Q4 2022 Energizer Holdings Inc Earnings Call
One of them is expected to drive double digit constant currency, EPS and EBITDA growth, while generating 10% to 12% free cash flow for the full fiscal year.
A few more details on each of these.
Despite significant headwinds from persistent inflation on our input costs and appreciating U S dollar and our exit from the Russian market. We delivered on the outlook we provided last November .
Just as important we returned to generating strong free cash flow with $95 million in the fourth quarter and we deployed a significant portion of this cash to begin paying down debt.
In addition to returning to our historical free cash flow generation. Another focus for the organization has been to restore the earnings power of our businesses.
As you May recall early in fiscal 2022, we implemented a series of initiatives designed to offset the inflationary headwinds we were experiencing.
As part of that undertaking we identified a substantial pipeline of incremental initiatives that are expected to further rebuild gross margins improve working capital efficiency and support long term growth.
Based on the scope timing and investment level, we consolidated these initiatives into a Standalone program project momentum.
Project momentum is designed to improve margins across each of our businesses and it is expected to ultimately generate incremental savings of $80 million to $100 million over the next two fiscal years.
These savings are independent of any changes to the inflationary environment and are coming from a broad range of projects.
Including operational and distribution network efficiencies procurement savings and SG&A reduction.
We have learned a great deal over the past two and a half years and those lessons have helped us identify more effective and efficient ways to operate our businesses. We're confident these efforts will not only help restore our margins over the long term, but also provide us the flexibility to navigate a dynamic environment with excellence.
Beyond the improvement in our earnings project momentum will help optimize our balance sheet to drive more than a $100 million and working capital improvement.
A more efficient balance sheet combined with expanded operating margins will reestablish energizer is a leading cash flow generator.
The success, we've had in 2022 and the benefits of project momentum make us very confident heading into 2023, our categories are meaningfully larger than pre pandemic levels.
Batteries are considered essential products to consumers and we continue our work to serve our consumers when and where they need us consumers are using 15% more batteries than they were pre pandemic we.
We expect this demand to be resilient, even as economic conditions impact consumers.
Against this backdrop, we expect to drive low single digit organic topline growth across both of our businesses in fiscal 'twenty. Three this growth combined with sequentially improving gross margins from targeted pricing and cost savings initiatives is expected to deliver double digit currency neutral growth in both.
EBITDA and EPS.
Furthermore, we expect to generate 10% to 12% free cash flow for the fiscal year, allowing ongoing debt reduction and deleveraging driving an important part of the equity return story for our shareholders.
Fiscal 'twenty two was a solid year and one that we're proud of as we look ahead the environment in which we are operating remains challenging by enhancing our long term algorithm with projects like momentum we have positioned ourselves for success not only this year with future years as well.
Now, let me turn the call over to John to provide additional details about our financial performance project momentum and our 2023 outlook.
Good morning, everyone I will provide a more detailed summary of the quarter and full fiscal year before turning to our 2023 outlook and a brief financial overview of project momentum.
For the quarter reported revenue grew three 2% with organic revenue up seven 4%.
Top line benefited from pricing, partially offset by lower volumes due to broader inflationary pressures and the lapping of elevated volumes in the prior year.
Adjusted gross margin decreased 150 basis points to 36, 2% due to higher operating costs, including transportation material and labor costs as well as unfavorable currency impacts the positive impact of price increases in both battery and auto care, partially offset the negative impact to margins.
Adjusted SG&A as a percent of net sales was 15, 1% versus 14, 3% in the prior year.
The absolute dollar increase of $9 $8 million was primarily driven by increased recycling fees.
Spending related to our investment in digital transformation and compensation expenses.
A&P as a percent of sales was three 5% down 190 basis points.
The decrease in the current year is the result of a reduction in non working spending as well as a lighter investment in the fourth quarter as we were past the peak auto season, and transitioning into the holiday season for batteries.
We elected to move more of our spending for batteries into the coming first quarter closer to the holiday season.
Interest expense increased $5 $2 million due to a combination of higher average debt and rising rates.
We delivered adjusted EBITDA and adjusted earnings per share of $146 million and <unk> 82 per share respectively. In spite of currency headwinds of $9 7 million or <unk> 11 per share.
We also generated $95 million of free cash flow in the quarter returning to the top end of our long term algorithm of 10% to 12% of net sales.
We paid down $60 million of debt and retired another 25 million subsequent to the end of the quarter.
