Supply-Chain Issues Will Cut Ecolab’s Q4 Profit Margins

Ecolab will report lower-than-expected fourth quarter earnings. The company blamed temporary Covid-related effects on broad business activities and higher prices due to suppy-chain issues. Ecolab expects to report fourth quarter 2021 results on Feb. 15, 2022.

Still, the world's biggest player in the Industrial & Institutional market said that it expects reported sales to increase 10% versus last year and acquisition adjusted fixed currency sales growth to accelerate to 9% in its fourth quarter 2021. The gains will come from double-digit increases in the Institutional & Specialty and Other segments, with further strong gains in the Industrial segment.

“In this very challenging environment, we remain encouraged by the exceptional work of our teams, which led to the strong sales results, new business wins and accelerating pricing nearing 4% as we exited the quarter, all of which improved further from the third quarter and underscore the success of our long-term value proposition,” said President and CEO Christophe Beck. “The raw material supply and customer logistics issues remain significant, which is why we have focused our efforts on protecting our current customers and on serving earlier business wins, with extraordinary actions that came at a substantial short-term cost. This was the outcome of a strategic decision made in 2020 to protect our current customers while investing further in accelerating share gains to emerge even stronger as market disruptions ease.”

Company executives remain optimistic about the new year. Assuming the rate of cost inflation and Covid impacts ease over the next couple of quarters, Ecolab expects continued strong sales and pricing momentum in 2022 and looks for full-year 2022 adjusted diluted earnings per share growth to rise in the low-teens.
   
“We enter 2022 not with the environment we expected, but with the underlying momentum we wanted to have. With a continued, but uneven, global economic recovery, we expect further strong sales trends, robust new business wins, new innovation and increased pricing to capture the incremental value we create for our customers and to compensate for the much higher supply costs we expect in 2022,” Beck explained. “At the same time, we will continue to leverage digital automation to drive performance in ways that improve both customer experience and cost efficiency.”

Beck said the challenges that affected Ecolab and the rest of the world in the fourth quarter to continue into the first quarter of 2022. But if inflation and Covid impacts ease over the next couple of quarters, Ecloab will deliver improved results as the year goes on and deliver strong full year 2022 sales growth with adjusted diluted earnings per share growth reaching low-teens levels.

“With our unique value proposition to help solve the world’s people and planet health challenges while improving business health, we remain confident in our longer-term outlook and we expect to continue to leverage our growth opportunities to drive superior results for our customers and shareholders,” he concluded.