10-QPeriod: Q2 FY2019

ECOLAB INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:ECL

Summary

Ecolab Inc. (ECL) reported its second quarter and first six months results for 2019, demonstrating a modest increase in net sales and net income attributable to Ecolab compared to the prior year. Net sales for the second quarter grew by 2% to $3.76 billion, and for the first six months by 1% to $7.26 billion. Diluted Earnings Per Share (EPS) saw a 5% increase in the second quarter to $1.26, and an 11% increase for the first six months to $2.28. The company highlighted strong performance in its Global Industrial segment, with fixed currency sales up 8% in the second quarter. Significant restructuring charges related to the 'Accelerate 2020' plan and expenses associated with the planned spin-off of the Upstream Energy business impacted profitability, though the company provided adjusted figures excluding these items which showed more robust growth. Ecolab also continued its strategic acquisitions, adding businesses in the life sciences and online training sectors. The balance sheet reflects growth in assets, including goodwill and intangible assets, along with an increase in total liabilities. Cash flow from operations remained strong, providing ample liquidity for investments, dividends, and share repurchases. The company reiterated its financial guidance and reaffirmed its commitment to its strategic growth initiatives, despite facing some headwinds from foreign currency translation and varying global economic conditions.

Financial Highlights

54 data points
Beta

Revenue

$3.17B

43.8% Gross Margin

Net Income

$368.60M

11.6% Net Margin

EPS (Diluted)

$1.26

Total Assets

$20.83B

Cash & Equivalents

$15.70M

Free Cash Flow

$386.00M

Financial Statements
Beta
Revenue$3.17B
Cost of Revenue$1.78B
Gross Profit$1.39B
SG&A Expenses$900.00M
Operating Income$464.40M
Interest Expense$54.50M
Net Income$368.60M
EPS (Basic)$1.28
EPS (Diluted)$1.26
Shares Outstanding (Basic)287.60M
Shares Outstanding (Diluted)292.10M

Key Highlights

  • 1Net sales increased by 2% to $3.76 billion for the second quarter and 1% to $7.26 billion for the first six months of 2019 compared to the prior year.
  • 2Diluted EPS for the second quarter rose 5% to $1.26, and for the first six months rose 11% to $2.28, with adjusted figures showing stronger growth (12%).
  • 3The Global Industrial segment showed significant fixed currency sales growth of 8% in Q2, driven by Water, Food & Beverage, and Paper businesses.
  • 4The company is executing on its 'Accelerate 2020' restructuring plan, incurring $37.5 million in charges in Q2 2019, with total expected costs of $260 million.
  • 5Significant expenses were incurred related to the planned spin-off of the Upstream Energy business ($14.5 million in Q2 2019).
  • 6Cash flow from operating activities was strong at $917.5 million for the first six months, supporting investments and capital allocation.
  • 7Ecolab completed strategic acquisitions in Bioquell (life sciences) and Lobster Ink (online training) during the first half of 2019.

Frequently Asked Questions

In the second quarter of 2019, Ecolab reported net sales of $3,759.4 million, an increase of 2% compared to $3,689.6 million in the second quarter of 2018. On a fixed currency basis, sales increased by 5%.

Ecolab incurred $37.5 million in restructuring charges in the second quarter of 2019 related to its Accelerate 2020 plan. The company now expects total costs of $260 million for this plan, which aims to leverage technology, simplify processes, and reduce complexity. These charges are reported within 'Special (Gains) and Charges'.

Ecolab announced its intention to separate and spin-off its Upstream Energy business. During the second quarter of 2019, the company incurred $14.5 million in expenses related to this planned spin-off, primarily professional fees. The spin-off is expected to be completed in 2020.

Ecolab completed acquisitions of Bioquell (life sciences) and Lobster Ink (online training) in the first half of 2019. While not individually significant enough to require pro forma financial information, these acquisitions contributed to growth in specific segments. Acquisition and integration costs were reported as special charges, totaling $1.5 million (product cost of sales) and $0.4 million (special charges) in Q2 2019.

Ecolab generated strong cash flow from operations, with $917.5 million in the first six months of 2019. The company had $85.7 million in cash and cash equivalents as of June 30, 2019, and a $2.0 billion credit facility. This strong operating cash flow supports ongoing operations, investments, dividends, and share repurchases.