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Ecolab (ECL)

Participants
Michael Monahan Senior Vice President and External Relations
Douglas Baker Chairman and Chief Executive Officer
Daniel Schmechel Chief Financial Officer and Treasurer
Gary Bisbee Bank of America Merrill Lynch
Greg Bardi Barclays Capital, Inc.
Chip Moore Canaccord Genuity Inc.
Laurence Alexander Jefferies LLC
Tim Mulrooney William Blair & Company, L.L.C.
John Roberts UBS Securities LLC
Vincent Andrews Morgan Stanley & Co. LLC
Christopher Parkinson Credit Suisse Securities
Dmitry Silversteyn The Buckingham Research Group Inc
Scott Goldstein Citigroup
Shlomo Rosenbaum Stifel, Nicolaus & Co., Inc.
Hamzah Mazari Macquarie Group
Scott Schneeberger Oppenheimer & Co. Inc.
Rosemarie Morbelli G. Research, LLC
Justin Hauke Robert W. Baird & Co.
Call transcript
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Operator

Greetings and welcome to the Ecolab Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. President, for Vice Senior Monahan, External Ecolab. Relations Mike you. Thank

You may begin. now

Michael Monahan

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

growth double-digit fourth We earnings the Ecolab’s earnings in information strong share the with supplemental momentum overview release. also quarter. Starting growth and to per the a share results, the diluted per brief you continued refer in of adjusted

gains, XX% fourth adjusted increase. cost pricing efficiency the and earnings strong fixed New actions income yielded drove business which diluted acquisition accelerating quarter’s with along and tax per currency quarter operating fourth innovation product growth, sales and adjusted reduced share rate,

Adjusted operating rose continuing acceleration XXXX. throughout along the as EPS, adjusted lower growth income recorded currency press The acquisition with the some in diluted to fixed currency shown rate discussed XXXX. quarter the highlights income X%. in increased operating adjusted on yielded from XX% quarterly our continuing tax double-digit throughout gain, and trends increase Moving the a X%, sales release, fixed

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

well our add developing us are experience improve investments sales for working and digital their actionable insights our new increase to effectiveness. will force and Our operations, enhance with their customers

continue also across of and segments. all business our sales underlying pricing solid volume to We see

expect earnings rise $X.XX impact the higher to volume the per diluted product XXXX investments. offset We to than and delivered adjusted XX% to range, gains XX% business share costs $X more the and price as of

First momentum year continued to range. cost $X.XX deliver the quarter share to adjusted growth in earnings to actions, higher X% line delivered the balance and, of the $X.XX be this product more efficiency along to growth income with diluted adjusted earnings are business strong expected top and double-digit our over than to expect we yield diluted offset per year. operating summary, per XX% share up In costs

some comments. headwinds, Importantly, expect year. the we digital we superior in including Baker make develop we differentiation, sustain as despite continue and is to growth And product with information, exit Doug right investments here the future the investments for momentum now, of the key strong to areas to

Douglas Baker

the we growth, year OI the saw really strong by is solid we well. volume. driven and but which momentum. improving comments XXXX, and the organic fourth at going hello. double-digit of including new I’ve we as sense – I’m in the it the If Mike, word. driven of bit positive also quite to fourth and QX This part very EPS quarter, X% strong throughout by Thanks, all a we enter We’ve We business, year, maybe pricing, quarter year in couple and really got with got look brief in enjoyed in keep strong was repetitive. a the solid for and had

to be XXXX as consequence, project So we good well. a very as

adjusted growing full-year or this range, from pricing; just were XX% is a a QX EPS They continued aren’t and our material driven really formula: be to that’s in forecasting by volume The they XX% slower XX% they’re benefit less growing favorable, going good our than X% underscore less. to year accelerate to range. We’re and projection. headwinds, raw plans; XXXX,

not we’ll invest growth say, we I in and the Importantly, continue economic year, important in the is systems, innovation bring so key story the and an remains same. customers driver really times. And good story our digital our success both to to would throughout fundamentally and good importantly,

This great it’s cost exactly know impact. which have when business our define focused what teams great the what results our we we model, in for lowest drives we’re on. financials driving great So best at is environmental we and as shareholders

So if the field. quite pleased is enter with – out testament and deserved, that to there’s teams been I’m well who any it’s we momentum really executing have in it’s really our the a very shout XXXX out

I’ll back that, for it with turn So to Mike Q&A.

