BERN TWP., Pa. – Despite the COVID-19 crisis facing businesses around the world, EnerSys, the Bern Township-based manufacturer of stored energy solutions for industrial applications, managed to stay profitable, although it suffered a substantial decline in sales.
Some other companies declared bankruptcy.
Almost all of the sales decline can be attributed to the company's motive power line of business, as many industrial manufacturing plants around the world were closed or operated at reduced production levels. When manufacturing plants aren't operating, they don't need batteries for their forklift trucks.
EnerSys' two other lines of business, energy systems and specialty, combined, showed an increase in net sales.
Company-wide, EnerSys had adjusted net earnings of $39.4 million and diluted net earnings per share (EPS) of $0.92 compared to $55.9 million and $1.30 respectively in the first quarter of fiscal 2020.
"To offset the reduction in revenue, we have taken multiple initiatives to flex our operational expenses in line with reduced revenue and our work from home initiatives continue to successfully support the business," said David M. Shaffer, the company's president and CEO. "We are flexing our manufacturing capacity to match supply with demand, maximizing manufacturing efficiency and benefiting from raw material and energy cost reductions."
Shaffer also said that, despite headwinds from COVID-19, EnerSys generated strong profitability and operating cash flow principally due to the demand for its products in industries where it has been designated as an essential critical infrastructure supplier.
EnerSys products and services support niche markets within critical industries such as telecommunications and data networks, healthcare, food and beverage, energy, information technology, and defense. For the most part, these industries, and thus EnerSys' major manufacturing operations, have been allowed by governments around the world to continue operating.
Of its three lines of business, motive power was most affected by COVID-19.
"Our energy systems business held up well," Shaffer noted, "as telecommunications operators expanded their capacity and hardened their networks to accommodate the work/school from home initiatives brought on by the pandemic.
"Our specialty business benefited from several new aftermarket transportation contracts, which was somewhat offset by weakening demand from new large over-the-road truck manufacturers. Specialty also secured several large multi-year development contracts for guided munitions."
Shaffer also pointed out that EnerSys' manufacturing facilities generally have continued to operate during these unsettled times with most experiencing only relatively brief or no suspensions of activity. The company said it expects to release its new lithium systems for material handling in September 2020, following testing with lift truck original equipment manufacturers and large end users. Also, capacity expansion of TPPL (thin plate pure lead) battery manufacturing is on schedule for the second half of fiscal 2021.
Shaffer said he expects to resume guidance when the company's ability to assess the global motive power market's recovery becomes clearer.
Net sales for the first quarter of fiscal 2021 were $704.9 million, a decrease of 10% from the prior year first quarter net sales of $780.2 million and a 10% sequential quarterly decrease from the fourth quarter of fiscal 2020 net sales of $781.8 million.
The decrease from the prior year quarter was the result of an 11% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing, partially offset by a 4% increase from the acquisition of competitor NorthStar.
Net earnings for the first quarter of fiscal 2020 were $48.6 million, or $1.13 per diluted share, which included an unfavorable net of tax impact of $7.3 million, or $0.17 per diluted share.
On July 6, 2020, the company announced that it was changing its reportable segments, beginning with its first quarter of fiscal 2021, from being based on geographic regions to lines of business.
The new reportable segments are energy systems, which includes energy solutions related to telecommunications systems, uninterruptible power systems, and other power applications; motive power, which includes power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, as well as mining equipment, diesel locomotive starting and other rail equipment; and specialty, which includes energy solutions for transportation, satellites, military aircraft, submarines, ships and other tactical vehicles.
Net sales for energy systems in the fiscal first quarter were $353.4 million, down from $353.8 million in fiscal 2020. Operating earnings were $28.1 million, a decrease from $29.9 million in fiscal 2020.
Motive power net sales were $262.8 million, a 24% decrease from sales of $344.4 million in fiscal 2020 first quarter. Operating earnings were $27.3 million, a decrease from $37.6 million in fiscal 2020.
Net sales for specialty were $88.7 million in fiscal 2021 compared to $82.0 million in fiscal 2020 first quarter. Operating earnings were $5.8 million, a decrease from $10.2 million in fiscal 2020.
EnerSys (ENS: NYSE), according to the company's website, is a global leader in 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.