Ecolab (ECL) 31 Jul 182018 Q2 Earnings call transcript

Company Profile

Participants

Michael J. Monahan	Ecolab, Inc.
Douglas M. Baker, Jr.	Ecolab, Inc.
Daniel J. Schmechel	Ecolab, Inc.
John Roberts	UBS Securities LLC
David E. Ridley-Lane	Bank of America Merrill Lynch
John P. McNulty	BMO Capital Markets (United States)
Tim M. Mulrooney	William Blair & Co. LLC
Hamzah Mazari	Macquarie Capital (NYSE:USA), Inc.
Manav Patnaik	Barclays Capital, Inc.
Laurence Alexander	Jefferies LLC
David I. Begleiter	Deutsche Bank Securities, Inc.
Vincent Stephen Andrews	Morgan Stanley & Co. LLC
Christopher S. Parkinson	Credit Suisse Securities (USA) LLC
Andrew John Wittmann	Robert W. Baird & Co., Inc.
Dmitry Silversteyn	Longbow Research LLC
Shlomo H. Rosenbaum	Stifel, Nicolaus & Co., Inc.
Jeffrey J. Zekauskas	JPMorgan Securities LLC
Scott Goldstein	Citigroup Global Markets, Inc.
Scott Schneeberger	Oppenheimer & Co., Inc. (Broker)
Michael Joseph Harrison	Seaport Global Securities LLC
Rosemarie Jeanne Morbelli	Gabelli & Company

Call transcript

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Operator

Greetings and welcome to the Ecolab second quarter 2018 earnings release conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Monahan. Mr. you, Thank now may Monahan, begin. you

Michael J. Monahan

Schmechel, materials these Thank the you. the Ecolab's Factors on differ to with quarter Chairman our our Please to recent discussion quarter's most Dan statements second ecolab.com/investor. Risk that earnings of this on performance. release slides to and cautionary and and and the call. those XX-K forward-looking that everyone, Form and our With could referencing read discussion, the along stating actual XA, and Ecolab's results welcome available conference results Baker, me Ecolab's Factors, actual differ slides future Doug our of projected. website moment posted teleconference, cause materially A are other the Hello, at today results in materials. from CFO. results a our and estimates take CEO; are of our is include could Item statements, described These are and under outlook

We earnings the per results, the also quarter. growth brief a momentum share supplemental of Ecolab's review second diluted the Starting with in continued release. information in you to refer the

the pricing, increases quarter's That growth, increase. quarter strong innovation product fixed currency second XX% cost efficiency business share acquisition-adjusted with along adjusted per tax sales gains, drove yielded solid reduced business in New rate, our and of line earnings all second segments. top a and

income all Regionally, with basis currency and XX% yielded by from sales delivered per operating by second X%, Adjusted margins was XX% as Consolidated points increase were XXXX press Adjusted X%. North quarter than quarter to growth XXXX gain along in tax and costs good more price, earnings rate increased increased fixed The currency growth the segments. highlights diluted adjusted offset lower increases with fixed sales X%. second income some product share in sales rising currency adjusted the quarter. rose Acquisition-adjusted diluted operating rose to fixed led as decreased per Moving volume, the quarter discussed business America. release, earnings in efficiency our XX $X.XX. operating in share.

work to our to lines as sales grow cost bottom winning expertise, efficiencies and new service and driving through new innovative our well products top business as pricing continue rates. We growth, at aggressively and drive to improved and

offset underlying also sales pricing volume yield headwinds improving for our see product and cost look across income and good stronger than continued business continued and We that to segments, delivered more growth.

range, to earnings impact and continue volume to and of increasingly per We the XX% diluted first the XX% $X.XX higher investments. the offset costs per gains price rise share growth to half expect XXXX business earnings as to to half, product adjusted share $X.XX with outpacing delivered expected second

sales per currency to will efficiency XX%. quarter begun third and strong adjusted in investments. our range, recent $X.XX to $X.XX diluted share acquisition-adjusted The leverage fixed technology initiative have systems earnings expect We the with growth, up X% we

operating the actions efficiency year while to as investments improve simplify and increase XX% balance delivering customer summary, for earnings share right over here's the business the sales adjusted these faster, superior now to we develop forecasted per growth same while some with to expect future. growth year, our deliver XX% we make time the expect more Doug to making better, Baker of We we And diluted this growth, momentum the Ecolab are In our taking in further comments. and better at the outcomes. structures, right future strong profitable our and actions

Douglas M. Baker, Jr.

about our business. Thank we you, our Mike. quarter, Hello. A couple second on good comments feel

term long term. near Our position is and both strong

clean a as relevant healthy and energy, positioning environment on look If you as basis, safe abundant ever. water, our is macro food,

the fundamental aging we particularly in middle frequently, day the is energy Asia. of constant. already are is spend. to expectations globally. their on in are betting in The positions largest are trends The and bigger news class consumer markets. Food two Population energy A It's population class increases the that While developed various the shift shift. food demand growing, change growing seem water, their disproportionately for users diets scarce. drives and of and and water as as also travel for is aging healthcare middle

and in see now this results. So our for mid our and and long businesses in is total, water, demand healthcare solid and over energy, reflected food the safety, we term,

executing are well. We

X% first and from growth organic X% all from the We moved X% share are single X% growth we large in second X% our XXXX X% certainly above sales corporate half. in upper we XX% is other, market In year the X% moved in half, first Institutional gains, in half; was accounts reflects in and evidenced organic businesses. half to by this of expect This last up expect in in X%-plus net in seeing versus accelerating XXXX. organic the has X% organic in our led half to from the organic XXXX organic which by to pest, of growth half. digits as organic from X% organic XXXX in business, to Industrial move first second new and XXXX. total, year's in Energy and to year; XXXX first this to XXXX expect in X% from

margin only too building building line spite momentum, momentum we're are top not Now of we in inflation.

