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Energizer Announces First Quarter Results

Energizer Holdings, Inc. Press Release (excerpted)

FlashlightNews.org - 1/24/2007

Company reports higher revenue and profitability, but reports higher zinc prices raising costs

Energizer e2 Lithium Batteries

Energizer e2 Lithium Batteries

ST. LOUIS, Mo. - Energizer Holdings, Inc., (NYSE: ENR), today announced results of its first quarter ended December 31, 2006. Net earnings for the quarter were $122.3 million, or $2.08 per diluted share, versus net earnings of $120.5 million, or $1.77 per diluted share in the first fiscal quarter of 2006. Included in the current and prior year quarters are charges of $2.3 million, after-tax, or $0.04 per diluted share, and $3.1 million, after-tax, or $0.05 per share, respectively, for restructuring projects in Europe.

"We are pleased with our first quarter results, as our robust sales growth helped offset higher zinc costs," said Ward M. Klein, Chief Executive Officer. "Our most recent battery pricing initiative being implemented this month in the United States and previously announced pricing being phased in around the world should help mitigate higher material costs going forward. As for Schick, innovation is the key to success in the highly competitive wet shave business, and we look to our February 2007 launch of Quattro Disposable in both men's and women's versions to sustain our momentum."

Sales for the quarter were $959.2 million, an increase of $76.8 million in absolute dollars and $58.3 million in constant currency basis, as all three segments improved. Segment profit increased 3% to $226.1 million as continued growth in the Razors and Blades segment was partially offset by a decrease in the North America Battery segment. General corporate and other expenses were basically flat, and interest and other financing items increased $3.5 million.

North America Battery

Net sales to customers for the first quarter of $416.5 million increased $20.7 million, or 5%, due to favorable pricing and product mix and higher sales volumes. Overall pricing and product mix was favorable due to the price increase that was implemented in early calendar 2006. Performance battery and charger volumes increased in excess of 30% in the quarter. Energizer Max unit sales decreased 8% in the quarter, mainly due to retail inventory contraction and the lack of hurricane-related sales.

Gross profit increased $4.9 million for the quarter, as higher sales were partially offset by higher product costs primarily due to the increased cost of zinc. Product cost in the current quarter was unfavorable $8.7 million compared to the same quarter last year as material cost increases of $12.4 million were partially offset by other cost reductions. Segment profit decreased $3.8 million, as the higher gross profit was more than offset by higher advertising, promotion, general and administrative expenses.

The United States (U.S.) retail battery category is defined as household batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty batteries. The U.S. retail battery category declined an estimated 1% in dollars for the quarter, versus the same period last year reflecting lack of hurricane-related sales in the current year as well as a relatively low-growth retail environment. Retail consumption of Energizer's products increased an estimated 4% in dollars, resulting in an approximately 38% share of the retail battery category for the quarter. Regarding Energizer Max, retail consumption was flat in units and up 3% in dollars, reflecting the price increase implemented early in calendar 2006, partially offset by increased sales of larger pack sizes, which sell at lower per unit prices. Retail inventory levels at December 31, 2006, were modestly lower than seasonal norms and prior year retail inventory levels.

International Battery

Net sales for the quarter were $307.2 million, an increase of $36.7 million, with currency accounting for $11.2 million of the increase. On a constant currency basis, sales increased 9%, primarily on higher volumes. Volume increases were primarily in the performance and premium product lines. Overall pricing and product mix for the segment was basically flat in the quarter as higher prices in a number of markets were roughly offset by an unfavorable European mix of larger package sizes, which sell at lower per unit prices.

Gross profit increased $6.0 million for the quarter, including $8.9 million of favorable currency impacts. Absent currencies, gross profit declined $2.9 million as the benefit of higher sales was more than offset by higher product cost of $12.5 million, primarily attributable to higher zinc and other materials. Segment profit increased $1.1 million, including $6.5 million of favorable currency. Absent currency, segment profit declined $5.4 million on lower gross profit and higher selling, general and administrative expenses.

Outlook

Looking forward, zinc, and to a lesser extent, nickel, copper and other material costs in the battery segment will continue significantly above last years rates for at least the remainder of 2007. At current market prices, and taking into account inventory on hand and hedges in place, we anticipate material costs to be $65 to $75 million unfavorable for the balance of the fiscal year, compared to the same period last year. Previously announced price increases in the U.S. and a number of international markets, along with planned reductions in other operating costs are intended to offset all or the bulk of material cost increases.

To access the complete press release, visit: Energizer Press Release.