Ecolab (NYSE: ECL) reported Q2 EPS of $0.65, $0.20 worse than the analyst estimate of $0.85. Revenue for the quarter came in at $2.69 billion versus the consensus estimate of $2.84 billion.

SECOND QUARTER HIGHLIGHTS:

• Reported sales from continuing operations -15%. Acquisition adjusted fixed currency sales -14% as strong growth in the Healthcare and Life Sciences segment was more than offset by a modest Industrial segment decrease and significant declines in the Institutional and Other segments.
• Reported diluted EPS -$6.98, driven by the previously disclosed net $2.1 billion non-cash charge for ChampionX. ChampionX results and ChampionX special gains and charges, including prior periods, are reflected as discontinued operations.
• Reported diluted EPS from continuing operations $0.44, -63%.
• Adjusted diluted EPS from continuing operations $0.65, -49%, excluding special gains and charges and discrete tax items. The adjusted EPS decrease reflects COVID-19 related volume declines and negative operating leverage, as well as certain COVID-19 related impacts including second quarter equipment lease billing suspensions, distributor inventory reductions and increased bad debt expense.
• Cash flow from operating activities of $387 million (with $332 million from continuing operations). Free cash flow of $275 million (with $229 million from continuing operations).

CEO comment

Commenting on the quarter, Douglas M. Baker, Jr., Ecolab’s chairman and chief executive officer said, “Our second quarter results were significantly impacted by COVID-19 but were in line with our expectations. The impacts were most acutely felt in our Institutional business as the rest of our businesses collectively grew both sales and income during the period:

• Healthcare and Life Sciences had record growth.
• Our Industrial businesses had strong margin performance driving strong income gains.
• The Specialty portion of our Institutional segment also realized strong growth.

“Our Institutional business was directly impacted by the COVID-19 shutdown of travel and dining early in the second quarter. This was further exacerbated by the resultant distributor inventory reductions and a decision we made to suspend second quarter dish machine lease billings as a means of supporting the restaurant and hospitality industry during this incredibly traumatic period.

“We believe the second quarter is the low point for both the Institutional business and the company, and we expect sequential quarterly improvement for both leading into 2021. We do not expect the distributor inventory reduction to repeat, and the lease billings suspension was only a second quarter event. The end markets recovered through the second quarter and the trend has continued into July. While we continue to expect both the COVID-19 and economic challenges to persist into 2021, we expect our customers’ overall consumption to be stronger in the third and fourth quarters than the second quarter.

“What should not get lost in the current temporary challenges is the much more significant long-term opportunities. Even in the midst of the early chaos, we were very successful in gaining share. Hygiene standards and awareness have been heightened and our expertise is in high demand. Remote capabilities, which have been a key component of our digital investments, have become an even more significant advantage. New opportunities have emerged in virtually every industry we serve, and new business generation remains at a high level.

“We are already on it. We are accelerating technology rollouts, further expanding our hygiene and hand care product capacity, and we have an aggressive respond-and-recover plan in Institutional which will accelerate the recovery, penetration and unit share gains.

“We feel confident we will emerge from 2020 in a strong position. While we have challenges to fix, we have a greater number of opportunities to chase. I am very pleased with our team’s ability to adjust where needed and to capitalize on our strengths and opportunities to continue and grow share.”

For earnings history and earnings-related data on Ecolab (ECL) click here.