Q2 2021 Energizer Holdings Inc Earnings Call
As a reminder of this call has been recorded all.
I would now like to turn the conference call for two months, Jackie <unk>, Vice President Investor Relations.
The floor is yours ma'am.
Thank you.
Good morning, and welcome to Energizer second quarter fiscal 2021 conference call. Joining me today on the call are Mark Levine, President and Chief Executive Officer, Tim Gorman, Chief Financial Officer, and John <unk>, Our controller and Chief Accounting Officer of.
A replay of this call will be available on the Investor Relations section of our website Energizer Holdings Dot Com. In addition, the slide deck, providing detailed financial results for the quarter. It is also posted on our website.
During the call we will make forward looking statements about the company's future business and financial performance. Among other matters. These statements are based on management's current expectations and are subject to risks and uncertainties, including those resulting from the ongoing COVID-19.
19, pandemic, which may cause actual results to differ materially from the these statements.
We do not undertake to update these forward looking statements.
Other factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in the reports we filed with the SEC.
We also refer in our presentation to non-GAAP financial measures a reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in our press release issued earlier today, which is available on our website.
Information concerning our category and market share of discussed on this call relates to markets, where we compete and is based on energizing the internal data data from industry analysis and estimates we believe to be reasonable.
This quarter ecommerce data is not included in our category of review as the data is not currently available. It is uncertain when that data will become available in the future.
Unless otherwise noted all comments regarding the quarter end of year pertained to Energizer is fiscal year and all comparisons to prior year relate to the same period in fiscal 2020.
With that I'd like to turn the call over to Mark.
Thanks, Jackie and good morning, everyone today, I am pleased to share our second quarter 2021 results, which build on the momentum from our first quarter as we benefited from elevated demand.
The distribution and strong execution, all of which led to robust earnings growth.
As we look specifically at the results for the quarter, we maintain top line momentum with organic sales up 12, 7% with strong sales across categories in markets around the globe.
We were able to meet that demand, while also demonstrating improved cost control and delivering synergies, which partially offset the inflationary headwinds from transportation tariffs and product input costs.
Our adjusted earnings per share were <unk> 77.
More than double the prior year, driven by strong organic sales growth synergy realization favorable currencies and lower interest expense.
Given our performance in the first half we are increasing our full fiscal year outlook for the following.
Net sales growth to 5% to 7% adjusted earnings per share to a new range of $3 30.
For the $3 50.
And adjusted EBITDA to a new range of $620 million to $640 million.
Tim will provide more information on both the quarterly results and the revised outlook in a moment.
Turning to category trends consumer demand in our categories remains elevated as a reminder of the category of data I'm about to provide does not include ecommerce as Jackie indicated in our opening comments.
Starting with batteries to changes in consumer behavior that have emerged since the beginning of COVID-19 drove the battery category globally.
First an increase in the number of devices owned per household and second an increase in the amount of time devices are being used which has led to more frequent battery replacement.
During the three months ending February our brands grew faster than the category and we gained two one share points globally as we benefited from the previously discussed distribution gains.
In the most recent for weeks through March in markets like the U S, Australia, and the U K the category experienced year over year declines as we lap the initial spike in COVID-19 related by.
We anticipate that these year over year declines, including a 13, 9% decline in the U S. During the four week timeframe.
However, if you look at the same markets on a two year basis, there is robust growth when compared to the pre pandemic levels.
In the U S. For example, the category was up 14, 1% for that four week period, when you compare 2019 for 2021.
Across both the most recent for weeks and the two year basis Energizer significantly outpaced the category.
Looking at the U S auto care category in the 13 weeks through February we saw a healthy category growth of seven 4% as the category experienced both an increase in household penetration and existing consumers spending more on cleaning and maintaining their cars.
Given the seasonality of our portfolio the cold weather and the short term constraints on our wipes supply, which have recently been resolved energizer lagged category growth in the U S. Similar to batteries, we are seeing category growth in the latest for weeks and on the two year basis with Energizer outpacing the category.