As noted in our press release. This morning, we recorded a onetime noncash $542 million impairment charge on certain intangible assets, including trademarks and goodwill associated with the acquisition of Spectrum's battery and auto care businesses.
This accounting charge reflects the negative impact on the cash flows associated with these assets, which as we have previously noted have been adversely affected by rapidly increasing input costs and.
And more recently currency headwinds and interest rate increases.
We continue to view these assets as vital components of our portfolio and this noncash accounting charge does not have an impact on our outlook for these businesses.
As Mark mentioned, we delivered our full year 2022 outlook for revenue adjusted EBITDA and adjusted EPS.
Organic revenues increased three 1%, marking our seventh consecutive year of organic growth as.
As pricing actions and new distribution across both of our segments were partially offset by volume declines.
Adjusted gross margin was down 230 basis points as higher input costs were partially offset by pricing actions synergies and the reduction of COVID-19 related costs incurred in 2021.
Adjusted EBITDA of $568 million and earnings per share of $3 eight or within our original outlook provided at the beginning of the year, despite currency headwinds of $26 million or 29 per share respectively.
For our fiscal 2023, we expect organic revenues to increase low single digits as the benefits of carryover pricing and additional targeted pricing are partially offset by category volume declines across both the battery and auto care segments.
Reported revenues are expected to be negatively impacted by approximately $90 million currency headwind.
<unk> and a low single digit decline.
We expect gross margins to improve between 100, and 150 basis points year over year.
Carryover pricing new pricing in the year and improvement in freight costs are net positives, while input costs and currency continued to be headwinds.
In addition project momentum is expected to generate approximately 100 basis points of margin recovery.
We are actively managing costs and the remainder of our P&L keeping most flat with the prior year. However, we do plan to increase investments in A&P back to the 5% to 6% range in the coming year.
All of these factors result in an outlook for adjusted EBITDA in the range of $585 million to.
$615 million and earnings per share in the range of $3 to $3 30.
These results reflect negative currency headwinds on earnings of approximately $27 million or <unk> 30 per share.
On a currency neutral basis, adjusted EBITDA is expected to grow 10% and earnings per share is expected to grow 12% versus prior year, both at the midpoint of our outlook.
I would like to also give additional color on the first quarter and rest of year trends.
First we are still comping elevated volumes in the prior year and expect organic sales to be down low single digits in the first quarter and then improve as we move through the year.
Our cost of goods in the first two quarters will also reflect the impact of production at peak inflationary costs and to a lesser extent the cost of operational inefficiencies as we produce lower volumes, while actively managing down inventories at the end of last year.
Gross margin should start the year roughly in the range of 37%, 38% and improve each quarter thereafter.
Also based on current rates year over year currency impacts are expected to be most pronounced during the first half of the year with the first quarter seeing currency headwinds of roughly $40 million on sales and $10 million on operating earnings.
Finally, rising interest rates are expected to add 10% to $15 million to full year interest expense.
<unk> weighted towards the first half of the year.
Project momentum is expected to benefit 2023 by $30 million to $40 million more weighted to the back half and has been included in the outlook ranges we provided today.
Over the next two fiscal years, we expect project momentum to generate $80 million to $100 million in total savings with roughly 80% of those benefits impacting gross margin and the remainder are recognized throughout the rest of the P&L.
We also expect to improve networking capital by $100 million, which will allow us to fund the projected one time cash operating expenses related to the program of $40 million to $50 million and generate free cash flow in line with our long term algorithm of 10% to 12% of net sales.
We are planning for capital related to the program to be largely incorporated in our annual budget expectations of 2% of net sales.
And finally, a few comments on our debt capital structure and capital allocation priorities.
Our debt is currently 86% fixed at an average interest rate of four 6% with no meaningful maturities until 2027.
We paid down $85 million of debt in September and October , making good progress towards our deleveraging plans.
Looking ahead debt Paydown and deleveraging as our primary capital allocation priority.
We will also continue to invest in our business and brands for the long term, while returning cash to shareholders through our quarterly dividend.
Before I turn the call over to Mark for closing remarks, I wanted to announce that Jackie berlitz, our longtime VP of IR is going to retire at the end of this year.
That means this will be Jackie his final earnings call.
Jackie Thank you for your dedicated service to Energizer, we appreciate everything you've done and wish you well.
Now I will turn the call back over to Mark.
Thanks, John our investments and the team's work and dedication are evident in our fiscal year results.
Looking ahead, we are well positioned to drive growth in the years ahead.
