Novice Investing - Energized by Energizer Holdings

Date: Thursday 07th 2008f August 2008 01:41:38 PM

Energized by Energizer Holdings - 03/04/2007

By: Novice Investing Staff

Energizer Holdings Co. (ENR) engages in the manufacturing, marketing and distribution of batteries, flashlights and grooming products. With market capitalization of $ 4.78 Billion, Energizer can be considered small in the presence of consumer giant Procter & Gamble Co. (PG) which own the Gillette brand or Colgate Palmolive Co. (CL)

Peeking through Energizer's 2006 annual report shows that has been able to report net earnings of $ 261 Million despite the huge increase in raw material price. For example, price of Zinc, a key materials in making batteries, rose from 64 cents per lb in fiscal 2005 to $ 2.00 per lb in November 2006. That shows the durability of Energizer's business model. Despite the stock has gone up 4 folds from $ 20 per share in 2003, we are wondering if Energizer's business strength will continue.

Energizer divides its business into two parts: 1) Batteries and Lighting products and 2) Razors and Blades. For batteries and lighting, about 86% of the sales came from household batteries. Energizer has two main brands in this segment. One is the premium Energizer brand which provides longer lasting high performance batteries. The other is Eveready brand catered towards more value-conscious customers. For razors and blades, Energizer relies on its Schick brand, which is number two in market share behind industry leader, Gillette. This segment is divided into three categories; Men shaving system, Women shaving system and disposable razors.

Energizer by large is still a battery company. Total sales for fiscal year 2006 is $ 3,077 Million . Batteries account for $ 2,147 Million in sales or 69.8 % from total sales. Meanwhile, razor and blades contributes another $ 930 Million to total sales.

Energizer can withstand the increase in raw materials without sacrificing profits. Perhaps, it has initiated an effective cost cutting method, which was not mentioned on its annual report. However, Energizer needs to do a better job in controlling inventory. As of 30th September 2006, inventory

stands at $ 553.9 Million, which is equivalent to 65 days worth of sales. Energizer's biggest competitors have a much better inventory control. For example, inventory at Procter & Gamble Co. is 33.3 days worth of sales. Colgate Palmolive meanwhile, holds 32 days worth of sales.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Energizer Holdings Co. (EBAY) or any other securities.

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