A global sanitation products company,
Ecolab Inc.
's (
ECL
) adjusted earnings per share of 50 cents for the first quarter of
2012, beat both the Zacks Consensus Estimate of 48 cents and the
year-ago earnings of 45 cents per share.
Adjusted earnings exclude tax adjustments as well as special
gains and charges such as those related to the merger with Nalco.
In the reported quarter, profit attributable to Ecolab fell 47%
year over year to $50 million (or 17 cents per share).
Revenue
Revenues spiked 85% year over year to $2,810.9 million (a
quarterly record), ahead of the Zacks Consensus Estimate of $2,718
million. Growth was triggered by Global Energy and Latin American
franchises along with Food & Beverage, U.S. Institutional and
Global Water segments.
Segment Analysis
Revenues from the larger U.S. Cleaning & Sanitizing segment
climbed 4% year over year to $709 million driven by its Food &
Beverage and Institutional sub-segments.
Sales from the U.S. Other Services division rose 4% to $111
million in the quarter. In constant currency, revenues from
Ecolab's International segment increased 3% to $733 million backed
by solid sales in Latin America.
Global Water sales, in terms of constant currency, were $498
million, driven by growth in metals, mining and food and beverage
industries. Sales from Global Paper and Global Energy segments were
$199 million and $537 million, respectively.
Margins
Gross margin dropped to 42.6% in the first quarter from 49.3% a
year ago. Operating margin declined to 5.9% from 10% in the
prior-year quarter.
Selling, general and administrative expenses were lower at 35.2%
of sales in the first quarter of 2012 compared with 38.3% of
revenue in the year-ago quarter.
Balance Sheet
Ecolab exited the quarter with cash and cash equivalents of $354
million, more than a two fold increase from the previous year.
Long-tem debt increased approximately seven fold to $4,911
million.
The company repurchased $1.4 million shares in the quarter under
its share buyback program.
Guidance
Ecolab reiterated its forecast of 16% to 20% increase in
adjusted earnings to $2.95 and $3.05 for fiscal 2012. Special gains
and restructuring charges, such as Nalco acquisition costs, are
expected to be roughly in the band of 60 cents to 65 cents a
share.
For second quarter 2012, adjusted earnings are expected to be in
the range of 69 cents to 72 cents. Adjusted gross margin (except
special gains and charges) is expected to be roughly 46% and
SG&A (including purchasing accounting), as a percentage of
sales, is anticipated to be roughly 33%.
The company expects to incur extraordinary items, mainly related
to the Nalco merger and restructuring of operations in Europe,
amounting to 10 cents in the second quarter.
Although we are impressed by Ecolab's strong international
exposure, we remain cautious about aggressive competition from the
likes of
Clorox
(
CLX
) and
Church & Dwight
(
CHD
). Raw material price inflation also remains a headwind.
We are currently Neutral on the stock, supported by a short-term
Zacks #3 Rank (Hold).
CHURCH & DWIGHT (
CHD
): Free Stock Analysis Report
CLOROX CO (
CLX
): Free Stock Analysis Report
ECOLAB INC (
ECL
): Free Stock Analysis Report
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