Finally, while we don't have e-commerce category data this quarter, our net sales of increased 70% across our combined portfolio a reflection of our investments and ongoing focus which are paying off and positioning us to lead well into the future.
The environment remains dynamic and we can't predict the impact of vaccines, the virus variance or the results in consumer habits.
However in surveys with consumers many expect the pandemic influence habits to continue.
Including the increased use of devices, such as home health and home office equipment as well as increased focus on their auto cleaning habits.
During the quarter, we faced inflationary headwinds from transportation tariffs and input costs.
However, we were able to offset a significant portion of these through the delivery of synergies as.
As we look to the future we do not believe that these costs are transitory and having initiated productivity and revenue management efforts to offset the.
Our revenue management efforts are focused in three main areas.
Channel and mixed management across our markets brands and pack sizes, including leveraging the breadth of our strong battery brands from premium to value.
Resetting the promotional framework, including the frequency and depth of promotion and price increases based on a longer term outlook of product input costs, our innovation pipeline and currency impacts.
As an example of this work, we recently announced price increases in the U S and our auto care portfolio to offset the headwinds we are experiencing.
Going forward, we will evaluate a number of factors, including macroeconomic conditions product input costs transportation costs market dynamics innovation and currency to assess the need for additional pricing actions across the balance of our portfolio.
Our internal initiatives designed to reshape our organization and to ensure we are poised for future growth are all progressing well spud.
Specifically, we are on track to deliver over $120 million in synergies by the end of fiscal 2021.
A portion of which is being reinvested in the business through innovation and brand building activities.
We have significantly increased production in the Indonesia plant that we acquired in the first quarter, which provides us with a source of high quality products at lower costs.
We have built an impressive innovation pipeline for our auto care business and have it have advanced our international growth plans with international auto care organic growth for the second quarter at 24%.
Our global product supply team has made significant strides in reshaping our network, which we expect will result in greater efficiency effectiveness and supply chain resiliency.
And finally, we have launched projects to advance our organization's data and analytics capabilities.
Waiting of seamless data flow, which starts with the consumer and weaves its way through our organization in a more automated manner will ensure that we are positioned to meet the demands of consumers in a rapidly changing operating environment.
With that I will now turn things over to Tim who will dive deeper into our financial performance for the quarter and provide more details about our updated outlook for the fiscal year.
Tim.
Thanks, Mark and good morning, everyone. In addition to the earnings release, we issued this morning. The slide deck included on our website highlights of additional key financial metrics.
As Mark touched on as we cross for the halfway Mark for the fiscal year. We are pleased with our continued momentum.
Our organic revenue growth of 12, 7% combined with synergy realization cost controls lower interest expense and favorable currency headwinds resulted in strong adjusted earnings per share of <unk> 77.
Up more than double the prior year's second quarter.
And adjusted EBITDA of $148 million up 20 per cent compared to the prior year.
Taking a deeper look at the organic revenue growth, we maintained our topline momentum with strong sales across all of our categories and geographies.
Both of our segments showed organic growth with the Americas up nearly 16% in the international up 6%.
In our battery and auto care businesses grew benefits.
Benefiting from elevated demand and distribution gains that began last summer.
Adjusted gross margin decreased 110 basis points versus the prior year to 45% in line with our adjusted gross margin reported in the first quarter.
This was impacted primarily by increased operating costs that resulted from higher tariffs associated with source products to meet elevated demand transportation labor and product input cost all consistent with inflationary trends in the global market.
Additionally, our gross margin was negatively impacted by the lower margin profile associated with recent distribution gains and acquisitions.
The synergies of $14 $2 million and favorable impacts from currency exchange rates, partially offset these negative impacts.
