Exide Forecast 60 Percent Growth in Profits
The company reported net income for the full year of $26.4 million or $0.33 per diluted share as compared to a net loss of $11.8 million or ($0.16) per share in the prior year period and a loss of $68.5 million in 2009. The improvement in net income was driven by significantly lower restructuring and impairment charges, higher gross profit and lower operating expenses.
Adjusted net income for fiscal 2011, which excluded restructuring and impairment charges of $34.0 million, was $57.9 million or $0.72 per share. This compares to adjusted net income of $48.5 million or $0.64 per share for fiscal 2010.
Exide Technologies is a producer of stored electrical energy solutions, and one of the largest manufacturers and suppliers of lead-acid batteries for transportation and industrial applications in the world, with fiscal 2011 net sales of approximately $2.89 billion. The company’s operations in the Americas and Europe and Rest of World represented approximately 42.9% and 57.1%, respectively, of fiscal 2011 net sales.
The company has two main areas of operation, transportation and industrial energy. The company’s transportation batteries include ignition and lighting batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, marine and other applications including Micro-hybrids and lead-acid batteries used on Full Electrical Vehicles. The company’s principal batteries sold in the transportation market are represented by the following brands: Centra, DETA, Exide, Exide Extreme, Exide NASCAR Select, Orbital, Fulmen and Tudor, as well as other brands under various private labels. Transportation segments represented approximately 64.6% of the company’s net sales in fiscal 2011.
The company’s Industrial Energy segments supply both motive power and network power applications. Motive power batteries are used in the material handling industry for electric forklift trucks, and in other industries, including floor cleaning machinery, powered wheelchairs, railroad locomotives, mining,and the electric road vehicles market. Network power batteries are used for back-up power applications to ensure continuous power supply in case of a temporary power failure or outage. Industrial Energy represented 35.4% of the company’s net sales in fiscal 2011.
Jim Bolch, president and chief executive officer, said, "The cost increases experienced during the last several months of fiscal 2011 coupled with delayed pricing action will likely cause first quarter profits to be slightly down from the comparable fiscal 2011 period. We remain confident, however, in our ability to continue to improve the operating performance of the Company and expect full year fiscal 2012 operating income to be in the range of $160 million to $170 million, up from $95.8 million in fiscal 2011."
If this 60% increase is translated into EPS growth then the current adjusted PE, less than 11.0 as of Friday’s close, looks relatively low. Chief Financial Officer Phillip Damaska said he had a “high degree of confidence in the guidance number we’ve put out there” which he said was driven by assumed restructuring costs of $8-$10 million compared to $42 million in 2011 and strong improvements in the Industrial Business division which had seen a 38% increase in backlog.
With total debt of $749.1 million compared to shareholders equity of $405.9 million, the company employs significant leverage. Partially mitigating this, $675 million of the debt does not mature until 2018, and over 90% has a fixed rate of interest.
Probably as a result of the high leverage, Exide has not been a favorite of many of the Gurus. However George Soros has traded the stock in the past and is reported to have bought in earlier this year at around $10.80. The stock closed on Friday at $7.76.
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Disclosure: The author has no long or short positions in Exide Technologies.
Forward-Looking Statements: Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially.