Ecolab (NYSE: ECL) reported Q4 EPS of $1.23, $0.02 worse than the analyst estimate of $1.25. Revenue for the quarter came in at $3.07 billion versus the consensus estimate of $3.11 billion.

FOURTH QUARTER HIGHLIGHTS:

• Fourth quarter earnings showed sequential improvement from the third quarter despite the negative impact from the greater than expected COVID-19 second wave.
• Reported sales from continuing operations -6% from the year-ago period. Acquisition adjusted fixed currency sales -8% as strong growth in the Healthcare & Life Sciences segment was more than offset by a modest Industrial segment decrease and significant but stabilized declines in the Institutional & Specialty and Other segments.
• Reported diluted EPS from continuing operations $1.04, -23% versus last year.
• Adjusted diluted EPS from continuing operations, excluding special gains and charges and discrete tax items, were $1.23, -15% versus last year. The adjusted EPS decrease reflects COVID-19 related volume declines, unfavorable business mix and investments in the business which together more than offset cost savings, favorable pricing and lower variable compensation.
• Strong cash flow from continuing operations with $650 million from operating activities, and $523 million free cash flow which is an improvement over last year.

CEO comment

Commenting on the quarter, Christophe Beck, Ecolab’s president and chief executive officer said, “We had a solid business performance during the fourth quarter in the face of significant COVID-19 related end market restrictions that were more substantial and widespread than anticipated. Our underlying business continued its sequential improvement as sales trends remained stable and operating income further improved, driven by new business and customer penetration gains, along with continued pricing and lower costs. Importantly, through this challenging period, we further increased our growth investments in innovation, digital technology, sales capabilities and backbone infrastructure that should allow us to best capitalize on the post-COVID environment.

“While 80% of our aggregated business showed good sales and strong income growth, one of our most important investment initiatives has been in our Institutional business, which accounted for approximately 20% of our sales and nearly all of our COVID-related impact in 2020. We accelerated the work begun in recent years to further enhance Institutional’s critical field capabilities. We have completed the implementation of advanced digital field technologies that will further improve our field effectiveness, customer experience and operational performance. And we have also implemented improvements developed over the past 18 months to our field sales organization that will further increase our sales firepower and should more effectively drive unit and penetration share gains. In addition, innovative new programs like Ecolab Science CertifiedTM are already providing customers and guests with the peace of mind that they require now, and we believe, will require for the future. We believe Institutional is in a very strong position to capitalize on the reopening of its markets, and from the opportunities driven by the expected rise in global hygiene standards.

“As we enter 2021, we expect COVID-19 will continue to have a significant effect on the economy and our end markets, with its primary impact in the early part of the year. We expect to see the beginning of the COVID-19 recovery in our global end markets starting in the second quarter but believe it will take several quarters to fully realize a new normal. However, we believe that our strong new business wins, product and service innovation, investments in new hygiene and digital technologies, and successful sales and profit initiatives will deliver full year 2021 earnings above 2019 results from continuing operations, with the first quarter year-on-year percentage decline showing modest sequential improvement from the fourth quarter and the remaining quarters of 2021 showing strong year-on-year growth.

“While there are many external issues for us to navigate, our confidence in our positioning and our ability to meet both the challenges and opportunities the future represents has never been greater.”

Business Outlook

The continued uncertain outlook regarding the timing and pace of global economic recovery from COVID-19’s impact does not yet present an adequate basis for us to provide either quarterly or annual earnings forecasts.

We expect full year 2021 Healthcare & Life Sciences segment sales to moderately improve over the prior year’s very strong gain, with good year-on-year sales growth from our Industrial and Other segments. We look for our Institutional & Specialty segment to show a significant year-on-year increase for the full year as it recovers toward its pre-COVID peak 2019 levels.

We believe COVID-19 will remain a critical economic factor throughout 2021, particularly in the early part of the year. We believe the beginning of the recovery in our global end markets will start in the second quarter with the broader expansion of the vaccine distribution, and we expect it will take until the end of the year to generally reach a new normal. However, we believe that our strengthened business will deliver full year 2021 earnings above 2019 results from continuing operations, with the first quarter year-on-year percentage decline showing modest sequential improvement from the fourth quarter and the remaining quarters of 2021 showing strong year-on-year growth.

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