Energizer (ENR)2025-05-06 17:48Financial Performance - The Company reported net sales of $9.2 million and $7.1 million for the quarters ended March 31, 2025, and 2024, respectively, and $16.9 million and $19.4 million for the six months ended March 31, 2025, and 2024, respectively [143]. - Operating profit for the quarters ended March 31, 2025, and 2024, was $2.4 million and $1.4 million, respectively, and for the six months ended March 31, 2025, and 2024, was $4.3 million and $6.6 million, respectively [143]. - For the second fiscal quarter ended March 31, 2025, net earnings were $28.3 million, or $0.39 per diluted common share, compared to $32.4 million, or $0.45 per diluted common share in the prior year [157]. - For the six months ended March 31, 2025, net earnings increased to $50.6 million, or $0.69 per diluted common share, from $34.3 million, or $0.47 per diluted common share in the prior year [158]. - Total net sales for Q2 2025 were $662.9 million, a slight decrease of 0.1% compared to $663.3 million in the prior year [183]. Project Momentum - The Project Momentum program is expected to generate approximately $200 million in pre-tax savings by the end of fiscal 2025, with $181 million realized as of March 31, 2025 [153]. - Total Project Momentum restructuring and related pre-tax costs for the quarter ended March 31, 2025, were $17.6 million, down from $23.4 million in the prior year [154]. - Project Momentum delivered savings of approximately $16 million in the second fiscal quarter, contributing to adjusted gross margin improvement [169]. - Incremental network transition costs related to Project Momentum were $2.7 million for the quarter and $16.7 million for the six months ended March 31, 2025 [156]. Currency and Economic Impact - The Company experienced currency and related losses of $1.0 million and $22.0 million in the three and six months ended March 31, 2024, respectively, due to the economic reform in Argentina [144]. - The impact of currency, excluding hyperinflationary markets, negatively affected earnings by $2.7 million, or $0.03 per share, for the quarter ended March 31, 2025 [161]. - The macroeconomic environment remains challenging, with inflationary pressures and geopolitical instability expected to continue affecting operations and consumer demand in fiscal 2025 [141]. - The Company anticipates continued declines in operating profit due to rising costs from the devaluation of the Argentine Peso [143]. Costs and Expenses - The Company recorded $2.3 million and $3.5 million in SG&A of legal fees and other costs associated with acquisitions during the quarter and six months ended March 31, 2025, respectively [149]. - SG&A for Q2 2025 was $136.0 million, or 20.5% of net sales, up from $122.5 million, or 18.5% in the prior year [171]. - Adjusted SG&A for the first half of 2025 was $243.7 million, or 17.5% of net sales, compared to $231.7 million, or 16.8% in the prior year [172]. - Advertising and sales promotion expense (A&P) was $20.8 million, or 3.1% of net sales, in Q2 2025, down from $21.4 million, or 3.2% in Q2 2024 [173]. - R&D expenses were $8.1 million, or 1.2% of net sales, for Q2 2025, consistent with the prior year [174]. Debt and Financing - The company entered into an amended agreement extending the term of its $760 million Senior Secured Term Loan to 2032 and its $500 million Revolving Credit Facility to 2030 [198]. - The company has a contractual commitment to repay long-term debt of $3,138 million, with $5.7 million due within the next twelve months [211]. - Net cash used by financing activities was $81.7 million for the six months ended March 31, 2025, compared to $193.9 million in the prior year [203]. Cash Flow and Investments - Cash flow from operating activities was $64.2 million for the six months ended March 31, 2025, a decrease of $150.7 million compared to the prior year, primarily due to working capital changes [201]. - Net cash used by investing activities was $55.7 million for the six months ended March 31, 2025, with anticipated capital expenditures of approximately $80 to $90 million for fiscal 2025 [202]. Segment Performance - Battery & Lights segment net sales increased by 1.5% to $488.0 million in Q2 2025, driven by organic growth of $14.2 million, or 3.0% [184]. - Auto Care segment net sales decreased by 4.1% to $174.9 million in Q2 2025, with an organic decline of $4.8 million, or 2.6% [185]. - Global segment profit decreased by 4.2% to $147.5 million in Q2 2025, with an organic profit decline of $3.8 million, or 2.5% [189]. - Battery & Lights reported a segment profit decrease of 5.8% year-over-year, with an organic segment profit decline of $6.8 million, or 2.8%, due to increased SG&A and A&P spending [193]. - Auto Care achieved a segment profit increase of 17.8% year-over-year, with an organic segment profit rise of $11.2 million, or 23.7%, driven by improved gross margin from Project Momentum savings [194]. Taxation - The effective tax rate for adjusted net earnings for the quarters ended March 31, 2025, and 2024 was 23.1% and 23.3%, respectively [164]. - The effective tax rate year-to-date was 23.9%, down from 33.8% in the prior year, primarily due to charges from the December 2023 Argentina Reform [179]. Hedging and Derivatives - The Company reported a gain of $3.5 million and a loss of $2.7 million on foreign currency derivative contracts for the quarters ended March 31, 2025, and 2024, respectively [221]. - The Company has 16 open hedging contracts for future zinc purchases with a total notional value of approximately $29 million as of March 31, 2025 [223]. - The Company recorded an unrealized pre-tax gain of $36.3 million on the interest rate swap as of March 31, 2025, compared to $39.8 million as of September 30, 2024 [226]. - The unrealized pre-tax loss on the zinc hedging contracts was $0.3 million as of March 31, 2025, compared to an unrealized pre-tax gain of $4.0 million as of September 30, 2024 [223]. Inflationary Accounting - The financial statements for the Egypt subsidiary were consolidated under highly inflationary accounting effective October 1, 2024, due to a cumulative inflation rate exceeding 100% [228]. - The Argentina subsidiary's financial statements have been consolidated under highly inflationary accounting since July 1, 2018, and remain highly inflationary as of March 31, 2025 [229]. - The impact of highly inflationary accounting for Egypt and Argentina on consolidated financial statements is uncertain and depends on exchange rate movements and monetary assets and liabilities [230].