pricing challenge have us we this dollar since since is primarily no and the strengthened last through we're call by raw year. news overcome has materials May plus in and The inflationary also May since Day. our by transportation on giving $X.XX volume. with $X.XX X. increased So an environment, for increasing that $X.XX call that is last $X.XX, news The This good a it's

was In fact, margin ago. a off evident, recovery in a is year margins with QX significantly gross with QX already ago, where line year

$X.XX pricing range. with to good our $X.XX confident given volume deliver management and consistent within we and of feel coupled So our strong trends will we SG&A,

accelerating half, implied adjusted plus it to low with in QX. is, compared one catching forecasted is up This of material to half to continued raw pricing cost. Mike this. take, takes growth second the in plus lumpier savings though, in volume of QX strong EPS a which second story time. some me step than a XX% overtaking Let and address digits actually up our cost already little double moment The and looks alluded

pricing second secured volume while already over reflects the Our current of second savings well. needed the forecast in and the trends as the hand, half half in forecasted we've are XX% incremental cost

leads All our forecast. confidence the in of this to

leverages call. investment the that the we in generate years last rate The in $XXX we've $XXX announced Finally, will technology. run million by XXXX. our efficiency five million program made also referred formally last our program to This in we savings

back and We G&A consolidating vendors. by by leveraging third-party are our and consolidating offices, driving efficiency Workday by by in consolidating systems, platforms, SAP

the New digital tied QSR is and safety new technology, service platforms, to TRASAR, improve and capability. customer allow field customer continue new digital to and programs which XD and to field FRS and us SMARTPOWER, like CIP like XD efficiency

So all to drive mid-teens beyond be told, fuel XXXX. growth continued EPS will additional this

for that, with will it who So up turn I'll back questions. Mike, open to it

Michael J. Monahan

Doug. question-and-answer Operator, begin the concludes please Thanks, our remarks. period. That formal

Operator

Thank you.

comes with your John question the proceed Roberts UBS. Please Our questions. of first with line from

John Roberts

you. Thank

the the longer-term rather in will uptick business. seeing I a and Are think that here? a pickup by of reinforce might you than temporary you customers started be restaurant that your full-service investments see to part confirm Institutional it

Douglas M. Baker, Jr.

restaurant strong growth. have meaning full-service consistently been in segment drive things. the foot it's be or consider say would sales all segments. don't in growing traffic. modestly been the and enough for drive has I almost to weak segment got continues and continue Sales that weak is would two past What's to said, horribly impaired share With that unhealthy, say us to we growth I

share how to to it's lead doing introduction, more last Institutional We of starting really a which delay why what that is and and seen had large SMARTPOWER. seeing started in you're I more talked We expected it we to a XXXX. launched what think late we've platform recovery gain half late, year gains, is this last we've traction. year, year first to versus we to

John Roberts

transactions characterize with. had thinking you could right are number that then I M&A think we've of there know you involved now. weren't don't I you a that there? are And that's things if some pipeline big about the

Douglas M. Baker, Jr.

reasons. careful, have healthy We're looking of into would a to list targets we're specifics We obvious I at. would still money. I remain or with say, go never say going we that shareholder for smart

end. be the We'll number of several before proven in close be With continue that and past. more to to I forward. closed year think we've to would year expect going deals we've a said, this

John Roberts

you. Thank

Operator

David question is question. your line Lynch. from of Merrill America next of Ridley-Lane with Please the with proceed The Bank

David E. Ridley-Lane

Sure.

hear I pricing would in you right? a raw to I your So raw expect material into the be expectations material revised XXXX? on terms on pricing Based prices, of around basis just what And dollar quarter? catching in up fourth Did to wanted costs would check. that

Douglas M. Baker, Jr.

seen year. each continue business, we're going the Well, Yeah. We've and year. we're simply by six going and last solid leave us this to the the XXXX, acceleration to going pricing to in into accelerate by the carry-in continue That's across of of in to pricing accelerate a of really math. to total balance to quarters board through with need lot the through just

capture it years these several and the all year, don't extend the of agreements You on specifically typically day out. last

we to to grow. continue would expect see pricing So

scenario as in almost would think any pricing I see up you XXXX under look. we

range year on for going to balance year. of margins, the around gross flat You'll the see remain that they're year. They're already

margins see You'll the fourth in particularly expand, OI quarter.

David E. Ridley-Lane

there? just new would your follow-on Brexit clients including Ecolab's deal perhaps be effects how quick to a very And some a business, disruptive follow-on, to UK

Douglas M. Baker, Jr.

it – that We've I WTO But moves under monstrous. looked calc'd basically at economic that mitigate don't conversation going it. Well We've us taken be if potential; steps us everybody some think feel. probably already is be the up. not We've will that's direct impact almost a already it's impact said, that resorts be would to good that's scenario. that. think I ends i.e., the to duties. that how to effects piece to where big would With for any It we the

David E. Ridley-Lane

Thank you much. very

Operator

the question. Capital question of line is with John with proceed next The McNulty Please from BMO your Markets.

John P. McNulty

even question. guess Yeah. should relatively straight-line them and and the you we can it opportunity, be how buckets coming thinking or help about through through, major efficiencies in Thanks is about see for that? cost savings Is those I regard the or XXXX? lumpier it to XXXX With phasing-in $XXX cost-cutting that us million and think than taking to my you

Douglas M. Baker, Jr.

fairly going had but going say We to to be would These and do third. you Workday, more be I the come time one. initiatives be going for to a people terms the buckets, S a I take is to a a of a third, that payroll third, It's it's We've side, G&A if systems a XX things This the in us enough over it's period systems more side. the on for bit cost-effective. the from trajectory on Yeah. onboarding little is the those say down exit globe. both allowed and systems simpler close around lot one straight-lined. lot people. down around G&A and has which taken XXX certainly to would to

SAP, these where you plant contracted all is carriers, upgrades, dropping we they out we're tank. you own route our looking these people If tank into efficiency. differently. both route to carriers to Often, look at already going of monitoring it can in the off our at are product, which stand putting our exactly lead know loads If tanks, tank rolling –

done what reduce now and better States, shipping full. we third roughly have visibility and costs have actually because reduce aren't already of it You the already production trucks of SAP outages a understand it's to heck takes were the thought ship of in with a a of the we And that any the best number amount same we've XX% United volume. up, trucks we of where we way is safer. to lot full of to have our what don't Logistics,

over So we're this all stuff.

aren't ordering. online do fax Field a machines We our today. to order, ordering to imagine. online makes i.e., Frequently, understanding efficient distributors have can you better can visibility; to creating to way. phone the as it we're it sense have portal technology, start partner an cost in customers collaborative or even a And more fax they way number We're maybe most me us. opportunities. let where where driving you other us just a moving with makes and We'll of take still go so sense can and direct say,

going So on, host there's are just whole are a being now. that tools things of these and deployed

us and to you'll see these of continue S platforms it, enable new G&A on longer And that, side, side period the both will do but on so We early. always the S do efficiency. a to disproportionally that We'll drive for time.

