Energizer Holdings (ENR)

• Article
• Discussion
• Edit
• History
• Bookmark

See all Bulls Reasons Bulls: Reasons To Buy International diversification 0% agree International diversification Well diversified geographic reach makes the company less dependent on American Market and partially insulates it from economic down turn. View or Edit Reason 0 votes 0% agree Playtex Acquisition 0% agree Playtex Acquisition Acquisition of Playtex will result in high synergy with additional realizable sales of Playtex Product lines in international segment. View or Edit Reason 0 votes 0% agree See all Bears Reasons Bears: Reasons To Sell "Diversification, while normally a good thing, has its risks" 0% agree "Diversification, while normally a good thing, has its risks" Diversification, while normally a good thing, has its risks. With the acquisition of Playtech, Energizer has entered into the feminine hygiene arena in a big way. There is still substantial integration risk, and of course, one has to wonder if a battery company is up to the challenge of successfully growing a feminine hygiene business. View or Edit Reason 0 votes 0% agree Diversification, while normally a good thing, has its risks 0% agree Diversification, while normally a good thing, has its risks Diversification, while normally a good thing, has its risks. With the acquisition of Playtech, Energizer has entered into the feminine hygiene arena in a big way. There is still substantial integration risk, and of course, one has to wonder if a battery company is up to the challenge of successfully growing a feminine hygiene business. View or Edit Reason 0 votes 0% agree Reliance on Wal-Mart 0% agree Reliance on Wal-Mart Wal-Mart is Energizer's largest customer, accounting for 20% of the firms' combined sales. Being so dependent on one customer, can be risky, particular if Wal-Mart should feel the need to renegotiate or switch vendors. View or Edit Reason 0 votes 0% agree Send the authors a comment or suggestion This is one of the better written overviews I have read hear. A couple of notes: I notice the sto... more [Dismiss] [Done] See All Suggestions

Top Contributors shiv desai Related Articles China BAK Battery (CBAK) Emerging Markets Exchange Rates Exide Technologies (XIDE) Procter & Gamble Company (PG) Related Blog Posts » See All Related Posts powered by Wikinvest Wire

Best known for its tireless mascot, the Energizer Bunny, Energizer Holdings, Inc. is engaged in the manufacturer of primary batteries, flashlights, and men's and women's wet-shave products. The company derives more than 50% of its revenue from outside the United States, and with its two main brands, Energizer and Eveready, marketed and sold in more than 165 countries and operations in 23 manufacturing and packaging facilities on five continents, the company is nothing if not global. One of the primary concerns facing Energizer is the cost of raw materials. Zinc, a key component in its batteries, has more than doubled in price since 2005. To maintain margins, Energizer, has had to raise prices, potentially lowering demand for its products.

The acquisition of Playtex in October 2007, a top player in the feminine hygiene industry that holds number top two spot in every industry in which it competes, represents a foray into a wholly new business line. Playtex could benefit from Energizer's broader distribution (165 countries vs, Playtex's 15). The combined enterprise could also benefit from greater leverage with retailers.

[edit] Segment Information

Energizer has two two operating business segment: Battery and Razors and Blades.

[edit] Battery

With 19 plants in 14 countries and 6 billion batteries produced in 2006, Energizer is one of the world’s largest manufacturers and marketers of batteries and flashlights. The company's Battery segment consists of household batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty batteries. The company markets its batteries under the brands Energizer and Eveready.

Alkaline batteries are the predominant household battery type in developed parts of the world, while carbon zinc batteries continue play a major role in less developed countries. Demand, however, for higher power, higher priced lithium and rechargeable batteries has grown significantly in response to the need to power newer devices such as digital cameras. The company’s portfolio of products allows it to compete in less wealthy markets and take advantage of trading consumers up to performing products as the macroeconomic trends improve. Energizer estimates its share of the total U.S. retail battery category was approximately 37% in 2006, 36% in 2005 and 34% in 2004.

IN LTM ending 06/07, the segment grew by 11% and contributed approximately 70.5% to the Total Revenue. Battery Segment is further divided into two sub segments.

[edit] North American Battery

For LTM ending 06/07, this segment grew approximately by 10% and contributed 40% to the total revenue. Growth was primarily driven by higher volume. High performance lithium and rechargeable battery volume grew more than 40%. Battery charger sales were up more than 50%, including the launch of our new Energizer To Go cell phone charger line.

Market Potential: U.S. households currently own 2.2 billion battery-powered devices, a number projected to continue growing 8 percent annually – and one-fourth are high-drain devices.

[edit] International Battery

For LTM ending 06/07, segment grew approximately by 12.5% and contributed 30.5% to the total revenue.

