Edgewell Personal Care(US:EPC)2022-05-09 16:00Financial Performance - Net sales in Q2 fiscal 2022 increased by 5.5% to $547.7 million, with organic net sales rising by 2.1% due to strong performance in Sun Care, Grooming, and Women's shave [84]. - Net earnings for Q2 fiscal 2022 were $23.2 million, up from $14.4 million in the prior year quarter, while adjusted net earnings decreased to $27.0 million from $38.5 million [84]. - Net earnings per diluted share in Q2 fiscal 2022 were $0.43, compared to $0.26 in the prior year quarter, with adjusted earnings per diluted share at $0.50, down from $0.70 [84]. - For the first six months of fiscal 2022, net sales increased by 4.2% to $1,011.0 million, with organic net sales up by 2.3% driven by growth in Sun Care and Wet Shave [88]. - Net earnings for the first six months of fiscal 2022 were $34.4 million, compared to $32.1 million in the prior year, while adjusted net earnings decreased to $50.2 million from $61.8 million [90]. Acquisition Impact - The acquisition of Billie was completed on November 29, 2021, for a purchase price of $309.4 million, net of cash acquired, funded through cash on hand and a revolving credit facility [78]. - Organic net sales will be negatively affected in fiscal 2022 due to the Billie acquisition, as sales previously reported as third-party sales are now inter-company sales [72]. - For the second quarter of fiscal 2022, net sales increased to $547.7 million, a 5.5% rise, driven by a $27.4 million impact from the Billie acquisition [94]. - Wet Shave net sales for the first six months of fiscal 2022 increased 3.4%, including a 6.0% increase from the acquisition of Billie, while organic net sales were relatively flat [106]. Cost and Margin Pressures - Inflationary pressures have impacted margins, with higher costs in materials, labor, warehousing, and distribution, as well as increased advertising and promotional expenses [84]. - Gross profit for the first six months of fiscal 2022 was $420.0 million, with a gross margin of 41.5%, down from 44.8% in the prior year period [95]. - Adjusted gross margin percentage for the first six months of fiscal 2022 was 42.0%, down 300 basis points from the prior year, primarily due to commodity inflation [95]. - Wet Shave segment profit for the second quarter of fiscal 2022 was $27.6 million, down 39.9%, with organic segment profit decreasing 23.7% due to inflationary pressures [107]. Segment Performance - Organic net sales for the first six months of fiscal 2022 rose by 2.3%, supported by increased volumes in Sun Care and Grooming, despite declines in Skin Care and Feminine Care [94]. - Sun and Skin Care net sales for the second quarter of fiscal 2022 increased 14.9%, driven by Sun Care growth of over 28% [108]. - Feminine Care net sales for the second quarter of fiscal 2022 decreased $7.7 million, or 11.5%, impacted by supply constraints [111]. - Feminine Care segment profit for the second quarter of fiscal 2022 was $1.9 million, a decrease of 66.1% due to supply chain constraints [112]. Expenses and Cash Flow - SG&A expenses for the first six months of fiscal 2022 were $198.2 million, representing 19.6% of net sales, compared to 19.2% in the prior year [96]. - Research and development expenses for the first six months of fiscal 2022 totaled $26.5 million, accounting for 2.6% of net sales, down from 2.9% in the prior year [99]. - Cash flow used by operating activities was $39.9 million during the first six months of fiscal 2022, compared to $18.8 million used in the prior year [118]. - Cash flow used by investing activities was $325.7 million during the first six months of fiscal 2022, primarily due to the acquisition of Billie for $309.4 million [119]. Debt and Financing - Total borrowings were $1,454.8 million as of March 31, 2022, including $204.8 million tied to variable interest rates [115]. - The company had net borrowings of $179.0 million under the Revolving Credit Facility, primarily to fund the acquisition of Billie [120]. - Future minimum repayments of debt include $179.0 million in fiscal 2025, $750.0 million in fiscal 2028, and $500.0 million in fiscal 2029 [123]. - The company incurred additional financing cash outflows related to early debt retirement of the 2022 Senior Notes totaling $26.5 million [120]. Taxation - The GAAP effective tax rate for the second quarter of fiscal 2022 was 26.6%, while the adjusted effective tax rate was 25.3% [81]. - The effective tax rate for the first six months of fiscal 2022 was 20.5%, a decrease from 28.4% in the prior year [102]. Shareholder Returns - The company declared a quarterly cash dividend of $0.15 per common share for the first fiscal quarter, totaling $16.6 million declared during the six months ended March 31, 2022 [122]. - Dividend payments totaled $16.7 million in the first six months of fiscal 2022, compared to $8.4 million in the prior year period [120]. - The company repurchased 1.9 million shares of common stock for $75.4 million, with 7.8 million shares remaining under the Repurchase Plan [121].