10-QPeriod: Q1 FY2019

ECOLAB INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 2, 2019For Securities:ECL

Summary

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 million, 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.

Financial Highlights

54 data points
Beta

Revenue

$2.92B

42.7% Gross Margin

Net Income

$296.50M

10.1% Net Margin

EPS (Diluted)

$1.01

Total Assets

$20.93B

Cash & Equivalents

$79.00M

Free Cash Flow

$191.10M

Financial Statements
Beta
Revenue$2.92B
Cost of Revenue$1.68B
Gross Profit$1.25B
SG&A Expenses$896.10M
Operating Income$313.60M
Interest Expense$56.10M
Net Income$296.50M
EPS (Basic)$1.03
EPS (Diluted)$1.01
Shares Outstanding (Basic)288.20M
Shares Outstanding (Diluted)292.30M

Key Highlights

  • 1Net sales increased 1% to $3,505.4 million, with fixed currency sales growing 4%, indicating underlying business strength.
  • 2Net income attributable to Ecolab surged 20% to $296.5 million, resulting in diluted EPS of $1.01, up from $0.84 in Q1 2018.
  • 3Operating income increased 4% to $367.2 million, with adjusted operating income (excluding special items) growing 8%.
  • 4SG&A expenses as a percentage of sales decreased to 28.6% from 29.3% in the prior year, reflecting cost management and sales leverage.
  • 5The company is proceeding with its 'Accelerate 2020' restructuring plan, with expected costs of $260 million and expected completion by the end of 2020.
  • 6Ecolab announced plans to spin off its Upstream Energy business, expected to be completed in 2020.
  • 7Cash provided by operating activities was $378.1 million, though lower than the prior year, reflecting working capital fluctuations.

Frequently Asked Questions

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.

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.

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.

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.