As Mark mentioned, we do expect inflationary headwinds over the balance of the current year and into next year at the present time, we are essentially fully hedged on the commodity cost for fiscal year 2021.
Looking beyond this year, we will continue to take actions to offset the impact of these headwinds through continuous improvement efforts and pricing actions.
A&P as a percentage of sales was 4%.
Relatively flat compared with the prior year's second quarter consistent with our priorities, we invested on an absolute dollar basis in the A&P to support our brands and innovation with.
With total A&P spending of $4 million or 19% over the prior year.
Excluding the acquisition and integration costs SG&A as a percentage of net sales was 16, 7% versus 18, 4% in the prior year primarily.
Primarily the result of elevated sales experienced in the current year.
On an absolute dollar basis, adjusted SG&A increased $6 million.
In part because of the hydro of overheads associated with our top line sales growth and foreign exchange rate impacts.
We realized in the early $20 million in synergies this quarter, bringing the total for that first half of 2000 $21 million to $40 million.
Since our battery and auto care acquisitions were completed we have recognized approximately $109 million of synergies exceeding our initial targets and we expect to realize an additional $10 million to $15 million over the balance of the year.
As I mentioned last quarter, we've taken advantage of favorable debt markets and refinanced the significant portion of our debt over the last 12 months we.
We expect these refinancings to contribute to a $30 million reduction in our 2021, the interest expense of which $8 million was realized in the second quarter.
At the end of the quarter, our total debt was approximately $3 $5 billion.
Or for eight times net debt to credit defined EBITDA.
With nearly 84% at fixed interest rates and an all in cost of debt of four 2%.
As a result of our strong organic growth in the first half of the fiscal year. We are updating our full year fiscal 2021 of the outlook for the following key metrics.
Net sales growth is now expected to be between 5% to 7%.
Owing in large part to of prolonged elevated battery demand in North America and for.
Favorable currency impacts.
Adjusted gross margin rate is expected to be essentially flat on a year over year basis in line with our previously provided outlook.
Adjusted earnings per share is now expected to be in the range of $3 32.
The $3 50.
Adjusted EBITDA is expected to be in the range of $620 million to $640 million.
And finally adjusted free cash flow is expected to be at the low end of our previously provided range of $325 million to $350 million due to working capital requirements, mostly related to inventory as we look to rebuild safety stocks.
The revised net sales outlook provided for the full year reflects the low single digit decline over the balance of the year consistent with our prior outlook. We began lapping elevated COVID-19 related battery demand late in the second quarter, and we will lap the favorable impacts of weather on our auto care business, particularly in refrigerants.
In the third and fourth quarter.
With respect to gross margin rates, we expect them to remain roughly flat throughout the balance of the year as synergies and the impacts of favorable currency offset inflationary cost pressures and mix shifts.
We will also benefit over the rest of the year.
Our gross margin in the third and fourth quarter of 2020 was burdened with onetime COVID-19 related cost of $9 million of $19 million respectively.
As we turn to the second half of the year, we expect to build on the momentum from the strong first half by executing on our strategic priorities to deliver the full year outlook now.
Now I would like to turn the call back over to Mark for some closing comments.
Thank you Tim.
<unk> had a great first half of fiscal 2021, which is a testament to the efforts of our colleagues around the world to make ship and deliver the products that our consumers needs. During this time.
We are focused on winning the day by staying focused on the consumer and delivering for our customers all while building the foundation to win in the future with that I will open the call for questions.
Thank you Sir.
I'll begin the question and answer session.
We're asking the question a little bit of press Star then one on the touch sub salt.
From using a speaker phone please pick of Brad said before passing of the keys.
For any type of a question has the address towards all of your question. Please press Star then two.
Again of the Star then one to ask the question at this time of we'll just pause momentarily to some of our roster.
Hum.
Okay.
And the first question the Apple.
Come from Bill Chappell I'm sure. The Securities. Please go ahead.
Thanks, Good morning.
One of them.