I want to Echo John's congratulations to Jackie on a tremendous career with Energizer. Thank you for everything Jackie we wish you the best.
With that I will open the call for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
Is that any time. Your question has been addressed and you would like to withdraw your question. Please press star. Thank you.
Please limit yourself to one question and one follow up.
At this time, we will pause momentarily to assemble our roster.
Today's first question comes from Lauren Lieberman with Barclays. Please go ahead.
Great. Thanks, Good morning, first Jackie Im jump I'm jumping on the bandwagon, so congratulations and enjoy and also thank you for everything.
No my question.
So first I just wanted to.
To clarify I think theres been some confusion. This morning, just around the guidance and so just wanted to be clear that the ranges and the relief are in fact inclusive of currency headwind. So that's just sort of part one and kind of.
Question.
And then the second thing was.
I wanted to talk about gross margins this quarter.
We're a little bit below expectations I know the total P&L came in in line, but kind of what was the negative surprise on gross margins and just as we you gave us some guidance as to how to think about this the slope of recovery into 'twenty three.
But I was curious kind of what what's kind of pulled it down a bit as the starting point is a little bit different than we'd expected.
Yeah.
Thanks, Lauren Yeah. The outlook that we gave is inclusive of currency impacts so that 585% to 615 for EBITDA and $3 to $3 30 for EPS include all the currency impacts that we've talked about.
In the quarter, we came in at about 36, 2% adjusted and as we talked about going into the back half of the year. We were looking at about 37%, 38% in the third quarter spiked a bit fourth quarter came in at that 36, we were actually in range with what we were expecting but as much as we built inventory we've seen some movement wed also seen as we kind of finished out the quarter we had been.
Actively working down those inventory levels. So youre seeing that production volumes were a bit lower that's impacting the fourth quarter and will continue to impact us a little bit in the first quarter and as you talk about we're looking at a 37% to 38% starting point in the first quarter and the growing sequentially as we go through the year.
Okay, and then I guess the follow up question to that would be and we've seen this from some other companies that are coming into.
The new year with elevated inventory in high cost inventory at that so I guess, how sensitive is the outlook and.
And how much wiggle room is there should volumes be lower than what you would have expected.
The rate of volume decline is greater will take more time to work through that inventory and then therefore take.
Take longer to work through gross margin. So can you maybe share a little bit about the volume outlook in particular.
Relative to the elasticity that that's why I'm asking it in terms of the gross margin progression.
Yes, I mean, I think specifically to working through inventory, we did a really good job. This last quarter inventory is down over $100 million.
We've seen that continue to work through we do expect it to take us about first and second quarter to get through the inventory levels.
Thats our outlook right now no no change to that I think I will turn it over to Mark a little bit to talk about how we see elasticity to have held up nicely, but mark can probably give some more color. There, yes, Lauren I think when you think through we took multiple price increases in both battery and auto in 'twenty, two really pleased with how demand held up particularly when you consider a lot of the macro factor.
<unk>, we have additional sort of carryover pricing that's built into the 'twenty three outlook.
Do anticipate taking some targeted pricing in 'twenty, three as well not broad portfolio of pricing, but I would just call them more.
Micro targeted pricing.
Elasticities have really held and therefore as they are at or better than what we expected in recent periods, you've seen them worsened a little bit.
As macro factors compounded some of the price increases with general inflation Youre also looking from a volume standpoint still working through some of the elevated COVID-19 demand and batteries and auto so that's going to be a little bit of a drag on volumes, we factored all of that into the outlook.
Well.
Impact on gross margin as well so I think we feel.
Really confident in the outlook, we're providing today and do have some flexibility.
<unk>.
May evolve over the course of the year just like they did last year.
Okay, great. Thanks, so much.
The next question comes from Bill Chappell with <unk> Securities. Please go ahead.
Thanks, Good morning.
Belmond Bill and also Jackie Congratulations I can't believe we worked together for 20 years.
Thanks, Tom.
Things I guess first on.
Project momentum given maybe the understanding that the Genesis behind this I mean, obviously you've had a good year.
A lot of the issues that have plagued margins per se have been macro that affected other companies. So just trying to understand what was the genesis of doing it is now and where you think.
<unk> margins were the biggest buckets of kind of margin improvement can come from.
Sure Bill I think the name for the project with chosen really with a purpose and when you think through that.
Effort with the organization undertook in 'twenty two.
Organization really did a fantastic job getting us back on our front foot in terms of how we were able to manage the business and manage a lot of it to your point a lot of these macro factors that were coming coming at us. So it was absolutely an inflection point and we were able to deliver on the outlook that we provided last November .
