Energizer Holdings Inc. (
reported first quarter 2013 non-GAAP EPS of $2.20, which exceeded
the Zacks Consensus Estimate by 4 cents. EPS improved 7.3% year
over year and 25.0% sequentially primarily due to stringent cost
control in the last quarter.
Revenues declined a modest 0.5% year over year but increased
4.3% sequentially to $1.19 billion in the reported quarter.
However, it fell short of the Zacks Consensus Estimate of $1.21
The year-over-year decline was primarily due to weak organic
sales (down 0.3% year over year) and unfavorable foreign exchange
(negative impact of 0.2%). Revenue growth suffered due to
declining market share in the battery segment.
Personal Care (46.5% of revenue) decreased 1.8% year over year
to $554.3 million. Organic sales declined 1.4% year over
year, primarily due to weak sales in Wet Shave and Infant Care
product segments, which declined 3.9% and 8.3% on a
year-over-year basis, respectively. Feminine Care remained flat
on a year-over-year basis, while Skin Care revenues jumped 11.3%
from the year-ago quarter.
Personal Care revenue declined 6.1% sequentially as sales
declined across all the segments. Wet Shave, Skin Care,
Feminine Care and Infant Care plunged 8.7%, 4.4%, 7.5% and 12.4%,
respectively. Hydro franchise grew 26.0% year over year in the
quarter. However, this strong growth was fully offset by weak
performance from Quattro line of products.
Household Products (53.5% of total revenue) increased 0.7%
year over year to $638.2 million. Organic sales increased 0.8% on
a year-over-year basis, driven by 2.0% increase in alkaline
battery sales. The increase in alkaline sales was driven by
approximately $18.0 million of incremental sales related to the
impact of Hurricane Sandy.
Excluding this incremental volume, organic sales would have
declined 2.0% from the year-ago period due to continued category
declines and lower market share in the U.S.
On a sequential basis, Household products jumped 15.4%,
primarily due to incremental sales related to Hurricane Sandy and
Gross margin was flat on a year-over-year basis at 47.1%, as
favorable pricing in Household products was fully offset by
unfavorable product mix. Gross margin expanded 100 basis points
("bps") on a sequential basis.
Operating margin increased 50 bps from the year-ago quarter
and 380 bps on a sequential basis to 23.2% in the reported
quarter. This strong improvement was primarily driven by lower
spending on advertising and promotion (A&P), selling, general
and administrative expenses (SG&A) and research and
development expenses (R&D) in the quarter.
SG&A expense as a percentage of revenues declined 110 bps
from the year-ago quarter and 200 bps on a sequential basis. This
was primarily due to lower compensations costs, effective cost
control and improving unfunded deferred compensation liabilities.
A&P expense also declined 10 bps from the year-ago quarter
and 80 bps sequentially.
As a result of improving operating margins, net margin
increased 10 bps on a year-over-year basis and 170 bps
sequentially to 11.5% in the reported quarter.
Balance Sheet & Cash Flow
Cash and cash equivalents were $787.1 million at the end of
first quarter compared with $718.5 million at the end of the
fourth quarter. Long-term debt remained flat sequentially at
$2.14 billion. Cash flow from operating activities was $71.6
million in the reported quarter.
Energizer reiterated fiscal 2013 adjusted EPS guidance in the
range of $6.75 to $7.00 per share. From the sales perspective,
management expects mid-single digit sales growth in the Personal
Care segment. For the Household Products segment, management
continues to expect a decline in low-single digits primarily due
to lower volumes.
In Nov 2012, Energizer announced a restructuring program to be
completed over the next two years that is expected to yield
pre-tax cost savings of $200 million on an annualized basis.
Management expects this 75% of the cost savings initiative to
improve profitability and the rest would be ploughed back into
the business for long-term growth perspective. The company
expects this savings to accrue from the second quarter of
We believe that product innovations coupled with higher
pricing of Energizer's household products and the restructuring
initiatives would positively impact its results going forward.
Moreover, lower-than-expected operating expenses and prudent
product mix would expand margins in the near term.
However, declines in volumes in the battery category,
unfavorable foreign exchange and increasing competition from
companies such as
Panasonic Corp. (
), Kimberley-Clark Corp. (
Procter & Gamble Co. (
are the near-term headwinds.
Currently Energizer has a Zacks Rank #3 (Hold).
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