Energizer Holdings, Inc. — Q1 FY2024 Form 10-Q
Reporting period: Three months ended December 31, 2023; unaudited. Dollar amounts are in millions except per-share data. The company manufactures and sells batteries, lights, and auto-care products.
Financial performance
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Net sales | $716.6 | $765.1 |
| Gross profit / reported gross margin | $267.0 / 37.3% | $298.3 / 39.0% |
| Operating segment profit | $139.3 | $148.9 |
| Net earnings | $1.9 | $49.0 |
| Diluted EPS | $0.03 | $0.68 |
| Adjusted diluted EPS, non-GAAP | $0.59 | $0.72 |
| Operating cash flow | $178.1 | $161.0 |
| Capital expenditures | $25.5 | $9.5 |
Sales declined 6.3% year over year; organic sales fell 7.4%, partly offset by favorable currency impact. Battery & Lights sales fell 8.0% and Auto Care sales rose 5.7%. Segment profit declined 6.4%. Adjusted gross margin was 39.5%, up 0.5 percentage point year over year, with Project Momentum savings more than offsetting mix, product-cost, and pricing pressures. GAAP net earnings included significant restructuring charges and Argentina-related currency losses.
Cash, debt, and liquidity
Cash and cash equivalents were $241.7 at quarter-end, versus $223.3 at September 30, 2023. Long-term debt was $3,303.3 on the balance sheet; the debt note reports $3,346.1 of total long-term debt including current maturities and finance leases. The company prepaid $75.0 of term debt during the quarter and another $55.0 after quarter-end. It had no revolver borrowings and $492.4 of revolving capacity available after letters of credit. The company reported compliance with debt covenants. Operating cash flow benefited from working-capital movements, including increased receivables collections. Cash used in investing was $37.1 and cash used in financing was $110.8.
Outlook, commentary, and notable items
- Project Momentum: The expanded program targets $160–$180 of annual pretax savings by the end of FY2025, including $145–$160 from restructuring and $15–$20 from continuous improvement and working-capital initiatives. Management expects $55–$65 of savings in FY2024. Estimated program costs include $140–$150 of cash operating costs, about $20 of non-cash costs, and $75–$85 of capital expenditures through FY2025. The company reported approximately $76 of savings realized to date.
- Capital spending: FY2024 investing cash outflows are expected to be approximately $95–$105, including $35–$45 for Project Momentum initiatives.
- Argentina: The peso was devalued about 50% in December. The company recorded $21.0 of exchange losses, with no corresponding statutory tax benefit. Management cautioned that Argentina’s costs may rise faster than pricing, potentially reducing FY2024 operating profit; continuing effects are uncertain.
- Other factors: Management cited inflation, geopolitical instability, transportation and supply risks—including Red Sea disruption—and commodity-cost pressure. Currency excluding hyperinflationary markets benefited pretax earnings by $5.6 year over year. The quarter also included an $11.6 Belgium battery-asset acquisition and $22.4 of restructuring and related costs.
- Shareholder returns and contingencies: The company declared a $0.30-per-share dividend for Q2 FY2024. It said pending legal matters are not reasonably likely to be material based on current information; accrued environmental costs were $14.7.
Important facts for investors to verify
- Whether battery volume declines, attributed partly to holiday-order timing and weaker non-tracked channels, reverse in subsequent quarters.
- Delivery of Project Momentum’s targeted savings against its substantial restructuring and capital costs.
- The continuing earnings and cash effects of Argentina’s currency reform, inflation, and possible pricing actions.
- Whether adjusted margin improvement persists despite lower reported sales, product-cost pressures, and Auto Care profit weakness.
- Debt-reduction progress, interest-rate exposure, and liquidity needs; management’s outlook is subject to capital-market access and operating risks.