Profit machinery upgraded while volume still arriving

Edgewell Personal Care Company (EPC) — this company's answers

The model's full reasoning — Q3 2017 call → NOWe need to determine if management conveys both: (1) realized structural improvement in per-unit economics due to company actions, and (2) volume arriving now with most ahead. From transcript: David mentions "strong adjusted operating profit growth of nearly 40%; adjusted EPS growth of 68%; good cash flow generation, and the share gains in Wet Shave and Sun Care." Also "we continue to get traction from innovation" and "we launched several key offerings in e-Commerce, and emerging markets in support of our key growth initiatives." Sandy: "Gross margin with 50.5%, an increase of 230 basis points, the increase was driven by lower product costs resulting from both operational efficiencies and favorable commodity costs, as well as favorable product mix." So part is commodity, part is operational efficiencies. But also "favorable product mix" - that could be structural? But they also mention "lower product costs resulting from both operational efficiencies and favorable commodity costs" - so not purely company-made. Also "A&P expense as a percent of net sales was 17.9%, down 110 basis points, primarily due to higher spending last year in support of Feminine Care innovation and promotional campaigns in Wet Shave." That's cost cutting. They talk about ZBS savings, restructuring savings. But is that a structural improvement in per-unit economics? They say "We continue to expect, incremental restructuring savings of $20 million to $25 million in 2017 and an additional $20 million to $25 million in 2018 and 2019 combined." That's future savings, not realized yet. But they also say "Zero Based Spend initiative remains on track to deliver an estimated $10 million to $15 million in net savings for fiscal 2017" - that's realized? They say "on track" - so maybe partially realized. But the question asks: "management conveys that the company has ALREADY ACHIEVED A STRUCTURAL IMPROVEMENT IN HOW MUCH IT KEEPS FROM EACH UNIT OF BUSINESS — through changes the company itself made that are now visible in the recent period's actual results" - So we need to see if they say that the per-unit economics have improved due to company actions, not just commodity. They mention "operational efficiencies" and "favorable product mix" - but also commodity. They also mention "lower product costs" - but that could be from commodity.

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