Energizer’s first-quarter profit drops 16 percent

Energizer Holdings Inc. this morning reported a lower first-quarter profit, citing expenses related to its acquisition of Playtex Products Inc., a seller of tampons, baby care and Banana Boat sunscreen. 

Energizer, the Town and Country-based seller of batteries and Schick razors, reported a net profit of $102.6 million, or $1.74 a share, for the quarter that ended Dec. 31. A year ago, the company reported a first-quarter profit of $122.3 million, or $2.08 a share.

The earnings per share fell well short of Wall Street estimates. Average estimates from eight analysts polled by Thomson Financial had expected Energizer to churn out $2.20 per share, not counting various charges such as 26 cents per share related to the write-up and subsequent sale of inventory purchased in the Playtex acquisition.

The company said its first-quarter results also included integration and other realignment costs of $5.2 million, after-tax, or 9 cents per diluted share.

Energizer’s shares declined in early trading, falling $5.32 or 5.5 percent on the New York Stock Exchange. Shares stood at $81.38 at 11:02 this morning.

The company recorded $1.2 billion in first-quarter revenue, a 24 percent increase compared with the year-ago quarter.

Despite the costs associated with adding a new business, chief executive Ward Klein said he was pleased with Energizer’s performance during the quarter.

“Momentum continued in our Household Products segment and we focused our efforts on building a new Personal Care division, consisting of the Schick Wilkinson-Sword and Playtex Products businesses,” Klein said in a statement.

Klein said he was optimistic about Energizer’s outlook, but cautioned that ”fiscal 2008 will be a transition year” as the company tries to integrate Playtex into the larger company with a minimum amount of disruption. The company expects to reap some synergies from the Playtex deal but “will incur integration costs,” it said in a press release.

Plus, Energizer shepherded an advertising push in the first quarter, increasing advertising spending behind shaving and batteries in order to accelerate “long-term brand building activities,” Klein said. The company plans to continue to ramp up advertising to support its new Quattro Trimmer.

Energizer’s household products division, which includes batteries and lighting products, increased its sales $66 million or 9 percent, to $790 million.

The U.S. retail battery segment grew five percent in dollars for the 12 weeks ending December 29, 2007, versus the same period last year, partly due to price increases.

Retail sales of Energizer MAX alkaline batteries grew four percent in the quarter, slightly slower than the overall category. Energizer’s ”price-oriented product sales” dropped 12 percent.

But retail sales of Energizer’s lithium and rechargeable products jumped 22 percent, demonstrating shoppers’ willingness to “trade up” to performance brands for digital cameras and other high-tech devices. Energizer said it experienced ”similar product mix shift” in international markets.

Sales in the company’s personal care division — ranging from tampons to Schick razors and Hawaiian Tropic sunscreen –  rose to $400 million from $235.5 million a year before, for a 70 percent increase.

Energizer closely tracks the cost of materials such as zinc and nickel because they influence the company’s profits.  Energizer said zinc costs have peaked and should decline throughout the remainder of the year. But nickel and certain other commodity costs will “remain unfavorable for the next two quarters,” it said. 

Energizer expects total material costs to be “unfavorable” to the tune fo $10-15 million for the remainder of the fiscal year. The company is raising prices on rechargeable products in the U.S. by 8.5 percent to help offset some higher costs associated with the items.