Exide rebounds despite debt concerns

The company is seeing some market share gains, but is sacrificing margins along the way.

By Jim J. Jubak Apr 5, 2013 10:30AM
 Arrow Up copyright Nicholas Monu, iStock Exclusive, Getty ImagesExide Technologies (XIDE), a leading maker of lead-acid batteries, was trading substantially higher Friday morning after a very sharp selloff Thursday. Shares plunged 47.5% yesterday following a story on Debtwire, which reported that the company had hired investment banker Lazard to study refinancing alternatives after a more traditional refinancing failed in late 2012.  

The company finished the December quarter with $80 million in cash and cash equivalents and reported a $15 million loss for the period. It also faces the September maturity of $60 million in convertible debt.

Exide has been battling to win back market share in the battery replacement market -- its share of the automotive replacement market rose to 32% in the December quarter from 27%. (The company has a 69% share of the original equipment market, down from a high of 74%.) But those market share gains have come at the cost of profit margins. 

Operating margins fell by 1.7 percentage points in the quarter from the year earlier period to 11.3%. After the quarter's results, analysts cut their estimates for operating margins in the fiscal year that ends in March 2014 by 2 to 3 percentage points.

Exide supplier Polypore International (PPL) fell 3.1% on the news. Exide competitor Johnson Controls (JCI) was down 1.3%. 

(Johnson Controls is a member of my Jubak Picks 50 long-term portfolio. I'll have an update on that portfolio next week, by the way.)

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. When in 2010 he started the mutual fund he manages, Jubak Global Equity Fund (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund may or may not own positions in any stock mentioned. The fund did own shares of Johnson Controls as of the end of December. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here
Tags: JCIXIDE
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