Despite a lot of twists and turns that I don't think anyone anticipated going into the year and that's a testament to that effort, but as we took a step back and we're thinking about 'twenty three we really wanted to accelerate on that progress in this program.
It's built around.
We have $30 million to $40 million of savings built into 'twenty three already with the balance being recognized in 'twenty four.
A number of major buckets of work.
And all of the lessons that we've learned over the last couple of years.
Looked at operational distribution network changes that we could make product sourcing footprint optimization, some automation value engineering.
Procurement, obviously, we're going to run sourcing events, we're going to look at additional partners.
We're going to look at both the location, we're going to look at the location in terms of where we source product and then in SG&A, just obviously look across the board. It indirect spending so if we can optimize model and sort of where work takes place and how we can improve the way we work together.
I think this program is everything you'd like to see it's going to benefit the P&L. It is going to improve the balance sheet with working capital efficiency, it's going to be able to drive improved debt reduction and then.
Equally importantly, it's going to drive and change the way, we operate which is going to benefit the organization in the long run. So we're really excited about what this program is going to kind of bring to the financials, but also in terms of.
How we operate the business going forward.
Got it thanks and then.
Kind of granular questions on looking at both fourth quarter and first quarter if any.
Impact from Hurricane Ian was that in fourth quarter or was that in first quarter was there any incremental price increase in October or was that just gives us carryover pricing and then also kind of holiday sets are you in a better space.
Got that.
For holiday 2022 than you were in 2021 or about the same or worse.
Thanks.
Yeah, Hey, Bill Let me, let me take you through the first quarter a little bit so the hurricane did occur in the fourth quarter, we probably saw about $3 million of incremental sales.
Looking at the total first quarter, we do want to kind of get this right size for everyone. We're comping elevated demand coming in the quarter. So we expect organic low single digit top line.
Gross margin year over year should be roughly flat.
We are going to reinvest back into A&P. So as we've talked about it was a little bit light in the fourth quarter were pushing that into the holiday so that should be up a bit.
And then this is a quarter, where the currency impact will be most severe so on a year over year basis top line is going to be impacted by about $40 million and <unk> is going to be impacted by about 10.
One other thing I wanted to call out I don't think I was specific in the full year interest is a headwind of about 10% to $15 million full year in the quarter, it's probably five or $6 million.
And so on.
And there are a fair amount of headwinds going into the quarter. We expect all of those to improve though as we kind of go sequentially.
Throughout the year.
And your last question about holiday sets I would say we're in as equally beneficial position. This year as we were last year for holiday. So we feel really good about where we're headed.
That's great. Thanks for the color.
The next question comes from Andrea Teixeira with Jpmorgan. Please go ahead.
Hi, Good morning, this is giovanni on for Andrew.
You did mention Barbra battery usage.
About 50% higher than the categories are definitely larger than pre pandemic, but I was wondering like since Q.
Q4 ended in the loft.
Five six weeks.
Can you just comment on the current consumer trends you are seeing.
As it relates to lastly, like either trading down.
April and also are you also seeing any retailer inventory management and if so how long do you expect it to be ahead headwinds.
A lot of questions in there let me see if I can tackle all of them, but let me know.
That's okay, but just let me know if I Miss anything first the last question first on inventory.
I would say, we're seeing slightly elevated inventories right now, but thats not unusual with where we are in the holiday season, and a lot of that's driven by holiday shipments retailers wanted to get an early start on holiday because I think by all accounts, we're going to look at an elongated holiday buying season. So that is not something that we're worried about I would say inventory levels are.
Slightly elevated but a normal position heading into holiday not not a big concern for us.
Now, let me walk back to I think some of the macro questions in terms of the consumer the consumers are obviously feeling pressured in the current environment. There has been a focus on essentials.
They are really focused on grocery utilities fuel Fortunately the bulk of our portfolio falls within the essentials bucket, particularly when you are talking about our largest category in batteries that is an essential product and consumers are focused on value and value is going to depend on the individual consumer preference that could be pack size that could be the frequency.
The purchase.
In terms of the fundamentals of all of our categories, particularly on batteries. The underlying fundamentals are very strong.
Device ownership is up 6% still today versus pre pandemic levels.
A number of batteries that are household users on a year over year basis is up 15% when you compare it to pre pandemic levels.
And then let me transition into sort of private label part of your question, which is consumers continue to prioritize brands.
