01—Abstract
Summary
Summary of the 10-Q filed August 1, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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.
02—Key points
Key Highlights
- Net 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.
- Diluted 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%).
- The Global Industrial segment showed significant fixed currency sales growth of 8% in Q2, driven by Water, Food & Beverage, and Paper businesses.
- The 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.
- Significant expenses were incurred related to the planned spin-off of the Upstream Energy business ($14.5 million in Q2 2019).
- Cash flow from operating activities was strong at $917.5 million for the first six months, supporting investments and capital allocation.
- Ecolab completed strategic acquisitions in Bioquell (life sciences) and Lobster Ink (online training) during the first half of 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, Ecolab Inc. kept $0.12.
- Revenue$3.17B100.0%
- Cost of revenue−$1.78B56.2%
- Gross profit$1.39B43.8%
- Operating costs−$924.4M29.2%
- Operating income$464.4M14.7%
- Interest, other & tax−$95.8M3.0%
- Net income$368.6M11.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed August 1, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $3.17B$3.69B | −14.1% |
| Cost of Revenue | $1.78B$2.15B | −17.0% |
| Gross Profit | $1.39B$1.54B | −10.0% |
| SG&A Expenses | $900.00M$1.04B | −13.2% |
| Operating Income | $464.40M$494.60M | −6.1% |
| Interest Expense | $54.50M$60.20M | −9.5% |
| Net Income | $368.60M$351.30M | +4.9% |
| EPS (Basic) | $1.28$1.22 | +4.9% |
| EPS (Diluted) | $1.26$1.20 | +5.0% |
| Shares Outstanding (Basic) | 287.60M288.80M | −0.4% |
| Shares Outstanding (Diluted) | 292.10M293.30M | −0.4% |
05—Questions
Frequently Asked Questions
What was Ecolab's revenue performance in Q2 2019?
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%.
How did the 'Accelerate 2020' restructuring plan impact the company's financials?
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'.
What is the status of the planned spin-off of the Upstream Energy business?
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.
How did Ecolab's acquisitions perform, and what were the financial impacts?
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.
What is Ecolab's liquidity and cash flow situation?
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.
06—Continue