Duracell’s brand is strong and it should be earning more money
Duracell’s $82 million of pretax profits in 2017 were still well below what it earned as a subsidiary of P&G. Can you clarify or quantify to what extent transition costs or purchase price accounting impacts at the segment level were still temporarily burdened last year? Or is it possible that the gap in earnings contribution simply reflects a commoditization of the category given the entry of Amazon into the battery market?
I did see that Duracell’s earnings were up in the first quarter. Is that a sign of a more meaningful contribution in 2018 and beyond, as you finish right-sizing the manufacturing footprint and acquisition-related charges fall away?
Yeah. Duracell should be earning more money than it is now, and will be. And as you mentioned, it’s well on its way there. But it is not earning an appropriate amount now, based on the history of the company.
I was around when… I was on the board of Gillette when Gillette bought Duracell. And I’ve seen what it does when it is managed to its full extent. And I saw what Jim Kilts did with it at Gillette when he ran it. And there were a lot more transition problems in the purchase. For one thing, there’s a lot of rules connected with our swap of our stock in P&G for Duracell. There are a lot of things which you cannot do that made sense to do in that period of transition from P&G’s management to ours. But Duracell… the brand is strong. Very strong.
The product line is very strong. And we are making more money. And we should, and I believe we will earn, really, what the property is capable of earning. We should be earning that relatively soon.
But you’re absolutely right that it is… from a profit standpoint… is under performing.
We’re making a lot of changes. And some of those are involved in jurisdictions… countries… where it is really expensive to change in terms of employment… payments that have to be made if a plant is changed or something of the sort.
But I like the Duracell deal absolutely as well as when we made it.
I like it better than you do.
No. Duracell is a very, very… is our kind of business.