Michael Monahan

Thanks, our That remarks. Doug. concludes formal

plan the in of hold of annual to booth As XX. tour Restaurant on we May a we Q&A, Association National before our our Monday note final Show Chicago start

ahead, September further on Investor XXXX plan X. Looking our we hold Day Thursday to also

questions, contact begin period? Operator, have any office. question-and-answer you our please the If please would you

Operator

you. Thank

caller, of now proceed will with session. a chance question-and-answer [Operator Bank one so participate. that Instructions] with question comes follow-up Bisbee and yourself a Merrill Gary of limit you first brief question line We question the be conducting Lynch. ask We to America others from one question. your that to please Our per have Please

Gary Bisbee

Hey, afternoon. good guys,

best question had to a picked first helpful the up in pricing volume that’s as obviously, years. year about number and me, guess, we has been for in but growth. really But think – of revenue also I its So fairness,

I is you’ve as of of you lap types get cadence pricing, assume, what start to again the those like? think you’re unlikely XXXX, on to about look got top you gains now. the So as what

on think the volume sustainable the as is Thank So bit your or into this decelerates move the line? that, recent that top growth is revenue is reasonable optimism is to trend you. it we year, a around such

Douglas Baker

to those that to similar from are in be we in contributions XXXX. very We saw believe volume and XXXX going pricing

And try think really market even it’s But so raw be still driving got that’s spot customers. our in slowing, Fundamentally, we’ve what’s going want in while any we don’t past, we a better as We at up to with conversation the I talked forecast, and given like slower customers. quarter. material don’t pace, do to match simply to inflation inflation you’ve it’s price year-on-year. pricing, our it because for it’s

mode, increases XXXX you XXXX. the we still so forecasted we way continued for from in a see standpoint through of And in pricing recoup and we’re increases if and in that saw parts the XXXX the will, all

throughout think that there We will, i.e., stick, second big expect don’t growth is vice the year. collective would a it’s we the much So fairly versa. in if steady, versus you or first-half sales hockey faster

Gary Bisbee

to guess, else people focus to executive a probe that, you. for spin. just as to on on I Does is months? over And divert then M&A a that’s the we your strategy this the have next you any or quick not working be bolt-on XX you prepare about to the think or wanted what ability either anything impact XX going follow-up. are the on to as team huge think deal Thank

Douglas Baker

it’s mean, Yes, project. a large fair. I absolutely It’s

us falls hard to understand, of where M&A. path from worked from bolt-on preclude if we continuing will shadow not think, this the our will, project. It I you

is, and it we’re have these in of pipeline create quite this. think go create very the now. focus segregate done past in situations good We we’ve are and that successfully we teams a right we when going kind I on to What

drain We don’t as will utilize needlessly capacity outside well, we than or services, are do can better so equal that internally where they what we here.

team. We you during If sales to margin when period They Nalco we recall, the created growth executed them a gave of recall, a time charter. say, that in excellently. of if even also And we the continue growth rest had, the integration, you businesses. very successfully and standalone drive we

Gary Bisbee

Thank you.

Operator

Thank you.

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

Greg Bardi

Manav. want the This actually little to Greg I on for Hi. calling assumptions hit bit a just on material more. raw is

little level happened ending up third-party put wondering Just worse, of you’ve into conservatism the those just assumptions what given in year bit assumptions? last a terms of what

Douglas Baker

you’re We’ll I follow philosophy, year. make would new the a Yes. No, this mistake think, we advocating.

So you than would basically forecasts, which level you’re materials right. a lower raw much if year, mean, formulate is last saw. suggested, had we we in it went actually in XXXX I have on inflation indices the would of have you how

you slightly is If materials time. in look the above raw at for our indices, at in our forecast indices point this forecast

believe wrong forecast. with certainly We the on our have be And transpires. – we we also don’t we that eventuality we would material understand going overly Obviously, up up, that obviously, in need if can to the if indices pricing one ramp are we it always but what raw that’s to. way too. another, what We needed accelerator, exactly aggressive. probably if not actually see We’ll and being to or we’d we step do that ramps proven accelerate are

Greg Bardi

just ask the the a business quickly side. about Okay. about think wanted about you more for Energy And lot to in I how the growth upstream the you’ve for talked that I of the growth trajectory past, business? Downstream drivers secular focus then on think

So some that the appreciated? the downstream nice on the would on if that side, be growth you of could Thanks. just touch drivers driven have

Douglas Baker

a top business just a downstream mid in of things number we one And business. businesses is it’s that you in it. cyclicality, in not There income, but if the growth growth our energy, line or steady The are of at portfolio, Yes. look steadiest single-digit on have drive total. either very

a global are that player We in market.

certainly of key world drives the that growth significant typically parts have You still consumption. in economic energy

consumer lightweight are while fundamentally a a cetera, absolutely aspect refineries the there key you the And obviously, of other through lightweight vehicles, of you plastics. critical of production that way and It’s plastics some initiatives. sustainability pressure The et plastics, to going are be is the plastics. materials, way certainly out to number on petrochemicals,

story there’s we we as very so this steady And look demand business. believe at

ours. If quite also you that the past, market indicate business the look both end would and resilient, it the at is

Operator

Thank you.

