Ecolab, Inc. (ECL)
Q1 2010 Earnings Call
April 27, 2010 1:00 pm ET
Michael Monahan – Vice President External Relations.
Douglas Baker – Chairman, President, Chief Executive Officer
Nathan Brochmann – William Blair
Andrea Wirth – Robert W. Baird
David Ridley-Lane – Bank of America
P J Juvikar – Citi
Lawrence Alexander – Jefferies & Co.
John McNulty – Credit Suisse
Mark Gulley – Soleil Securities
Michael Harrison – First Analysis Group
Gary Bisbee – Barclay’s Capital
John Roberts – Buckingham Research
Edward Yang – Oppenheimer
Robert Koort – Goldman Sachs
Rosemarie Morbelli – Ingalls & Snyder
Dmitry Silversteyn – Longbow Research
Previous Statements by ECL
» Ecolab Inc. Q4 2009 Earnings Call Transcript
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» Ecolab, Inc. Q2 2009 Earnings Call Transcript
Welcome to the Ecolab, Inc. first quarter 2010 earnings release conference call. (Operator Instructions) Now I would like to turn the call over to Mr. Michael Monahan, Vice President, External Relations.
Hello everyone and welcome to Ecolab’s first quarter conference call. With me today is Doug Baker, Ecolab’s Chairman, President and CEO. A copy of our earnings release and the slides referenced in this teleconference are available on Ecolab’s website at Ecolab.com/investor.
Please take a moment to read the cautionary statement on Slide 2 stating this teleconference and the slides include estimates of future performance. These are forward-looking statements and actual results could differ materially from those projected. Factors that could cause actual results to differ are described in the section of our most recent Form 10-K under item 1A, risk factors, in our first quarter earnings release and in Slide 1. We also refer you to the supplemental diluted per share information that is also in the release.
Starting with Slides 3 and 4, we delivered strong earnings results and sequentially stronger sales growth in the first quarter despite generally challenging market conditions as we aggressively drove new account gains, sales of new products and benefited from favorable delivered product costs and cost reductions to drive improved margins.
Looking ahead, we raised our forecasted EPS range for 2010 as we expect outperforming our gradually improving markets and deliver superior growth once again in 2010.
Starting with some highlights from the quarter, reported first quarter earnings per share were up 67% to $0.40. On an adjusted basis, excluding special gains and charges and discrete tax items from both years, first quarter 2010 earnings per share increased 24% to $0.41.
The adjusted earnings per share growth was driven by better volume, new products, new account gains, pricing, favorable delivered product costs and cost savings which more than offset higher operating costs and continued investments in our business.
Looking ahead, our U.S. and European food service markets appear to be starting a slow recovery. Lodging room demand has increased and is showing recovering trends worldwide. Food and Beverage and Health care are seeing steady growth trends, and we continue to see good growth across all market segments in our Asia Pacific and Latin America businesses.
We continue to be aggressive, focusing on top line growth as we emphasize our innovative products and service strength to help drive market share growth in our core businesses and deliver new account acquisition among our national, regional and independent prospects, and we are making significant investments in key growth businesses to drive future growth.
We also remain focused on cost savings emphasizing productivity and efficiency improvements to help increase margins. We expect to show another quarter of sequential sales growth improvement in the second quarter with adjusted EPS increasing 8% to 14% to the $0.54 to $0.57 range compared with an adjusted EPS of $0.50 in the second quarter in 2009.
We raised our forecasted range for 2010. We now look for a double digit EPS growth in 2010 with adjusted EPS in the range of $2.21 to $2.26 per share, representing an 11% to 14% gain over last year.
In summary, we expect 2010 to reflect yet another strong performance for Ecolab as the aggressive sales efforts to gain new accounts and achieve better sales penetration along with improved efficiency and cost savings to again deliver attractive growth and shareholder returns.
Turning to the details show in Slide 5, Ecolab’s reported consolidated sales for the first quarter increased 6%. Looking at the components, volume and mix increased 1%, pricing was up 1%, and currency benefited sales by 4%.
Slide 6 includes sales growth by segment and division. Sales for U.S. cleaning and sanitizing operations rose 2%. Institutional sales improved, rising 1%. New account gains and new products benefited the first quarter sales.
We continue to outperform soft consumption from food service and lodging in the first quarter. While still in the early stages, we believe the markets and our customers have an improving tone to their business, and we continue to expect gradual improvement and demand through 2010.
We remain focused on driving sales using innovative products and wear washing, laundry and housekeeping that provide superior performance while delivering water, energy and labor savings for customers. We are also targeting independent accounts and regional chains with additional and redeployed sales people and programs.
These actions have resulted in good new account gains and we are continuing our efforts to drive more sales and margin growth. We expect these aggressive sales efforts, investments in our sales team, and new accounts to help us continue to outperform our markets in the second quarter and the year.
Kay first quarter sales grew 13% led by strong growth from both QSR and food retail. We enjoyed good demand from existing and new fast food chain accounts. The food retail business also showed continued good sales growth driven by new account wins.