Hey, just first question, just maybe talk a little bit more on gross margin in your commodity kind of outlook.
I guess, one you know.
What where are you in terms of hedging into fiscal 'twenty. Two I know you do more than four or five months out so I imagine you're the.
Decent shape and the second maybe give us some more examples or more color on what youre doing in terms of revenue management pricing on the battery side of it.
I appreciate the the commentary on auto care, but I assume your I don't know if youre looking at price increases or just the timing on promotions just any color there would be great.
Sure why don't I start with the second question and then I'll have John cover the.
Gross margin impacts in Q2, and as well as the bridge for the balance of the year.
When we analyze gross margin headwinds in the levers that we're going to pull in order to address and we really focus on for buckets in the first and foremost the first thing we need to do is make sure that we've done everything we can do internally to control our costs, but something that we do exceptionally well and it's an ongoing discipline that we need to make sure that we continue.
To activate to ensure we've done everything we can to control the.
Of course within our four walls on mixed management, we proactively manage brands pack sizes of enforcement across channels across customers.
To drive margin improvement. So that's an ongoing discipline, we have dedicated teams who do that on a daily basis.
And then the promotional activity, we look at we look hard at the depth and frequency of promotion again, that's something we do day in day out anyway, but when the when you're facing in place of inflationary headwinds that filter needs to be a little bit tighter and that's something that we've we've begun to implement over the last couple of quarters as tighter promotional activity.
And then really finally once you once you've optimized those will take a look at pricing actions like we did not appear the this past quarter and as you've heard in the past we base that on a number of factors inflationary headwinds.
Currencies, what's the market dynamic innovation investments and we will continue to do that during the first part of this fiscal year, we have seen inflationary pressures.
Anticipate that they're going to continue for the balance of the year, we've been able to mitigate those really through proactive management of all of the areas that I. Just mentioned, we also have the benefit of synergies and as you mentioned, we also have a hedging program, which helps smooth out some of the impacts that we feel and gives us a forward look so that we can take these these headwinds into account as well.
Planning all of those activities John why don't you cover kind of the provision gross margin yeah sure.
And maybe just the first question on hedging. So we're we're fully hedged for commodities for the rest of the 'twenty, one and we're about 25% hedged for 'twenty two.
This quarter, we did see about 310 basis points of incremental input costs as you mentioned the market was really.
Tariffs related to sourcing more product for China to meet that elevated demand increased transportation costs.
Half of that that we've seen is really related to increase volumes, but we've also seen increased freight rates and then higher labor rates and the number of our production locations, especially in North America.
So.
We have seen higher commodity spot rates, but as we've discussed we are fully hedged for this year. So the impact this quarter was modest as we look at the back half of the year, we're calling for gross margin to be relatively flat with the first half and that's despite 20% to $35 million of incremental costs driven by the same issues such as tariffs freight and labor as the.
Well as we're seeing about 25 per cent of that amount due to commodity inflation.
More than offsetting those costs for the rest of the year will be about 10% to $15 million of incremental synergies.
And roughly $29 million of onetime COVID-19 costs that we incurred last year, but don't expect to repeat this year.
And next we have thereof.
<unk> of Morgan Stanley.
Hey, guys.
So two questions first just on the battery side thinking about category trends going forward can you give us a bit of detail of what you're assuming for category growth in the back half of the fiscal year in batteries I am just wondering how much of that halo of the higher devices per household as well as greater usage in the household.
Are you assuming that totally dissipates, mostly dissipates how would you characterize that and then also just longer term thoughts on the sustainability of this higher category volume as you look out over the next couple of years. So a.
The longer term look at that also.
Yeah.
Over the next four quarters, it's likely that we're going to see or the we do have some tough comps over the next four quarters because of the elevated demand but I.