John P. McNulty

much thanks for Great, very color. the

Operator

is William Mulrooney your from of line question with the question. Please Blair. Tim with next proceed Our

Tim M. Mulrooney

afternoon. good Yeah,

XX You a higher volumes next XX in points to point guys from of And on the restructuring pricing. expansion I'm calculating over get and typically operating basis XX margin expansion the three to years net basis XX plan.

So to XXX several Is adding next over next I'm over expansion thinking basis operating are margin how points I at about years, guys you in guess. about the together, thinking that XX years, looking this? three the that

Douglas M. Baker, Jr.

Yeah. It's designed to be additive.

large, that's and we to by So math would too. the that get

Tim M. Mulrooney

great. I than a second adjustment expected. then guess for at working quarter? looking Was flow Okay, And large free quarter, cash there it lower your in was capital the the

Douglas M. Baker, Jr.

Dan this have I'll one. let

Daniel J. Schmechel

not well, let's was, It Thanks. Yeah. adjustment, clear. an be

was taking it below it say strong is on typical us. it. would The performance. put finger is second a half what followed your total, in quarter first And not you flow a cash last yes, first year, which outcome the was very But quarter – for I

on a for last cash year-to-date was essentially of maybe is operating drivers. into I in you few capital. something $XX basis, year a So behind it million, down break that flow would all working like

and increased Of also uncollected balance. pricing the increases, course, good news receivables

I chunk There's a also July. end carefully that's accelerated some which in America, we would it it. June say in North saw payment watched payments timing, of So at and of the

it, cash would impact growth invested working days likewise, it an the I which but has good or news, net has on of of is So Energy say higher capital.

very there's have is of net expect impact in will will impact for reported look, some from strong it Energy full it flow cash and cash of is some that reverse very good the about We'll our net the pricing. I our as think increased But the feel delivering performance. year conversion So I full income. net the timing we'll for good year performance be that

Tim M. Mulrooney

capital, than free Okay. from reform? even is grows tax flow with XXXX working higher cash assume it Dan, in to just benefit safe EBITDA faster the given

Daniel J. Schmechel

that that Yes, I think right, would okay? would be

Tim M. Mulrooney

guys. Thanks, Okay.

Operator

Mazari next of proceed is from line afternoon. Hamzah was Hamzah Please Macquarie (USA), just with Mazari if you Capital - Our curious Macquarie could the question Group. questions. Good with Inc. I your bit. or color a for around like structurally below XX% churn. run for any Any feels slightly that, is to maxed it out you? it's customer share just does room that It – improve

Douglas M. Baker, Jr.

It to through a is typically go by in going on are we don't the where churn side of positive dramatic really I periods. low business. say businesses which the economy. we're I we as improvement, we most these This what number standpoint historic good. numbers think Where customer if strong that's is, will, compete sales success would ago. retention is for we different at us. focus of of It's of The over in. XX% in acceleration in best up or look because past business. a is was where the and a still great We talked the same a year we indicator pieces sales just effort our improving lot in of capturing That's number we're half That's or It's our terms Mazari going this year - period one, Capital number versus business. is. more Hamzah top new leading believe line. Macquarie a in the about Inc. we large had (USA), how to of a businesses, you're levels, look the you from we best-in-class improvement see of driver for for first XX%

competitive to a that domestically, your it's scale just isn't how seeing just curious and business? the as thinking you're about And know it anything guess big relative flat. Okay. versus Institutional, I I segment. but as follow-up European was your to you're in expectations on question, more

Douglas M. Baker, Jr.

second in even number as underlying the growth maybe inventories would X%, sales distributor inventory be some the and though cited was printed distributor Yeah. we printed the quarter in first had the number said Institutional We as lower to we larger overall, expect the quarter QX. build balanced. in

QX. north second in we're to Our expect X% in And to half an X% that underlying of a again little expand X%, rate in continue to as was and we XXXX. going exit growth the that

at say exactly globally it we pace thought faster, business to accelerating So I what improving, we would see. loved exactly would about would go thought have would. that that's the we the have We it is but

Europe be soft With terms overcome be probably with half. that compete said, able to thought we're going of Institutional to With the the we in that we it's the a exactly half, toughest should on. business little business globally. to environment it We execution, Europe, be better was what in focused first which is that we In do. going second the it's said, in believe stronger still in,

forever. don't for - business (USA), digits performing low, year. we is Capital business it believe it's Thank It's Inc. our single the So not low expectation. growth Hamzah now, to be right a Mazari Macquarie you. X% But will the

Operator

next of your Barclays. comes question. with line Please the question The from Manav Patnaik proceed with

Manav Patnaik

to Healthcare good area. afternoon. just know if weak wondering. terms there more I challenges first need you, overall, some just in Europe there. Thank have you that I is just My continued performance. obviously said question was you right guess like but the it maybe changes was portfolio the color make business of sounds I on mix, more you if there's in

Douglas M. Baker, Jr.

