Top Companies Report

9. Ecolab

June 28, 2012

St. Paul, MN
Sales: $3.6 billion (estimated) for cleaning and sanitizing products.
Corporate sales: $6.8 billion. Net income: $463 million.

Key Personnel: Douglas Mr. Baker, chairman and chief executive officer; Christophe Beck, executive vice president and president, global integration; Larry L. Berger, executive vice president and chief technical officer; Angela M. Busch, senior vice president, corporate development; Ching-Meng Chew, vice president and treasurer; John J. Corkrean, senior vice president and corporate controller; Steven L. Fritze, chief financial officer; J. Erik Fyrwald, president; Thomas W. Handley, senior executive vice president and president, global food and beverage and Asia Pacific Latin America; Michael A. Hickey, executive vice president and president, institutional; Roberto Inchaustegui, executive vice president and president, global specialty; Phillip J. Mason, executive vice president and president, EMEA; Stewart H. McCutcheon, senior vice president and chief information officer; Eric G. Melin, executive vice president and president, Asia Pacific; Michael L. Meyer, executive vice president, human resources; James A. Miller, executive vice president and president, global services and specialty; Timothy P. Mulhere, executive vice president and president, global healthcare; James J. Seifert, executive vice president, general counsel and secretary; Gregory E. Temple, executive vice president and chief supply chain officer; James H. White, executive vice president and president, Latin America.

Major Products: Institutional—warewashing, laundry, housekeeping, water filtration and conditioning and pool and spa management products. Food and beverage—cleaning and sanitizing products, equipment, systems and services. Pest elimination—commercial elimination and prevention services and grease elimination programs. Kay—cleaning and sanitizing products and services for restaurant and food industries. Professional—floor care, carpet care and personal care products for the commercial, industrial and health care markets.

New Products: Apex2 warewashing, Stealth Fly Station, Exelerate ZTF cleaning solution, Mip cleaning formulations.

Comments: Through acquisitions and NPD, Ecolab continues to make good on its mantra “Circle the Customer.” In December, the company completed its $8 billion acquisition of Nalco, a leading water treatment supplier. That move put Ecolab out in front on the water scarcity issue—something that will affect businesses, consumers and the planet itself. According to the World Bank, demand for fresh water will exceed supply by 50% by 2025. That move came as Ecolab was posting double-digit gains in 2012. Corporate sale rose 12% to $6.8 billion. Net income fell 13%.

Within the US cleaning and sanitizing business, sales rose 8% to $2.9 billion. Institutional, which accounted for 52% of sales, rose 4% due to a growing lodging market, partially offset by declining foodservice. Food and beverage sales increased 7%, driven by dairy and food market growth.

Kay sales increased 7% due to gains in the food retail business. Healthcare sales increased 28% thanks to the acquisition of O.R. Solutions. Without that acquisition, sales rose 4% in 2011.

International sales rose 11%, due primarily to improved exchange rates. Sales in Europe, Middle East and Africa accounted for 60% of sales; followed by Asia Pacific (22%), Latin America (10%) and Canada (8%).

The Nalco acquisition closed less than a year ago, but Ecolab is already reaping the rewards. For the first quarter of 2012, sales soared 85% to $2.8 billion. Net income declined 47% to $49.7 million, due to the Nalco inventory step-up, the early retirement of debt and other integration and restructuring charges.

First quarter 2012 sales for US Cleaning & Sanitizing operations rose 4% to $709 million. Institutional and Food and Beverage led the growth. US Cleaning & Sanitizing operating income increased 15% to $128 million compared with the year ago period; US Cleaning & Sanitizing operating income increased 11% when compared with first quarter 2011 pro forma operating income; excluding acquisitions, operating income increased 6%.

“The ‘new’ Ecolab is off to an excellent start. Our team did a great job successfully managing the business and simultaneously made great progress against our integration and synergy objectives, exceeding both. Most impressively, our team also delivered record new business gains,” said Douglas M. Baker, chairman and chief executive officer. “As a result, our top line momentum remains very strong. Sales grew in every segment and in every region. Our new global energy business led the way with a truly standout quarter, and we also saw solid results in our global water, US institutional and worldwide food & beverage businesses. Regionally, both North America and Latin America strengthened compared with recent trends.”

US Other Services sales increased 4% to $111 million in the first quarter. Operating income declined 6% to $14 million as continued improvement in the equipment care business profitability was offset by investments made in the EcoSure quality assurance field sales organization.

Sales for international cleaning, sanitizing and other services operations, when measured at fixed currency rates, grew 3% to $733 million in the first quarter. Sales increased 5% in fixed currencies when compared with first quarter 2011 pro forma fixed currency sales, led by strong growth in Latin America operations. International cleaning, sanitizing and other services fixed currency operating income increased 10% to $48 million in the first quarter when compared with a year ago; fixed currency operating income increased 12% when compared with first quarter 2011 pro forma fixed currency operating income. When measured at public currency rates, international cleaning, sanitizing and other services sales were $746 million and operating income was $49 million.

For the remainder of 2012, Baker contends the company has three objectives: build one Ecolab, accelerate growth and deliver synergies.


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