Ecolab Inc. (NYSE:ECL) Q4 2019 Earnings Conference Call - Final Transcript

Feb 18, 2020 • 01:00 pm ET

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Ecolab Inc. (NYSE:ECL) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings. Welcome to the Ecolab Fourth Quarter 2019 Earnings Release Conference Call. [Operator Instructions]

At this time, it is now my pleasure to introduce Mike Monahan, Senior Vice President, External Relations. Thank you, Mr. Monahan. You may now begin.

Executive
Michael J. Monahan

Thank you.

Hello, everyone, and welcome to Ecolab's fourth quarter conference call.

With me today is Doug Baker, Ecolab's Chairman and CEO; Christophe Beck, our Chief Operating Officer; and Dan Schmechel, our Chief Financial Officer.

A discussion of our results, along with our earnings release and the slides referencing the quarter's results and our outlook are available on Ecolab's website at ecolab.com/investor. Please take a moment to read the cautionary statements in these materials stating that this teleconference and the associated supplemental materials 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 under the Risk Factors section in our most recent Form 10-K and in our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.

Starting with a brief overview of the results. Pricing, new business gains and product innovation led fourth quarter acquisition adjusted fixed currency sales and operating income growth, which, along with lower delivered product costs and cost efficiency actions, yielded the fourth quarter's earnings increase.

Looking at some highlights from the quarter, and as discussed in our press release, acquisition adjusted fixed currency sales increased 1% as the Industrial, Institutional and Other segments showed steady sales gains and more than offset the decline in Energy. Excluding the ChampionX business, Ecolab's acquisition adjusted fixed currency sales rose 3%. Adjusted fixed currency operating income margins increased 60 basis points, continuing their steady improvement. The growth was led by double-digit gains in the Industrial and Energy segments. Adjusted earnings per share increased 8% to $1.66 and were up 10% excluding the Healthcare recall.

Progress continues on the separation of our ChampionX business. We continue to expect the transaction to be completed by mid 2020. Looking ahead, our work to drive sales momentum showed improvement in the fourth quarter, with ongoing business volumes up 1% excluding ChampionX and the recall. We are driving new business wins, focusing on our innovative products, sales and service expertise and our value proposition of best results at the lowest total operating cost for customers. We also continued driving productivity and cost efficiencies.

Our fourth quarter slides and earnings discussion include an earnings bridge for 2020. As shown, we expect strong operating earnings growth for the full year of 12% to 15%. However, we will also face some headwinds in 2020, including $0.08 from the impact of lower interest rates on our pension plan; $0.04 from an unfavorable currency exchange; and the impact from the coronavirus outbreak, which we estimate will cost us $0.05 in the first quarter, with the remainder of the year not estimated and forecasted at this time. Net of this, we look for 2020 adjusted diluted