I that outperforming challenges. America. particular, of North is the in in all say changes little our are Europe said, in would healthcare. some is of clearly a Healthcare. went say the all in America would it businesses they But I With through Healthcare, France the exception Europe, North market, than in dicier – market has some being

to we've We're first to going half. accelerating an expect and have think have a well. slow half adjusted I back

starting say anything. us believe execution North as and we'll year. to moving have In much on the I the a I as would it's think there in reasons an reacceleration quarter throughout America, are third of in lot uptick

our sales we efforts, significantly they're operating well. say. improved around simply the The have team like. things It's better doing cleaning, do non-program don't they're the by going job hand digits, to a growing is which double than room care else know both. sterile, central vectors, I and program managing and are we're expected, so We on to put have softer to theaters, it. that what Cumulative

a have robust, would improved. be to expect We half. going what It's not call to I better but will it be second

Manav Patnaik

there your said, think are you XX% then guess And you business be it. got have leverage efficiency additive, coming years? when you Okay, would tied your the like in I you to operating in like target, on opportunities to just the plans, feel about that margin that just you the can touch other

Douglas M. Baker, Jr.

Yes, investments I in market think we in investment oil were is period and the and going thought while significant not for HR were did fairly blink also a we're what most these North headwinds. are moving which critical – our even digital what on recent expenditures FX to been to of SAP into headwinds America. business, call We we a we've and period like we technologies through serve business, system Catalyst, our customers. improve importantly are But backbone one ability

and is All had off, investment there. we've of significant paying this

I think order now go you're natural as what forward, we increased And investments harvesting so is focus of going these things. to on see probably the

see period expect the of more we're so increase have margins, after the where And investments. the we We a year level may after entering made. going investments start to investments we're And in this upping do don't fruits expansion done for that but for going that stay SG&A to year. from terms seeing already reason a we at while, year simple to you're you're

Operator

Alexander your with line next The question. of Jefferies. Laurence from comes the with proceed Please question

Laurence Alexander

flex more ones. to a basis in out can you two if growth guess or look point is trends five last also business, four your XXX see the challenging? the you – or that years, raws Sciences bridge margin productivity expansion, just made, you points One the characterize on strong the and I pricing Life XXX following do productivity there? you as your say – But up as afternoon. is Good quick very of to catches get you

Douglas M. Baker, Jr.

hunk created for Healthcare a mid-teens of is this. yes, a Sciences exactly more F&B doing do. do margin out little And to the as ago we to top business year probably thing business by out line attractive create on and Sciences Sciences, is It's growth. the couple Life a very would right for in probably the hoped Healthcare, the ,and terms a On focus percent a We optics, of The what would of it's line going the we as wanted also It's years took business perfect but business. it isn't Life bit expect. grow to Life bottom business, this of you we it follows. a

that characterized make no but cleaning-in-place are multinationals. haven't a looking last They're and have All technologies water is pharmacos very need is a cosmetic their industries. need. in Our around reduction for stuff answer difference This what team that's there. large I it Why good all is We the big we job. we're the doing after the areas. the And an the They great by highly they this on now. industry do consistent XX in valued been years, technology. globe They service for we technologies. need to,

for to it's us, match so a And it. and go after so we're perfect going

guess the adding under And we real. XX% raw we year margins, margin it always fuel still improvement here In harvest lay and because see, we're up XX% is go do. to now made, talked. real. XX%, on terms that we to this believe believe math. can start going out, for margin starting of pricing just how at catch very we've I accretion. talked they're that I We're the to much is we've We'll investments we've We

few next seeing again, We accretion significant and margin the start will here years. you'll more over

near believe margin don't of out we're room. I running So anywhere

Laurence Alexander

you. Thank

Operator

of the question. Deutsche your question Please Begleiter with proceed next from Bank. is David The with line

David I. Begleiter

or market is gains customer? disruptions wins. some at normal of these competitor your winning business you get acquired, and from benefits Doug, some Ecolab you. share this the Are some Thank this they year mentioned as

Douglas M. Baker, Jr.

competitors anything and disruption, constant it more to a with have like the else. I than Given history seem seems

know gain in don't a We our it's outpace number are a not. So have hold long want and And high growth because ourselves to to years have people top we that. disrupted if of and share of line time. tend for do obviously over terms and bar, or a because we to continue we I major competitors to

share The across of we good gaining are invested a – the major we're our we they've really good all out. board. job. feel teams strong innovation first businesses quarter. We in a So a that had doing very and very leveraging very in like are rolled They're half. We had

Sometimes the you at all up have very just yes collection a new you because happen. time, a quarter that say followed but get with dip same strong after that of wins in just They second. another we the it

So we're area. that doing well in

David I. Begleiter

And guess is or that, I it that to? volume there Doug, drivers Institutional, just second talking is in that drivers of a acceleration on pointing you're the one multitude or acceleration half to, two you're for

Douglas M. Baker, Jr.

talking you broadly? or specifically Are Institutional

David I. Begleiter

speaking broadly really here. I'm

Douglas M. Baker, Jr.

are straight-line, forecast our them. for sales second half, if with trend and now. pricing see to that the very – we the really right There's trends bend no volume I you consistent the the say would trends

of acceleration we which sudden ahead in I continue of good a to we typically next that It's over in to first pricing, a from acceleration the of early in The my we're X% next to us the going our looking – for very secured And timing six and experience half preamble, a little we all that consistent of second that's that type already type year, quite visibility securing terms and expect trend And we we I us. metric not quarters even that to this. this quarter. the very visibility pricing gives as the mentioned have normal the year. we've the same looking fairly last of we're continue X% into in of have thing, had say confident visibility, of And be new and couple. the need to solid so half seen XX% the makes in business with would just we're have would as through see during going

easiest cost So simply savings thing those your unique. under obviously, understand not control. because and are codify to the all And they're are to

They're through a second, year. say none as It basically And we're what's offsetting That's of through. So versus I drive using raw material are roughly the it's which a step They really call third quarter to fourth What at the would what this the of that straight-line going the very accelerate costs function does through the outside unique. let-up all year. is acceleration. stays quarter level to not those change we in is trends balance in the – indices. third. actually for go

one, it. those modest really doesn't not very it a it's If happen, have or We drive that but factors $X.XX doesn't fundamental only are happen. it our manage big forecast. $X.XX. deal. It's a the We'll But

as we've at. to on mean got to continue that good So when accelerate pricing, that been stick things you But look it does volume, continue we've all and deliver those doing through the it, we're there's not a to been are do savings. hockey in on this what But thing. cost we've

David I. Begleiter

Very good, thank you.

