Short Energizer Holdings, Inc.

NYSE:ENR

Sohn Conference – May 2017

Company Overview

Page 2

2000 – Spun off by Ralston Purina

2015 – Spun off by Edgewell Personal Care

May 2016 – Acquired HandStands (Auto Care)

Batteries (Alkaline): #1 or #2 player in most/all markets, #2 in US with 30% share

Lighting (flashlights – ~15% US share, headlights, and lanterns)

Auto Care (fragrance – ~20% US share, appearance)

HandStands (~10% of Sales)

Core Battery (~90% of Sales)

When Did You Last Buy Batteries?

Page 3

Alkaline Batteries Are In Long-Term Secular Decline

Page 4 Source: Deutsche Bank

Secular Decline Of Alkaline Batteries Likely To Continue

Page 5

Global Alkaline Battery Market expected to decline at 0.16% CAGR from 2015 to 2019

In the US and Europe, battery sales have been declining in the ~3-4% range over the last several years

Products, like mobile phones and smart watches, now featuring lithium-ion batteries

Lithium-Ion Market forecast to grow at 11.6% CAGR from 2016 to 2024

OEMs and their suppliers provide lithium-ion batteries, not Duracell or Energizer

Source: Research and Markets, Transparency Market Research, Deutsche Bank

European Battery Sales (Y/Y)

High Customer Concentration With Major Retailers

Page 6

Some argue that, with Berkshire’s acquisition of Duracell, the players in the space will act more rationally

The Problem: All of the power lies in the hands of retailers

In the US, ~90% of battery sales are concentrated among only 8 or 9 retailers

Retailers have all the leverage over their suppliers, forcing them to drop their margins, threatening to give preference to other branded players or private players

Battery Retailers

Retailers will continue to beat up the branded players, resulting in declining prices and margins for battery suppliers.

Costco Case Study

Page 7

Costco beat up their suppliers so much that the winner in the competition to be their exclusive supplier, Duracell, was forced to also make a private label battery for them. The kicker is that the private label lasts longer as well.

Source: http://www.paulallenengineering.com/blog/kirkland-signature-alkaline-batteries

The identical bottoms of the

batteries reveal that they were

made by the same company (Duracell)

Discharge Duration [Gray = Kirkland Signature, Orange = Duracell]

Private Label Vs. Branded Batteries: Value Proposition

Page 8 Source: Clark.com, Batteryshowdown.com

Private Labels have 10-15% share in the US and ~30% share in Europe

Private Labels have turned batteries into commodities. With little overhead and no advertising, they offer essentially the same product at a much lower price

This low-priced alternative should lead to declining share, pricing, and margins for branded players, regardless of what they do

Brand doesn’t carry the same weight for batteries as it does for other products, like detergent or shaving razors

The products are not differentiated, and consumers, given the availability of information, have begun realizing it

Energizer and Duracell have cut their advertising budgets accordingly

Private Label Branded

Basic Technology Patent Date 1960 1960

Pricing Lower (25-40%) Higher

Cost Per Unit Energy Lower Higher

Variable Production Costs Same Same

Overhead Bare Bones Sizable Offices and Sales & Marketing Teams

Advertising Budgets Virtually Non-Existent Sizable

Page 9 Source: Batteryshowdown.com, Deutsche Bank

Even in the European market, which has Private Label share in the ~30% range, which reflects the increased competition there, Private Labels like Ikea Alkalisk and Costco Kirkland Signature are still the best deals

Private Label Vs. Branded Batteries: Performance

Page 10

Private Label vs. Branded Batteries: E-Commerce

Source: Amazon.com

Retail And The Amazon Effect

Page 11

E-Commerce currently makes up about 2-4% of total battery sales

E-Commerce has grown 75% in the past year, and will likely continue to grow at a very fast pace

Private Labels can now circumvent the distribution and relationship advantages of the branded players

Source: 1010data

“The times they are a changin’.” – Bob Dylan

Retail And The Amazon Effect (Continued)

Page 12 Source: 1010data

In addition to declining pricing and margins, the ascendancy of E-Commerce should also result in share loss for branded players

Energizer’s Cost-Cutting Prospects Are Minimal

Page 13 Source: Energizer Investor Presentation

Some sell-side analysts indicate that there is room to cut costs

By all accounts, Energizer has been a well-run business over the last several years

As indicated to the left, Energizer’s 2013 restructuring recently streamlined their business

Speaking with Energizer’s IR, they indicate that there is no real cost-cutting opportunity

Energizer Hyped As An Acquisition Platform . . .

Leveraging their distribution platform, Energizer acquired a great set of brands

Shaving: Edge, Schick, Skintimate

Sun Care: Banana Boat, Hawaiian Tropic

Feminine Care: Playtex, Stayfree, Carefree, and O. B.