Quality is really going to be the decision driver with long lasting.
And a trusted brand is going to drive that decision and youre seeing that play out in the scanner data with private label down two share points globally in the U S. It's down three two share points in Energizer gained two five share points globally. So brands continue to matter demand is holding up well and youre not seeing a lot of trade down.
That's very helpful. Thank you and I'll pass it on.
The next question comes from Robert <unk> with Evercore. Please go ahead, great great. Thank you.
Connected questions.
Can you just give us your best sense now.
On what normalized battery demand looks like.
On one hand, you talk about 6% more devices batteries up 15% versus pre pandemic, but you also talk about elevated so just just as kind of the initial question.
Are we 5% over normalized do you think or where would you assess that.
Well, what I would say is as you look it up with the outlook. We provided for 'twenty three we are calling for organic growth and batteries and that is driven primarily.
Primarily by pricing you are going to see some volume declines in the first part of the year as you work your way through the year. So I would say from a volumetric standpoint.
We'll have to work through the elasticity impact I would say the COVID-19 impacts as well as just the general inflation impacts, but we are showing organic growth in both batteries and auto care so from a value standpoint.
I'd say youre at the new base in terms of the business I think volume is a little bit of work to come back to as we get through 'twenty, three but I would say youre, establishing that new base now both when you compare it to a value and volume basis.
And on the volume side, maybe 5% or three or just kind of rough order of magnitude.
Well I mean, if you look at the latest 13 weeks. When you are looking at the battery category you have in the category of value up slightly with volume down 12%.
Pricing during that time period was up 20% or more across the board in the battery category. So I think what Youre seeing is values is carrying the day right now in the battery category, but youre going to see that volume work its way up as you get through the quarter. So I would say youre.
On a category basis down 12, but thats going to improve as you work your way through the year John anything.
No I think full year.
High single digit decline, so to Mark's point and it improves as we go throughout the year.
Okay, and then just in terms of the.
The productivity program.
And the rationale for that.
Is that designed to restore margin or gross profit dollars.
And and I guess the question is given that the category is stronger.
If it was just dollars why why wouldn't pricing alone given the health of the category offset it or do you need it because of what's happened with currency just trying to understand the structural drivers here.
When I started that turn it over to John for a little more color I mean, I would say, we're attacking the margin recovery from all angles inclusive of pricing, we leaned in heavily on pricing as you know during fiscal 'twenty two.
I think what we're leaning into as we head into a tougher economic environment as we're keeping things within sort of the four corners, we are going to make sure that we attack costs that have crept into the system over the last couple of years and make sure we get rid of those and all.
All of the savings that we're talking about is sort of regardless of what happens in the inflationary environment. So it was.
Take things into your own hands and continue to improve the profitability based on what you can control.
But certainly pricing and trade investment will continue to be a focus to make sure that where we do invest those dollars we get the highest return.
And Thats all great. So could we expect perhaps that as we come out of this you will have higher margins than in the past is that.
Something to that.
As you can aspire to.
So I think when you look at our gross margin improvement, we're expecting to improve gross margin over the course of fiscal 'twenty three from 100 to 150 basis points.
And that high yet.
First year.
Higher higher than.
Pandemic, Robert what I'd say is we're this is a recovery program, we're trying to get back to where we were so I don't I wouldn't project higher because we can't see that far but I do think that this will give us the best best chance to continue to improve those margins as we go forward got it. Thank you very much thanks Robert.
The next question comes from Kevin Grundy with Jefferies. Please go ahead.
Okay.
Great. Good morning, everyone I apologize for the background noise I'm traveling and I also wanted to Echo my congratulations to Jackie as well, it's been a pleasure well deserved retirement.
A couple of Cleanups for me Bob.
With John just first to follow up I guess on Lauren's line of questioning around FX I think the market was probably a bit surprised by the impact on profit, which relative to the top line not quite as dire as it has been historically for energizer business.
And then Relatedly, John I guess.
I think folks are probably also a little bit surprised that the top line impact not more dire given what the dollar has done relative to sort of your preliminary guidance with fiscal <unk> can you help on those two products and then I can follow up.
Yes.
If you look at.
The impact that we have to profitability next year, that's inclusive of hedges and so it matters how fast this rule as it rolls out so the hedges are offsetting some of that impacts that we're saying $30 million roughly versus the $90 million top line and that's not outside our normal band.
I think we also we saw significant.
Impact like you said last quarter coming into the fourth quarter. So that's already baked in and then you've got the year over year change. So you are seeing.