I think let me take the longer term for you because I think that's more important and we feel like we're extremely well positioned coming out of the pandemic. There's no doubt we're going to have some tough comps that we're going to have to cycle through but that really doesn't dampen our enthusiasm at all for how we're feeling about the battery category at the moment and let me explain why consumers are in a.
In a different place coming out of the pandemic than the where they were going in and a lot of the habits that they've implemented are going to have some staying power and.
And if you look at some of the consumer data that we've seen of consumers that we mentioned in the prepared remarks had purchased more devices in the U S. The number of battery powered devices has increased roughly mid mid single digits for households in 2020 and net.
Equates to roughly about $1 five devices more for household than what they had previously.
So encouraging is that they're using those devices more and their purchase the purchase frequency is up 6% versus the prior year and when they do buy they are buying more debt that's up 10%.
All of those factors are driving very healthy category dynamics at the moment and if not pantry loading the consumer research that we've that we've engaged and tells us that 90% of consumers who are buying batteries today are buying them for immediate use for they're not they're not discussing their pantries and we're going to have a big deload roughly a third of those consumers.
Expect to continue to use more batteries in the future than they have in the past and what Youre seeing is it's really playing out in the data I mean, the three months.
Curious for the end of February now the category was up globally, 14% with Energizer up 20%.
And then if you look at more recent four week data, which has negative category trends.
But what I would say is if you look at sort of the April data for 2019, the 2021, the categories of nearly 16% with energizer up 18%.
So theres a lot of noise in the numbers you are going to have to deal with comps against some extreme demand, but we believe coming out of the pandemic.
It's going to be it's going to be a very healthy category and I think what we wanted to do is see some of these some of these trends continue to have the staying power of that.
We believe they do and I think at that point that'd be an appropriate time for us to take a look at our long term growth expectations for the category, but we like what we're seeing so far.
Great that's helpful and if I could just follow up on Bill's question on pricing.
In auto care can you give us a sense of what percent of the portfolio, you're taking pricing up.
A bit better sense for magnitude and just help me understand the decision to take pricing there versus not announcing anything in terms of price increases in batteries of.
The fleet very different commodities underlying that but just help me sort of understand that decision conceptually yes.
The are you pointed to a couple of the factors right. There in your question I mean, one is we.
We don't have the hedging benefits in the auto that we do in batteries. You also have some seasonality in the business, which made the timing of it.
Little more critical than it than it is in some of our other categories.
And then in terms of the price increase itself we don't.
Speak publicly about the level of percentage increases it was broad based across the category.
And certainly we always look to offset the inflationary headwinds that we're experiencing from the input cost perspective.
Next we have Lauren Lieberman of Barclays.
Great. Thanks.
Firstly I wanted to ask about was just the way that you talked about the cost inflation not being transitory.
And I understand the obviously the current inflationary picture on inputs.
But I was curious if there was something embedded in there on your overall global supply chain just knowing some of the elevated cost that you experienced for the last 12 months and degree to which that's being baked in as being not transitory of for really talking about more of the car.
Current inflation that we're all reading about day to day. Thanks.
It's nothing more to read into that other net in the current inflation that we're all reading about day to day.
Okay perfect.
Good good simple answer.
And then I was looking for all for an update on the auto care innovation and I think this is the time when it's your event Energizer.
Energizer owned pipeline would start coming to market. So I was curious if you could talk a little bit about that or if any of that activity has been.
Slow down or delayed until next year, just given given COVID-19 and overall mobility trends or of some of that's been launching in and what the read has been from from retailer.
Very excited about the innovation, we have showing up in stores nothing we haven't slowed anything down based on the pandemic. In fact, we spent several things up.
<unk> seen of disinfecting product that we were able to launch and very rapid timeframe.
For the armor all products as well as we've also introduced ceramic products, which youre going to see more broadly in the market today.
Early days in the auto care season, right now so I wouldn't want to.
Declare victory at the moment, but very promising that we've seen in the latest for weeks.