Operator

of Stanley. line The question. Please Vincent next question comes from with the with your proceed Andrews Morgan

Vincent Stephen Andrews

ask the you guys. very had year. as till of And Energy quarter in expansion Thanks wanted ago, the margin recall I to just from nice to the half the segment, call three really year months in the second happen and afternoon, year. expect good I that you over didn't

it made earlier? happen what So

Douglas M. Baker, Jr.

in for One, we RFPs. still said, one-timers think profit With have recovery. There very very team We're couple The doing – recovery. obviously in emphasizing control I been were solid OI you the which Energy there. would some if indicates still it being a is up think a things. volume. beneficial margin that did I'd Look, good XX% good XX% I We've job. for second segment. had those, quarter we're pricing. our getting disciplined We're say on was

careful. that know turn that We And chase not recovering profit deliver. you're rolling could negative game and out new that really that we We we're business aren't cash and want don't deals going can play pricing, to to or deals the low-margin if over technology, not. all they're

and through. But expectation is we're the it coming The lumpy, Energy now year. a what And throughout when to so that which is I think so business you year, sales the years, profit changes see in to years high so out remains the work the little sales, we low high better entered our overtakes as see going margin recovery and going few base we're was will. single-digit pricing think see beginning raws, if of OI, to double-digit but single-digit going continue recovery. out you We a

Vincent Stephen Andrews

within been anything a that hiccups plans or implementation. the the I just – install down as And quarter the of opportunities like there that the with It that, that. be was might ERP big pricing all? from a Okay. other for separately there any follow-up, doesn't like or any any But ERP there things are this like modules, have think road at any to sound

Douglas M. Baker, Jr.

as a world this North be will, system. of whole little we've lot been this those been But design, there's if to say lot of piece because an out in is we've zero just a do. would a have And our year. has SAP. behind done on SAP a and team I say will follow-on the say front have is implementations times. through more but say, a excellent commercial a you implementation. risk this you of would it We've first system. us And I run the an never put with and and on us, always there's bunch, many number it that of in number difficult out job. SAP our running the I running because going parts times. a We as now over than it events rolled hiccups done big can't American work. yeah, Canada that SAP risk Yes, A these never of done own of configured roll none I you it's of is exactly it's to we've for But – you managed

Vincent Stephen Andrews

much. very Thanks

Operator

Credit Hi, The Please - line the Securities questions. next S. question LLC Parkinson with Christopher your Chris proceed is with Suisse from guys. coming Suisse. Credit Parkinson of (USA)

just top some this peak you global for to the prior You for outlook us on just the walk quick market you. outlooks ability cost base, given three your composition few with of years, can level over sub-segments, ultimate your existing hit and but on through Thank just just comfort energy margins? a any your thoughts the your next growth little, reach

Douglas M. Baker, Jr.

margin that that's I mid-teens reach ceiling confident sector the business. don't for and quite a a Energy had that believe we as Look, we'll in again. I'm the total,

recovery year, the in to a grew If well it's to starting by we to sales have business WellChem continues exactly first half what because also go in and do. little it's you It upper be and single line margin seeing growth. just doing But recovers for Mid That pretty our I and expansion would is OI Nalco need recover. and north go the XX%. segment, price traditional its slow call well, bit We're because getting recovery a up you're though, there business. the downturn. falls as feed significant business, also this base. going higher they and like around it to Ecolab of to XX% is will that It as want technology a would one, top has against off And to they're quickly, gave bigger price quickly. re-expand expect it's fairly driving they, recapture as fast in do seeing is characteristics. exactly to what to acts Water digits much expectation. or starting solid that business through new they're to margin the doing Downstream they year what more steadiest as Downstream

And out Sales year. so recovery, OFC, to now. starting digits this of modest versus all mid-single always are year. laggard then this but have going very a recovery that terms be in is little cycle. And see margin We'll you're recovery OFC seeing of the play to through of a bit you're parts WellChem

that it's falling expect lagged recovery. to got accelerate business of and next a closer And growth double-digit and it's strong to cities. lagged, you've unconventional two it in year, unexpected. U.S. really out. We tale international where of is coming is None this lagged The

Can contributors. versus it's and about on international color and be these effect would to XXXX would Parkinson selling but initiatives Securities to color little early ultimately quick you're how be and give LLC S. any on North Thank the positive progressing? Healthcare Suisse we year, Great, Christopher XXXX more helpful. us on growth a Next both you and new just in - America think a the within just margin expect have the just follow-up. understand and innings, (USA) Credit I how you.

Douglas M. Baker, Jr.

turnover, program and earlier, central As operating and year. mentioned our I They're hygiene sterile room quite well. efforts on year around are doing et cetera double growing digit

We continue to have success.

the customer We it customer. a on like that. The too. Obviously, the team's the good with the trade likes We have pipeline. We margins. like

on on included the expected. We because terms we need of in are Many them don't had we there can't can they're formats, that of need our a host just sometimes more program you non-program of than there you with to fill stability focus quite or confident And side. through distribution – we well the we we're other we and want also And the – In products. weaker side, as hole there, GPOs arrangements. but on just even sold through other obtain. just sales which to work sit area up great have

I you. to what know don't So tell

floor, expect now. we right of plan move where has the think third growth in year. balance year, accelerating I believe is job - off this leading you. to be thank done XXXX, S. year Christopher Credit we LLC their see the will (USA) quarter stronger into expect We rethinking team Great, we're for fourth the Parkinson and good to which Securities which a a The and Suisse the

Operator

Please Andrew with is next questions. question your from of W. proceed line The Robert Wittmann with the Baird.