Please comes Our of Chip Genuity. the from Moore next line with proceed Canaccord your with question. question

Chip Moore

Thanks. business, as talk exiting and to environment a quantify Doug, bit can help where maybe geography headwind Thanks. in in XXXX? maybe can lower-margin you are and competitive for then you about more just particular, a institutional, us that by you some

Douglas Baker

will remains I’d be competitive has is It for market considerable region. Certainly, that compete and – don’t from what standpoint. I an environment know say a challenged and the Yes. the time. was period the of think changed we dramatically Europe most competitive in institutional we by

the comment, a of through aggressive smart quite to terms where and we’ve yes, we weren’t determined times, that number through bids low-margin of up we been this ended In match.

impact in We it to have faced impact, have business, probably bottom bids. high-margin begin line some contract we principally arena. the because top the business you word whatever very less wasn’t catering some want then competitive with, to line, exited use, aggressive on This loss, will simply and

different we away when for and very business going for do will piece to that And in not to of not – one or the the is losing not make time food of going customers, these to right and considerable a work beverage can a resecured can’t situation the also at time, companies a isn’t society partner this for decided Obviously, I period that idea than The do we of business money money. in the If business forward, to of virtually ever in the we a all. that back, see The problematic for reason be way, think as prove it’s financial you but match we we’re good we’re went a benefit. of go our where market. bids. and for after of and situation. going number very do but strategic we by have we beverage food period faced business through instances,

we’ll if This is as sector do and costs And year going again institutional division prove, grow be single think mid have this growth mid things. year significant. well. going this single-digit get not as right will so is can’t We we specific other institutional to digits to a and

Chip Moore

Understood. Thanks.

Operator

Thank you.

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

Laurence Alexander

and food on. with particularly give seeing the on parts for that in where see need would traction couple significantly – think of industrial and you’re – you Are What or difficult? Can of there on change so facing pricing as a the institutional, dairy on of Secondly, investments, to price beverage years of next the more being dispersion and digitalization the increases? investment? so acceptance you any of kind Hi. regional terms feel pockets what more the gaining or otherwise over to pace you on the to about traction it’s

Douglas Baker

in throughout Yes. the improvement the the our where around Well, over industrial and capture fourth I question saw pricing, we’re year first mean, ended industrial businesses seeing X% quarter. pricing and a in we significant in

discussed enter to I that expect we We continue as earlier. as XXXX,

plus same pushing was number regionally, historical, pricing cultural, right, a it’s it’s which always are seeing would there, got but at rate column, et also challenged say, a China, we it’s in the the exactly is to and just market, of that the net we the But everywhere. I more too. not some not same know change You’re price cetera. that in securing that’s ultimately markets, other we’re

good So price. capture ability we the about to feel

help know that at we of really often greater for from I alternatives, hard day the think work the to merchandise and significant to they willing to value within a comes They their pay we and customers we which total net than facility, it, prove the very savings that is day are savings deal and than that out, is understand us. heart They’re because it we tangible. water the and it they are bring COX bill pay better it. that energy drive or in, their

to So part this the get equation, things I need see? do we that’s the need to of important do. we reason an mean one Well, is me, to of that we price. what the critical most would question, I important digital. say, second And

need We that huge to in well And have play we built-in really think digital a I those future. advantages advantages leverage.

which sites, X costs to hard moment. nearly information of those a million probably the isn’t cloud been customer we’re the at unique the technically collecting and those today. down. to are have collecting information going cloud Connecting very have We fraction small XX% But connected are dispensers,

those on we have so to we’re The information connected. will a And get real streams go mission that unique. be

we to and out on is of of if food think, ways cost large our for customers simply moving large-scale We where, sensitive, advantage thousands industrial, I as because we have have be this capital concept. We versus to And taking will, then fairly moving, the information very utilize water you may reasons, of unit have we tests because of unique benefit a this analyzing a and now it going wins the big is done ability given of beverage customers. into the this, in have millions translate customers to the some institutional and dramatic. know-how think you the really on see area. one you and ability proven and scale isn’t We’ve capture and out

the We’re of same quite as go. confident, value it’s going creation to show kind we

without to need we this see continue scary from digital I to say, So and bet is I investment. place any But to to making. also obviously, fruit a would think, investing be be for bad the a future business

if got on some hiccups, a here. other And hold to investors future. it’s guarantee would to invest fire continue even some the our we’ve the because feet things, stumbles we long-term going our or wise to be think have to digital forward, way successful So investments safest some to I

Laurence Alexander

you. Thank

Operator

Thank you.

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

Tim Mulrooney

morning. questions. I two good have Yes,

conversation, first your And the much year-over-year XXXX? much back raws how – assumptions what product were price how in XXXX? are one, for costs delivered The to going

Douglas Baker

cetera, globally up rate, they’re materials high significant. raw Well, single-digit, pretty X% like et

assumptions into are Our half. year roughly this

So..

Tim Mulrooney

it. helpful. Got That’s

Douglas Baker

increase, but …so level. the at X% more

Tim Mulrooney

Yes.

orders performance? or back-half Okay, business the what Thank events looking the other back-half there difficult And that the I’m such you. Doug, are And comps water outperformed my XXXX, in perfect. any water. that given most to you thinking particularly That’s was the the Were drove year? XXXX of in for. large the of model, relative for one-time about strong then, how

Douglas Baker

XXXX. I’m the XX% if Well, is listening, water for hoping in team

annuity is probably bit. say, would that our the calm of balance For I business No, like the an down businesses. water other the I’d business, a investors,

new mean, not big, helped. So not would mining, net very of But numbers success in the light, our for have of job… there was it’s good – where the was second-half in sale, And that’s done quite a the occasions, the can significant always saw a have driving kind success – team new in I a we But really top be and/ say, story. and terms business It or pricing certainly key I obviously was the improved a Paper acceleration in to broad. year investment also business, the and line. of fundamentally broad heavy, big the driver in driving that’s there, rare

Tim Mulrooney

Yes.

