Ecolab Earnings Call Nuggets: U.S. Institutional Market and Sales Acceleration
Ecolab (NYSE:ECL) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
U.S. Institutional Market
David Begleiter – Deutsche Bank: Doug, can you comment on the competitive intensity in the U.S. Institutional market in the quarter, any changes that you’re seeing from Diversey or others?
Douglas M. Baker, Jr. – Chairman, President and CEO: No. Not materially different. I wouldn’t say that’s what’s really coloring the quarter from an Institutional standpoint. U.S. when we look at it we would say the underlying rate there is around 4% in Institutional in North America. I think that’s more a reflection of continued softness in the market. We still continue to win in terms of gains and losses and we believe gaining share overall. So I think the Institutional business is doing decently in a lousy environment.
David Begleiter – Deutsche Bank: Just briefly Doug, how did Champion do in Q1 sales and earnings?
Douglas M. Baker, Jr. – Chairman, President and CEO: Yes. Double-digit on both, so in line with where we expected. So I think we have talked about this combined business run rate in the 12% to 13% range. We saw that maybe a little north from Champion, so that’s how we expect to see going forward.
Nathan Brochmann – William Blair & Company: I wanted to talk a little bit, you were just mentioning towards the end of your comments expecting some sales acceleration throughout the second half of the year here. Is that just based on the comps being a little bit easier relative to 1Q or are there additional new business in the pipeline particularly maybe within the Energy segment that’s going to be coming on or just other things that you could provide a little bit more color on there?
Douglas M. Baker, Jr. – Chairman, President and CEO: Yes. It’s certainly both. I think if we just stood still which I don’t think is possible in business we would certainly see improved reported sales numbers in the out quarters because you do have an artificially high comparison quarter-on-quarter in the first quarter, but I think it’s also important that yeah, we see momentum in terms of new business, productivity, we see that in all of our core businesses. So we feel good about those efforts. We’ve got a number of new innovations that take time to roll out throughout the year. Yes, specifically in Energy. We would have viewed Energy on a normalized basis to be certainly in the range we talk about in Q1 of 12%, 13% type performance, is what we really saw when we look at the underlying trends in Energy. So, that’s going to come through and that’s what our expectation for the year is in Energy, is a double-digit top line and bottom line performance, pre-Champion. Then obviously when you’ve got Champion, you’ve got a bigger base, and we would expect the same on a pro forma basis when you have the Champion on top of it.
Nathan Brochmann – William Blair & Company: Then just related to that, how are you guys viewing Europe right now in terms of the environment obviously, you mentioned it’s still soft. Is it getting a little bit softer, is it kind of maintaining where it’s at and what are you guys doing to continue to gain share over there?
Douglas M. Baker, Jr. – Chairman, President and CEO: Yeah, Europe, if anything, I think we talked about this in the recent or last call, I mean, Europe we view it as – we had a bias it was negative certainly going in and I’d say Europe is softer than last year. No doubt about it. I guess for the quarter, our Europe business is down a couple of points. If we look at the legacy Ecolab business, we’re still able to increase margin by over 200 points in the quarter. Some of that is a – it’s a very small quarter in terms of profit contribution, just in terms of numbers. We don’t expect 200 basis points for the year, but we’re still quite confident that we’re going to exceed the 100 basis points commitment that we made at the beginning of the year for this year in Europe, just looking at legacy. If I look at Europe in total for the year, I think, when we add the WPS and Energy business in there we would expect modest sales increase for the year and pretty good OI margin increase north of 100 basis points in total.