BERN TWP., Pa. – EnerSys, the Bern Township manufacturer of stored energy solutions for industrial applications, set a few records in its fiscal third quarter. Net sales, for one, were up 12% above net sales in fiscal 2021’s third quarter. That’s good, but it could have been better.
Even though order rates continue to be strong, the company’s backlog grew to $1.2 billion, double the usual level. The culprit, as it has been the past few quarters, is shortages in the supply chain.
EnerSys also faced significant cost increases in excess of $30 million in the quarter which it countered by aggressive pricing increases of its own to offset the quarter’s immense inflationary impact.
The company appears to be unphased. Speaking to analysts during the earnings webcast, David Shaffer, president and CEO, said, “We believe we performed better than our competitors as we continue to maintain our market share.”
Despite its efforts to counter the headwinds of today’s business climate, EnerSys ended up with a decline in adjusted operating earnings that carried through to all of business segments. Earnings per share (EPS) were also down in the quarter compared to the previous year.
While the order backlog produced negative effects this quarter, it also foretells better results in the future. In a statement, Shaffer was optimistic.
“We have continued to make substantial progress on our strategic technology and business development initiatives including 5G powering, transportation market share, and next generation Motive Power products, which collectively account for the majority of our backlog growth. Our lithium technology continues to gain traction as we now have several lithium variants available to Motive Power and Energy Systems, we released our Outback Mojave home energy storage lithium battery system, and $46 million of the $117 million of Energy Systems orders so far received for the California Public Utilities Commission backup power mandate were for lithium batteries.”
Operating results
“Demand is robust across all of our lines of businesses,” continued Shaffer, “and we expect this strength to continue well into our next fiscal year.”
Net revenue for the third quarter of fiscal 2022 was $844.0 million, an increase of 12.4% from the prior year third quarter revenue of $751.1 million. It increased 6.7% sequentially from the second quarter of fiscal 2022 revenue of $791.4 million. The increase compared to the prior year quarter was the result of a 10% increase in organic volume resulting primarily from strong demand and the easing of the pandemic plus a 3% increase in pricing. The sequential increase was due to a 5% increase in organic volume and a 3% increase in pricing, partially offset by a 1% decrease in foreign currency translation impact.
Net sales in the quarter for Energy Systems increased 14.2% to $85.2 million from $337.2 million in fiscal 2021 as 5G sales continue to ramp. Energy Systems, which combine enclosures, power conversion, power distribution and energy storage, are used in the telecommunications broadband and utility industries, uninterruptible power supplies and numerous applications requiring stored energy solutions.
Shaffer observed, “Energy Systems margin improvements through pricing, contract manufacturing on-shoring, product redesign, and volume will continue to accelerate over the upcoming quarters with further demand growth in network powering.”
“Motive Power order rates have returned to normalized levels,” he continued, “and the business will benefit as forklift electrification efforts continue, shortages abate, and we work down our backlog.
Motive Power net sales were $339.5 million compared to $304.4 million the previous year, an increase of 11.5% as higher margin NexSys maintenance-free products continue to grow. Motive batteries and chargers are utilized in electric forklift trucks and other industrial electric powered vehicles.
Specialty Products net sales increased $9.8 million to $119.3 million from $109.5 million in fiscal 2021. Specialty batteries are used in aerospace and defense applications, large over-the-road trucks, premium automotive, medical and security systems applications.
Shaffer commented, “Specialty’s significant growth in the third quarter was actually stymied by supply shortages which should set the business up for an even stronger fourth quarter. As such, we anticipate the benefit of our robust demand, pricing actions, technology developments, and supply mitigation strategies to show continued improvement over the upcoming quarters.”
Net earnings for the third quarter of fiscal 2022 were $36.3 million, or $0.85 per diluted share. Net earnings for the third quarter of fiscal 2021 was $38.6 million, or $0.89 per diluted share.
Adjusted net earnings per diluted share for the third quarter of fiscal 2022, on a non-GAAP (Generally Accepted Accounting Principles) basis, were $1.01.
EnerSys also said it bought back 1.5 million shares for $116 million since the beginning of the third quarter, bringing its year-to-date repurchases to 1.9 million shares for $148 million The company has $42 million left in authorizations for repurchases.
Also, the company said it expects adjusted diluted earnings per share to be between $1.11 and $1.21 in the fourth fiscal quarter.
EnerSys (ENS: NYSE) manufactures stored energy solutions for industrial applications. They complement an extensive line of motive power, reserve power, and specialty batteries with a full range of integrated services and systems and sales and service locations throughout the world.
