01—Abstract
Summary
Summary of the 10-Q filed May 2, 2019. Cited figures are marked; the original filing is the authoritative source.
Ecolab Inc. reported solid financial results for the first quarter of 2019, demonstrating continued growth and operational efficiency.
Net sales increased by 1% to $3,505.4 milliona, with fixed currency sales showing a more robust 4% increase, indicating underlying business strength despite currency headwinds. Net income attributable to Ecolab rose significantly by 20% to $296.5 million, translating to a diluted EPS of $1.01, up from $0.84 in the prior year's quarter. This performance was supported by effective cost management, with Selling, General, and Administrative (SG&A) expenses decreasing as a percentage of sales, and a slight improvement in operating income margin.
The company also advanced its strategic initiatives, including the Accelerate 2020 restructuring plan aimed at enhancing efficiency, and announced its intention to spin off its Upstream Energy business. Despite some special charges related to restructuring and the spin-off, the core business demonstrated resilience. Ecolab's balance sheet remains strong, with manageable debt levels and continued cash flow generation from operations, enabling strategic investments and shareholder returns.
02—Key points
Key Highlights
- Net sales increased 1% to $3,505.4 million, with fixed currency sales growing 4%, indicating underlying business strength.
- Net income attributable to Ecolab surged 20% to $296.5 million, resulting in diluted EPS of $1.01, up from $0.84 in Q1 2018.
- Operating income increased 4% to $367.2 million, with adjusted operating income (excluding special items) growing 8%.
- SG&A expenses as a percentage of sales decreased to 28.6% from 29.3% in the prior year, reflecting cost management and sales leverage.
- The company is proceeding with its 'Accelerate 2020' restructuring plan, with expected costs of $260 million and expected completion by the end of 2020.
- Ecolab announced plans to spin off its Upstream Energy business, expected to be completed in 2020.
- Cash provided by operating activities was $378.1 million, though lower than the prior year, reflecting working capital fluctuations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Ecolab Inc. kept $0.10.
- Revenue$2.92B100.0%
- Cost of revenue−$1.68B57.3%
- Gross profit$1.25B42.7%
- Operating costs−$935.6M32.0%
- Operating income$313.6M10.7%
- Interest, other & tax−$17.1M0.6%
- Net income$296.5M10.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 2, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $2.92B$3.47B | −15.7% |
| Cost of Revenue | $1.68B$2.07B | −19.1% |
| Gross Profit | $1.25B$1.40B | −10.7% |
| SG&A Expenses | $896.10M$1.02B | −12.0% |
| Operating Income | $313.60M$354.30M | −11.5% |
| Interest Expense | $56.10M$61.00M | −8.0% |
| Net Income | $296.50M$247.30M | +19.9% |
| EPS (Basic) | $1.03$0.86 | +19.8% |
| EPS (Diluted) | $1.01$0.84 | +20.2% |
| Shares Outstanding (Basic) | 288.20M288.60M | −0.1% |
| Shares Outstanding (Diluted) | 292.30M292.70M | −0.1% |
05—Questions
Frequently Asked Questions
What was the revenue growth in the first quarter of 2019?
Ecolab reported a 1% increase in net sales to $3,505.4 million for the first quarter of 2019, compared to $3,470.9 million in the first quarter of 2018. On a fixed currency basis, sales grew by 4%, suggesting underlying business strength that was partially masked by currency exchange rate fluctuations.
How did profitability change in the first quarter?
Net income attributable to Ecolab increased by a significant 20% to $296.5 million in the first quarter of 2019, up from $247.3 million in the same period of 2018. This translated to a diluted Earnings Per Share (EPS) of $1.01, a notable increase from $0.84 in the prior year. Operating income also saw a healthy increase of 4% to $367.2 million.
Are there any significant restructuring or strategic initiatives impacting the results?
Yes, Ecolab is advancing its 'Accelerate 2020' restructuring plan, which involves technology investments and organizational changes, with total anticipated costs of $260 million. Additionally, the company announced its intention to spin off its Upstream Energy business, expected to be completed in 2020. These initiatives, along with some acquisition integration costs, contributed to 'special charges' noted in the financial statements, but the core business performance remained strong.
How is the company managing its debt and cash flow?
Ecolab maintained a solid financial position with total debt at $6,008.2 million (long-term) and $1,132.3 million (short-term) as of March 31, 2019. The company generated $378.1 million in cash from operating activities during the quarter, although this was lower than the prior year, partly due to working capital changes. The company has a $2.0 billion credit facility available and remains compliant with its debt covenants, indicating good liquidity and financial flexibility.
06—Continue