Douglas Baker

innovation Leveraging sales drive new to as go they forward.

Tim Mulrooney

you. it. Thank Got

Douglas Baker

You bet.

Operator

you. Thank

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

John Roberts

lower institutional concentrated you’re but your harder efforts, be expect chains, the be been go provide I don’t some to sort smaller on customers? digitization the you to you. guys to whether – you the have the effectively, More proceed, allows a this that to to know would able penetrate? of to into larger up Thank chains go Back able they to down services in at – business cost for smaller restaurant as

Douglas Baker

the but on a learn and and you got And is successfully standpoint. able capability you solving more problems advantageous which and can desire efficiently. will that the more, field the which both our you have cover, targeted Yes, utilization I lower worlds, that, drive resources higher technology continue as still how predictive, we to more not be I think continues evolve and outcomes I as cost. you of to is our us a technology would be the will imagine But cost, Yes, ultimately say, I enable for going focus as digital would also the of ultimately we driving evolution the typically, more you’ve customers. can very best to imagine that – react to you’re even be using is superior use huge you of do our would want to of digital customer and our

us of market. a our cost, will probably to yes, broader think, it the go So, capabilities improve to enable I and lower swath

John Roberts

water I on institutional give small had relatively track not an penetration And increase to business. your out You update market? And kind us business you’ve broken go as tried now you have of then clearly? a lost ahead a and the relatively small it’s there, could

Douglas Baker

there institutional consistent, et you upper cetera. And we quite Yes, – while. reprioritize their so food market business. work and much used because water units, is would for would business we that to we in a really, redividing would reasons in done has a resplit markets, to to proven and of Nalco through business will, I the XXXXs, business you light Ecolab the performer will, water through redivision, for And good say single-digit mid and been And our improved Nalco and include and if Nalco thought beverage And one see this will, And if light largely if go in was you seeing XXs. the incorrectly up market. It thinks is results it dedicated much very drives that, now the that deprioritized into business, business and be work you through, will, to about the and well. have, focus of of good we XXs. And how the of one going business the this have I we to gone globally investment was important be early to water results. It how by we got if much focused also the believe the we’ve an that did are in way. going all – as and a go-to-market did management the a work

working New we means we it us getting to after areas, and model large because a are it and out route from secure. some if in particular, of that replicate see segment want we route to give market. another can’t gives acquisitions us an learn additional of market, to in there made think we that metro We’ve so York And large capabilities

John Roberts

you. Thank

Operator

you. Thank

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

Vincent Andrews

and year where for you’re and you. through talked just give the that comments you going how phase GPMs? year, we In terms some and gross which get about us the inflection quarter? Thank much earlier? Could do you the you in see think to profit does margins year on cost But the of improvement overall for how the in

Douglas Baker

Yes.

expect or in you -year And the terms we will, seeing vast for decline, gross businesses. the I majority in the you’ll will -on here think, think, versus if improvement see less. it gross I would if the daylight, improvement second in to of you fourth first start profit will, be year-on-year quarter of quarter much year margins, margin, quarter

to you’re second So going steadily didn’t from second-half through if quarter, XXXX we XXXX improved and the see you surprised be I’d the in have, will, versus think, year-on-year I margin quarter increased if QX. line, first

kind that XX But it’s than to going don’t have given year, as first we’re this going second-half going discussed just overall. basis the know the improvement first-half in the it’s this, be it quarter to the be year I For of to – points XX is to situation. in mean, we I stronger obviously,

Vincent Andrews

Any it’s And comments as Okay. just assume, tax cash flow generation on lower a you also rate, follow-up. I housekeeping And capital? a not noted materially and working lower?

Douglas Baker

Dan a question. That’s

Daniel Schmechel

Yes.

flow corporate to in benefited good percentage tenths Also terms the rule improve flat in be we with lot couple in let time me a just of We shakes rate at the mean let – finished mid-last was did feel of XXXX from even continuing my tax year. that that that our or about XXXX. I me cash for U.S. but in expectation we So of and great question say, XXXX XX%-plus generation income work clearly, position, expect not a look flow range maybe outperformed expecting the to point, up to the the flow tipping cash be great of comparison cash of okay? yield in consistent okay. great tax reported our continue of XXXX yes, to to rate, net tax And looking so reform. for in sort just free you’re say, the new a a free from really we a

Vincent Andrews

very you Thank much.

Operator

Thank you.