Page 14

After 2000 Ralston Purina Spin After 2015 Edgewell Spin

The battery business has declined, reducing Energizer’s leverage to introduce new products

The good brands are spoken for

Energizer now has to bid against the likes of P&G, Unilever, Nestlé, and Edgewell for deals

Energizer is not as well capitalized as these other businesses

Energizer plans to make more acquisitions, and this should result in a

squandering of shareholder value

. . . But Energizer Is Now A Fundamentally Worse Platform

Page 15

After 2000 Ralston Purina Spin After 2015 Edgewell Spin

Highly Recognizable

Brands

Do you know these brands?

Energizer’s First Acquisition Was Unimpressive

Page 16

HandStands

ENR paid 10x EBITDA (not cheap), with HandStands growing at low-to-mid single digits, although even this is questionable

Auto care is highly competitive, with HandStands losing share (going from 26% to 18% in fragrance) and sales recently

HandStands is already in ~70% of the retailers where Energizer is already featured, leaving minimal room for growth

The Energizer retailers which don’t carry HandStands likely don’t really sell automotive products

Shrinking Market Share

Source: Energizer Investor Presentation, Deutsche Bank

HandStands’ share

dropped from 26% to 18% in fragrance in just one

year

Energizer’s Recent Results Confirm Weakness

Page 17

1st Quarter – 2017 2nd Quarter – 2017

Stock traded up due to 7% organic growth, whose primary drivers were temporary

3%: shelf space gains, to be lapped in the 2nd quarter

3%: incremental holiday activity

Margin improvements due to favorable commodity prices and holiday sales improvements

On May 3rd, 2017, ENR reported NO ORGANIC GROWTH

“Inventory Deload”: This sounds a lot like channel stuffing

“Price Increases”: With the rise of Private Labels, especially Amazon, this isn’t sustainable

Source: Energizer Earnings Transcripts

Temporary factors (shelf space gains, commodity prices, hurricane sales) have enabled Energizer to beat street estimates on poor quality earnings

US Treasury Yield Curve

Several Near-Term Headwinds For Energizer

Page 18

“Inventory Deloading”

Lapping of shelf space gains in

2017 should result in little or no

organic growth

Commodity prices, recently at

historic lows, are rising and are

expected to rise much more

Rising interest rates (which are

expected) would make yield

companies like Energizer less

attractive

Source: IMF, US Treasury

Energizer’s Organic Growth

Channel Stuffing, Anybody?

Page 19

Energizer’s Distribution Gains

Some of this involves increasing

the number of displays at some of

their retailers

Though slightly beneficial, this

artificially improves sales by

saddling retailers with more

inventory

With their aggressive revenue

recognition, this is de facto

channel stuffing

In the most recent quarter,

“inventory deload” (-4%)

rendered their organic growth flat

Source: Energizer Investor Presentation and Earnings Transcripts

Energizer Added New Displays In Stores

Energizer’s Private Market Value

Page 20

Given that Energizer is the #2 player in the space, an 8x forward EV/EBITDA multiple is very conservative

Warren Buffett, Berkshire Hathaway CEO

Berkshire Acquires Duracell

February 2016: Berkshire Hathaway acquired Duracell, the #1 alkaline battery player, paying 7x EBITDA

Buffett traded his $4.7 billion worth of Procter & Gamble shares ($336 million cost basis) for Duracell and $1.8 billion in cash

Doesn’t include Berkshire’s ~$1.5 billion in tax savings from avoiding capital gains on the P&G shares. Including this, Berkshire actually paid more like 3.4x EBITDA

Energizer Is Exceedingly Overvalued

Page 21

This is assuming that multiples don’t compress below 8x

FY 2017E FY 2018E FY 2019E FY 2020E

Revenues 1,686 1,678 1,670 1,663

Growth % 3.2% (0.5%) (0.5%) (0.4%)

EBITDA 326 323 320 317

EBITDA Margin % 19.4% 19.2% 19.2% 19.1%

Market Capitalization 3,693 3,702 3,711 3,720

Net Debt 570 478 388 301

Enterprise Value 4,263 4,180 4,099 4,021

Forward EV/EBITDA Multiple 13.1x 12.9x 12.8x 12.7x

Assumed Forward EV/EBITDA Multiple 8.0x 8.0x 8.0x 8.0x

Implied Share Price $33.02 $33.98 $34.96 $35.95

Implied Return 44.7%

Several Catalysts Can Lead To Energizer Shares Declining

Page 22

Energizer’s investor appeal is its

2% dividend yield

Rising interest rates (which are

expected) would make yield

companies less attractive

Continued secular decline in the

alkaline battery space

Disappointing earnings as a

result of temporary factors

reversing

Poor acquisitions, which could

lead to debt or equity offerings

that could harm stock price

Thank You!

DISCLAIMER: THIS PRESENTATION IS NOT A RECOMMENDATION TO BUY OR SELL SECURITIES. PLEASE DO YOUR OWN RESEARCH.

DISCLOSURE: WE ARE SHORT SHARES OF ENERGIZER.