Andrew John Wittmann

in some bit today, couple decline the Institutional Great, of thanks you've question, the volumes I points XX-Q. we've explain on know percentage get seen a the for just But X thing get Obviously, to this if talked for a going in to more know my detail trends discussion full the rates. but volume decline about sequentially. the guys. enough of that's don't I little did that already, times was in to context the on taking we're hoping I business.

hoping bit for Doug, and reasons could maybe, you was about talk little the just was where the I So sequential go at. through the decline other segments a

one stick the and anything volume get explains potentially else that rate think for sequentially decline, would there – in to be not that context decline comparison that there I But helps me out is us Energy. might decline? the volume

Douglas M. Baker, Jr.

Institutional Yes, very inventories QX, in have and it's you products inventory. and had of really X%, distributor two is the that. where distributors The, upping a in down things. if consistent It QX versus was around so taking more XXXX. It was you improved you will, consumption Institutional

volumes, had QX about QX, which unusually talked second call would I we QX. some and of The we large was out in Energy came factor it of

was volume little indicate. QX lower in to and actual a than stabilizes, consumption second stuff inventory So the of more volume a see and indicated consumption, would hotter on going know of because in expect you actual is what we and was basis Energy. acceleration growth we it little terms than recovery, QX fell will, reported a the straight-line numbers stuff where in half one-time, if and what's on much in terms impacts That underneath,

for side have we day of the the or one the really quarter know of at next at times And quarter end the the shipments other. on We fall that consumption. they're designed

Andrew John Wittmann

Thank helpful. I had. That's you, all really that's

Douglas M. Baker, Jr.

Thanks.

Operator

Longbow Silversteyn is next Please the The of with question. with question proceed from Dmitry your Research. line

Dmitry Silversteyn

thanks afternoon, my for question. Good taking

second share between goal go you that as wondering share end-of-year repurchase much I'm for previously. up? count as about guys quarter. $XXX of and first repurchases didn't your shares debt how obviously debt there given Or a we did did million should just So paid You about you down level. think is versus the if that

So in between paydown M&A, how and of capital think we deployment should debt share terms about repurchases? absent

Daniel J. Schmechel

Hi, Dmitry. This is Dan.

repurchase right. So you're shares second We quarter. did not in yes, the

just off in to good first we got me pretty let However, a start the say quarter.

share year what and quarter. no there's today the repurchase about I and be did here deployment. first as thinking in always full I in we as is year, the to with million, change about consistently, last So about sitting we about we talked $XXX did for line think which million capital would think in $XXX about certainly our

from dividend. will flow So free we pay cash the perspective, a to continue

Of course, make the business. we in will investments

balancing accretive pursue really deployment would free cash in of And act will the M&A. share being the think repurchase I We flow. as of

I So be in expectations. full no the think across very if year, change look much last will you thinking, year it and our line in and with

Dmitry Silversteyn

I can billion going generate $X.X share of it paraphrase My me somewhere more to you, a little $X in free this or cash, bit you're spending you're $XXX that like If in going tells year model repurchases million in to neighborhood. looks north like be billion.

assign that I be to paydown, debt off? I absent difference So won't terribly if M&A,

Douglas M. Baker, Jr.

terribly not be I would would you that off. think

cash for bit times A-range structure. metrics run adjusted two And We EBITDA to of net little we accept an think in about QX-QX, north I'll a targeted of year. how the say that. we've of about asked the I've So terms the by allowance, We debt should be your we line capital end number. in number. flow free it's

beat think a the I thinking about you're little can by right it way. we bit, but it

Okay?

Dmitry Silversteyn

very much. Thanks

Operator

with line Please proceed from your Shlomo with coming is of questions. question next Stifel. the Rosenbaum The

Shlomo H. Rosenbaum

pin Hi, expectation my you XXXX. Dan, more just, the free of flow to cash hoping down for thank questions been Most terms answered. a was maybe you. of I in have little bit

specific just but billion? us we my guidance Should for a that you If have bit, do on You on give goal? $X.X think more little that can, a touched little follow-up. a you

Daniel J. Schmechel

the would billion bit. a said by I can $X.X we beat accept I and it think So number little

land would I think to billion $X.X full of expect that year, good pretty the is estimate okay? we where

Shlomo H. Rosenbaum

Okay, good. Thanks. that's

Daniel J. Schmechel

Give me a but little leeway, yes.

Shlomo H. Rosenbaum

a are comments be have order wanted not rate in being What of most year? would four in that Doug, than the better in I you're growth have then from or to you seems XXXX? to this organic and another to achieve XXXX able some better build components you about mind is the are just in work context of guess last terms to your concerned that. the year good shaping see? Okay. to up do way, you organic make pretty next be five, say XXXX right of I to to able It on think growth what ask. than What your Or that year

Douglas M. Baker, Jr.

fundamental I of to growth change think the year. don't year our drivers

the we're that so deploy our midst thing to also share, And which grow we make our we're doing with enables in of, business customers, to technology, customers. and which take sure need the with us existing continue right to

have time. this be grown And I made probably would thought investments we've of borne we're would already say that so technology the fruit. at digital I ahead where on we

back a two in We're big year, wins midst you customers rolling If of we've digital of had ours. it big the out. with went large in

operate reduction, drive cetera. water we customers our these to we can we think is new to host continue all can us our all going exactly simply I reduction, give safety, of to And continue how business, in we to improve carbon how do improve to this et a because going lead us food visibility better. for how are more how it's follow-on opportunities of operations, help

sit lot it's I metrics organic right that in now So rate think year. our camp. growth here of I next don't all worried seeing make about that a me

to don't I And Now a world, that's to almost but as play point my we're think not learning. is just anything to expectation possible this going of that destruction. we're how I all don't is know. it's tariff out, all in going play roulette huge

of very the us, think I we We in are where momentum the aren't that, for good margin as top on same have the sell for our increases currency. the to products it's of strong in very in lead cost strong our momentum into quarter could specifically to not the tariff as has Barring fourth making pricing we're line, an strong and XXXX overtaking directly raws into on with it impact of global the the shape in bull's well. an recovery. on us momentum going which line to But bottom moving economy, strategy year because going starts be leading and big clearly on problems; impact eye i.e., obviously

Shlomo H. Rosenbaum

Thank Okay, great. you.