Christopher comes line of your question. Parkinson question with Suisse. the next Our with from Credit proceed Please

Christopher Parkinson

you. Thank Great.

customer innings? quick degree safe us in this the Can and update teams, about say you think given just well, F&B early Thank been Pest has doing give you. Elimination. and it XXXX? penetration a we on the of to in should pretty and current selling just enterprise Is XXXX still in how Your these especially we’re

Douglas Baker

share, you’d to early say, we’re on Based innings. have in

so we’re and markets, but businesses, we’ve successful. think us. have of like we line we’re just been we number a a while And upside standpoint sight key in in significant still In front from one, these share some of

we would high business as to So, rates. it expect to the been, has very is continue organic of pest They’ve well. executing which kind been single-digit perform growth

and that as secure rate. fourth continue invest that type hard XXXX, to up the uptick and We have you I will, was responded surpassed. terms built kind we We as of a drive customers would growth say, water that willingness around growth are is et are is very team’s to think, I of terms shared pricing, would But in we story business is more $X.X the recoup They which say, you believe just and ended our of we reason say, too, Nalco And if need the an water bodes of we the there the consequence those X% I if a we sales a too in we’ve about to now programs in line, F&B, that first, to really had talked material into quarter, when refine working with share success and I in, to we to. good lost continue growth sustain cetera, and the F&B also will, combination announced rate. would significant acquired platforms top billion translate raw innovations have are of really well outstanding XD, the new where run that F&B’s up. it’s of early had space. opportunities. that food organic story synergy, significant margin that seen safety and than things, between in all anything. in a there momentum synergistic huge if innovation,

Christopher Parkinson

overall a sales a Just of follow-up differentiating growth on strategy Last shifting you’ve couple And approach How you the your healthcare. the just yourself versus competitors. status just comment at over then of been reaccelerating the in you key or quarters, business? offerings? I year, the Any hospital your believe evolution? this little the – in least Can handle versus your to peers? quick last offers Thank on you. approach

Christopher Parkinson

the Yes. talked – what about digits. was to disappointing they year, where improve single we did. the last We a, year healthcare No, mean, would I fair. very call, and I we forecasted low I’ll had year team’s the first-half like start throughout that credit we into

which done lot we quarter So fourth The the driven. growth very of But which has is job It’s and healthcare I also in team into reduction of organic couple rate probably team think those quite in the reductions. translating I exited programs a we calls, lot things. previous mentioned there’s I’d infections healthcare. a X% really done say, with has a that benefit, is of I in economic good work way they’re do need and rate and about I in to, there. work say, does, acquired we digital And further do. team better to utilizing right significant benefits, a would terms a do great of in around developing the sharpen the the programs to technology programs. talked we it’s done compelling enhance stuff. believe need What we They’ve work certainly

program terms business and size dominant becomes of any up of this will, not emphasizing is over more number. behind if start the you if of business been the therefore, continue of growth you in that growing It’s and it double-digit. sales time, But business healthcare, stuff that effort ultimately, length our real Our in we’ve the majority will, in the the piece of showing if yet. path putting, you just the overall

Christopher Parkinson

Thank you.

Operator

you. Thank

of Group. question. line Dmitry comes the from question next Please Our proceed your with Research with Silversteyn Buckingham

Douglas Baker

Hello?

Operator

is line your live. Dmitry,

Dmitry Silversteyn

space? sort thanks. Hi, given just U.S. a little growth you in parts of can in a about with the in to couple the going quick the – about gain Number wanted conditions a that service talk your of XXXX share restaurant to and of outside we questions. this should bit of your on environment business? how economic in think mean, in world ability one, I slower softer I what’s follow-up

Douglas Baker

do lost going Yes. is think mean, going I I very where the as any and institutional We maybe environment we’re but U.S. think isn’t a soft in economy, up. to Europe. in going sensitive. think year capture share show solid probably that to And we tougher probably don’t is mentioned will I Europe will think say, to a the think, businesses, still we to you – before, would the offset economy what see robust we good ability GDP have their I probably forecasted we Globally, go U.S. impact be remains et our it’s XXXX, but and be think and slower, spot. economies cetera, to be and continue we’re not see to pretty grow Europe have things a weaker

Dmitry Silversteyn

a Okay, you’ve about as of and for. Europe value-added XX being the most known execute for right. sort market comment most the the difficult This follow-up on made ago. called And all sort you strategy then kind could this of – you competitive just probably – of that the your been to comment have the years

in operating Europe either what is the geography? the there in of my horizon that are for in if and anything can players? that And on guys consolidating from result doing or stopping industry is, what you the so better terms environment of remaining not, other are in what’s space that question players And consolidation doing the

Douglas Baker

gives go Dmitry, I guess, it’s offering I position is – access we’re have ago, us typically, maybe years certainly, do us long access M&A, gives to going if our is – to we XX competitive today in technology didn’t than most ago. years if every to enhance years you our consolidate it our out here take through to institutional the we or for to. the and ability view, appreciate, XX to Well, XX want which I industry. customers an dramatically view going too to ago it to business, our say, five better markets ago, wouldn’t years It’s and/or either was notably, because

good time. that estimates, Europe. But our is to for I Europe it. think improved they’ve our I think, I much of in just situation. terms probably period absolute business to were year public We’ve don’t double have a it because And we facts, and percent of all private close a have time they a share. outgrown the the tougher larger We every competitor or because pretty have been of on the size, includes

feel other So kind relative to I don’t competitive advantage of technology to these the critical missing we’re comments. or markets. just relative Europe, are compete, any in we’re it’s or impaired there

it Our I more it’s in undoubtedly don’t is other But Europe believe is challenging in than obstacle. an places. competitive situation

