Energizer (US:ENR)2021-11-10 19:20Financial Data and Key Metrics Changes - The company achieved over $3 billion in net sales for the first time, with a 10.1% increase in net sales for fiscal 2021, and organic sales growth of 7.3% [8][26] - Adjusted earnings per share increased by 51% to $3.48, while adjusted EBITDA rose by 10% [27] - Adjusted gross margin decreased by 100 basis points to 37.7% due to inflationary cost pressures [23][26] Business Line Data and Key Metrics Changes - The Auto Care business experienced nearly 17% growth, benefiting from elevated demand and distribution gains [8][9] - The Battery business faced a decline in organic revenue, down less than 1% in the fourth quarter compared to 6% growth in the prior year [22] - The Auto Care category showed consistent growth, with a 3.5% increase in value compared to the previous year [14] Market Data and Key Metrics Changes - The global Battery category grew by 2.9% in value and 3.7% in volume on a two-year stack basis, despite a decline in the category in the near term [11][12] - The Auto Care category's household penetration reached nearly 75%, with a 20% increase in buy rate [14] Company Strategy and Development Direction - The company plans to mitigate rising costs through pricing actions against approximately 85% of its business, with a focus on maintaining brand preference and market share [17][19] - The company is exploring additional pricing opportunities and cost reduction initiatives to offset inflationary pressures [19][32] - The strategic focus includes investing in brands and expanding Auto Care internationally [15][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatile macro environment, with rising costs related to commodities, transportation, and labor expected to continue throughout 2022 [16][31] - The outlook for fiscal 2022 anticipates organic sales to be roughly flat, with expected declines in Battery volume due to prior year elevated demand [19][30] - Management remains optimistic about the long-term growth potential of the Auto Care category and the resilience of its brands [15][66] Other Important Information - The company proactively built inventory to ensure product availability during peak selling seasons, resulting in a 42% increase in inventory compared to the prior year [18] - The company entered into a $75 million accelerated share repurchase program, with approximately 1.9 million shares repurchased under this program [25] Q&A Session Summary Question: Comments on gross margin and pricing opportunities - Management indicated that pricing actions have been taken on 85% of the business, with ongoing evaluations for additional pricing opportunities [36] - Commodity costs are expected to worsen, leading to an anticipated gross margin erosion of approximately 150 basis points [39][40] Question: Long-term view on gross margin rebuilding - Management emphasized a focus on recouping dollars related to inflation and identified opportunities for efficiency improvements in the long term [45][46] Question: Inventory management for fiscal 2022 - Management plans to cautiously reduce elevated inventory levels while considering the current operating environment [47] Question: Impact of cost pressures on pricing - Management acknowledged that costs have increased beyond initial expectations, affecting pricing strategies during the peak season [49] Question: Supply chain issues and their impact - Supply chain congestion affects both Battery and Auto Care businesses, with management taking proactive steps to manage inventory and logistics [51][52] Question: Online business performance - The company reported robust growth in e-commerce, with consumers showing a strong preference for branded products in both Battery and Auto Care categories [60] Question: Auto Care growth sustainability - Management plans to sustain Auto Care growth through innovation and international expansion, with positive consumer engagement trends [64][66]