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“It is an interesting twist and ... intriguing” said Mark Henneman, executive vice president of Mairs and Power Inc., which has long invested in Ecolab and Nalco. Henneman admits that his investment telescope isn’t out 15 to 30 years. But he likes Ecolab’s plans. “Without energy, it would not have the opportunity to grow as fast as it is going to be growing.”
Said Andrew Wittmann of Robert W. Baird & Co., “Ecolab has endorsed a double-digit growth rate for that energy business. And that is really new for Ecolab.”
Ecolab’s stock is trading at a 75 percent premium from its pre-Nalco days. “I am happy that it all turned out,” Baker said recently, noting that Wall Street initially frowned at the idea of Nalco bringing oil services into Ecolab’s dependable model.
Investors said it was too volatile, Baker said. “But it wasn’t the business. It was the situation that was volatile. The issue was they were cash-strapped,” Baker added.
Gamble pays off
Energy sales now constitute 27 percent of Ecolab’s $13 billion in total revenue. “By the end of next year we will be closer to 30 percent,” Taylor said, noting that results now include Champion.
Ecolab workers are now in desert oil fields and on rigs and ship platforms right alongside the employees of customers such as Exxon, Shell, BP, ConocoPhillips, Chevron and other high-profile behemoths.
Today, Ecolab’s tentacles extend to 171 countries, up from 160 before its dive into energy. The goal is to “build business in the fastest-growing emerging markets” on the globe and to “cross-fertilize Ecolab, Nalco and Champion technologies,” Ecolab’s Baker said.
The combination should add $500 million in revenues by 2016 and hoist earnings growth to 15 percent a year, up from 12 percent.
Wall Street obviously will be paying attention. “The most natural opportunity is for [product] crossover in the food and beverage end markets,” said Wittmann from Robert W. Baird & Co. “You get the hygiene expertise from Ecolab and the industrial application that Nalco is very good at. If you put them together, hopefully you find an opportunity for better customer penetration.”
Dee DePass • 612-673-7725