Into next year, it's been a pretty significant headwind for us in total.
Okay got it if I can follow up a little bit more offline and then the other question just on the impairment charge.
Again, it's noncash, but I'm just trying to marry number one I can appreciate noncash number two I can also appreciate how much variability and terminal value and Youre valuing assets.
Just trying to marry that up with some of the transit for a near term cost pressures with Mark's comments about greater optimism on the battery category longer term can you help reconcile those a bit.
Yeah. So the majority of the write offs were in the auto care side and I think the two things that occurred as we kind of finished out the quarter. The currency that we just talked about had a significant impact on all of our international earnings relative to these models as well as the rapidly rising interest rates and that really changed impacted our cost of capital. So when we look at those models.
It wasn't so much the cash flows that changed or the organic cash flow it was really currency and cost of capital.
Got it I'll pass it on thanks, guys. Good luck.
Thanks, Kevin.
The next question comes from Hale Holden with Barclays. Please go ahead.
Hi, good morning.
I think from the gross margin comments for the first half of 'twenty three that I heard that there were some manufacturing deleverage as you work through your inventory backlog.
Okay.
Define that that's what the headwind was.
Well, we didn't give the exact number but I mean, what we're saying is it will start out in the first quarter sort of at $37 38, which is flat year over year, and it's a bit of a sequential improvement from the fourth quarter and then as you go through it will improve a little bit but most of that day.
Deleveraging of inventory, that's really impacting our production volumes that will be absorbed in the first quarter.
Great.
And then.
For 2003 I was wondering if you could walk through what your inflation expectations were.
On which part are you talking about gross margin gross.
Gross margin on our just generically what headwinds you were looking at.
Okay, maybe let me just walk you through.
Thinking about this.
We expect organic top line growth low single digits, that's obviously.
Currency is going to drag that down to low single digit decline.
We anticipate the volumes will be modestly down due to the elasticity impacts that mark talked about.
Gross margins will be up and Thats really we expect to have continued elevated material costs and the currency headwinds that we've talked about we are seeing some benefit in freight which will really kind of roll through as all of the improvements will kind of in the back half of the year, we're going to continue to invest in A&P. So thats going to go up youre on a year over year basis I did.
And it didn't want to call out the rates have risen pretty dramatically on interest even though we are over 85% fixed that is a $10 million to $15 million headwind year over year, the currency that I talked about $90 million topline 30 million roughly bottomline, that's <unk> 30 a share.
Those are kind of the key items that we're looking at that are there going to be headwinds going into 'twenty three.
Great very much I appreciate it.
Thanks Al.
Our next question comes from William Reuter with Bank of America. Please go ahead.
Hi.
Just have two so the first is it seems like you paid down your ABL balance during the fourth quarter, you repaid another $25 million of debt in the first quarter was that the term loan that you repaid or was that bonds.
It was a term loan.
Okay.
And then the.
The second question.
In terms of where you see your leverage ending the year based upon expectations for how much inventory you take out of the system do you have a sense for where you where are you seeing that.
Net leverage at the end of fiscal year 'twenty three.
Just in general paying down debts, our number one priority I think we have the opportunity to take out around a half a turn and thats going to be plus or minus but that's what we're going to push over the year.
Great so half a turn.
Working capital reduction, but net.
Net leverage reduction net leverage reduction yes.
Okay I'll pass to others. Thank you.
Thanks.
The next question comes from Carla Casella with JP Morgan. Please go ahead.
Hi, <unk>.
A question on margin all out quarter recycling costs I'm wondering if there's something that's the first time I think I've already talked about that at this point.
And in that market.
Awesome.
This forecast.
Okay, Yes.
Recycling is something we've done in a number of markets consistently there are some new programs.
Yes, Australia was one of the larger ones. So that was a bit of an increase for us in the year.
And going forward that will continue.
That should be in operation, we will continue to run well it'll just be an ongoing cost.
Managing the business.
Okay and then.
I might have missed it.
Now to pull forward the holiday sales.
The holiday sales were pulled into this quarter.
From that.
No we didn't give an amount it always kind of goes on either side of the line. So it varies from year to year, but I don't think as we look fourth quarter, what I would point to as organic.
Declines of low single digits is really what we're forecasting for this quarter.
Okay, great. Thank you.
This concludes our question and answer session I would now like to turn the conference back over to Mark Levine for any closing remarks.
Thanks, everyone for joining the call and your ongoing interest in Energizer I hope everyone has a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.
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