Ecolab sees momentum build, with better-than-expected 3Q results

Ecolab reported improved third-quarter results despite supply chain challenges and said it expects its momentum to continue through the fourth quarter with expectations of continued but uneven economic recovery in U.S. and European markets.

The St. Paul-based provider of water, hygiene and infection-prevention products and services earned $324.5 million, or $1.12 a share, in the quarter ended Sept. 30. That was a 32% increase over the same period in 2020. Sales rose 10% to $3.3 billion.

"The strong third quarter results were better than expected, driven by continued accelerating pricing, new business gains and new product sales, as we also successfully managed to significantly reduce the unfavorable impacts from Hurricane Ida on both our customers and supply chain," said Christophe Beck, Ecolab's president and chief executive in the company's earnings release.

Adjusted earnings in the quarter were $1.38 a share, beating the $1.30 a share analysts were expecting. Ecolab's revenue in the quarter also beat expectations by 1.4%.

One of the charges was a special charge of $50 million for disposing excess products. Ecolab had ramped up production of sanitizing products in 2020 to meet surge demands at the outset of the pandemic but a small portion of those products were no longer needed.

For the remainder of the year, Ecolab expects the U.S. and European economies to continue at an uneven pace with additional world markets following and expects to use price increases to offset some cost inflation.

"We expect fourth-quarter earnings to grow double digits, though not as strongly as the third quarter. And we continue to expect the full year 2021 to show a strong increase over 2020," Beck added.

Two Ecolab programs have contributed to the revenue growth.

Ecolab's Science Certified program — which focuses on higher levels of cleanliness and sanitation in restaurant, hotel and grocery settings — has certified 33,000 locations since launching last year.

"Customers are looking for ways to provide the right confidence for their own customers," Beck told analysts about the program.

Beck told analysts the program also has presented new opportunities that the company had not imagined at the launch.

On the industrial side, Ecolab's Net Zero program helps companies with their sustainability initiatives and environmental impact goals. "Our Net Zero program is getting some very interesting traction," Beck added.

Ecolab's Global Institutional and Specialty segment led the quarter with an 18% increase in revenue, followed by the Global Industrial segment up 7%. Sales in the Global Healthcare and Life Sciences segment were down 13% due in part to a tough comparison to surge growth in the third quarter last year.

Earlier this month Ecolab's chairman and former CEO, Doug Baker, was awarded the C.K. Prahalad Award for Global Business Sustainability Leadership presented by the Corporate Eco Forum to recognize his work in addressing the responsibilities of corporations to value the business risks of climate change and global water scarcity.

"Water is one of the world's most precious resources and vital to the health of society and industry," Baker said in the news release announcing his acceptance of the award on behalf of the entire Ecolab team.

Ecolab shares gained 4% Tuesday to close at $230.28. Shares have traded in the range of $181.25 to $231.25 a share over the last 52 weeks and are up 6.2% year-to-date.