Ending the end of April and the value for the category was up nearly 31% with energizer nearly 35%.
If you look at that on a two year basis versus the same time period of 19, Thats up seven 5% in the category with Energizer up 15% very healthy growth very healthy right now.
We're going to have to cycle through a period of time and particularly the auto retailers were shut down so youre going to see some some category of data that's going to look.
Really healthy based on that experience last spring.
But as of now again early in the season, but very promising results. We have seen in the latest data that we have that we have for of the top for <unk>.
The top growing skus out there with wipes and some of our upholstery cleaner wheel cleaner.
Very excited about what what auto care has to bring.
Yeah.
The next question, we have comes from Nik Modi of RBC capital markets.
Yes.
Actually I do apologize it looks like that's question one of the job. So we were glad to Rob auto side of Evercore. Please go ahead Sir.
Great. Thank you very much.
Quick questions first on batteries can you talk a little bit about.
The new distribution that you are getting.
And why that's lower margin and then moving over on the automotive side International was very strong any more details there and in general on the automotive side.
You had talked a year or so ago debt the brands were somewhat underinvested in.
Where are you in terms of building the brand equity on the auto side. Thank you.
On the battery side from the distribution standpoint, we were talking about that for a great deal of last fiscal year and that was really broad based distribution gains you saw expanded space in mass we had the.
Improved presence online home center, we were able to get back into the club channel and that May have been driving some of the margin headwinds that you are for that youre, referring to similar story in auto care, where we've been able to expand both on the auto retailers get additional space.
Improved presence online as well as in home center, we've been able to launch the distribution of home center, where the auto care business wasn't previously international.
Off.
The low base, but impressive growth rates, you're seeing some wins in Australia and in Mexico as well as.
Some nice wins in.
In the European markets with our fragrance business.
We've invested in the brands both from advertising and the A&P perspective, we've launched new creative.
More most importantly, we've been able to really rejuvenate that innovation pipeline and some of what we're able to go and present to retailers is the strongest it's ever been.
Thank you.
The next we have Nick Modi of RBC capital markets.
Yeah. Thanks, good morning, everyone.
Okay.
Just wanted to follow up on the last question.
Robert The fact about distribution gains I mean, it's been many many years and it's been.
Good.
Almost every year you guys said, you know being a separate company for the med dwell.
And I'm just curious you know how should we think about the runway of further distribution gains like how do we is there any way to quantify it any way to provide a framework and how we should think about it.
You know look this is something that the teams constantly battle day in day out for where we're constantly looking for additional space expanded space.
For preferential space across all of our categories.
For the balance of 'twenty, one while we're going to size the lost some of the big distribution gains and so you'll see the new distribution.
Per off because of some of the sales and distribution, particularly in club that we were able to the gain last year those are going to start to taper off in the the June July timeframe, but for the balance of the year distribution continues to be of tailwind for us I'd say, it's kind of it's going to have a positive impact all the way through September.
And just thinking about it longer term.
Are there certain channels or certain geographies, where do you still believe the way under index relative to where you should be.
That's kind of different market to market around the world I will analyze our footprint in the U S. Obviously, we of fair.
Fairly mature and robust distribution, but theres always an opportunity for us to get more space for new space, we have to do it the right way.
And we have to invest and drive the category.
Growth for the retailers and allow our brands to carry of the day, while doing that.
It isn't a discipline that we ever pull of the throttle back neck, we're going to continue to fight for more.
And right now what Youre seeing is really a renewed emphasis across the board both on pure play digital as well as omni channel and that's going to be an area of significant investment and we would expect significant growth over the next couple of years.
Next we have Kevin Grundy Jefferies.
Great. Thanks, Good morning, everyone a.
Couple of questions. If I could first the first one for Tim and the second one for Mark Tim with respect to cost synergies and productivity.
Clearly.
