sector on the packaging side that we cover. The emerging markets were a big part of that mesh in terms of growth, obviously, high-value categories as well. But just given sort of what's occurred and a bias towards less globalization, if you will, does that -- how does that change the calculus of that 4% or so organic sales growth constitution going forward? Does that change that materially in your view?

Does what specifically changed, Ghansham, sorry?

Just the lack of directional move away from globalization, supply chains moving around and so on.

No. I think if you look at our end market sales, and I know we've got slides in our materials that show our end market sales are actually pretty diverse, and we think that you're going to continue to see growth globally distributed, and the emerging markets are going to continue to emerge. So we actually believe strongly in that, have invested in that. And we've taken the long view and will continue to. Big part of our strength is, we actually go into a new potential market before it's even begun to develop and plant the Avery Dennison flag and work to develop the actual market, and that includes creating our customer classic converters within those markets. So that's something we've traditionally done and will continue to do. So no, I don't think overall that it changes that. I think what's going on in the political landscape and things move around. Product categories have been moving around as far as manufacturing, particularly for high employee or high labor content goods, such as apparel, those have migrated around the globe over time, and we've actually been able to leverage our global presence and global capabilities to service our customers and work with them regardless of how they migrate around the globe. So it's definitely an important dynamic. It definitely has an impact, Ghansham, given our global presence and long history of managing through these things, it's something that, yes, I feel confident we're well positioned to be able to do.

Okay. And then there's 1 more question from the audience. And then I just want to conclude with a sort of a high-level question for you. But the questions on the $120 million temporary savings in 2020, you called that previously. Should we expect a complete sort of reversal at some point?

The $120 million of what we call "temporary savings," Ghansham, so it's $50 million, $60 million of restructuring savings we said this year with another $60 million next year. So that's all $120 million. So that we expect to be structural. The other $120 million of temporary cost savings, yes, we said we expect a good portion of that to be a headwind as the -- as things recover, and we would continue to expect a good portion of that to be a headwind as things recover. So a lot of that's belt-tightening, and we're not going to go on not traveling forever. There are certain things you need to do to run a global business, and we will be returning to some of that, but some of it will obviously be sticky and remain. And on top of that, I think our history shows. We've -- one of our other key strategies, I talked about capital discipline earlier, is really around just a relentless focus on productivity. And we're going to keep that, and that helps fund our focus on high-value segment growth, driving outsized growth there and being profitable in our base business. And so we're going to continue to focus on our key strategies.

Okay. And just finally, Mitch, I mean I'll just give you a chance to pitch the story. I mean, obviously, the markets are gyrating around in terms of expectations of growth going forward. And there's clearly a positioning towards the world getting better. Just your view in terms of what investors should think about as they evaluate Avery Dennison at long-term as an investment.

Yes. Thanks, Ghansham. Yes. We are extremely confident about our position and prospects over the long term. We're focused on long-term value creation for all of our stakeholders, and I think our history shows that particularly over the last 10 years, we're going to continue to drive towards that. We're continuing to invest, again, to drive outsized growth in high value segments, leveraging our differentiators that we have in innovation, grow a profitable base. And we feel that this trying time that we're going through on multiple fronts, our leadership overall is going to continue to stand out. So I would just like to really more than telling our story, just to use the time to -- because a number of our team members listen to these calls and just once again, say thank you to the team. The team has done a phenomenal job showing agility, being dynamic and just keeping each other safe and making sure we're delivering for our customers. And we have a lot more to do on many fronts as a team, and I think times like this just really shows the testament to the strength of the team, and the team is demonstrating that right now. So I'm saying thank you a lot during this time, and I have a lot, and we all have -- and as investors, a lot to be thankful for, for the Avery Dennison team here. So thank you.

Okay. Terrific, Mitch. You've been very generous with your time. So thanks, again, for your participation. This will conclude the call, and I just want to wish everybody a great week. And Emily, will you close this out, please.