Dmitry Silversteyn

in the you three that five changing, And let’s call guess, don’t to next, I it, years? see

Douglas Baker

one can perfect We effectively do in we of the strategies And uniquely I is have world-class put lot is going advantages our just do. ought the the can And five continue years, of more predict. And think mean, invest the this From we’ll something advantage, don’t digital I it’s one translate continue broadly I next is a example size. fie and start we money to to will we we leveraging think I of over as a that over platforms is I know. because dollars now, into to we to advantage in them, utilized effectively. We to scale afford believe I we’ve do to that that so we to years. R&D. in absolute mean, more – to and that leverage dollars three in have money. into over to stronger which developing R&D I count hard continue that as them get next leveraging the we’ll forward, I three that years. more do think more

Dmitry Silversteyn

Okay. Thank Doug. you,

Operator

Thank you.

with Our comes of your proceed the with Please questions. question Citigroup. P.J. Juvekar from next line

Scott Goldstein

P.J. back is And foot I restaurant do to for drivers in that of question. Scott this my on taking sustainable year? that think growth the single-digit the range. Thanks XXXX? weaker for line mid talking despite go I did top business, to mind behind traffic level Doug, you you U.S. I if to the had Hi, return the would growth forecasted for XXXX And this you institutional think, through it And some growth think, of about

Douglas Baker

year. – this Yes. X single faster. relatively know flow same I the that of And XXXX. point And rate got the a the softness It’s we type digits I at or roughly for means if mean, exactly it don’t growth overcome same points we forecast mid you’ve Europe. we we’ve as acceleration go some is the losses secured, of install conversation reason which business, to on of won’t that see in little but through the bit new it.

in to important institutional had sort as successful lot the it new platform, by What we it drove starting is throughout quite well this platforms. warewash very broad. business. and of our I’m both of growth They year as Those most We innovation driving progress sold confident old-fashioned. a go uptake their they’re in forward. their as far in last So laundry factors more business are continued see

is moving food most going nicely for our It’s market China business. important service to long-term institutional be quite the for So globally.

investment important long-term. an So to area a for traction very us that’s important place and see

Scott Goldstein

I you. Thank color. the all Okay. Thanks for got. That’s

Operator

Thank you.

Stifel. of Our proceed Shlomo next Please Rosenbaum question comes from with line question. the your with

Shlomo Rosenbaum

questions. Thank taking year expecting in for that or the to line corporate average? this assets above spin grow you’re Hi. with are expected space below energy corporate in Doug, my average to you the Hey, out

Douglas Baker

More in line.

raw say, the business top to single-digit So, growth. they’ve well see the mid upstream line and well. we they as seen expect would inflation margin recoup in expansion as significant it’s as material that We would

the it, percentage different growth So growth. will, OI business wouldn’t from without to with and you I work percentage or say, is dramatically if going

Shlomo Rosenbaum

is that business didn’t – the some what at for kind executive of up I or beyond is several businesses of free perspective, time over Okay. the have just management on was the is other business, of the or company, And an to focus you does on other more talk commentary then spinout about you ground just – there from after wherewithal this areas there in the you of terms management give that just would could you end management focus to this beforehand? the I’m that some focus getting you bandwidth required last guess, does on markets, that in years? just changes kind

Douglas Baker

answer is we’re would exactly more And models what you would that’s if you Yes, during the expertise remains, in you is I the will, talked you and of it’s synergy really the I basis investment other it, it so of run an to becoming and for certainly, increasingly the of benefit time. spin get The in management need this businesses like we’re I’d about the call. disciplines it. kind alike, the model terms we and said. guess, less doing our that spin terms way. which shifting running I reason say, additional are more

of You uptake get terms in specific more on developments. synergy

have and/or the forward. go probably digital You other will in as some of we technology

more running. So, yes, is I company think to drive improvement a to and run, which go benefit arguably means a you’re what becomes the side bandwidth little innovation in easier

Shlomo Rosenbaum

great. Thank Okay, you.

Operator

Thank you.

from of Please with Hamzah question. with the Our Mazari comes next your Group. proceed question line Macquarie

Hamzah Mazari

I to it? portion just you. many The that Good afternoon. you is synergies question, remind products, if downstream. question between being could answer suite Maybe to of entire portfolio? you us your customers on Thank water the of My just how want various businesses on of you ask significant appreciate or touch corporate I on a touched reason your subscribe however is, in