Heightened emphasis here I guess, given given the commodity cost environment and the company's done a good job with the cost synergies exceeding the initial targets can you talk about other areas of opportunity, where you are particularly focused right now as an organization and how large that opportunity can be as we sort of think about profitability not just this year, but into next and then for Mark I know that there.
The limitation with the online data can you just given the importance and the growth that the.
Category are you seeing can you give us perhaps even a little bit more color to the extent that you have it around industry growth around how your share trends are holding up particularly relative to Amazon basics and <unk>. So that would be appreciate it. Thank you both.
Yes, Kevin relative to synergies of continuous improvement as you know the.
Before the battery and auto care acquisitions, we've always been focused on continuous improvement.
As you indicated we have over delivered on the synergy expectations that we had for battery and auto care and that'll continue through the balance of this year and then as we move into next year.
Continue to see areas for improvement in our global product supply chain into <unk>.
Take out cost.
As Mark had indicated.
As we go up against these inflationary pressures. That's the first thing that we're going to look to do is to offset those costs.
As necessary take any pricing actions that we deem appropriate.
It's both it's both of the cost as well as overhead so as we look to make investments.
The in technology that also will provide an opportunity for us as we move forward.
And Kevin I know on the the.
E Commerce front, it's important in and.
In the past we've provided the category.
Information about the we're.
We're just not receiving that information and many of the retailers are not providing it so we're a little bit.
Unable to do that with any degree of precision. So what we can provide you and we mentioned in the prepared remarks of what our sales are doing online we've talked about roughly a 70% growth rate I would say batteries is a little bit higher than that auto care, a little bit lower than that in our life business is right around there so healthy growth.
And what we're seeing online we have no reason to believe based on our the insights we're able to gather.
Debt on the battery side that our share position has meaningfully changed from where it was.
But again, that's more of a.
More of an opinion I think then it is based on a database of factual information, which we used to get I would say.
We're holding our own youre continuing to see the consolidation of online.
<unk> was trending for the last year or so auto care we have.
I believe that we are trending ahead of category growth rates and are gaining share and we hope that the the information starts to flow from from those data sources and as soon as they do we can provide updated category of information.
Next way of Andrea Teixeira of Jpmorgan.
Thank you for morning.
And just going back to the puts and takes that lead to your flat second half. Please call sales guidance at the high and you'd.
You'd lap of course tough comparisons and you asked for easier of internationally. So you mentioned some of the gains in auto care abroad. So can you. Please elaborate more in back on batteries internationally, how you're tracking there.
And also as a follow up on the <unk> Com E. Commerce growth that you. Just mentioned now are you seeing internationally Congress in the same pace or even accelerating given that it's a relatively little of penetration.
On the last question there Andrea I think it's the the growth is more robust internationally, just because it's off of a lower base, but we are seeing nice growth in our international markets, where we are.
Taking our efforts in the U S and applying to them to international markets in terms of the international markets on the on the battery side we.
<unk> seen in the light latest three months of the category.
<unk> continues to respond very well, we're in markets like France, Europe nearly 11%.
This is through February of 'twenty, One, Australia, which has been one of the first markets that I think has been on the other side of the pandemic up 7% and then of market like Germany.
18, 5%, so the cat battery category internationally as healthy as well and we're seeing those results.
In our business as well.
That's super helpful and since you've seen places where consumers have do we hope any has been ahead of us is that any earlier read on how consumption habits from may have changed.
It's an interesting read and it's something that we're watching is you've got markets like Australia, and New Zealand, who are coming out of the pandemic of little bit earlier in the certainly have some markets around the world, where we are where they are right in the middle of it and so we are watching that we're watching the consumer information for that.
POS data for the category of data out of those markets to see if there's any leading indications leading the indications that we have thus far coming out of markets like Australia and New Zealand is the there is some staying power to the health of the categories that we're in.
We expect that to continue and we're going to lean into it.
Alright, thank you so much for pets.
That's the way of.
Jason English of Goldman Sachs.