[edit] Razors & Blades

In 2003, the Company acquired the worldwide SWS business from Pfizer, Inc. SWS is the second largest manufacturer and marketer of men’s and women’s wet shave products in the world. SWS operates four manufacturing facilities worldwide and its products are marketed in more than 125 countries. Its primary markets are the U.S., Canada, Japan and the larger countries of Western Europe. SWS estimate its overall share of the wet shave category for these major markets at approximately 21% in 2006 and 2005 and 22% in 2004.

In LTM ending 06/07, the segment grew by 5% driven by new product sales and contributed approximately 29.5% to the Total Revenue.

[edit] Trends & Forces

[edit] Raw material prices are key to profitability

Energizer is vulnerable to fluctuations in the cost of raw materials such as zinc, a key ingredient in batteries. The company uses roughly 75 million pounds of zinc a year, so a 1-cent cost increase has a negative impact of $750,000 annually – and the price of zinc escalated from 64 cents a pound at the end of fiscal 2005 to over $2.00 a pound in November 2006, making the cost challenge significant. Energizer has been maintaining its margins by increasing the price. This makes the company’s products less attractive with respect to competitors in the absence of other distinguishing features, although it should be noted there is a limit to the elasticity of battery demand.

[edit] Lagged Value Growth

The battery category continues to be highly competitive as brands compete for consumer acceptance and retail shelf space. Overall battery consumption has been increasing for many years, but category value growth in the U.S. lagged unit sales until 2006 as consumer purchases have shifted to larger package sizes, which sell at lower per unit prices. Retail outlets experiencing the strongest battery category growth in the U.S. are those, which feature larger package sizes.

[edit] Foreign currencies

With half its sales outside the United States, Energizer face the risk of weaker foreign currencies. For example, a 10 percent weakening of the euro or yen translates into a negative impact on Energizer of approximately $10 million on an annualized basis.

[edit] Acquisition of Playtex Products

Energizer acquired Playtex Products in August – 2007. Playtex Products is a Personal Care Products Manufacturer and deals in Feminine Care Products and Diapers. With the acquisition, the Company is entering into different kind of business line and now competes more intensely with consumer products giants like P&G. Playtex claims the top or second-place spot in every category in which it competes. More than 80% of Playtex revenue is derived from US market. With a presence in over 160 countries, Energizer may be able reap a significant level of synergy from the acquisition.

[edit] Strategy for Growth

Energizer has developed following strategies to gain the market share in the competitive market scenario.

1. Broad Portfolio – Offering the broadest range of portable power solutions that gives multiple opportunities to meet diverse consumer and customer needs with a strong platform to trade up consumers to more premium products.

2. Brand Support – Brands matter in the battery category, and the company aggressively supports its well-known Energizer® and Eveready® brands with meaningful advertising and promotional support.

3. Minimize overhead – A lean overhead structure enables the company to fund its brand building efforts, while delivering healthy operating margins and generating strong cash flow.

4. Geographic Expansion – The company continues to expand the global presence and sales of Schick-Wilkinson Sword (SWS), introducing shaving solutions in more countries and classes of trade where it currently market batteries.

5. Encourage Trade-Up – Through continuous product innovation and strong brand support, it seeks to trade up consumers to new improved products in each area where we compete – men’s and women’s wet shaving systems and disposables.

6. Innovation - Creatively focusing on innovation in products and technology, Energizer is able to compete successfully against larger rivals. Some of the examples of innovation are: world’s first four-bladed razor and first all in one razor, battery line harnessing the power of lithium in a 1.5 volt cell, an alkaline battery with patented titanium technology, advanced titanium blade-coating technology, world’s only hearing aid battery dispenser and the proprietary intelligent power management technology in new cell phone charger.

[edit] P&G's expected exit from Battery

Procter & Gamble Company (PG), Energizer's main competitor is said to be considering a spin off Duracell division. The deal has yet to be completed, but a successful spin-off, depending on the terms of course, could create a better competitive environment for Energizer.

[edit] Restructuring

Lean Transformation: The essence of Energizer's lean transformation is to focus on value adding activities and eliminate the least important. These efforts have resulted in significant cost savings over the past three years, helping offset the impact of rising material and fuel costs.

European restructuring: The company has initiated a cost-reduction program to streamline its commercial structure in Europe and use its resources more efficiently. The initial phase, restructuring of European supply chain, was substantially completed in the fourth quarter of 2006 at a total cost of $24.1 million, pre-tax, and is expected to produce annual cost savings of approximately $6 million beginning in fiscal 2007. Energizer is also combining its battery and blade commercial management, sales and certain support functions within selected countries. This phase is expected to cost $27-$33 million and expected to result in annual cost saving of $15-$20 million.

[edit] Competition

Energizer competes with Procter & Gamble Company (PG) , SANYO Electric Co, Exide Technologies, Greatbatch Inc., China BAK Battery, Spectrum Brands in batteries.

The main competitor to Energizer's Blades and Razor segment is P&G. P&G is several times the size of Energizer, affording it far greater marketing and production resources than the latter. P&G has is, however, to withdraw from the batter business.

[edit] References