Douglas Baker

heart I by, track way world. would units because of I of most our have, question buying or well, if offerings. double they a simply I we all to that includes think, our don’t penetrated mentioned the couldn’t to around the most And this, that Yes. minimum longstanding, customer customer answer, triple with we – customers. million highly not answer, breadth is sell the the the a the as there’s I ended of best hard We that X it’s say, up business one we

in upside significant customer. have we so every And

upside. lot Now planned this of a is

around or detection that, We out, offerings they result, sell open continues they every prevention opportunity of When capabilities practices. as ultimately a to grow scope Water new We’ve to. up their do and we they we every technologies. the invest that to to year. you opportunity year always Legionella can increase. – continues cooling the and in our continue become build go will, said, grow want they customers to to if tower and And want

too like no is which is frequently large by more a too So mistake share end we too of us, our running don’t in into walls growth many there’s made up companies. and front

to So we’ll make not mistake, make a that one. different going we’re

way their don’t and technologies upside opportunity, after them passed. I penetration there’s So There’s more in business Warewash itself opportunities. significant water opportunities, if water and a and has our got significant They’re customers. other a huge care huge upside institutional concentrated has huge a of it’s number filtration penetration in KAY getting potential. for number penetration of QSR

customer technologies probably have or from one opportunities. to of there’s that So set of one not upside set circle doesn’t customers

Hamzah Mazari

I Great. do a just to does one done Thank spin And just thoughts of valuation in the while, a deals? haven’t your else, appetite know it’s there? larger you. follow-up, but energy any or maybe you maybe something increase

Douglas Baker

was plenty to Yes, I think, appetite our begin with. large

going I counterbalanced think, with it’s be to always discipline.

if shareholders deals that’s can have to for would shareholders. us it aren’t company And we afraid billions. that, why team don’t going healthy to so, do deals we yes, successfully not whatever we large think such Ultimately, do invest think returns in the do but the that enable us. mean will valuation and the that proven I in to is our has We the be

return that accretive make lousy of return do but them and it’s value. can deals a drives lot on You we they’re long-term, think deals, EPS,

Hamzah Mazari

Thank you.

Operator

you. Thank

Please next your question line comes from question. with proceed Oppenheimer Scott Schneeberger Our of with Co. &

Scott Schneeberger

Yes, I give Anios. ago conversation Hamzah’s on big thanks. about on on M&A opportunity And that progress region years a maybe Thanks. do earlier an following how to Doug, what’s specifically, report have And a The question soft real last one? your win propensity Going upcoming? forward was you us the Hey, basis, in then a on – M&A. follow-up. this two Could there then relative that might about was Europe area? be

Douglas Baker

Yes.

key on versus of Anios is very plan And almost successful. on all or So today through metrics. plan been its has above

we areas, is about very mean, I how don’t the that cultural the feel good Anios so feel healthcare onboarded overlap. aren’t And good where how how there many we about integrated business. team integrated,

you for aggressive will. So case, would if I They are our think, investment side. up the typically it’s higher chalk We it cases success management on than have you – deals. fairly

start. good a to off is Anios so And

of of Europe, that. yes, – would terms as I concur sort In

environments XXXX was earlier little And good M&A when you weeks. create for typically will, Nalco, opportunities. if at And very can wise, economic was up. early, we eight if even and first maybe the they some, a than back or you Soft thought M&A heating least, recall bought was

a consequence and – but with the like change. economic bought was, high EBITDA, that was was number we single big And so because the it following was – XX it digits. it And print synergies,

we’ll yes, be So, looking. aggressive in

times, we’re economic tends Our do relative good tough well a performance in generator. and quite to cash

capabilities up economic our advantage times. and tough times in bad of probably economic So change changes significantly demonstrably in our more doing don’t M&A

Scott Schneeberger

anniversary heading XXXX. steady And I thanks. very, because was there. I appreciate segment, Thanks. that what reasonable other Other into to expect you’d just the now margin was But Equipment imagine – question a in very that. strong operating the expansion the lot right, achievable? so then all I’m there? And margin what All state departure what’s Care. the is what’s of of curious a –

Douglas Baker

low of other very margin businesses. Well, partially and that Yes. relative obviously you’re growth piece GCS to the the big A had year-on-year still was base a is margin that in the right. fact

out. right? exiting it, impacted that So It’s

forward, over think if relatively overall going as in have simply there businesses very It’s lumpy. commensurate large, be that a business, see very plus big pest higher-margin will. other performer. has business, some because It it’s small lumpiness be can but yes, quarters steady – and with It’s base. a I been I a margin will. CTG some steady will that can one mean, of not improvement have. you time So you if quarters the you’ll some good Pest businesses, little we a

Scott Schneeberger

Thanks very much.

Operator

Thank you.

with with proceed your next question question. G. Rosemarie comes of Research. the from Morbelli Our line Please

Rosemarie Morbelli

a you it? It me are different it as a business? what bit I feel everyone. offering. doing and for in planning Can little was your you, Bioquell to with talk healthcare though your sounds are if good to us you’re what Doug, is Thank give and how about could you it integrate with from wondering you better afternoon, totally – you

Douglas Baker

happily. Yes,

in define this a is for into being let really, business. you minute our me It’s Bioquell So case a will, integrated, different that if sciences business. word life

isn’t Bioquell view Bioquell be will light life initially pharma, care predominantly, of there cosmetic that industries, and from will, Bioquell if leverage, we somebody the But competency and, healthcare approach specifically, or touch against I harm. for here will, which science you some the we sciences, targeted the et the an mantra. fairly often vice i.e., most model understand being So else, technology time. The life technology, do brought with unusual application no advantage from is acute effectively versa. a the acquisition how in us. in make integration if stole it team cetera. is the great mean, we sciences you we got want sure our great great business on. to other parts to takes That We’ve life We standpoint, of

