10-QPeriod: Q1 FY2022

ECOLAB INC. Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 5, 2022For Securities:ECL

Summary

Ecolab Inc. reported its first quarter 2022 results, showcasing a 13% increase in reported net sales to $3.3 billion, driven by a 16% rise in fixed currency sales. This growth was primarily fueled by strong performance across its Global Industrial, Institutional & Specialty, and Healthcare & Life Sciences segments, where accelerating pricing and volume increases helped offset rising delivered product costs. Despite top-line growth, reported operating income declined by 14% to $254.5 million, and net income attributable to Ecolab decreased by 11% to $171.9 million, largely due to significant "special (gains) and charges" totaling $77.0 million. These charges included $27.6 million related to the fair value step-up in acquired inventory from the Purolite acquisition and $18.0 million for Russia/Ukraine charges. Excluding these special charges and discrete tax items, adjusted operating income saw a slight increase of 1% and adjusted net income attributable to Ecolab grew by 1%. Adjusted diluted Earnings Per Share (EPS) rose 1% to $0.82. The company's liquidity remains strong with ample credit facilities, though cash and cash equivalents decreased to $99.4 million from $359.9 million at the end of 2021, mainly due to increased share repurchases and capital expenditures. Investors should monitor the impact of ongoing cost inflation, supply chain challenges, and geopolitical risks on future profitability.

Financial Highlights

53 data points
Beta

Revenue

$3.27B

36.5% Gross Margin

Net Income

$171.90M

5.3% Net Margin

EPS (Diluted)

$0.60

Total Assets

$21.07B

Cash & Equivalents

$99.40M

Free Cash Flow

$21.40M

Financial Statements
Beta
Revenue$3.27B
Cost of Revenue$2.07B
Gross Profit$1.19B
SG&A Expenses$914.70M
Operating Income$254.50M
Interest Expense$55.10M
Net Income$171.90M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)286.20M
Shares Outstanding (Diluted)288.10M

Key Highlights

  • 1Net sales increased by 13% to $3.3 billion, with fixed currency sales up 16%, driven by pricing and volume across key segments.
  • 2Reported operating income decreased by 14% to $254.5 million due to significant "special (gains) and charges."
  • 3Net income attributable to Ecolab fell 11% to $171.9 million, impacted by $77.0 million in special charges, including inventory step-up from the Purolite acquisition and Russia/Ukraine related costs.
  • 4Adjusted diluted EPS increased by 1% to $0.82, excluding special charges and discrete tax items, indicating underlying operational improvements.
  • 5Gross margin compressed to 36.5% (adjusted 38.1%) from 40.7% (adjusted 41.3%) due to higher delivered product costs outpacing pricing increases.
  • 6Cash provided by operating activities decreased by $125 million to $170.1 million, primarily due to increased working capital needs.
  • 7Share repurchases increased significantly to $262.1 million in the quarter, compared to $61.8 million in the prior year period.

Frequently Asked Questions

The primary driver of the 13% increase in reported net sales to $3.3 billion was a 16% rise in fixed currency sales. This growth was fueled by strong performance across Ecolab's Global Industrial, Global Institutional & Specialty, and Global Healthcare & Life Sciences segments, supported by accelerating pricing strategies and increased volumes.

Operating income decreased by 14% and net income attributable to Ecolab fell by 11% primarily due to significant 'special (gains) and charges' amounting to $77.0 million. These charges included $27.6 million for the fair value step-up in acquired inventory related to the Purolite acquisition and $18.0 million for charges associated with Russia/Ukraine operations. Excluding these items, adjusted operating income and adjusted net income showed modest year-over-year growth.

Ecolab is implementing accelerating pricing strategies and has begun introducing energy-related surcharges to offset higher delivered product costs and raw material inflation. The company expects its pricing actions, coupled with continued volume growth and cost savings initiatives, to mitigate the impact of these inflationary pressures.

Ecolab maintains a strong liquidity position with a $2.0 billion revolving credit facility and significant cash on hand, although cash and cash equivalents decreased to $99.4 million from $359.9 million due to increased share repurchases and capital expenditures. The company expects to fund its foreseeable cash requirements through operating activities and existing borrowing capacity.