Sagging oil results hurt Ecolab's quarterly profit

Oil sector woes descended with gusto on Ecolab Inc., sending its second-quarter profit lower, despite solid gains from non-energy-related divisions.

The St. Paul-based maker of cleaning, sanitizing and water treatment chemicals for hotels, restaurants, hospitals, breweries and energy firms reported sales that slipped 2 percent to $3.32 billion, due in part to negative foreign currency exchanges.

Net income dropped to $258 million, or 87 cents a share, which includes a charge of 21 cents per share "primarily related to the energy industry downturn," officials said.

Excluding the charge and other one-time items, adjusted earnings fell 1 percent to $319 million, or $1.08 a share, which was in line with average analysts' estimates.

Ecolab's stock rose $4.14 per share to close at $122.81 Tuesday.

Ecolab narrowed its earnings outlook for the year, saying it now expects 2016 adjusted earnings of $4.35 to $4.50 per share. That is up from the 2015 adjusted earnings of $4.37, but down from the prior guidance that called for 2016 earnings to reach $4.35 to $4.55 per share.

In a statement, CEO Douglas Baker said, "The good news is our energy and currency headwinds appear to be abating, and we expect better earnings growth in the second half" of the year as energy markets are at or approaching "apparent bottoming conditions."

The energy business, which for Ecolab consists of the Nalco and Champion Technologies acquisitions within the last five years, is positioned for gradual recovery beginning next year, Baker said.

Energy aside, Baker noted that Ecolab's institutional, industrial and other non-energy segments are expected to continue their strong showing for the rest of this year. Adjusted for currency fluctuations, sales for those non-energy divisions grew 4 percent during the quarter.

Christopher Muir, equity analyst at S&P Global Market Intelligence, lowered his earnings forecast for Ecolab for the year but maintained his hold rating on the stock. He increased his 2016 Ecolab stock price forecast from $120 to $126 a share.

"We see a stronger dollar and lower energy sales pressuring 2016 results, but see stronger growth in other segments," Muir said. "Institutional and industrial growth [will] offset weakness in energy."

Dee DePass • 612-673-7725