Hey, good morning folks congratulations on a strong quarter. Thank.
Thank you couple of quick questions. Thank.
Thank you for the.
The different bridges this quarter in terms of how you build out on the EBITDA et cetera.
Looking at the organic drop through organic sales growth of $75 million.
The leading to only $95 million of EBITDA.
Variable margin of 12 seven it just struck me as very low can you give us some context around the why that flow through is that more robust.
John Yes, so look.
We expect the full year and second half improvement EBITDA and EPS to really be driven by a couple of things strong operating performance.
Synergy realization of $50 to $55 million of if it got some positive currency impacts as well as we're confident of the $29 million of COVID-19 costs of.
Setting that some of the things of that Youre seeing are.
Incremental SG&A that's related to the.
The sales volumes sort of like we saw in this quarter.
We're doing some additional investment in A&P as well and so.
You are seeing slightly less EBITDA accretion relative to the sales growth.
Okay. Okay.
And.
Investors, we talk with the continuously kind of come back with one key question that is.
Whether or not your hedges your hedge cost is materially below the spot rates out there and whether we should be expecting a bit of of cost cliff as we roll into next year.
Is there any context or color you can give to it.
The either validate or ease those concerns.
Yes, Jason I mean, we did call out. So if you look at this quarter of $16 million of incremental costs for the nine months were talking about $40 million to $50 million of incremental that's related to the tariffs transportation and labor as well as a little bit of commodities about 15% of those commodities, but we're 100% fixed so we're rolling into some of those higher costs.
But not as big an impact of 21.
We will see those hedges start to roll off and so as we get out further out you'll start to see some inflation come through on the commodity side as well.
So as we look at our top for commodities and those accounts for about 15% of our Cogs.
Seeing spot prices relative to our average cost in 'twenty, one up 15% to 20%.
So that's a bit of the inflation that we're seeing come through in our expectation.
Is that we're going to address those through continuous improvement efforts to take cost out as Tim mentioned as well as some of the revenue management of the Mark is talking about.
Okay. Thank you that's helpful I'll pass it on.
Okay.
The next we have William Reuter of.
Bank of America.
Good morning.
So I know you were.
Not interested in sharing the details of the percentage of price increases in auto, but where the price.
Price increases you pushed through enough to offset the raw materials in the business on a dollar for dollar basis for on a margin basis.
The price increases we pushed through were sufficient to offset the inflationary.
The pressures we were experiencing in auto.
Okay and then my second question with regard to pushing through additional price increases in battery.
I guess, how frequently are mid season price increases pushed through on battery or do you typically wait for more of a large of discussion around shelf space resets to push those true.
Yes.
We will do is pull together the information of what we've done in the past.
When we were experiencing headwinds in transportation labor tariffs commodities like we are now we can.
Go through those exercises internal cost revenue management activities and then the.
The last resort.
Move on to pricing.
There is no I think what we have to do is.
Have enough of a handle on the permanent and see the impact and have enough data to be able to book to come that go into customers that have the fact based discussion about the pressures that we're feeling and whenever that time is in the cycle of the right time to have that and as soon as we have that information both together feel like we have a fulsome story.
The 2% and justify a price increase that's when we're going to go with but Theres no sort of magic window of when it will go in or when we want we're just going to do it when we feel like we have all of the facts to justify it and have that discussion with.
That's the way we've approached it in the past.
I would expect that the waiver and approaches in the future as well.
Perfect very helpful. Thank you.
Well at the start showing no further questions. We'll go ahead and conclude our question and answer session Alan.
I'd like to turn the conference call back over to Mr. Michael <unk> for any closing remarks, Sir.
Thanks, everyone for your time and for joining us today and your ongoing interest in Energizer.
Alright.
Thank you you also served to the rest of the management team for your time also again the conference call has now concluded at this time you may disconnect. Your lines of everyone take care and have a wonderful day.
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