Long-term in experience and need, that. who best we’re to somewhat going unique the capabilities do with thesis center are will, a you and you specialist expert that to always how are be unique, in, some learn Bioquell always in need if a going have prove do people you area. so going but We to

that drive learn with and over KAY best, ago, how years we’re to asset, utilize that is enhance learn them with the an if even like did can you we many So and of which or more probably them will, from feed them you performance technology time. we the did going approach with take understand Anios, team, do business

Rosemarie Morbelli

I is them room there thought isolate kind technology infection So a if don’t you – some else. to of to it spread allows thought want totally anywhere that that their was I

apply I care I all thought at life industry? I and of in cosmetics? thought, that acute the as to not or hospital, science So science mean, how cosmetic it and does life

Douglas Baker

in comprehensive Yes. and times and/or manufacturing of pharma concentrated where kind a, do will, if other you to or need shutdown cosmetics There’s you kill.

manufacturing It’s It doesn’t room facility. infrequent. It to be clean just not specific of And whole parts a so others. could an necessarily that’s a have thing. applications the tool. be the and important It part could be of

Rosemarie Morbelli

a operations, on. margin. to very you particular thank that is when that assuming I gross may, to Energy And in addition look have you I it if lastly, XX% Upstream you you. so your at I’m to chance helpful, that And Oh, has is could then, reached how the return that? there But quickly can lowered inflation that do range? and the XX%

Douglas Baker

a you’ve right. factors, got mean, I you’re Well, Yes. couple of

than will post-spin are be margins Our they greater pre-spin.

no if which other in like will, post-spin in changes overall some we It The basis SG&A. previously or geography, undertook, X though, on gross XXX – costs, if factor point service of that a the change the rev is expect, gross it profit, ROIC point figure you impact will on not be certainly, consequence With that recall, also mean, impact the moved significantly was the both as to you’ll were have said, had, had rec on P&L if we you where change. our out it’s you margin. profit an OI, gross But both our can by that will. hard say, a or I enhanced did margin post-spin fairly I OI would

Rosemarie Morbelli

Okay. Thank you.

Operator

Thank you.

from Justin Robert with comes Hauke Baird. question with next your of Please Our the proceed question. line W.

Justin Hauke

margin that’s to be And guess last something Great. about what part asking even I structural to expectation was be than need Well, else of aspirational question or I it greater would decade-plus. that flat I been kind costs to gross because pricing from second it that down, does that be like gross – the think else as of going that up one material which diluting recovery about would it’s kind here. implied bit margin there really, was good kind up a X% is that the be the of would actually here. of that’s was equal, outlook, mean, And little is there’d only margin X% all pricing than raw as in be seems slightly in more I is with gross

is them that’s to? we margins go expect the to maybe diluting would So else gross from down changed where there anything that’s otherwise

Douglas Baker

I last year. pricing fourth in fundamental increase. raw the was mentioned No, there we And was as Pricing haven’t It year had been the I X% XXXX say, we for changes. through total would material X%. just quarter. a earlier, built X% in

moved will. we is materials, the momentum, QX, in rate. moving in And on raw But while lot a at And year-on-year really a materials so it year into they’re is QX forward, raw more than to moving simply comparison most they because are slower expected we you if going severe we’re XXXX. of have started obviously, increase, kind with to this on

a base go to really throughout throughout With be last for or any stick is I’ll you year quarterly of has The point XXX% a around system things. a starts. turn we job XXX% the in move And undertake becomes make we U.S. down said you ago so supply on this it And believe money. team initiative. and had bulk another.We will, that that last this to chain. point other than you through hijinks the have that was were and but And actually have it managing on the call That It The and it as not EPS we SAP. able you manage SAP distinction structural supply said a going started creates, we we now like to big, way in costs that and did we system plant other money successfully. internally, XX% importantly, not to the issues. recall, The XXXX certainly the them move But chain. supply hasn’t. put when of our on. did as this this a a week chain – of this all mid-February, we’ve would supply are make through now moved don’t last most the certainly your it systems, inventory are go successfully, investment forecast to there need easier the productivity somewhat hockey year of huge making one said, we’ll great from we no as costs it year, We as if you on in goes big It cost as near-term, probably there. just it

that you I call will have we than as bleed higher will off move supply and as well normal exit chain But XXXX of and some move our into consequence a that. costs in as We year continuation XXXX. of would this

Justin Hauke

the just expected. million in then the we just great. of a this What’s are the guidance XXXX Okay, But And track purely is and cost number $XXX question. on last savings can the that so better calibrate specifically? expected one,

Douglas Baker

million incremental last $XX versus Yes, year.

Justin Hauke

you. Thank Great.

Operator

the session. Thank Monahan you. Ladies Mr. question-and-answer floor comments. and turn to gentlemen, for any this back I’ll concludes final the

Michael Monahan

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

Operator

Thank concludes today’s you. teleconference. This

you You your for may disconnect Thank lines your at time. participation. this