A global sanitation products company,
) adjusted earnings per share of 72 cents for the second quarter of
2012 were in line with the Zacks Consensus Estimate and above the
year-ago earnings of 64 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 rose 47%
year over year to $184.5 million (or 62 cents per share) including
the Nalco merger restructuring and integration expenses.
Revenues soared 74% (including the Nalco merger) year over year
to $2,958.7 million. On a fixed-currency basis, revenues grew 6% in
comparison to the year-ago pro forma fixed currency sales
(inclusive of the Nalco operations). However, revenues were lower
than the Zacks Consensus Estimate of $3,023 million. Growth was
triggered by higher sales from Global Energy, Healthcare and Latin
Revenues from the larger U.S. Cleaning & Sanitizing segment
climbed 5% year over year, on a constant currency pro forma basis,
to $760.9 million driven by the Kay and Healthcare businesses.
On a fixed currency pro forma basis, sales from the U.S. Other
Services division rose 4% to $121.5 million in the quarter.
Revenues from Ecolab's International Cleaning, Sanitizing &
Other Services segment increased 5% on a constant currency pro
forma basis to $796.5 million backed by solid sales in Latin
America and Asia-Pacific and moderate growth in Europe.
Global Water sales were $509.8 million (up 1% on a constant
currency pro forma basis), driven by higher sales in North America
and Latin America, which offset lower demand from industrial
clients in Asia and Europe. Revenues from Global Paper inched down
2% to $200.8 million while Global Energy segment's revenues climbed
19% to $548.3 million, on a constant currency pro forma basis.
Gross margin dropped to 45.6% in the second quarter from 49.3% a
year ago. Adjusted fixed currency operating income rose 17% in the
quarter to $369 million. Operating margin inched down to 11% from
11.7% in the prior-year quarter.
Selling, general and administrative expenses were lower at 33.2%
of sales compared with 35.9% of sales in the year-ago quarter.
Ecolab exited the quarter with cash and cash equivalents of
$304.9 million, up 86.8% from the previous-year quarter. Long-tem
debt increased approximately seven-fold to $4,879.2 million.
The company repurchased $1.3 million shares in the quarter under
its share buyback program.
Ecolab lowered its forecast of adjusted earnings to $2.95 to
$3.02 from $2.95 and $3.05 for fiscal 2012, representing a 16% to
19% year-over-year increase. Special gains and restructuring
charges, such as Nalco acquisition costs, are expected to be
roughly 65 cents a share (earlier 60-65 cents).
For third quarter 2012, adjusted earnings are expected to be in
a range of 83 cents to 87 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 in a band of 32% and 33%. The
company expects to incur extraordinary items amounting to 10 cents
in the third quarter, mainly related to the Nalco merger and
restructuring of operations in Europe.
Although we are impressed by Ecolab's strong international
exposure, we remain cautious about aggressive competition from the
Church & Dwight
). 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
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ECOLAB INC (ECL): Free Stock Analysis Report
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