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Energizer to cut more than 10 percent of workforce

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11/09/2012 | 01:31am CEST

Energizer Holdings Inc (>> Energizer Holdings, Inc.) said on Thursday that it would cut more than 10 percent of its workforce, or about 1,500 people, as it tries to rev up results in its battery business.

Energizer Holdings Inc (>> Energizer Holdings, Inc.) said on Thursday that it would cut more than 10 percent of its workforce, or about 1,500 people, as it tries to rev up results in its battery business.

A restructuring at the company, which also makes Schick razors, was in the works for months. In September, Energizer said it planned to cut jobs and expenses but until Thursday it had not disclosed details of the plan.

Energizer's shares soared to $74.85 in after hours trading after dipping 22 cents during the regular session to $70.82.

This year, the company faced pressures including losing shelf space for batteries at Walmart and stepped up competition from larger rival Procter & Gamble Co's (>> The Procter & Gamble Company) Gillette razors. At the same time, it has been under constant pressure as popular iPads, mobile phones and other electronic gadgets do not require its kind of batteries.

"It is absolutely what the company has to do in the context of declining market share, declining category growth in batteries and much tougher competition," Sanford C. Bernstein analyst Ali Dibadj said of the restructuring. "This is a short-term Band-Aid, but going forward they're still stuck in very difficult categories and positions in those categories."

Energizer's latest restructuring comes two years after another effort to overhaul the battery business following the decline in battery-powered devices and the battery category during the Great Recession.

While there was some recovery in the battery category in 2010 and 2011, declines in devices that use batteries and the battery industry resumed in the past year, CEO Ward Klein said on a conference call.

"We think these slow but steady negative trends are here to stay," said Klein, who the company credits with having an integral role in introducing the Energizer Bunny back in 1989.

Energizer said it wants to streamline its lineup of household products to allow it to focus on the core battery business.

Plans include closing or streamlining battery factories and packaging facilities in the United States, Malaysia and Canada and streamlining lights manufacturing in China.

Energizer expects pre-tax cost savings of about $200 million from the restructuring, and said the majority of its charges should be recorded within the next 12 to 18 months.

St. Louis-based Energizer is best known for its namesake batteries. Its other products include flashlights, Eveready batteries, Playtex tampons, and Banana Boat and Hawaiian Tropic sunscreen.

The details of the restructuring come after other household products makers such as P&G, Colgate-Palmolive Co (>> Colgate-Palmolive Company) and Kimberly-Clark Corp (>> Kimberly Clark Corp) announced plans to trim their ranks.

Energizer was spun off from Ralston Purina Co in 2000. Since then it has grown with the acquisitions of Schick Wilkinson Sword, Playtex, the Edge and Skintimate shaving prep business and American Safety Razor.

LOOKING AHEAD

Energizer also said its profit rose to $117 million, or $1.84 per share, in the fiscal fourth quarter ended on September 30, from $45.8 million, or 67 cents per share, a year earlier.

Earnings excluding items such as restructuring costs rose to $1.76 per share from $1.10 per share and exceeded analysts' average forecast of $1.55, according to Thomson Reuters I/B/E/S.

Sales of household products fell due in part to hurricane-driven sales a year earlier, the loss of shelf space at Walmart and continued weakness in the battery category.

Household product sales fell 3.7 percent on an organic basis, which typically excludes acquisitions, divestitures and foreign exchange. Organic sales of personal care items such as razors were essentially flat.

Energizer forecast fiscal 2013 adjusted earnings of $6.75 to $7.00 per share, with sales up in a low-single digit percentage range.

Personal care sales should rise at a mid-single digit clip this year, while household products sales are expected to fall at a low-single digit rate, the company said.

The forecast includes about $20 million in shipments related to Superstorm Sandy and estimated pre-tax restructuring savings of $25 million to $35 million. It does not include any potential share buybacks.

Energizer just declared its first quarterly dividend of 40 cents per share this week, payable in December. The payout should continue at the current rate "for a while," said Klein.

(Reporting by Jessica Wohl in Chicago; editing by Andrew Hay and Phil Berlowitz)

By Jessica Wohl

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