Currency exchange woes and a lackluster oil sector continued to affect St. Paul-based Ecolab, causing fourth-quarter results to miss Wall Street expectations.
"We have performed well over the past two years through a very challenging business environment, defined by slow overall global growth, a strengthening dollar and substantial declines in the energy market," CEO Douglas Baker told analysts during a conference call Tuesday.
Last year, "continued solid fixed currency growth by our institutional, industrial and other segments led results and outpaced lackluster global end markets," he said. "New business wins, new products and a focus on sales execution, along with pricing and cost efficiencies, drove the segment gains."
The maker of cleaning, sanitizing and water treatment chemicals reported Tuesday that sales for the quarter ended Dec. 31 fell nearly 2 percent to $3.35 billion, $80 million below analysts' expectations.
Profits rose 75 percent to $366 million, or $1.24 per share, during the quarter. Excluding one-time expenses, adjusted earnings rose 2 percent to $1.25 per share, 2 cents shy of analysts' consensus estimates by Zacks Research.
Company officials noted that Ecolab's industrial business — its biggest — did well during the quarter and would have done even better had mine closures and China's industrial rebound improved at the faster pace than was originally predicted. Water treatment sales in paper and textile sectors grew during the quarter, as did results for Ecolab's institutional segment.
Results were particularly strong in Latin America. Worldwide, product prices are starting to edge up across several businesses.
Still, weak results from energy markets offset several positives, officials said.
For full-year 2016, Ecolab's sales slipped 3 percent to $13.2 billion, while profits rose 23 percent to $1.2 billion, or $4.14 per share. Excluding special one-time gains and tax items, adjusted 2016 earnings were flat at $4.37 per share, about 7 cents less than analysts expected. Ecolab's stock price rose 8 cents to close Tuesday at $124.03 per share.
In the future, Ecolab expects to see continued gains from Ecolab's well-performing industrial and institutional businesses, and improving results from its long-hammered energy business. That business is beginning to stabilize, Baker said.
Ecolab supplies chemicals to oil and gas drilling and refining firms that help separate oil from water and make raw fuel less gloppy, less corrosive and easier to move. Energy-related product sales slumped 14 percent during the fourth quarter, while operating profits before taxes plunged 30 percent.
Still, officials said Tuesday that global weakness in oil and gas markets is expected to improve significantly in the second half of this year as price increases accelerate globally and reignite supply orders for equipment and chemicals. Energy sales make up 24 percent of Ecolab's total revenue.
Companywide, Ecolab expects adjusted profits for full 2017 to rise 8 to 12 percent and reach $4.70 to $4.90 per share.
For the first quarter of 2017, Ecolab forecast adjusted earnings of 77 to 83 cents a share, up from 77 cents for the same quarter in 2016. New one-time charges associated with Ecolab's Swisher purchase and the recently announced Laboratoires Anios acquisition are expected to reduce first-quarter, unadjusted profits by 3 cents per share, officials said.
Earlier this month, Ecolab closed its $880 million acquisition of Laboratoires Anios, a maker of hygiene and disinfectant products based in Lille-Hellemmes, France.
That deal follows Ecolab's January purchase of Abednego Environmental Services, a Michigan-based engineering firm specializing in water recycling, paint booth management and waste treatment services for auto manufacturers. That purchase, which added $40 million in fresh revenue, has become part of Ecolab's Nalco Water business.
The newest acquisitions bulk up Ecolab's more traditional legacy businesses that involve water treatment and cleaning chemicals. Ecolab entered the more volatile oil and gas sector just a few years ago via two key acquisitions: Champion and Nalco. At the time, analysts warned that those additions would introduce unwanted volatility to traditionally steady income streams. Ecolab's more recent acquisitions are again focused on less volatile industries, analysts said.
Dee DePass • 612-673-7725
