Ecolab Inc. — 2024 Q1

Thank you, Tim. Let me start with the second part of your question. We are in a great fortunate place, obviously, here where we have top line momentum, and we have margin expansion. And both are obviously feeding our opportunities to invest behind our teams, our technology and our future, which is exactly the place where we want to be on a continuous basis as well.

Thank you, Ashish. I'll pass that question to Scott, who will be best positioned to answer.

Yes. Thanks, Christophe. Thanks, Ashish, for the question. So as you know, we've talked about before, we buy over 10,000 raw materials. So individually, they're moving in different places. But as we expected for Q1 in totality, DPC decreased in the upper single digits, and that was as we expected and as we guided to. And as Christophe said in his opening statement, as you talked about, how we see it throughout the year, expect that DPC to continue to ease through the year, but the magnitude of that favorability will diminish from Q1 to Q3. So going from this high single digits to lower single digits by Q3. And then to your last point about where we are versus prepandemic levels, commodity costs still remain as you've probably seen, very high versus pre-inflationary levels or pre-pandemic levels.

Thank you, Manav, good to hear you. A few things here. So maybe starting with the macro. I would say, kind of unchanged. There's a lot of puts and takes, obviously, in all the 40 end markets that we serve. But -- what we've seen in '23 is what we're seeing in '24 overall. So feel good about the general macro, at least with everything we know now.

Not much. There were 4 points on my plan, John, and I shared with you, you saw each step that we made when I could, obviously, so do so. The first 1 was to really adjust the cost structure. We did that. The second was to create that bifurcation for infection prevention and surgical, which happened very well in the latter part of last year and now so the pending sale of our Surgical Solutions business to Medline, that step 3.

Thank you, Josh, especially for nice comments. So the team has done an unbelievable work in the last quarter, like in the many prior to that as well. So back to your question on institutional and specialty. This business has been now for quite a while on a great path. As I've shared with you, very openly, the pandemic has been game changing for this business, and I mean that in a very positive way.

Thank you, Chris. I've never personally worked in the Pest Elimination business, but I love that business. It's unbelievable the performance that it delivered in the best of times, like in the most difficult times as we've seen as well over the past few years. Steady, high-growth, high OI growth business, great margin and great future. And maybe a few points here. The first one, they've reached the threshold of $1 billion sales in '23. For me, that was the moment to separate that business and to have it report directly to Darrell Brown, our Chief Operating Officer because it's a business where we want to have all the focus, all the attention, all the investment that we can get as well behind it because it's high growth, high margin, high return.

Yes, it's a good story, John. We know that building new growth platforms is hard. It takes time, but we've done it many times. Pest elimination that we just discussed was a perfect example that we did sort of years back as well. Life Sciences is one of the newest one that we have. And if you look at just the results in Q1, the fact that Life Sciences is growing in a market that's currently down double digit is showing how performing that business is and how interested our customers are in what we can offer.

Maybe so to your first question. So where, as I've shared with many of you, so we look at our businesses in 4 key categories. The fuel the growth, the protect the growth, transform the growth and fix. Those are the 4 big broad categories where we put our businesses and our markets and invest accordingly to make sure that we do a very smart capital allocation based on projected returns.

Pavel, we've been on that topic for a very long time, but we don't want to be part of the marketing fray or political fray of PFAS, we are by far, the leader in water globally. And we've been in the business of mastering water purity for a very long time, like almost 100 years, as you know. So PFAS purification is one of the many things that we do and can do in water.

Well, the short answer is that the hit rate is getting much better, especially when we think in terms of digital technology, data AI, we are uniquely positioned, serving 1 million customers in the world in 40 different industries in 172 countries, and connecting, as you've heard, thousands of devices and operations around the world.

I guess that's the end of your question, Jeff.

Very good. I will be too mature. I was not missing something, obviously here. So a lot on volume. You're right. So we're still 2% for the company. That's the way we report it. So that's not a surprise. That's why I'm saying the 1% to 2%. So for the year, I feel really good in getting that, again, that every quarter is created the same. We have some year-on-year comparison, we need to manage with. But the 1% to 2% feel good, and I'm talking '24 year. And individually here, institutional you're right. It's directionally, it's kind of half price, hub volume, doing really well, as I've shared as well, so previously as well in some of the question.

Thank you, Steve. The pest business has grown over the last many years almost entirely through what we call Circle the Customer, Circle the Globe, which is penetration of customers that the company has even if pest elimination doesn't have. As pest elimination grew over the last few years, obviously, they got their new customers as well at the same time, which are feeding as well the opportunity for the other non-Pest Elimination businesses. But if I look at the opportunity of pest elimination within our customer base, well it's worth billions out there. So sky is the limit. That's why this business is something that I like so much.

Okay. Thank you. I'm going to pass that question to Scott. But before I get there, so you've heard in my open basically how we look at it. So we're not disclosing too much detailed business information. So underneath what we publish. That's the case, obviously, for a business within health care. So the $15 million headwind per quarter once we close is kind of a good direction, but more to that, Scott.

Yes, Kevin, I'll talk on the proceeds and gain but very high level. At this point, I don't want to get ahead of ourselves. We need to close the transaction first, which we feel very good in. And the proceeds themselves, we're going to remain committed to our capital allocation priorities, which is focused on investing in the business. And from a tax perspective gain, yes, we do expect to realize a very attractive gain on the sale but we'll disclose that amount once the deal closes and once the accounting is finalized. But -- and that gain will be in special charges just from a housekeeping perspective, and that's not included in the $0.15 estimate we had on the full year special charges.

So 2 questions in here. So on Europe, I like a lot what this business has done. It just takes a big picture, 10 years ago, it's a market where we used to make no money. And today, it's a business that's close to the average of the company today. So has done a remarkable work, has grown very nicely last year, is growing as well in the first quarter in a very difficult environment, and margins have kept expanding, very significantly in Europe as well at the same time.

Yes. Thank you, Andy. It's been a long journey, and it's going to be a continued long journey. At the end of the day, we call it our one Ecolab growth program. It's to provide our customers with a transparent view of all the businesses that are serving them and all the opportunities that they have, if they were to work even more with them.

Mike, 10 years ago, I was not exactly in love with our mining business because it was focused on segments of the past, coal, primary metals, all those things where the world is not exactly going towards to longer term. And we made the conscious decision back then to shift everything towards much less cyclical, much more growth focus and much higher margin as well at the same time. And we've made a total transformation of that business over the last 10 years and what was 80-20 yesterday is closer to 20-80 today, which is why I like where we are and even more where we're going with mining.

Yes, Vincent, the guiding principle is to invest in wise that help us raise the probability of delivering our targets of the 5 to 7 the 20% OI margin, as you know, and 12% to 15% EPS growth as well at the same time for the long run. This is my job. This is our promise. This is what we're working all together towards to. So that's the way we're looking at those investments. It's not meant in a short-term way at all. .

Thank you. That wraps up our first quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thank you for your time and participation, and hope everyone has a great rest of your day.