Operator

question Please line with of the from proceed Jeff JPMorgan. with questions. The Zekauskas your comes next

Jeffrey J. Zekauskas

questions. have I Thanks two very much.

billion, $XXX X.X% first to over that's And so about costs you X%. your base to The out million want intention $X in is years, year. do is your and SG&A is knock that's per three about so SG&A, it in

So X% per a your that it? think way SG&A per year? does growing that right it as X.X% generally the will base year, case to mean that grow instead Is of about

Douglas M. Baker, Jr.

$X is have become inflation, I you curve think $X.X bend. this. Yes, billion isn't model realistic. where which which million and out a Often, XXXX, $XXX discussions if these almost billion, binary, by a to It's just you wants somebody natural have take part of

a on at going raw will say to also of come expect this which modeled But be the pricing, component efficiency accretion top by We from program. that additional this. to that, is our margin going from from line simultaneous would if comes to margin you're continue accretion I top the is business to favorability; i.e., that volume, goes. grow efficient you getting have And traditional more represented time, third formula same which to this

Jeffrey J. Zekauskas

during call, the your one-time in And to Okay. some Energy business. I items describe think Can discussion in were? referred the quantify you those you and what

Douglas M. Baker, Jr.

have associated close very in volume. it. that them. little SG&A are of commodities We They one-time some large specific sell There's sales are even products with There cases. some to big

a And so the business it's very large quarter. in routinely, but captured second of just we orders count couple on not we

it's So we we take right me to think that's it's trend. we run just get XX%. because how on to at it if – that rate our but get indicate We'll back wrong, it, don't looking not that from out don't find that's we more, XX%

Jeffrey J. Zekauskas

Okay, you so great. Thank much.

Operator

The Please of question. P.J. your next question Citi. is from the Juvekar line proceed with with

Scott Goldstein

on Scott Hi, is good for P.J. This afternoon.

business. I was So in I Institutional business investments you guess looking made at the the

last year. you program? that this that initiatives growth Is you some now with that started started you still ongoing think efficiency I announced late

Douglas M. Baker, Jr.

designed a continue. growth. But yes, were of lot them they absolutely, yes, for Oh will

Scott Goldstein

adding, what was Okay. you And it bucket adding in Was cost Institutional? on can were or count, you more IT you side? maybe the me to it were just follow-up, where head remind as a

Douglas M. Baker, Jr.

we We out. equipment in and customers. that accounting technology corporate takes we were specifically the added SMARTPOWER, adding, dispensing the new rolling enhanced merchandising had equipment or one, you've three, Two, you in area. GXXX got put And manpower

Scott Goldstein

Okay, got you. it. Thank

Operator

Scott of line with your Please questions. with proceed the Oppenheimer. from comes question next Schneeberger The

Scott Schneeberger

I each Doug, Thanks, driving growth, of that? The subcomponents delve But good you've to think good call. going those Thanks. we speak, just but guess in it Shlomo's be was addressed the or sub-segments maybe industrial what's I I in you how overview the could to was categories curious. we bit that's acceleration I going little to the could tariffs, in of of in granularly the could a of And progress? each afternoon. a other? given in way on how think specifically of Industrial one question influence that

Douglas M. Baker, Jr.

business about has doing Thank Industrial it. asking been great. Our you for

say So a things. I couple would

of and Water a and If its benefited at clearly lot business, the the marriage it's few and of partnership look technology. you're you with years work culmination right that last over now our F&B seeing

the the customers. Food those interlinked. together Beverage, value Water & to food safety very our program, outsized and bring And are So

– F&B and And really success pressure a but or only really it's is everywhere. the lot pressure, dairy quite side of business kind have The of the in negative so had the pressure doesn't negative on performing across it we've well our milk the where is got side simply any tough board, exception of so agri because the market.

brewery, food, the in those operations, well. beverage, all are close number business, of of that customers else. to who And face processed of doing a So protein would that's quite having I business, everything are and consolidating areas say

call those we're because situation what So bringing there the reason is the face for safety world-class food succeeding difficult I most say of we're value, because into at programs. industry. great Light. And of I underlying of the in area would The a it's energy water in use would significant reductions the come capabilities that best of leads combination also the in with Water probably lower that cost and that

on job the cetera, focuses business, industries, new, specific all of They've et in Institutional people done programs which manufacturing a opportunities. really and brand even creating the help done area. I host increased F&B business, Light exciting prediction the that identifying but programs business, heaviest because so think has the best very auto a They're around legionella need Water things. the whole So great

that in the been very have then as we in single-digit business is to And really growth set has recovery and really so steadily very a And been heavy the upper the speak. profile more And business the is year. accelerating good has mid heavy to mode.

don't things. had of business to China want the industry hotspot, that really glowing heavy it. so challenges specific two China. problem. we as well, we fairly see With a is flipping part you is said, a was And was bit a broadly in that think now. around not in while skip China place of I where And doing every One, was

I job that that good the the didn't a portfolio China. sold to focus down on us We operate, pieces we which done in sense for has think we've So pieces the to we need best. there make of to getting business us operate allowed some can

And and it's in in a and continue there. organic for part helps real so us. five It's which plan, a technology going of you're their starting opportunity growth Water standpoint, to China. year see from think is uptick China, challenge big we an to our big is

very it's is recovering. Mining much had So pretty Paper quarter. a across the board. strong

of important the market is exists that half versus percent they're in that half. recovered now. business to for us have technology, expect first second We paper improved an well, all Again, there China and high driving new as which given the very for

across Industrial this second do last organic very growth moved So the of year X% in in board the expect we strong, from X% a Industrial. year in and really even terms to to better half

Scott Schneeberger

comprehensive the That's Thanks for answer. great.

acquisition. the about in X.X you've a It's Just had follow-up, Anios really quick that years it's been portfolio. sizable a

Just give us observations Thanks. at this juncture.

