Ecolab(US:ECL)2025-05-08 20:08Part I Item 1. Financial Statements The unaudited consolidated financial statements for Q1 2025 show a slight decrease in net sales to $3.70 billion, while operating income increased to $555.3 million, and cash flow from operations decreased to $369.4 million due to working capital changes Consolidated Statements of Income Q1 2025 vs Q1 2024 Income Statement Highlights | Metric | Q1 2025 (millions) | Q1 2024 (millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,695.0 | $3,751.9 | -1.5% | | Operating Income | $555.3 | $517.9 | +7.2% | | Net Income Attributable to Ecolab | $402.5 | $412.1 | -2.3% | | Diluted EPS | $1.41 | $1.43 | -1.4% | Consolidated Balance Sheets Balance Sheet Summary | Metric | March 31, 2025 (millions) | December 31, 2024 (millions) | | :--- | :--- | :--- | | Total Current Assets | $6,081.1 | $6,025.7 | | Total Assets | $22,366.4 | $22,387.8 | | Total Current Liabilities | $4,609.2 | $4,792.8 | | Total Liabilities | $13,462.7 | $13,598.6 | | Total Equity | $8,903.7 | $8,789.2 | Consolidated Statements of Cash Flows Q1 2025 vs Q1 2024 Cash Flow Highlights | Activity | Q1 2025 (millions) | Q1 2024 (millions) | | :--- | :--- | :--- | | Cash provided by operating activities | $369.4 | $649.4 | | Cash used for investing activities | ($224.0) | ($201.0) | | Cash used for financing activities | ($241.6) | ($889.3) | Notes to Consolidated Financial Statements - The company announced the 'One Ecolab' initiative in July 2024, a restructuring plan to enhance growth and margin expansion by leveraging digital technologies and global centers of excellence. The company anticipates restructuring costs of $175 million and special charges of $50 million by the end of 202720 - In Q1 2025, the company recorded $39.4 million in restructuring charges and $4.8 million in special charges under the One Ecolab initiative. Cumulative charges under this initiative are $121.2 million for restructuring and $28.5 million for special charges21 - Effective January 1, 2025, the company realigned its reportable segments. The former Global Industrial segment is now Global Water. The former healthcare operating segment was moved into the Institutional operating segment, and Global Life Sciences was elevated to a standalone reportable segment48106 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In Q1 2025, reported net sales decreased 2% to $3.7 billion, while organic sales grew 3% and operating income rose 7% to $555.3 million, driven by the 'One Ecolab' initiative Overview of the First Quarter Q1 2025 Performance Summary | Metric | Q1 2025 Result | YoY Change | | :--- | :--- | :--- | | Reported Net Sales | $3.70 billion | -2% | | Organic Sales | - | +3% | | Reported Operating Income | $555.3 million | +7% | | Organic Operating Income | - | +17% | | Reported Diluted EPS | $1.41 | -1% | | Adjusted Diluted EPS | $1.50 | +12% | Results of Operations Q1 2025 Sales Change Components | Component | Percentage Change | | :--- | :--- | | Volume | 1% | | Pricing | 2% | | Organic sales change | 3% | | Acquisitions and divestitures | (2)% | | Fixed currency sales change | 1% | | Foreign currency translation | (2)% | | Reported GAAP net sales change | (2)% | - Adjusted gross margin increased to 44.4% in Q1 2025 from 43.3% in Q1 2024, reflecting strong value pricing147 - The 'One Ecolab' initiative, announced in July 2024, is expected to incur $175 million in restructuring costs and $50 million in special charges by the end of 2027, with anticipated annualized cost savings of $140 million150152 Q1 2025 vs Q1 2024 Operating Income Reconciliation | (millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Reported GAAP operating income | $555.3 | $517.9 | 7% | | Special (gains) and charges | 34.3 | 29.8 | - | | Non-GAAP organic operating income | $579.3 | $496.6 | 17% | Segment Performance Q1 2025 Organic Sales and Operating Income Change by Segment | Segment | Organic Sales Change | Organic Operating Income Change | | :--- | :--- | :--- | | Global Water | +2% | +5% | | Global Institutional & Specialty | +4% | +27% | | Global Pest Elimination | +5% | -1% | | Global Life Sciences | +5% | +31% | - Global Water: Organic sales grew 2%, driven by strong double-digit growth in high tech (data centers, microelectronics) and solid growth in manufacturing179180 - Global Institutional & Specialty: Organic sales increased 4%, with strong growth in the legacy Institutional business. Organic operating margin expanded by 3.9 percentage points due to strong pricing and lower supply chain costs183184185 - Global Pest Elimination: Organic sales rose 5%, but organic operating margin decreased by 1.1 percentage points as investments in the business outweighed the positive impact of pricing and volume188189 Financial Position, Cash Flows and Liquidity - The company's net debt to EBITDA ratio remained stable at 1.7 as of March 31, 2025196197 - Cash from operating activities decreased by $280 million YoY to $369.4 million, primarily due to unfavorable changes in working capital and timing of compensation payments198 - In March 2025, the company amended and restated its $2.0 billion revolving credit facility, extending the maturity to March 2030. No borrowings were outstanding under this facility as of March 31, 2025207 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company uses derivative instruments like foreign currency forward contracts and interest rate swaps to manage market risks, not for speculative purposes - Ecolab uses foreign currency forward contracts, interest rate swap agreements, and foreign currency debt to manage market risks230 Item 4. Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of March 31, 2025, with no material changes to internal controls, while continuing an ERP system upgrade - The CEO and CFO concluded that disclosure controls and procedures are effective as of March 31, 2025231 - The company is in the process of a multi-year ERP system upgrade, which is expected to improve the efficiency of financial and transactional processes233 Part II Item 1. Legal Proceedings The company is involved in legal proceedings, including the TPC Group plant explosion and a vehicle accident, believing claims are without merit and potential losses are covered by insurance - Ecolab's subsidiary, Nalco, is a defendant in multi-district litigation following a 2019 explosion at a TPC Group plant. Ecolab believes the claims are without merit and intends to defend them vigorously119121124 - The company was named in a lawsuit in June 2024 following a vehicle collision involving an employee that resulted in fatalities and injuries. The company believes any potential loss should be covered by insurance subject to its deductible125 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company repurchased 580,712 shares at an average price of $239.08, with 8,200,873 shares remaining for repurchase under the current authorization Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 428,123 | $233.58 | | Feb 2025 | 20,026 | $264.52 | | Mar 2025 | 132,563 | $253.03 | | Total Q1 2025 | 580,712 | $239.08 | - As of March 31, 2025, 8,200,873 shares remained authorized for repurchase under the company's plan238