Douglas M. Baker, Jr.

that We way. to just our was and had above all metrics it our review stay on Anios, and internal projected of first year

next one month, year, at days, watch years. do business three. specific look-backs XX review every at but the year is and every we always We at acquisition big Our three on

business performing. the so is And

second business markets has I worked The business, a have we we're particularly and number you double to. year of build, the say of untapped of that What opportunity has digits there to unlock a well in notwithstanding, growing strategy in and first if that led, were way at been first quarter expanding lot terms in for and Anios will, a the part us. quite healthcare that's well can the business street-up and want continues would we quarter doing of ahead in don't Anios globally, of we where the sales areas.

we're that We U.S. the expand from starting also one, to other of some acquired also we're looking markets now, in registration technologies with and considering Anios to in Anios and expansion the new were that process. the have

very So I think acquisition. performed was Anios well. an It's excellent

first we are We and or have all in expectations businesses terms bars what for our high met it of year. those of its exceeded that acquire, in

Scott Schneeberger

much. very thanks Okay,

Operator

with questions. the from with is of Global. your Please question Mike next Seaport Harrison The line proceed

Michael Joseph Harrison

one the across you Hi, major could good give other? it some if the be or detail restructuring divided the segments, or of terms to by I it program in pretty going afternoon. evenly an will impact Is was savings have wondering on the $XXX million on segment. outsized three

Douglas M. Baker, Jr.

here's too to say. Mike, It's that I early detail. go what would into much

specific, have but We in very terms going a we're do calls few to make which go of we have first. projects to

able certainly across not expect not With said, end three we'll year projects give insight when to it's across all going the how evenly more that falling you So that's I to as think segments. by the because simply what be every be quarter to we work.

Michael Joseph Harrison

All right, business. saw in and that Energy margin question you then improvement the a on the

are I'm you is be. margin could or positive there changes on saw understand trying exactly that of about talked products, how actions shift higher sustainable you to toward there. going mix new to and products Are just what the customers you products? You mix introducing taking those

Douglas M. Baker, Jr.

held you Yeah, we could out well, too back low price, them. because never we for technologies during of And go never downturn our if knew we doing both. price recover. appropriately number we're a the One, of you'll new a

now. so some And are of introduced being those

next have technologies technologies back quarter, were number conserve that but starting also years. on they're I in you fields. could the off every turning the a to that to in term, in say of a you what of basically about mix they to worried a is portfolio there's in If may up change corrosion, hole like you're heavy not When turned a dollar going the near so will, industry. would they customers can three in pipe they see on the really lot the which survive anti-corrosion eat trying

stable a are because much got it know now more they worried about they So environment. they've

of So sales for lot higher-margin per site, on. a these if highly start obviously technologies is seeing, turning which And These more technologies are us. always back you they're accretive. will, you

is be number that by the a XXXX. next expect would we factors. those why it's I recovery So will see margin we mentioned over would back years, mid-teens in which expect of few I continued to

Michael Joseph Harrison

much. Thanks very

Operator

line final with ahead Please Rosemarie Morbelli Gabelli. your of question the Our go comes questions. from with

Rosemarie Jeanne Morbelli

And feet linked or you Does no of Thank X% digital mean seeing to are market other that and the growth becoming less issues or your the technology are issues you, are focus growth good ground, that Doug, they longer to that, and increasing is you annually by the same on the sales emphasized coming that the afternoon, more the important hour. for you fact technology. going from the force? past everyone, by on X% thanks progress? we the have size that given

Douglas M. Baker, Jr.

who on have the focusing adding team. than account sales Yeah, our well, of even different team. largest parts we world. They around faster are corporate at the opportunities professionals We've sales our been a rate full-time certainly X% are X% to to

that we've years – and investing X% in X%. the steadily than last a lot arena few been that's to so been And steadily a for faster

going our learned what say strategy. be we've So the continue is digital part going is are with capability important of service be enhanced to I to that's to Field getting vital. an we visibility. would capability

and challenge. restaurants, cetera, to turns can great a a make we've get our be only become identify a them attributes into not et hotels, to can change we real before what it propositions the before of food field but concerning trend or an might team alarming actually hospitals, One plants, into change challenges we and trend they fix because got winning is problems,

down itself How going become, manifests to capability road, And things. I is say, more would that think important. two that I so the

the solve continue be this do going to we continuing team's up even problems to easy, able think automatic time free to and all more and to handle ability for And I are we work, business. capacity We'll I to that count to on our the people for depends their as ordering increased that increased terms easy, make takes work, work rate. we're how setup it it think to customers today how do admin do as successful by are doesn't, that increase in If offload make other time sales, ordering, shows margin. same it at identify using it shows love the head opportunities. harvest That's really If going adding job. of up sales. up we'll creating we're then

Rosemarie Jeanne Morbelli

I Okay, wondering that's very helpful. And was then pest elimination. about if talk you could

We there have a organically. multiple? are growing in corner. opportunities at with line acquisitions, turned now and potential out the Any there It expectation reasonable is

Douglas M. Baker, Jr.

a business, valuation number because our though high. get finding way to hard return And exist the than large cautious generate footprint As smaller pay your same it's businesses of and the a that time. footprint, be you could it's that for we a returns if lot opportunity over we on have a maybe high large multiple. we're valuation very these active a small, money really might leverage is acquisitions you compensate a generating way. for high technology often we If to a the And in on they're doesn't for do if shareholders reasonable over business, them. large in of the of M&A I for business, more of need in the seem large they we're size. such of doesn't We potential all would Valuations competitive about medium say a relatively very even rich to are whatever They of make or is landscape a and to anything and opportunities. looking expect, today. the ourselves at number to doing anything And to hit time, is I of buy period closing to XX%. the them Part just all we're that quite don't And think grow area.

of opportunistically it do makes do going lot when heck it a for sense of we're So a and our to shareholder.

Rosemarie Jeanne Morbelli

All right, thank much. you very

Operator

floor to like closing would I turn back now you. remarks. to Thank the for Mr. Monahan

Michael J. Monahan

participation website. be call. rest Thank on This you. and quarter slides the our for Thanks and will replay of day. second wishes That your discussion for our conference conference call wraps time associated and up for the our best available the

Operator

for you concludes your participation. teleconference. today's Thank This

your this time. You now disconnect may at lines

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